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Our Jobless Green Future

Posted By Conn Carroll On April 17, 2009 @ 10:36 am In Energy | Comments Disabled

This past summer we took the Center for American Progress to task for putting their name on a “study [1]” purporting to show how how many “green collar jobs” $100 billion in government spending on “green investments [2]” would create. At the time, we argued that all of CAP’s green job creation numbers were worthless since they ignored all the jobs that would be destroyed by the taxing and regulation needed to subsidize those green jobs. [3]

Now a new study out of Spain, the very country President Barack Obama cites as an example of his green job future [4], demonstrates just how right we were. The Wall Street Journal [5] reports:

The study, released last month by researchers at Universidad Rey Juan Carlos, uses data from the Spanish government and European Union to demonstrate that each job created in Spain’s renewables industry costs as much as 2.2 jobs elsewhere in the economy.

Not only did Spain’s green energy policies cost jobs, they also created a green energy bubble that is bursting just like the housing bubble that has crippled our economy:

What hasn’t been reported in much detail from the Juan Carlos study is the way Spanish renewable-energy policy created an enormous investment bubble that may already be bursting. In many ways, this is the most important element of the report.

Since 2004, Spain’s Socialist government has essentially guaranteed a huge return on any investment in solar, wind or hydro. It’s done so by requiring electricity distributors to buy all renewable energy produced in the country, at prices that at times have been 10 times higher than market rates. This is known as a “feed-in price,” and it has cost Spanish energy customers an extra €28.6 billion this decade.

Initially, the government set a regulated price for solar power of 575% of market rates for small producers and “only” 300% for larger ones. The result was a series of inefficient solar farms small enough to get the higher subsidy but often owned by the same companies. And not just by power companies: “builders, real estate companies, hotel groups and even truck manufacturers” got in on the action.

In 2007 the government finally tweaked the subsidy schedule to level the playing field for larger solar producers. Yet within four months, regulators realized that the mandated prices were still so generous that 85% of all solar-powered generating capacity due by 2010 was already in place. To rein in the market, Madrid passed still another law that sharply reduced incentives to build new solar capacity.

Firms had one year to get in under the old system, and, boy, did they work overtime to make it: Government data indicate that 83% of Spain’s solar capacity was installed in those 12 months. That jump came after solar capacity had already grown by 118% in 2005, 308% in 2006, and 458% in 2007. In all, solar-power capacity in Spain grew by more than 20,000% from 2004 to 2008, a rate surpassed perhaps only by Zimbabwe’s inflation.

If that’s not a bubble, we don’t know what is. And while it will be a few months longer before the effects of the new, stricter solar regime can be measured, it’s not hard to predict sluggishness — if not an outright bust.

Madrid’s chosen method of curtailing solar-power growth is to set a quota for new installations, one that equals about 15% of the growth seen in 2008. That means the jolly green job fairy will soon be leaving: Two-thirds of the roughly 50,000 jobs created in renewables have been in construction, manufacturing and installation — exactly the kind of growth that couldn’t be maintained, and which Madrid is explicitly trying to curb now. Trade unions say the new law has already led to 15,000 solar job losses in just a few months — and that was before the 480 that BP cut.

Some people might be tempted to conclude from Spain’s experience that renewable-energy policies must simply be drawn up more tightly to avoid this kind of boom and bust. They’d be wrong.

Spanish policy shows that green dreams like renewable energy are achievable only through massive transfers of money from productive sectors to those seeking to get rich quick thanks to government mandates. And that the few jobs created greatly depend on maintaining impossible levels of growth. Even in Mr. Obama’s Washington, you can’t print enough greenbacks to pay for these green jobs.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/04/17/our-jobless-green-future/

URLs in this post:

[1] study: http://www.americanprogress.org/issues/2008/09/pdf/green_recovery.pdf

[2] green investments: http://www.americanprogress.org/issues/2008/11/green_investment2.html

[3] we argued that all of CAP’s green job creation numbers were worthless since they ignored all the jobs that would be destroyed by the taxing and regulation needed to subsidize those green jobs.: http://www.foundry.org/2008/11/14/the-left-is-still-living-in-a-cost-free-world/

[4] the very country President Barack Obama cites as an example of his green job future: http://www.foundry.org/2009/04/07/renewable-energy-the-road-less-traveled-for-a-reason/

[5] Wall Street Journal: http://online.wsj.com/article/SB123992109862226959.html

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