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  • Subsidized Green Jobs Destroy Jobs Elsewhere

    Government expenditures are not free. Economists know this and most others recognize it when they take the time to think about it. Unfortunately, it seems not everybody takes that time.

    In a story fit for satire in The Onion, a renewable energy research group, bankrolled by a $1.1 billion subsidy from the Department of Energy, concludes that huge government subsidies for renewable energy don’t reduce employment after all. However, their reasoning works only so long as the subsidies don’t come out of anybody’s pocket—a practical and theoretical impossibility.

    Two environmentalists at the Alliance for Sustainable Energy, LLC (see ASE brag about the billion it gets from Uncle Sam, here ) on contract to the National Renewable Energy Labs authored a research paper that tries to undermine the widely circulated research from a Spanish think tank.

    The Spanish research, directed by economist Gabriel Calzada, at King Juan Carlos University, analyzed the subsidized expenditure necessary to create the green jobs in Spain. It compared those funds to the private expenditure needed to support the average conventional job. Supported by other data as well, they conclude that each subsidized green job in Spain eliminated over two conventional jobs.

    While there are multiple problems with the ASE critique of Calzada’s work, the flawed foundation of their critique is best illustrated by the following statement:

    Furthermore, there is no justification given for the assumption that government spending (e.g., tax credits or subsidies) would force out private investment.”

    That is, the environmentalists do not see government expenditure as having a cost. They employ the same free-lunch fallacy that underpins essentially all the analysis showing green-energy subsidies increase employment.

    The first week of every principles of economics class goes over the problem with free-lunch assumptions. The labor and material used to make windmills or solar panels or to install insulation cannot simultaneously be used to make refrigerators and automobiles. When government spends more money, it necessarily diverts labor, capital and materials from the private sector.

    Dr. Calzada simply calculated how many jobs, on average, would have been supported with these resources had they been left to the private market. The ASE critique doesn’t even recognize that the costs exist. Therefore, the ASE critique can hardly be used to undermine the credibility of the Spanish conclusion—subsidies for green technologies reduce overall employment.

    Posted in Energy [slideshow_deploy]

    6 Responses to Subsidized Green Jobs Destroy Jobs Elsewhere

    1. Pingback: With Cap and Trade, It Will be Laborless Day | Conservative Principles Now

    2. Rubicon says:

      There is no logical reason to destroy jobs in one sector, so fewer jobs can be created in another sector.

      All want a clean planet, despite the nasty assertions of some. Yet how are we to push for clean jobs, when all that push does is result in unemployment and in positive environmental results many cannot even measure. Trillions for a one half degree temperature reduction, at best, is simply foolhardy. There are many methods we have yet to discover, but we need the brilliant minds in the private sector & yes even in the current fossil fuel energy sector, to find the methods which will make it possible to have a green economy.

    3. Pingback: Grassroots in Nebraska: In the News, August 28-September 4, 2009 | Grassroots in Nebraska

    4. Pingback: Green Jobs? Mandated Wind and Solar? Cap & Trade? We’ll Pass on that Showcase | Conservative Principles Now

    5. Jamie Friedland, DC says:

      I obviously stumbled across this post long after publication, but your current posts link back to it and I have a question. You reprinted that italicized quote above referring to government spending not forcing out private investment. You say that’s wrong, but it seem to me that it’s actually true as long as that government money doesn't come from NEW taxes. Am I wrong?

      You explain in the final paragraph that the Spanish study calculated how many jobs $X could create if invested by the private sector rather than the government. Fine, I’ll accept your premise. But at current tax levels, that federal money is already gone from the private sector equation. As long as tax levels don't increase, then subsidized jobs created by public investment in renewables aren't actively destroying other jobs; you are actually saying that this job-creation money is just not being spent as efficiently as the Spanish study says is theoretically possible IF the private sector decided to spend an equal amount directly on job creation.

      That is a different argument, because it admits that those subsidies are in fact creating jobs, not destroying them. Again, conceding your premise, spending $X to create one job instead of 2 isn't job loss, it’s inefficiency. And I know your answer is if we just cut taxes then the private sector could create those 2 jobs etc, but that is more complicated and I'm not having that argument right now. Also, with reduced consumption right now, it probably isn’t what would happen if we just gave those tax dollars back.

      If there isn’t a major flaw in my logic, and please explain it if you think there is, the headline/conclusion of this post are decidedly wrong.

      It looks like the argument you lay out above COULD be true – if the subsidies were explicitly funded by new taxes that took money solely from what would otherwise be spent on nothing but private salaries/wages. But even then you are ignoring the health and environmental benefits of switching off polluting and limited fossil fuels to clean, renewable energy sources. And ignoring the massive subsidies (http://www.eli.org/pdf/Energy_Subsidies_Black_Not_Green.pdf) that fossil fuels already receive etc. etc.


    6. Jamie Friedland, DC says:

      Moderators: there is some sort of problem with the comment timestamping here…they seem to be getting the same date/time as the original post. Just an fyi, no need to approve this comment.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

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