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Green policies may not create many jobs

Like many states, Ohio is banking on green energy technology to put residents back to work. Yet, a new Ohio State University analysis examining the economic development impacts of green policies suggests that the state’s current efforts are unlikely to generate large numbers of new jobs.

However, on a more positive front, the analysis also indicates that related proposals such as cap-and-trade are unlikely to be the massive “job killers” that opponents fear.

The analysis is laid out in a policy brief titled, “Green Policies, Climate Changes, and New Jobs: Separating Fact from Fiction.” In the document, Ohio State agricultural economist Mark Partridge and his colleagues Amanda Weinstein and J. Clay Francis discuss why environmental policies, such as green energy subsidies and cap-and-trade, do little to affect job growth.

“The overriding weakness for alternative energy to create jobs, even in the short run, is that virtually all green energy technologies are capital intensive, meaning that they require few workers to get started or maintain,” said Partridge, the Swank Chair in Rural-Urban Policy and a professor in the Department of Agricultural, Environmental, and Development Economics. “Not only are green energy technologies capital intensive, but there will also be offsetting displacement effects resulting in fewer fossil fuel jobs, as well as a ‘relabeling’ of existing jobs.”

With the argument that green energy technologies are cleaner fuels, the authors find that subsidizing them will result in a reduction of carbon emissions.

However, said Partridge, it is important for policymakers to fully understand all of the “opportunity” costs of using green energy subsidies.

“The analysis suggests there may be more efficient ways of creating jobs and/or reducing carbon emissions. For instance, the subsidies used to fund green jobs could instead be used to fund other worthwhile projects with greater job-creating potential or even be used to reduce budget deficits,” said Partridge, who holds Ohio State University Extension and Ohio Agricultural Research and Development Center appointments. “The report outlines alternative lower-cost methods to create jobs, such as increasing funding for construction of infrastructure and research and development for long-term growth.”

Partridge added that the subsidy funds could also be used to fund other methods of carbon reduction.

“Subsidizing simple energy conservation efforts in commercial and residential buildings can be more cost effective in reducing carbon, and because the technologies are often more labor intensive, they could create more jobs than green energy alone,” Partridge said. “As stated in the brief, ‘The most important lesson is that policymakers should consider the most cost-effective means of both controlling greenhouse emissions and generating economic growth – and the answer may not lie in a sound-bite solution like ‘green jobs’ that claims to tackle both.’”

Overall, the analysis suggests that the minimum cost and more effective method of reducing carbon emissions and creating jobs would be to separate environmental policy from employment policy.

While the authors are supportive of cleaner energy technologies for pressing environmental needs, they caution about its economic development effects.

“Fortunately, before policies such as green job subsidies and cap-and-trade are enacted, there are valuable lessons to be learned from previous experience,” said Weinstein, offering California as an example of a state dramatically ahead of the nation in alternative energy developments, but where green-job share of total employment remains below 1%.

“Add to that, the state is one of the hardest hit economically and the findings suggest that the move to a more green economy has not been a major economic engine for California, though it has made the state greener,” Partridge said.

The authors discuss directing subsidy funds towards job creation activities while focusing on alternative methods of reducing carbon emissions. One alternative that will appropriately increase the cost associated with carbon emissions is cap-and-trade.

“Opponents of cap-and-trade claim that we cannot afford the job losses associated with such a measure. Yet, the report counters that claim, referencing a cap-and-trade program enacted as part of the 1990 Clean Air Act that opponents feared would cost jobs but which resulted in having a negligible impact on employment,” Partridge said. “It seems both sides may be overstating their case. Green jobs are not likely to be a significant source of new jobs and similarly cap-and-trade will not significantly affect jobs either.”

The full policy brief can be accessed at http://aede.osu.edu/programs/swank/.

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