Green Jobs Myth
By Kevin Andrews - Australian Polity - Volume 2 (Number 3)
Australian manufacturing is suffering a major slump, with businesses closing or moving overseas and jobs being lost. When studies indicate that significant additional job losses will occur because of the carbon tax legislation, especially in places like the La Trobe Valley in Victoria, they rightly question the indecent urgency of the Labor government to impose a scheme in the absence of similar schemes elsewhere.
The current job losses are compounded by research by the Australian Trade and Industry Alliance that indicates that less than nine per cent of the one million manufacturing workforce are employed by firms that will receive compensation for the carbon tax.
Workers are not mollified by the assertion of people like Professor Garnaut that “the new jobs will be as numerous as the old jobs that have been lost.”
In this context, it is worth examining the claim that the tens of thousands of jobs that will be lost—what Professor Garnaut refers to as “structural change”—will be replaced by new green jobs.
Professor Garnaut acknowledges that “all Australians want to know where the new jobs and new incomes will come from”, but his response “from everywhere” is hardly convincing in light of the overseas experience.
Consider some recent developments.
In the United States, a $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
According to a report in the Washington Post, the program—designed to jump-start America’s clean technology industry by giving energy companies access to low-cost, government-backed loans—has directly created just 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.
President Obama has made “green jobs” a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny after the collapse of Solyndra, a Northern Californian solar-panel maker whose closure could cost taxpayers as much as $527 million.
Last year, Obama visited the company and hailed it as the “future of clean energy.”
According to the media report, Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.
Even claims by the US Energy Department that a green-jobs program saved 33,000 jobs at the Ford Motor Company, have been queried. Several economists said they doubt the loan program saved 33,000 jobs at Ford.
“I always take these job estimates with a big grain of salt,” Harvard Business School professor Josh Lerner who has written about failed government efforts to stimulate targeted industries, said. “There tends to be a lot of fuzzy math when it comes to calculating these benefits (regardless of the party taking credit for the program).”
Mark Muro, a Brookings Institution fellow who researches the clean-tech industry, said the agency appears to be counting every employee working in upgraded plants, when the more relevant question is how many workers would have been laid off without the loans.
Solyndra, the first company backed under the Green loans scheme, closed its doors after declaring bankruptcy. It has since been raided by the Federal Bureau of Investigations. The failure of the solar-panel manufacturer, which got a $535 million government loan guarantee and later direct government loans, led to the layoff of 1,100 workers.
Energy Department officials claim the program will create or save sixty thousand jobs. But, if the twenty companies that have won loans so far deliver all the new jobs they have promised, they will hire a total of just 8,050 new workers for permanent positions. According to the US media reports, half of those twenty companies have neither created nor saved any permanent jobs yet; several won their loans only recently.
If the revised sixty thousand target is reached, it would work out to about $640,000 in loan guarantees for every job created or saved. If the companies do well, they will not need to draw on the guarantees and will not cost the Government anything. But if the companies go bankrupt, as Solyndra did, taxpayers will pay.
This comes on the back of President Obama’s claim that his stimulus bill created or preserved 225,000 clean energy jobs. That is $355,000 per job. However, much of the money went to China.
Despite the claim of green jobs, the overwhelming majority of stimulus money spent on wind power has gone to foreign companies, according to a new report by the Investigative Reporting Workshop at the American University’s School of Communication in Washington, D.C.
According to the report, nearly $2 billion in money from the American Recovery and Reinvestment Act has been spent on wind power, funding the creation of enough new wind farms to power 2.4 million homes over the past year. But the study found that nearly eighty per cent of that money has gone to foreign manufacturers of wind turbines.
And the third largest maker of solar panels in the US, Evergreen, is closing its main American factory, laying off eight hundred workers and shifting production to a joint venture with a Chinese company in central China, despite receiving at least $43 million in assistance from the State of Massachusetts.
Michael El-Hillow, the chief executive, said in a statement that his company had decided to close the Massachusetts factory in response to plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years—including a drop of ten per cent during last year’s fourth quarter alone.
The plunge is reflected in share prices. Shares in solar companies fell an average of 26 per cent last year. Evergreen’s stock, which traded above $100 in late 2007, had dropped to just $3 earlier this year.
Mr El-Hillow said Chinese manufacturers have been able to push prices down sharply because they receive considerable help from the Chinese government and state-owned banks, and because manufacturing costs are generally lower in China.
Evergreen follows First Solar, another American company and one of the world’s largest solar power vendors, whose products are made overseas already.
The US administration has announced that it is again delaying a plan to curb greenhouse gas emissions from power plants.
The overseas experience points to two consequences. First, it is a myth that green jobs are being created in large numbers. Secondly, every job created comes at an enormous cost to the nation.
This reflects the experience elsewhere. A recent study in the United Kingdom found that for every green job created, 3.7 jobs in other parts of the economy are destroyed. This follows a similar study from Spain which showed 2.2 jobs are lost for every green job created.
Not only will families pay extra costs for energy and transport, the so-called green jobs is a myth. No wonder workers in places like the La Trobe Valley, the Hunter and the Illawarra are worried about their future.