One argument in particularly grates on me -- that "green investments create jobs."
It is easy to understand why advocates are so keen to wrap their arguments with a "jobs" claim in these tough economic times. At the most superficial level, the claims can appear true. Build a solar photovoltaic plant or wind mill, and you will most certainly have humans at work.
But is also fairly straightforward to demonstrate that these arguments are often fallacious. Let's start with a precisely worded claim the likes of which one hears frequently "U.S. investment in green energy technologies allow us to substitute U.S. labor for the purchase of energy sourced abroad, and thereby create net new jobs -- while sending less money to troublesome countries."
Is this, or can this be, true? Yes -- but not always true, and given the portfolio of technologies most often discussed and subsidized, not usually true.
The rub is this. Let's assume that the new green sources are of equal economic efficiency as existing sources -- a generous assumption. If one substitutes a new green technology for energy produced in the U.S., then no foreign purchases are displaced (or obviated) and no net new jobs are created. What green energy sources are most often discussed in the context of valuable new green investments? Solar, wind, geothermal. What kind of energy do these technologies produce? Electricity. What is the current domestic component of U.S. electricity and its fuel sources? 98%!
Here's some detail (source: DOE Annual Energy Review) :
|Electricity -- 40% of U.S. Energy Demand|
|Fuel Source||% share||% U.S. sourced|
|Hydro + biomass||8%||100%|
The data suggests that substituting, say, a lot of wind power for any of the fuels we use now will not create any net U.S. jobs. Rather, we'll have more wind mill fabricators and maintainers, and fewer NG producers, coal miners, and train and pipeline workers. One may feel that such a change in the U.S. job force mix is desirable, but it will not constitute an increase in employment.
In a regime of growing electricity demand, one could argue that the new wind (or other green) power source will be substituting for the incremental NG supplies which may be foreign sourced. However, with the development of unconventional NG supplies, it now appears likely that the U.S. will be in position to produce all its own NG needs for the the foreseeable future. Also, 90% of the NG the U.S. imports comes from Canada, which in practical terms might also be considered domestic.
With 98% of electricity and its fuel sources sourced domestically now -- and 99.8% sourced in North America -- it is just not arithmetically possible to create net new American jobs with new green sources of electricity.
In fact, the only fuel for U.S. use that is sourced substantially abroad is petroleum. Therefore, the only green investments that have the opportunity of creating net American jobs through substitution are those that replace or obviate the need for petroleum. Here is how we use petroleum:
|Petroleum -- 37% of U.S. Energy Demand|
|Product Supplied||% of Total|
|Motor fuels: gasoline + diesel||67%|
|Heating: home fuel oil + propane||9%|
|Other: asphalt, coke, etc.||16%|
What green source of energy can, at least conceptually, make net new American jobs (and again assuming that they are economically competitive? Here are three:
- Biofuels, which make motor fuels from American grown and processed materials;
- Electric transportation technologies, such as batteries, which while technically not an energy source do allow the use of domestically fueled electricity in place of petroleum sourced abroad;
- Technologies to increase efficiency of motor vehicles, which reduce the need for foreign sourced fuels and allows the consumer surplus to be spent on other goods and services, the majority of which are (on average) domestically produced.
The data above also suggests a non-green energy substitution idea to increase net American jobs. I've never heard it advocated because it does not fit the green agenda. However, it is economically practical and guaranteed to produce net jobs: induce the substitution of natural gas for home heating in place of home heating oil and propane.
NG is a cheaper and better source of home heating than either oil or propane, which also comes from petroleum. In 2005, 13% of homes still used oil or propane, primarily in stodgy areas like New England. Inducing utilities to hook up, say, half of those homes with NG would create thousands of jobs, reduce the fuel usage (through increased efficiency) and reduce costs to those consumers, all while simultaneously reducing our oil imports by 6%. Some may recoil at forcing utilities to do things at government command, but if we're willing to saddle them with less economic requirements like Renewable Portfolio Standards, this would not be a big change in principle.