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Green Job Destruction: The Spain Study (Netting to negative via government)

As many of us have argued for some time, simple economic theory suggests that the government’s push to create “green jobs” will ultimately kill more jobs on net. While the theoretical argument is fully compelling, however, it’s nice to have hard data to show people that this particular theory plays out in reality.

That’s why this study, from the Universidad Rey Juan Carlos in Spain should be kept handy (the report is in English).

After examining Spain’s experience with an aggressive wind-power program, the researchers concluded:

1. As President Obama correctly remarked, Spain provides a reference for the establishment of government aid to renewable energy. No other country has given such broad support to the construction and production of electricity through renewable sources. The arguments for Spain’s and Europe’s “green jobs” schemes are the same arguments now made in the U.S., principally that massive public support would produce large numbers of green jobs. The question that this paper answers is “at what price?”

2. Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, the Spanish experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

3. Therefore, while it is not possible to directly translate Spain’s experience with exactitude to claim that the U.S. could lose at least 6.6 million to 11 million jobs, as a direct consequence were it to actually create 3 to 5 million “green jobs” as promised (in addition to the jobs lost due to the opportunity cost of private capital employed in renewable energy), the study clearly reveals a tendency that means the U.S. should expect such an outcome.

The study has other fascinating facts, including the cost of creating a green job (571,000 Euros each!), and how many jobs are lost in the economy as a result of putting on more renewable power.

Donald Hertzmark at MasterResource, putting the pencil to government-side costs as well as private costs, and evaluating the Spain study, concluded:

The arithmetic of green jobs is ineluctable and grim. For each utility worker who moves from conventional electricity generation to renewable generation, two jobs at a similar rate of pay must be foregone elsewhere in the economy, otherwise the funds to pay for the excess costs of renewable generation cannot be provided. Moreover, by raising costs throughout the economy, high cost green energy will reduce the competitiveness of US exporters, thereby destroying (presumably well-paying) jobs in such industries.

Basically, those of us who have been arguing against the “Green Job” and wind-power boondoggles have, if anything, understated how absolutely dreadful these ideas are!

14 comments

1 Andrew { 04.10.09 at 10:02 am }

Well, duh. The “green jobs” idea is just another example of the broken window fallacy. I can’t believe people need to do studies to work out what is intuitively obvious if you think about it long enough.

2 Dennis { 04.11.09 at 10:46 am }

This is the opposite of the broken window fallacy.
This isn’t destruction and repair. This is investment and modernization. The legacy job losses are created by new efficiencies. The demand for power didn’t go away. A cheaper, less labor intensive production replaced it.

3 Andrew { 04.14.09 at 9:33 am }

Dennis-if “green tech” is so great-”modern” “efficient” “cheaper”-then why on Earth does it require government subsidies? Surely such technology, if so great, is profitable, and thus can stand on its own in the market? No? Well, maybe your claims are flat out wrong then.

4 Andrew { 04.14.09 at 9:59 am }

Also let’s dissect this:

“This isn’t destruction and repair. This is investment and modernization.”

Well, actually, you don’t repair a broken window, but replace it. But that’s mere quibbling. More to the point, by “investment” you mean subsidies. This would be the equivalent of me, acting as the government, giving money to the glass maker to make new windows. Well, fine, except for two (actually three) things. The first problem is that unless I am paying him an inordinate amount of money, there still needs to be a demand for the new windows-and if I’m paying him subsidies, then there must not be enough demand. The government naturally is going to want the fancy windows (let’s call them “green windows”) to succeed, and the glass maker to succeed, but as long as everyone is buying the cost effective “dirty windows” he can’t. So the government decides t0 tax dirty windows-this is exactly the kind of market distortion that green tech proponents favor. Plus, and this is the second issue, the extra money for the subsidies has to come from somewhere. Well, maybe you can use the tax money from dirty window taxes-except, not surprisingly, fewer people are buying them because, well, that’s what you wanted-but now dirty window revenue is declining. So you have to get the tax money from somewhere else. See, you have really just “spread the bill around”-now everyone has to pay for the more expenive windows-maybe not directly, but they get the bill from Uncle Sam anyway. Now, the last problem with “investment” I want to mention-it is like gambling. The government “investment” puts a lot of money on the line that isn’t even their money with no guarantee of return-and if the tech that government investment favors flops, everybody gets screwed. Now to “modernization”-how is this any different than saying “the old stuff must go, in favor of the new stuff”? How is this any different than the government saying, “Let’s modernize. Break all the dirty windows and replace them with green ones”? “Modernization” is just another way of saying that the windows need to be broken. Well, the real problem I observe here is that at some point it does make sense to make these changes. But that is the point at which (without government assistance) the “green windows” make more sense to the market than “dirty windows” because not only are they clean, they are afforable. Well, we aren’t really there yet, and the decision shouldn’t be taken out of people’s hands by the government just because the government finds the higher cost exceptable because the technology is “clean”-it is up to people whether they want to pay for the more expensivbe tech because it is clean-not some politician who “knows better”.

5 Don { 04.15.09 at 1:44 am }

The study makes yet another point. Spain’s government is now committed to subsidizing the wind and solar installations, even during this economic downturn when it can’t afford to, as long as they operate. When newer, more cost effective, technologies come along, the Spanish government will still have to pay these wind and solar losers because that guarantee was the only way anyone could be induced to build them to begin with.

6 OH BOY { 04.23.09 at 4:26 pm }

Gov’t subsidized never ever worked — look at the corn to ethanol. Did anyone in this country go to school — if it doesn’t make sense and I mean all around economic sense why would you do it!

7 OH BOY { 04.23.09 at 4:31 pm }

Wind has never worked – look at Canada/wait to you see their report!!! Gore and the rest of them are playing political pool w/ all of our money. Watch Fox News and read the papers than go do some real research, that means reading and calling someone other than our political make a buck of of us politicians//wind and solar is a joke!

8 OH BOY { 04.23.09 at 4:37 pm }

Until we get back on the honest track and find out who sponsors who w/these wind lover organizations or environmentalists == OUR COUNTRY IS DONE!!!
We need to clean house next time around. I believe in creating jobs and a clean environment, but when you suck the life out of someones hard earnings it has got to stop. I believe this administration will do just that. Watch out for the giant blood suckers” Get rid of GM CEO – I say get rid of the unrealistic//you can’t subsidize and ta your way out!!!

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