FLASHREPORT

LESS JOBS, GREATER COSTS: THE REALITY OF THE "GREEN JOBS" MYTH

Margo Thorning

[Publisher's Note:  We are pleased to officer this insightful commentary from Margo Thorning.  Thorning is Chief Economist with the American Council of Capital Formation - Flash]

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Recently, proponents of action on climate legislation have discovered a new buzzword to cloak the economic costs of their proposals: “jobs.” In the midst of a jobless recovery and with the national unemployment rate hovering at 9.7%, the earlier in a bill’s description you can place the term “jobs,” the better.

Make no mistake though – all measures to mitigate greenhouse gases (at least, all those considered by Congress so far) add up to a net job loss for US workers. As such, attempts to reframe legislation designed to reduce carbon emissions as a jobs bill are deceitful. Economists and academics are almost universally clear on this issue. In the short term, any mandated reduction in carbon emissions will impose economic costs on society.

Take the federal cap-and-trade proposal introduced last year by California Rep. Henry Waxman as an example. Analysis by the American Council for Capital Formation found that the Waxman-Markey bill would reduce the gross state product by as much as $70 billion per year and result in 300,000 fewer jobs being created in 2030. Consumers could see a 27 percent spike in electricity prices and a fall in household income of $800 to $1,400. Fewer jobs, greater costs to consumers.

New federal legislation expected to be released next week – the Kerry-Graham-Lieberman Bill --is also being touted as a job creator. The strategy this time is to divide and conquer, using as many as 8 different programs to selectively reward certain industries over others. While these tactics may indeed create new jobs in some sectors, offsetting losses in other sectors are likely to  make the bill a net loss for the overall economy. Again, fewer jobs, greater costs to consumers.

State legislators have taken note of the recurring federal sales pitch. Countless studies have attempted to show that AB 32 in California, for example, would actually improve the state’s economy. Curiously though, supporters aren’t confident enough in those studies to tie the legislation to the state unemployment rate, as has been proposed under a current ballot initiative.

That’s because most economists realize that state specific legislation is even worse for economic activity than proposed federal legislation. Federal plans have the unique benefit of spreading the pain over multiple states, while go-it-alone laws such as AB32 would place all of the suffering squarely on the shoulders of Californians.

Golden State power companies are already feeling the pinch over regional “green” energy mandates. Those in Los Angeles are engaged in a heated battle over requests to raise electricity rates in order to finance the requirements to provide more renewable energy, including wind and solar energy. Add on California’s projected population increase to 44 million in 2020, and that means more energy use for home heating and cooling, job growth and transportation conflicting with a reduction of greenhouse gases of 41 percent at the same time. Even at the state level it’s fewer jobs, greater costs to consumers.

Policy makers supporting “green” jobs initiatives should realize that admitting you have a problem is the first step to recovery. No matter how fervently they wish it to be so, no emissions legislation will ever truly be a jobs bill. Until we’re honest about that point, it’ll be extraordinarily difficult to have a meaningful discussion over which policy tools will impose the least burden on our economy, while still meeting environmental goals.

There are a number of steps that can be taken to mitigate the costs of climate policy, and even further improve the environmental benefits of legislation. Improving the tax treatment of new investment through faster depreciation and investment tax credits could reduce growth of greenhouse gas emissions as well as enhance productivity growth. Safely developing domestic resources here at home, where environmental controls and standards are among the most stringent in the world ensures responsible production of oil and gas, and would add over a million new good paying US jobs. 

Legislators need to take an honest look at this topic, and work towards comprehensive solutions.  American energy security depends on a combination of efficiency improvements, expanded access to domestic resources, and stable long-term Federal policies that support investment and resource development for all sources of energy.  Now that would be a jobs bill.
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Margo Thorning is chief economist at the American Council of Capital Formation. You can contact her, via the FR, here.