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TMFEldrehad (100.00)

Green Jobs Cost Too Much

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February 16, 2010 – Comments (16)

Those of you who have been following my picks in CAPS know that for quite some time I have been rather bearish on the whole 'alternative energy' sector.  The problem I've always had is one of simple economics.  Fossil fuels prevail as our main form of energy generation for one simple reason, they are the most economically effecient.  It is my very firmly held belief that alternative sources of energy will begin to prevail only when the economics allow them to.

In the meantime, any talk of so-called 'green' jobs actually aiding the economic recovery, well, I think such claims are very suspect.  Allocating resources away from more effecient production (fossil fuels) and toward less effecient production (alternative energy) has an economic cost, and while jobs may be created, more will be lost as a result of the reallocation.

It works not a lot unlike my economic refrigerator.

Turns out, many of these 'green' jobs are costing us $100K each.

President Obama has spent billions on so-called green job programs as part of the economic recovery and plans to spend billions more. He has repeatedly argued this will create good-paying jobs that cannot be outsourced.

But, according to the green groups themselves, these jobs can be highly expensive, often costing well more than $100,000 per job in subsidies and/or tax credits. Just last month, the White House said it was spending $135,294 per job to create 17,000 green jobs. (link)

I guess what really rubs me the wrong way is that the movement toward 'green' jobs is often pitched as a way out of the recession.  If my economic refigerator is right, and I think it is, this artifical reallocation will lengthen and deepen the recession instead.

I'm not saying that an argument can't be made that it's worthwhile to make the move, for a lot of reasons, despite the cost to our economy.  Such an argument would be, in my mind, valid and legitimate, even though I might not necessarily agree with it.

But 'green' jobs being the way out?  I don't see it.  Quite simply, they cost too much.

Regards,

Russell (a.k.a. TMFEldrehad)

16 Comments – Post Your Own

#1) On February 16, 2010 at 11:45 AM, davejh23 (< 20) wrote:

Besides the cost of subsidies and tax credits, do we even have the talent to fill these jobs?  I work in the industry, and we certainly don't have a surplus of talented engineers in this country.  We currently have hundreds of open req's for high-paying engineering positions, and they are not being filled because the required skill set is just not there.  $100K subsidies and tax credits don't matter much if you have to spend hundreds of thousands and a few years of training before a new engineer is productive.

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#2) On February 16, 2010 at 11:46 AM, dudemonkey (55.81) wrote:

If those jobs lead to cheaper, more efficient energy, then they will have paid off multiple times over.  I guess it depends on what kind of jobs they are.  The article takes it as a given that these jobs are manufacturing that pay low wages and not the engineering and research jobs that you'd hope for.

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#3) On February 16, 2010 at 11:50 AM, imobillc (< 20) wrote:

I have to disagree with you!

 By the way I like your economic refrigerator.

Mars 

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#4) On February 16, 2010 at 12:36 PM, ElCid16 (96.37) wrote:

What government subsidized jobs don't cost too much?

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#5) On February 16, 2010 at 1:28 PM, JakilaTheHun (99.93) wrote:

I'm not sure that "green jobs" are uneconomical so much as the policies that politicians promote in order to appeal to certain interest groups are uneconomical.  When politicians say they'll create "green jobs", they normally mean they'll create some form of subsidies that will often backfire and harm economic efficiency.  Instead of "creating" green jobs, they merely give competitive advantages to certain "green" companies over others. 

I also think we need a redefinement of the whole "green" issue.  Nuclear, natural gas, and geothermal power are the most practical short-term solutions to our environmental problems.  Certainly, nuclear and natural gas both have their problems, but both are much better than using coal power and both are economical.  We have too many hurdles for nuclear power development, unfortunately, though. 

There are other areas that might be considered "green" that will provide jobs and be economical, including smart grid, energy efficiency improvements, LED lighting, etc, but the best thing we could do is find ways to help empower small businesses that innovate in these areas.  Mindless subsidies don't achieve that --- they simply arbitrarily reward certain parties at the expense of others. 

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#6) On February 17, 2010 at 10:04 AM, miteycasey (77.50) wrote:

ANd where is the surprise in this?

If it was economically feasible it would already be happening.

People(T. Boone Pickens) want the governemnt to foot the bill while they make the profits. If it was profitable why isn't T. Boone going at it alone instead of asking for government intervention?

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#7) On February 17, 2010 at 10:23 AM, mikeblount (< 20) wrote:

Green almost broke Spain

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#8) On February 18, 2010 at 1:00 PM, GundersonGroup (45.32) wrote:

Russell,

 With all due respect that particular mindset perpetuates the excessive cost externalization that capitalism promotes. The capacity of the planet and the global society to absorb these costs is rapidly diminishing. Wouldn't you rather have relatively cheap capital allocated into sustainable activities in the present rather than high cost capital spent in the future when we cannot spare it because we need all of it to support our inefficient dead-end activities?

 

I suggest you reconsider your position.

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#9) On February 18, 2010 at 4:22 PM, TMFEldrehad (100.00) wrote:

With all due respect that particular mindset perpetuates the excessive cost externalization that capitalism promotes.

Kindly define excessive.  A bit of a rhetorical question, but, different people will define 'excessive' differently, and come to different opinions as to how much artificial reallocation is warranted based on said definition.

The capacity of the planet and the global society to absorb these costs is rapidly diminishing.

Let's assume that it is (though how rapidly might be an open question).  As capacity is reduced, cost rises.  As costs rise, alternatives become relatively cheaper.  Which was kind of my point.  Alternatives will prevail when the cost/benefit allows them to.

Wouldn't you rather have relatively cheap capital allocated into sustainable activities in the present rather than high cost capital spent in the future when we cannot spare it because we need all of it to support our inefficient dead-end activities?

Relatively cheap capital?  I disagree that the capital being used to create said artificial reallocation is cheap.  In fact, it is terribly expensive.  The government, with all it's inherent ineffeciencies, is the one doing the spending.

Each of us is going to have a different opinion as to how much reallocation (if any) is prudent.  What bothers me is the argument that said reallocation will get us out of the recession faster.  It won't.  It will lengthen and deepen it.  Someone might think it worthwhile to do despite this fact, and, while I might disagree, fair enough.  Just don't tell me that governmental taxing or borrowing in order to create a reallocation away from the more effecient and toward the less efficient will actually give the overall economy a boost when it will have the oppostite impact.

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#10) On February 19, 2010 at 7:03 PM, checklist34 (99.80) wrote:

thta is a fact, rec from me.

solar power et al should live if demand allows them to, that is all.  :)

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#11) On February 22, 2010 at 4:29 PM, MKArch (99.66) wrote:

Russell,

 I tend to lean conservative so my initial gut instinct is with you on green jobs. The word green actually gets on my nerves. That said I added some solar stocks to me CAPS portfolio recently and own some SPWRB. My pitch for these guys is three words: "Amenijad, Putin and Chavez".

 I have come to believe it's become a matter of national security that we at least try to foster alternatives to oil. As is always the case the argument for paying up to develop new technologies is more complicated. I remember in the early days of the personal computer a news program was interviewing someone about what it could be used for and they mentioned shopping lists and recipes as examples. The economics of some alternate energy sources might not make perfect sense right now but what about in 5-10 years?

From the little bit I've followed the solar p.v. companies they have already made great strides in reducing costs and a lot of future cost cutting is simply a matter of volume. Even though the word green gives me the heeby jeebies I think investing in the development of alternative energy technologies is worth the potential national security benefit. How much did the space race cost us for what benefit? Proponents argue many new technologies were developed out of that program which is a decent point but think about the benefits if pushing alternative energy sources yeilds some meaningul independence from oil. I grudgingly say it's worth pushing.

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#12) On February 22, 2010 at 5:18 PM, angusthermopylae (43.14) wrote:

MKArch

I'm with you on this one, and, in fact, keep wondering why the national security angle isn't being pushed by the green crowd.  Sure, it would be a bit jarring, but a perfectly plausible commercial goes something like this:

[camera zooms in on hippy (leather vest, flower-power, rose-colored glasses)]

Hippy:  "Dude, renewable energy isn't just a way of saving Mother Earth..."

[CGI morph to same hippy with high-and-tight, wearing an Army or Marine uniform]

Was Hippy:  "It's good for America!"

[fade out with billowing flag in front of wind and solar farm...maybe some John Philip Sousa playing...]

 

 

(wow...I think my soul just shriveled a tiny bit.  Shrinkage!)

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#13) On February 22, 2010 at 6:26 PM, TMFEldrehad (100.00) wrote:

I have come to believe it's become a matter of national security that we at least try to foster alternatives to oil.

A valid point -- and one of the ways that governmental intervention here could be argued to be worthwhile despite the economic cost.

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#14) On March 06, 2010 at 3:05 AM, PeteGall (73.29) wrote:

 You have to discount the cost of the effects of climate change. I'm sure there are many deniers of this so please, just let me say I believe that it's going to have large impact in the future, that's the number one reason I support alternative energy. And you also have to  discount the effect of carbon fuels on the air quality and the damage to lungs and respertory ailments. The oil and gas industries get plenty of government subsidies. The rail system was created on government subsidies. Currently our dollars are shipped out to import oil, it would be a huge turn around to have an in country energy supply. So many good reasons to change, so few to keep doing the same.

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#15) On March 07, 2010 at 4:17 PM, wutangfinancial (60.27) wrote:

In the medium to somehwat long term, you're right-output will be reduced as a result of distorted price signals and higher taxes to support green job creation.

 In the very short term/present, Keynsiens will argue that any reduction in unemployment is worth it just to keep us out of deflation, even if its through inefficient govt. spending.  I'm not sure if I agree with the hardcore Kenysiens on this, so I'll tend to side with you. Ricardian Equivalence is a bitch. 

 However,  there is a very compelling argument for the very long term. Our terminal growth rate is largely dependent on the rate of technological progress. By fostering an industry like green tech, an industry which most likely experiences increasing returns to scale, the US can develop a lasting comparative advantage in the field. The development of supporting industries related to green tech and the knoweldge spill over from green tech into other industries could lead to a virtuous cycle of growth. The private sector may fail to coordinate the proper level of investment for very long term research and development. The internet, for example, was developed with absolutely no viable business model in mind by the department of defense. It took decades to become anything more than an academic project. 

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#16) On March 07, 2010 at 4:30 PM, wutangfinancial (60.27) wrote:

Sorry, I know the last part of my comment was a bit of a tangent. I recognize the internet analogy isn't perfect since an R&D project at the DoD isn't the same as full scale industrial planning. Still, I think the knoweldge stock created by a new, exciting industry like green tech can pay huge dividends decades later, much like the internet paid dividends much later.

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