Clean energy benefited from billions in stimulus funding. But as projects fail to deliver many jobs, that government support could poison the movement.
When Congress announced that it would pass an economic stimulus approaching $1 trillion in early 2009, every industry lined up at the Capitol for a handout. This is hardly surprising: when the government is giving away free money, everybody wants their fair share. The renewable energy industry was no exception. It ended up getting tens of billion of dollars through several different provisions. But as its projects fail to deliver the jobs promised, the funding could poison the green energy movement in the long run.
How the Government Can Advance Green Energy
There are essentially two ways that the government can help to push green energy endeavors. The first is through direct spending. It can provide direct subsidies like loan guarantees to industry players or it can provide tax breaks to firms or consumers who purchase the industry's products. In the stimulus, spending took both of these forms.
The second way the government can promote clean energy alternatives is indirect. It can provide a competitive advantage by making fossil fuel options more expensive. It can do this through stricter regulation or taxes.
The problem, however, is that a recession is the very worst time for the government to push green energy through either of these methods. The spending isn't particularly effective at job creation, and if costs rise for firms and consumers, then even more jobs will be lost.
Good Energy Policy Can Be Poor Stimulus
Here's the problem with having funding for renewable energy initiatives in a stimulus bill: it actually makes for pretty poor stimulus. Wind turbines, solar panels, electric cars, and other new green technologies are very expensive. So the output you're getting for each dollar spent is low relative to what you might get from other industries. And less output for more dollars means relatively fewer jobs than other alternatives.
To make matters worse, the jobs these produce are exactly the wrong kind as far as stimulus is concerned. Many are for high-skilled workers. Some aren't very shovel ready, as sometimes research or development is necessary before production can occur. And some of the most expensive and essential materials necessary for the products -- like rare earth metals -- are produced in China. That creates lower-skilled jobs that create value from natural resources overseas but not in the U.S.
Earlier this month, the Energy Department confirmed this problem. Its $38.6 billion loan guarantee program created only 3,545 new, permanent jobs after being half spent. The Obama administration promised it would create 65,000 jobs. So at this pace, it will barely provide 10% of the jobs projected. That's a cost of potentially $2.7 million per job.*
Increasing Taxes and Regulation Kills Jobs
This point is true no matter what the economic situation: taxes and regulation are bad for jobs. If firms face higher taxes, then their profits will fall. That will leave them less money to expand and create jobs. If regulation rises, then firms' costs rise. Again, this reduces profits which will also force job cuts or slower hiring.