Not All Green Jobs Were Created Equal

In my next Greener Money column for Smart Energy Living Magazine, I look into the economic behind Presidential and green claims that the stimulus package and the Climate bill just passed by the House can both create economic growth while cleaning up the economy. I found most of the rhetoric coming from the greens to be disappointing. For the most part, it touts the numbers of "Green Jobs" which will be created, without looking at the cost. For instance, while the report from the American Solar Energy Society does a good job defining "green job" and counting them, it does not look at what would have happened if we put our resources elsewhere.

Probably the most incredible claim I heard from on the green side came from Jigar Shah, who told me via email that spending on solar photovoltaics produces "more jobs per federal dollar invested" than other green technologies. He did not respond to two requests for his source. I found this claim hard to believe, because solar manufacturing is very capital intensive, and manufacturing jobs are likely to be high-skill and highly paid. The labor-intensive installation is unlikely to completely make up for capital intensive (and often overseas) manufacturing. Clean energy investments which are not capital intensive, such as weatherizing homes, are likely to produce more jobs because 1) less money is spent on equipment and more on labor, and 2) the workers are typically paid less.

The Cost of Creating a Job

The best national report I read was Green Prosperity, which was sponsored by Green for All and NRDC, and written by the economists Robert Pollin, Jeanette Wicks-Lim, and Heidi Garrett-Peltier at the Political Economy Research Institute at the University of Massachusetts, Amherst (PERI). This report used data from the US Commerce Department Input-Output tables and IMPLAN to look at the potential for job creation from each $1M of spending in various industries, some of which is presented below in table 3 from the report:

TABLE 3. BREAKDOWN OF JOB CREATION BY FORMAL EDUCATIONAL CREDENTIAL LEVELS

	1) Clean Energy Investments	2) Fossil Fuel Investments	3)Difference (col 1-2)
Jobs per $1M	16.7	5.3	11.4
% of category	100%	100%
College degree jobs $24.50 avg wage	3.9	1.5	2.4
	23.3%	28.3%
Some college jobs $14.60 avg wage	4.8	1.6	3.2
	28.7%	30.2%
High School or less jobs $12.00 avg wage	8.0	2.2	5.8
	47.9%	41.5%
High school or less jobs with decent earning potential $15.00 avg wage	4.8	0.7	4.1
	28.7%	13.2%

Note that while clean energy spending creates more high paying jobs than fossil fuels, clean energy is even better at creating jobs for low skilled workers: Everyone stands to gain, but those who have the most trouble finding jobs have the most to gain.

Comparing Clean Energy Industries

Unfortunately, even this report does not detail the differences Jigar Shah was alluding to: the difference in job creation between clean energy investments. Where can we best deploy our stimulus dollars for the greatest effect? I contacted the authors of the study, and Heidi Garrett-Peltier was able to provide the following job creation numbers for industry sectors they considered in their research:

Sector	Percent of spending in Green Program	Jobs per $1M spending
Weatherization	40%	17.1
Transit/Rail	20%	20.8
Smart Grid	10%	13.3
Wind	10%	13.8
Solar	10%	14.1
Biomass	10%	15.5
"Green Program"	100%	16.7
Fossil Fuel	-	5.3

Here, "Green Program" is a weighted average of the six energy industries, with the weights approximating the anticipated spending contained in the stimulus package and the climate bill. They did not look at the credential level job creation benefits of the clean energy sectors individually.

I find it very encouraging that the two best job-creation sectors (Transit /Rail and Weatherization) are also the sectors which get the lion's share of investment; this is why the Green Program as a whole produces more jobs per million dollars spent than any of the sectors besides these two.

Will the Jobs Last?

All this discussion is about a stimulus to the economy, in order to jump start it and get it going again. The Green Prosperity Report considered only jobs created by the direct effects of the spending, and the indirect effects of increased spending by people whose earnings increased due to higher earnings. These new jobs are only likely to last as long as the spending continues, after that, the hope is that the economy will have begun producing jobs again without federal stimulus.

Nevertheless, there will be ongoing effects that will help the economy long after stimulus spending has ended, and the impressive job creation numbers above do not consider these effects, which "dominate the job creation figures" according to Howard Geller, the Executive Director of the Southwest Energy Efficiency Project [SWEEP], and co-author of a study on job creation from energy efficiency measures in Colorado. Weatherization was just one type of energy efficiency measure the SWEEP study looked at, although the other sectors above were not considered because of SWEEP's focus on energy efficiency.

He says, "I don’t think renewables are going to have nearly as much impact [as efficiency]. Using the same input / output model, you won’t get nearly the job creation from the energy bill savings. It’s the cost effectiveness of EE that leads to the savings and long term job creation." So, to the extent that measures are cost effective, they will produce ongoing savings and job creation. Of the spending sectors listed above, Biomass is likely to be the most cost effective of the energy generation technologies (Wind, Solar, and Biomass), if the money is used for biomass co-firing in existing coal plants, and both Wind and stand-alone Biomass will be more cost effective than Solar (see my article What Does Clean Energy Cost?.) Only Biomass co-firing is likely to be able to compete with weatherization for long term job creation effects among these three.

The ongoing job creation effects of smart grid are unknown, since no one has done it before. However, giving people better information about their energy usage has been shown to reduce their consumption as much as 15%, so there should be some long term effects.

For transit spending, the benefits depend on if the transit improvements will be effective enough to allow people to reduce their car ownership: According to the Green Prosperity study, the marginal cost per mile of travel on transit is about the same as the marginal cost of auto travel, but large gains are available from any reductions in car ownership.

Conclusion

Green investments will be good for both the economy and the environment. Nevertheless, any additional federal spending will use borrowed funds that have to be repaid. Hence, we should focus on spending in sectors with both large job creation potential, and long term impacts. Clean energy as a whole has excellent job creation potential and long term impacts, but some sectors are better than others. Although the climate bill which passed the house is not everything we might want, it's nice to know that most of the spending is going to the right places.

Comments

[Steven Hansen:]

"Although the climate bill which passed the house is not everything we might want, it's nice to know that most of the spending is going to the right places."

you have got to be kidding. the f^&*^^^ money is coming out of your pocket.

Jul 07 05:05 AM

[Windsun33:]

The so-called "green jobs" is mostly a myth. One reason the number look better than real is because green has been redefined to fit the agenda. Many of those jobs are not new - but a construction worker that installs insulation is now magically added to the green jobs creation tally board. Even though he was doing the same thing 20 years ago...

Jul 07 10:21 AM

[jerrydd:]

Good article!!

One thing not mentioned is the huge subsidies oil, coal get that makes green subsidies tiny in comparison. And much od the 'green subsidies are loans, not grants or tax credits.

Oil subsidies are tax breaks, depletion allowances, etc along with socialized costs like Persian Gulf military, oil war costs, imported oil costs and pollution like gas station tank removal, air, ect. This comes to $1T/yr drained from our economy that would go to millions of US jobs if we were independent on oil by going to 'green' tech.

Coal is about as bad with millions of acres dead now and polluting most every river/stream in the US, world. Just mercury is so bad you can't eat fish but 1/week or you'll get mercury poisoning. A reported ate 2 fish meals and his mercury levels went to 50% above max safe levels. Each major coal plant puts out 200lbs, a dirty bombs worth, /day. Google radioactive coal emissions gov reports for a real eye opener. Now add acid rain, particulates, building, bridge corrorsion, ect and add extra health costs and coal's real cost is huge.

And their price is rising fast so it's not whether we can afford 'green', but whether we can afford not to go green.

And we desperately need jobs it provides.

Jul 07 11:55 AM

[Ouch$:]

GE recently delivered wind turbines to Delaware, they were built overseas, so the temporary jobs they created were for long shore men, truck drives ( because the windmills will be installed in Pennsylvania ) and construction workers. These look like temporary jobs.

Jul 07 12:22 PM

[WayneS:]

On Jul 07 11:55 AM jerrydd wrote:

> One thing not mentioned is the huge subsidies oil, coal get that
> makes green subsidies tiny in comparison. And much od the 'green
> subsidies are loans, not grants or tax credits.
>
> Oil subsidies are tax breaks, depletion allowances, etc ...comes to $1T/yr drained from our economy that would go to millions
> of US jobs if we were independent on oil by going to 'green' tech.

There are over 500 oil companies in the U.S. Lets just use XOM as it is the largest. Here is their 2008 income
Net income: $45,220 million
Income tax: 36,530 million
taxes and duties: 41,719 million
Sales-based taxes: 34,508 million
Total taxes: $117,977 million
I get better subsidies using the standard deductions on my income tax form.

Jul 07 12:52 PM

[SubsidyEye:]

What is difficult to discern in all of these studies is the degree to which the analysts took into account foreign trade in technologies and components. "Buy America" clauses notwithstanding, there are a number of renewable-energy and environmental technologies that America already buys that are made overseas. See:

newamerica.net/files/G...

Failure to account for that fact risks overstating the job-creation benefits of investments in green sectors. That some stimulus money may leak out to foreign suppliers is not necessarily a bad thing, especially if other countries providing "green" stimulus packages are also allowing imports from America. But if politicians who previously supported green spending on the assumption that all of the money would stay within national borders start hearing that some of the material and equipment is (gasp!) being imported, things could start to get ugly.

Jul 07 01:40 PM

[La Marque:]

How many fossil fuel jobs disappear because of spending on green jobs?

Jul 07 03:20 PM

[WayneS:]

Through RIFs and mergers fossil fuel jobs are already at 10% of what they were in the 80s. This is oil companies, service companies and support companies. The "Oil Companies" are still reducing employees by about 10% per year. That's the reason they are making a lot of money with such small profit margins and high taxes. They have become efficient to the nth degree

20On Jul 07 03:20 PM La Marque wrote:

> How many fossil fuel jobs disappear because of spending on green
> jobs?

Jul 07 03:50 PM

[Windsun33:]

Right now solar is the single most heavily subsidized sector in the world. The only thing that comes close is dairy farms. "Big oil" is about #40 on the list as a percentage of incentives, tax breaks, etc.


On Jul 07 11:55 AM jerrydd wrote:

>
> Good article!!
>
> One thing not mentioned is the huge subsidies oil, coal get that
> makes green subsidies tiny in comparison. And much od the 'green
> subsidies are loans, not grants or tax credits.

Jul 07 04:37 PM

[decoflair:]

Tom,
Have any of the stocks you have mentioned dropped into a "buy" range??

Jul 07 05:42 PM

[carbonates:]

Most of the "tax subsidies" given to oil companies are also given to every other business, including green energy. Few if any direct subsidies exist for the oil industry. The only examples I can think of are indirect benefits such as research done by DOE, which often funds university research programs directly, not oil companies who happen to benefit from the research.

The so-called subsidies to oil companies are mostly a myth created by spinning the definition of tax deductions. Depletion is provided to all natural resource companies. Depreciation is provided to every industry and every business that buys equipment. The recent threat to change the way drilling costs are accounted for amounts to the opposite of a subsidy, since other businesses are allowed to expense costs related to obtaining their inventory. All US oil production pays royalties to landowners, which in turn gets taxed. Most states tax oil production directly. Probably 35% of the price of a barrel of oil that is turned into gasoline represents taxes. The Mineral Management Service, which oversees oil leasing for Federal lands, is the second largest source of income to the US Government behind the IRS. How is that a subsidy? How much of a return is the US government going to get in taxes for energy produced from "green sources"? Probably not as much as it gets from oil production.

I sincerely doubt the numbers of jobs for fossil fuel investments are correct. Pay for college graduates in the oil industry (engineers, geologists, geophysicists) ranks among the highest. Starting pay can be six figures straight out of school. The engineering jobs I have seen in "green sources" are considerably lower, and the "green" collar work I have seen offered is barely above minimum wage and is mostly seasonal work. Those workers will spend several months a year drawing unemployment because the vagaries of that type of work. I instead would give as an example, the fact that research work done by the Gas Research Institute using Federal funding, has added TRILLIONS of dollars to the US economy. Without this work, gas shales would not be at the level they are now, and we would not have 100 years worth of known gas reserves in the United States. Likewise, thousands of highly paid workers in the oil industry would be looking for jobs.

Jul 07 05:47 PM

[User 210954:]

My best guess of the number of dissappearing fossil jobs would be the number that equivalent spending on fossil energy might create... so for every 16.7 clean energy jobs, you lose 5.2 fossil jobs.

Just a ballpark guess, though.


On Jul 07 03:20 PM La Marque wrote:

> How many fossil fuel jobs disappear because of spending on green
> jobs?

Jul 08 05:12 PM

[Tom Konrad:]

I'm waiting on the market as a whole, not stock price targets... if the market falls as I expect, it's only getting started.

And I'll probably say in an article, after I've done my buying myself.... not in a comment.


On Jul 07 05:42 PM decoflair wrote:

> Tom,
> Have any of the stocks you have mentioned dropped into a "buy" range??

Jul 08 05:18 PM

[jack kreg:]

it takes 20-30 real jobs in the private economy to produce enough tax dollars to get taxpayer funded green job!!

Green jobs are paid for by hard working American's in the real economy, where money is made through productive work.

Jul 08 07:14 PM