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The Green Jobs Fallacy

September 28, 2018
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By Paul Homewood

From the Institute of Economic Affairs:

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In his Party Conference speech on Wednesday, Jeremy Corbyn unveiled plans to kick-start a “green jobs” revolution, pledging to create 400,000 skilled posts in the low carbon sector. But do these claims stand up to scrutiny?
One flaw in any plan to use low carbon industries to ‘create jobs’, is that many parts of it tend to be capital intensive and people light. This is evident in Labour’s own modelling. They pledge to spend £12.8 billion on a home insulation programme they say will create 160,000 jobs. This works out at a cool £80,000 of subsidy per job created.
State-funded job creation, moreover, can carry huge costs (and opportunity costs).  ‘Public money’ does not materialise from thin air, it inevitably involves diverting resources from elsewhere. If funded by government borrowing, it risks ‘crowding out’ of private investment. If not, increased taxation on productive industries and jobs – which in turn leaves them with less money to employ people.
We can’t apply an analysis to Labour’s hypothetical proposal at this stage. But we can also look at related studies such as the “Study of the effects on employment of public aid to renewable energy sources” from
Universidad Rey Juan Carlos in 2009. This demonstrated that the Spanish solar subsidies model, which many other governments at the time attempted to emulate with very similar language and ambitions to Labour’s current proposals “destroyed 2.2 jobs for every ‘green job’ created”.
But even if this were not the case, centrally planning the economy in this way would remain a poor mechanism for tackling climate change. The best solutions to global warming will involve technologies that do not yet exist, tested and made affordable through scale-up according to demand – not government targets – and then sold around the world. The most efficient way for the state to assist this process is not to “pick winners”, by throwing money at technologies we know are ineffective, or can never be competitive.
Already, state subsidies have created perverse incentives in the provision of building insulation technologies. There have been several well-intended schemes to improve the thermal efficiency of buildings – underpinned by numerous behind-the-scenes battles between providers to ensure those schemes favour their specific technologies over rival products. Such lobbying is a classic consequence of social subsidy programmes, which remain an inefficient model for deciding what works or encouraging innovation. Better to let customers choose.
Forcing the issue through bodies principally focused on hitting arbitrary environmental targets can have harmful unintended consequences. Ecological targets, for example, have been used as an excuse for rushed projects that ended up putting entirely inappropriate flammable panelling on tower blocks. That should never have happened. As a less extreme case, some experts believe we may even be over-insulating our buildings, creating sealed ‘box-houses’ that can’t breathe. If that then requires energy-guzzling air conditioning to address overheating in the summer, it is entirely counterproductive.
It’s not hard to see why this might occur. As any public choice economist will attest, politicians are inevitably influenced by the best-funded, best-mobilised voices. In the case of green industry this means big incumbents, and their lobby groups, who have made their money largely from government. The perverse incentives associated with the allocation of state funds create a strong risk of a ‘low carbon industrial complex’, where consumers lose out to producer interests.
The Hinkley Point C nuclear power plant is a classic in this genre. The project, if built and operational, will cost Joe Public £81bn over 35 years, largely due to effective lobbying of the Government to offset EDF and their investors risks with a fantastic rate of return of some 10-15% a year. Compare this with Government borrowing at 0.5%. And, given the problematic EPR design used to for Hinkley’s reactor, the plant lacks even the hope it might stimulate a global export industry. Nobody else wants it, and it hasn’t even been built yet.
Or take Carbon Capture and Storage, a form of technology which will never be financially viable in the UK. We simply don’t have enough heavy industry or coal-fired power stations left to use it, and we’re one of the most expensive places in the world to build infrastructure. The situation is the exact reverse in China, where they have the comparative advantage to test and build this technology.
A much smarter policy than our ever-failing £1-2bn demonstration plan for carbon capture, then, would be sending British brains to China to help with their efforts. Let their technicians scale it and sell it back to us if it can ever work. Fundamentally, the planet doesn’t care where green innovation happens, so long as it happens.
The best possible tax intervention on climate change would be a simple global carbon tax, creating a single global carbon price to tackle a single global externality. Our present system is the worst of all possible worlds; a range of national and regional carbon taxes, targets and regulations that distort outcomes and make the UK uncompetitive.
It creates a vicious cycle of poor investments; growth-stunting taxes are added to energy bills in order to fund ineffective schemes, which then require further ‘bad taxes’ to keep them afloat. This in turn inflates UK energy bills, which puts up the cost of doing business domestically, which in turn leads to further displacement of jobs abroad. Particularly, and paradoxically, for example in the manufacturing supply chains of green industries. Wind turbines are not woven from hemp, they’re built principally of steel, concrete and plastics, all based on energy intensive industry.
On climate change, there is a happy middle ground between doing nothing and doing too much in the wrong place. Unfortunately, the direction of UK energy policy is very much poised towards the latter. We don’t need more green job destruction schemes.

https://iea.org.uk/the-green-jobs-fallacy/

24 Comments
  1. dennisambler permalink
    September 28, 2018 11:04 am

    “The best solutions to global warming”… is to stop pretending that it is real and due to our CO2 emissions. Taken over time, climate is clearly cyclical and not controlled by CO2.

  2. September 28, 2018 11:08 am

    “As a less extreme case, some experts believe we may even be over-insulating our buildings, creating sealed ‘box-houses’ that can’t breathe. If that then requires energy-guzzling air conditioning to address overheating in the summer, it is entirely counterproductive. ” I have found just this case with my own home. Cavity wall insulation plus roof etc. During the winter, I have to run a dehumid unit virtually 24/7, otherwise I get black mold due to cold spots. During this summer, we had 2 mobile air-con units going, again, virtually 24/7, to keep the place cool.

    • quaesoveritas permalink
      September 28, 2018 11:15 am

      I resisted the pressure of a few years ago to have cavity wall insulation installed and I am glad that I did.
      The argument I always used was that if winters were going to be warmer, why did I need more insulation than in the past?
      I also read that cavity wall insulation could cause dampness.
      .

    • bobn permalink
      September 28, 2018 3:02 pm

      Insulation keeps a building cooler in summer and warmer in winter. Most summers in UK we open doors and windows to regulate temperature but this year was a hot one so we closed doors and windows and drew curtains at midday to keep the sun from heating the house. Our well insulated (cavity wall as well) stayed cooler than the 30c outside. In the evening we opened the doors and windows again. If you dont have insulation you’ll have cold and damp spots everywhere in winter. If you have mold spots then that shows where you have poor insulation / damp air penetrating. If the air gets a little stale in your ‘sealed-box’ then open some doors and windows! Insulation is one of the few smart ideas out there. Not because its green but because its black. It puts your bank in the black as it saves you energy costs of heating and cooling.
      A coolbox is insulated and guess what – it keeps its contents cooler for longer than an uninsulated box. Insulation works in a thermos and in a house.

  3. Max Sawyer permalink
    September 28, 2018 11:10 am

    How confusing entering a comment has now become. Why?
    It used to be fill in this box and that was it.

  4. Max Sawyer permalink
    September 28, 2018 11:11 am

    Now it seems to work, but what is “enter a URL”, “click on an icon” all about”

  5. Charles Wardrop permalink
    September 28, 2018 11:21 am

    Since the UK output of CO2 is negible at 1.3% of global, and so many big emitters dissent from CO2 curbs, e.g., China, India, USA, we could abandon decarbonisation as mere token Greenery, which we need not and must not afford. No one would follow such an example of the folly of green tokenism and any perceived moral obligations are eyewash, esp. with others’ coal fired expansions, as in Germany and China and, surely, many more.

    Problem solved, but would our pathetic politicos realise that and repeal the CCActs(2008,9)?

    • Max Sawyer permalink
      September 28, 2018 12:08 pm

      My point precisely.

  6. September 28, 2018 11:27 am

    The IEA seems to have forgotten that Corbyn has a magic money tree. Diane Abbott will be in charge of cultivating, fertilising, harvesting and accounting for the crop of money.

    Venezuela here we come.

    • Max Sawyer permalink
      September 28, 2018 12:11 pm

      Wasn’t a magic money tree discovered at the time of the banking crisis – £billions created out of nowhere. Perhaps that is what Labour are considering. God help the economy.

      • dave permalink
        September 28, 2018 7:11 pm

        There is a universal misunderstanding – even and perhaps especially amongst economists – about ‘money creation.’ The Government, or the banks, or what have you, merely apply colour, or scribbling, to a bit of paper, which is still nothing nothing but trash.

        This trash BECOMES money AT THE MOMENT when ordinary people treat it as a means of exchange and only so long as they regard it as having a reasonably steady ‘value’ (use) in exchange. ‘We’ collectively are the ‘creators’ of our money.

        Thus, in a hyper-inflation, what happens is that the ordinary people destroy their money by ceasing to believe in it. After a while there IS no means of payment. Whatever scrip is printed* by Government stays as trash; and the economy is paralyzed.

        It is like ‘placebo medicine;’ which is only a medicine so long as you or your body thinks it is ‘a medicine’. I do not give you a placebo medicine – I give you a placebo – perhaps sugar water** – and your faith in me, or desperation for alleviation, does the rest.

        * Or ‘credit you’ in a computer’s memory.

        **Actually, placebos work better if they taste foul, or are very expensive, or involve some suffering. Hence the popularity of going to spa hotels and paying hundreds of pounds to have your lower regions steamed, a la the green luvvie Gwyneth Paltrow.

      • Russ Wood permalink
        September 30, 2018 12:20 pm

        And Zimbabwe was an example of what happens if you over-use the “money tree”. At the end it was cheaper (but harder) to use the umpteen-billion Zim dollar notes than use them to buy toilet paper….

  7. Mike Jackson permalink
    September 28, 2018 12:25 pm

    Someone made a comment under a Times article this morning about the extent to which politicians have ended up in thrall to lobbyists, a point I have made myself more than once.

    Apportioning blame is probably futile but it is certainly true that the rise of a professional political class in recent decades (and the resulting detachment from the “real” world) has opened the door to every NGO and single-interest pressure group with their well-honed “agendas”.

    If politicians stop listening to their electors (or the electors stop holding their politicians to account — chicken/egg?) then the double-glazing/cavity-wall-insulation industry “Association” and its “spokespersons” will happily fill that gap!

    • Max Sawyer permalink
      September 28, 2018 12:40 pm

      Too many politicians follow the path – school, university (reading something as useless outside the Westminster bubble as PPE and dabbling in university politics), constituency party activist/local councillor, MP’s “gofer”/special advisor, stand in a hopeless seat to show willing (this step often omitted), stand in a safe seat as a reward, PPS, PUS, Minister of State, Secretary of State. Experience of real life – zero, as is their interest in it and those who live there (until an election is due).

    • Gerry, England permalink
      September 28, 2018 1:51 pm

      The problem is the deficiency in democracy so that we are not able to hold politicians to account. The Harrogate Agenda has been created to rectify this.

  8. Harry Passfield permalink
    September 28, 2018 1:45 pm

    “Fundamentally, the planet doesn’t care where green innovation happens, so long as it happens.
    The best possible tax intervention on climate change would be a simple global carbon tax, creating a single global carbon price to tackle a single global externality.”

    Assuming, of course that Climate Change is actually a problem. If one thinks that CC is a problem then it follows one thinks that CO2 is the villain of the piece, something I’ve never been convinced of.

    Furthermore, I’m incensed that ex-MPs and Ministers with energy/environment portfolios have lined their pockets on leaving office by working for the companies set up at their behest. Deben, Huhne and Davey are just three who spring to mind so easily.

  9. Gerry, England permalink
    September 28, 2018 1:54 pm

    With their ignorant drivel on Brexit I had written off the IEA as being able to produce anything worthwhile so this comes as a bit of a surprise.

    I agree that there is still a lack of evidence that global warming exists or is man-made, but I can understand that challenging that would be too bigger a step for their report and might dilute the valid points they have made.

  10. MrGrimNasty permalink
    September 28, 2018 10:36 pm

    The Conservatives/LibDems tried just about every conceivable incentive loan/industry program for domestic ‘green’ energy/to insulate houses, people don’t want it. They all ended up peeing money down the drain for little or zero result. What people want is cheap power, not a loan for £30K to inappropriately insulate an old house with a payback date after they are dead.

    The 2.2 jobs losses per green job is only the start. Apparently in the Spanish study, each “green” megawatt installed also destroyed 5.2 jobs elsewhere in the economy.

    http://www.aei.org/publication/the-myth-of-green-energy-jobs-the-european-experience/

  11. Max Sawyer permalink
    September 29, 2018 11:14 am

    “What people want is cheap power, not a loan for £30K to inappropriately insulate an old house with a payback date after they are dead.”

    This is the most sensible comment I have read for some time – brief and spot-on.

  12. Gamecock permalink
    September 29, 2018 2:27 pm

    “destroyed 2.2 jobs for every ‘green job’ created”

    But the green job is beholding to government, making it worth far more than the destroyed jobs.

  13. Michael permalink
    September 29, 2018 5:00 pm

    £81 billion for Hinkley point over 35yrs?! wow, how much would it have coat to build it as a state owned power plant instead?

  14. Max Sawyer permalink
    September 29, 2018 6:45 pm

    “Furthermore, I’m incensed that ex-MPs and Ministers with energy/environment portfolios have lined their pockets on leaving office by working for the companies set up at their behest. Deben, Huhne and Davey are just three who spring to mind so easily.”

    Therefore hardly surprising that politicians (who know their careers are of limited duration) won’t challenge the virtue-signalling over CO2.

  15. September 30, 2018 11:22 am

    I wish when people talked about job creation and the waste of “resources” they mentioned the obvious – people. Every person doing one job cannot be doing another. Every extra doctor means one fewer teacher or farneror banker, and every extra Green job means one fewer person doing something else. That is where the real waste occurs. If that person could produce something we value at 100 if left alone but then produces something we value at only 20 under Corbyn then we lose huge amounts of value. And we can never get that value back.

  16. swan101 permalink
    October 1, 2018 10:31 am

    Reblogged this on UPPER SONACHAN WIND FARM.

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