Gov. “Green” Push Puts U.S. in the Red

The current economic mess is mainly a result of government meddling, using the budget, regulations, and the tax code to push an agenda that Washington deems best. The notion that politicians can “green” the economy is, to quote Hemingway, a triumph of hope over experience.

Just this month, The New York Times reported:

In the Bay Area as in much of the country, the green economy is not proving to be the job-creation engine that many politicians envisioned. President Obama once pledged to create five million green jobs over 10 years. Gov. Jerry Brown promised 500,000 clean-technology jobs statewide by the end of the decade. But the results so far suggest such numbers are a pipe dream.

Environmental values embedded in our society produce continuous improvements in air and water quality, resource conservation, waste handling, and technology. In terms of energy per dollar of GDP or carbon per dollar, our economy is becoming increasingly less energy and carbon intensive. In fact, as Jesse Ausubel of Rockefeller University has demonstrated “the United States has averaged about one percent less energy to produce a good or service each year since about 1800.”

Moreover, Ausubel has attributed this phenomenon not to government intervention but to the fact that “the natural evolution of the energy system is away from carbon.” Technology, innovation, and market forces have been the drivers. And they will continue to be if the government lets them function.

The lesson here is that government should not pick winners for future energy sources; rather, it should provide clear and consistent rules for competition and an environment that encourages private investment.

In a recent evaluation of federal subsidies for energy producers, the U.S. Energy Information Administration (EIA) found that federal energy subsidies grew by more than $19 billion from 2007 to 2010—from $17.9 to $37.1 billion.

Accounting for $9 billion of that total jump, renewable energy enjoyed the biggest increase. Subsidies for these fuels (wind, solar, biofuels, etc.) now total $14.7 billion. And taxpayers may be wondering how much bang they’re getting for their bucks. A 2008 EIA report helped answer that question—demonstrating that while all sources averaged $1.65 subsidy per megawatt hour, wind and solar received about $24 per megawatt hour.

Experience in the Euro-zone has clearly demonstrated that making “green jobs” a primary national objective has done more harm than good. Energy prices, especially electricity have soared, economic growth, except for Germany, has been stagnant, and unemployment has been worse than ours. These results are not surprising.

A study published by Juan Carlos University in Spain concluded that for every green job created 2.2 would be lost. Commenting on the study, Institute for Energy Research (IER) president Thomas J. Pyle said:

As this study makes clear, Spain has spent billions in taxpayer resources to subsidize renewable energy programs in an effort to jumpstart its ailing economy – and what they’ve gotten in return are fewer jobs, skyrocketing debt and some of the highest and most regressive energy prices in the developed world. Now, as U.S. policy-makers prepare to embark Americans upon a similar course, this report offers our first realistic glimpse into what we should expect in return for that unprecedented sacrifice of public resources and personal autonomy.

Other studies have reached similar conclusions. For example, in a study entitled “7 Myths About Green Jobs” PERC concluded:

To attempt to transform modern society on the scale proposed by the green jobs literature is an effort of staggering complexity and scale. To do so based on the wishful thinking and economics embodied in the green jobs literature would be the height of irresponsibility. There is no doubt that significant opportunities abound to develop new energy sources, new industries, and new jobs. A market-based discovery process will do a far better job of developing those energy sources, industries, and jobs than can a series of mandates based on flawed data. The policy debate should be open so we can dispel the myths and focus on facts and analysis.

We are on the verge of a double dip recession and a total loss of confidence in government to set a sound and successful economic policy. There are a series of steps the government can take to reverse the current state of economic affairs. These include setting a course that brings federal spending back to the historical level of 18% of GDP, laying out a clear path to entitlement reform, simplifying the tax code, removing impediments to private investment and job creation, with reforming the regulatory system, and imposing a moratorium on new regulations except in cases of a clear and present danger.

Renewed economic growth and the investment that goes along with it will spur the new technologies that will take us further down the road of a lower carbon economy.

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