Free Market Energy Experts Doubt Effectiveness of Obama’s Green Jobs Policies

CNSNews.com, March 24, 2009
Lux Libertas, March 24, 2009
Green Being, March 24, 2009

(CNSNews.com) – While President Barack Obama touted a greener future for America on Monday, free-market economists expressed skepticism about the prospects of green jobs and how effective government spending will be for long-term energy policy.

The economic stimulus package that Obama signed into law earlier this year spends $39 billion on Department of Energy grants for clean energy and provides $20 billion in tax credits for renewable energy research. Meanwhile, Obama’s 10-year budget plan includes $75 billion in research tax credits for alternative energy sources.

“Through $59 billion invested in clean energy and in tax incentives to promote clean energy, the recovery act is estimated to create more than 300,000 jobs,” Obama told a group of clean energy entrepreneurs at the Eisenhower Executive Office Building in Washington, D.C., on Monday.

This includes the creation of an advanced research agency for energy, modeled after the Defense Advanced Research Projects Agency that developed the Internet, according to the White House. Further, the $1.2 billion from the stimulus package goes to research infrastructure at the Department of Energy’s national labs.

“These are jobs that will be created as we double our country’s supply of renewable energy and make the largest investment in basic research funding in American history,” the president said.

“These are jobs developing new batteries to power the next generation of plug-in hybrid cars, like those being tested at the facility I visited in California last week. These are jobs upgrading our power grid so that it can carry renewable energy from the far-flung places that – where it’s produced to the cities that use it,” he added.

But for a sustainable future, green jobs will have to prove more valuable than a means to get a government subsidy, said Patrick McLaughlin, a research fellow for environmental economics at the pro-free-enterprise Mercatus Center at George Mason University.

“I would speculate, in the short run, the government throwing money at any industry will create jobs,” McLaughlin told CNSNews.com. “For green jobs to be sustainable beyond the existing stimulus money, it would require market support.”

While there is some mild investment in wind energy at a limited scale, McLaughlin said most alternative energy sources are less efficient than fossil fuels. He doubts whether enough green jobs will be created to offset any economic cost from cap and trade.

Under cap and trade, companies would be limited in the amount of CO2 they could release into the air. Companies that emitted more than their limit would have to buy (“trade”) “carbon allowances” in the government-contrived system from companies that had carbon credits. The credits would come largely from “green technology” firms.

Simply, companies could compensate for their CO2 emissions by putting money into green businesses that theoretically produce less CO2.

Concerning the alternative, green-energy ideas, “If these are profitable industries, why aren’t they creating profit in the market” rather than relying on federal subsidies? McLaughlin said.

Obama said that innovators nationwide are creating private sector jobs using alternative energy sources, but he also stressed the need for government investment.

“The time has come to make that choice, to act on what we know,” said Obama. “And that’s why my budget makes a historic investment: $150 billion over 10 years in clean energy and energy efficiency, building on what we’ve achieved through the Recovery Plan.

“And it includes a 10-year commitment to make the Research and Experimentation Tax Credit permanent,” said Obama. “This is a tax credit that Serious Materials has used to grow its business, and one I’m sure others here today have used, as well. This is a tax credit that returns $2 to the economy for every dollar we spend.”

Every $1 spent on research and development of alternative energy adds $2 in benefit to the economy, according to the White House.

But subsidizing energy sources that do not have a market is the first step toward implementing a cap and trade system, which experts say will amount to an energy tax on consumers. It’s also a means for the government to pick winners and losers, critics said.

Technology-neutral research and development grants would be a better way to improve the country’s energy use, said Tom Tanton, a senior fellow in energy studies at the Pacific Research Institute.

“The idea of cap and trade constrains supply of some energy sources and drives the supply of others,” Tanton told CNSNews.com. “Compliance and enforcement are difficult. There would be sham trades.”

A cap and trade system adopted unilaterally in the United States would do little to reverse global climate change, McLaughlin said. It also may do little to improve the market for wind, solar or nuclear energy.

“Cap and trade may not even result in higher demand for green energy,” McLaughlin said. “If there is a tax on fossil fuels, the cost of energy will be so great and will impact the economy so much that it will drive overall demand down and green energy wouldn’t increase. It would be a great reduction for all energy use.”

The environmental industry is successful because of an army of lobbyists on Capitol Hill, said William Yeatman, an energy policy analyst with the Competitive Enterprise Institute, a free-market think tank.

“Ethanol has made the food more expensive, and ethanol is also more expensive than gasoline,” Yeatman told CNSNews.com. “That’s a consequence of letting Congress dictate the energy market instead of allowing the open market to decide.”