April 26, 2011
The European Experience
Kenneth Green and Ben Eisen
Green is the new black in Canada, the United States and Europe. Politicians and activists in Europe and North America have thrown on the green pants, green shirts and green cloaks of what we are assured is the future of life on Earth as we know it.
The theory that underlies the proposals to spend government money on developing a green economy is relatively straightforward to explain. A joint report by the Sierra Club, Greenpeace and the Alberta Federation of Labour describes green jobs as “jobs that are saved or created by policies that will shift our economy toward greater sustainability.”1 In other words, green jobs are jobs that are created when governments put environmental regulations, subsidies, and programs in place; these jobs would not be created in the absence of these policies. For example, if a government in Canada begins to heavily subsidize solar power generation, solar energy soon becomes a more attractive field for entrepreneurs, because it becomes easier to make a profit in it. If the subsidies are sufficiently large, the scale of solar energy production in Canada will increase, necessitating additional hiring to build solar panels, install those panels and perform other related tasks. In short, whenever a government heavily subsidizes an industry, it makes it profitable for firms in the industry to expand, and we can expect that there will be additional hiring within the industry. When the industry in question is involved in the production of renewable or clean energy, the additional jobs created in those industries are described as green jobs.
Those who support aggressive green jobs initiatives make the argument that there is an urgent need—because of the global warming threat—to move away from traditional energy sources and toward renewable sources.
The hope is that this transition will not only mitigate the threat of global warming but that it will also be a significant source of jobs and economic growth, as millions of workers will be hired to build thousands of windmills, manufacture and deploy solar panels, harvest biofuel feedstock and so on.2
Politicians across the world have been touting green jobs plans for many years. Former British prime minister Gordon Brown claimed that his green job plan was going to create 400,000 green jobs over the next eight years.3 Former U.S. vicepresident Al Gore has approvingly cited a study claiming that a green jobs strategy in the United States could create 1.7 million jobs in that country.4 President Barack Obama is even more ambitious, claiming that his plan for green jobs will actually create five million new green jobs.
Many Canadian politicians and activists have also loudly proclaimed the benefits of going green. For example, the leaders of The Suzuki Foundation and the environmentalist think tank Sustainable Prosperity spelled out an argument for an ambitious green jobs strategy in an op-ed written for the Toronto Star in January of 2009. Here, the authors describe their proposal for $15-billion worth of government spending on green jobs as a “green stimulus” program, and they argue that it is one of the best strategies for promoting economic development in the short and long term.
Here, the authors lament that Canada is “falling behind” its major trading partners such as the United States and China, which they argue are already investing heavily in “green stimulus” efforts that are creating thousands of green jobs.
The Suzuki-Sustainable Prosperity proposal for a “green stimulus” effort is just one of many examples of politicians and activists presenting plans for massive spending on green energy programs with the purpose of spurring economic growth and development in Canada. For example:
• The New Democratic Party of Canada presented a Green Collar Jobs plan that would have the government of Canada spend $8.2-billion over four years. The plan would include $4-billion to design and produce greener cars and trucks and $3-billion for training a “green collar workforce.” The architects of the plan estimate it would create 40,000 jobs.5
• Greenpeace, the Sierra Club and the Alberta Federation of Labour presented a plan for $5-billion in green jobs spending in Alberta. They claim it would produce 20,000 jobs in the first year and 200,000 jobs over time.6
• The Conservative government of Canada dedicated $1-billion to the creation of a Green Infrastructure Fund as part of its economic stimulus package.
• Sustainable Prosperity presented a Green Economic Stimulus Package for Canada that would cost $15-billion and supposedly create 160,000 jobs in the first year alone.7
• The Liberal government of Ontario has pursued an aggressive green energy strategy that uses public funds to undertake green energy initiatives, which the government claims will create 50,000 jobs.8
• The government of Manitoba expressed a commitment to spending on green energy, describing green job creation as a component of its poverty-reduction strategy.9
These are just a few examples of ambitious proposals for spending on green jobs creation that have been suggested or enacted by prominent activists and politicians across Canada, but there are dozens of others.
The proliferation of these proposals and their implementation by governments might suggest that the science and economics behind green jobs proposals are sound and that the world’s future is green: green energy powering green technologies and creating green houses, buildings, cars, and jobs, jobs, jobs. But is this thinking based on realistic economics? Is it a realistic understanding of green tech? And does it present realistic expectations of the growth potential of the green movement?
Fortunately, we now have a significant body of empirical evidence from Europe that sheds light on this question. Several European countries have been pursuing aggressive government spending on green energy development for many years, and the results of these efforts can help us understand whether such initiatives are likely to work in Canada. This study will examine the real-world evidence from the European experience with green energy and job creation. However, let us first examine the theoretical issues surrounding whether a government actually creates jobs through subsidies.
View entire study as PDF (20 Pages)
Kenneth P. Green
is a Resident Scholar at the American Enterprise Institute where he analyses public policy relating to energy and the environment. An environmental scientist by training and experienced policy analyst, he has authored numerous policy-oriented publications including monographs, magazine articles; newspaper columns; encyclopedia and book chapters; and even a textbook for middle-school students entitled Global Warming: Understanding the Debate. Prior to joining AEI, Dr. Green analysed environmental policy for 8 years with California's Reason Foundation, and analysed Canadian policy issues for three years at The Fraser Institute.