The green jobs debate (cont’d)

Nat Keohane

In a blogpost the other day (Cancun can’t: Ten reasons why the climate talks will fail), I devoted a paragraph (see below) to what could have been a longer critique of the way environmental groups tried to sell legislation to limit greenhouse gas emissions as a jobs program. I was reflecting my sense that green groups, in an effort to get cap-and-trade through the Senate during a recession, had latched onto a convenient but specious argument about “green jobs” that polled well, instead of trying to make what was a politically more-challenging argument: That we ought to adopt climate protection, despite its  modest short-term costs, because it’s important to protect the climate. Let me add that this question of political messaging isn’t an either-or; of course the green groups talked about climate along with jobs, and energy security, and any other semi-reasonable claim they could make on behalf of cap-and-trade.

But the debate, it seemed to me, was not as honest as it could or should have been. One word that rarely appears in any messaging from the green groups is “sacrifice”–even though doing the right thing about climate will require some short-term sacrifice. Another word you don’t hear much is “moral.”

In any event, I singled out Environmental Defense as a proponent of the green jobs argument. I did so because I remembered TV commercials like this one from EDF which says “Carbon Caps = Hard Hats,” and leaves viewers with the impression that cap-and-trade is a jobs creation program. I could have just as easily cited the Natural Resources Defense Council, Sierra Club or the Apollo Alliance (“working to catalyze a clean energy revolution that will put millions of Americans to work in a new generation of high-quality, green-collar jobs”).

Today, two economists who work at EDF — Nat Keohane and Gernot Wagner — posted a very useful response to my blog at EDF’s excellent Market Forces blog. I’ve posted it below–note in particular the Peterson Institute study which shows that carbon caps would create some (green) jobs and eliminate other (brown) jobs.  In a phone conversation, Nat told me that he was disappointed in my comment because EDF has been extremely careful not to oversell the green jobs argument–certainly more careful than opponents of climate regulation who made wildly  overstated claims that carbon caps would kill millions of  jobs. He’s got a point, although EDF’s political messaging around cap-and-trade was, inevitably, not as nuanced as the writings of its PhD. economists. I’m hoping to have a conversation with Nat and Gernot about “lessons learned” and  “where-do-we-go-from-here” before long.

Marc Gunther lists ten reasons why “Cancun can’t.” We won’t go into his other nine points here, but number three on the list hit home:

Environmentalists have been disingenuous about the climate issue. They’ve argued that regulation of carbon dioxide will create green jobs and grow the economy. Typical is this graphic from Environmental Defense. (“Get a step-by-step picture of how a carbon cap will spark new jobs, lift the economy and clean the air.”) Uh, no. Most economists agree that dealing with global warming will entail short term costs. (See Eric Pooley’s excellent analysis at Slate.)

Talking about jobs is one of the most difficult things to do well in the arena of climate policy. The jobs issue is highly politically charged—and for good reason, given the state of the economy. But it struck us as unfair for Marc to use EDF as his bête noire.

To begin with, the graphic that Marc links to doesn’t make the claim he ascribes to it. We weren’t saying that climate policy was a free lunch. What we were pointing out was that doing something about climate can also create good jobs in some unexpected places. More on that in a minute.

Gernot Wagner

We have bent over backwards to be as balanced and rigorous as possible in our assessment of the economics of climate change.

This turns out to be perfectly illustrated by Eric Pooley’s analysis—the same one Marc links to.

Eric’s indeed excellent analysis makes two points:

First, there is a broad consensus that the cost of climate inaction would greatly exceed the cost of climate action.

That’s the main, often-forgotten point because it seems so obvious: “it’s cheaper to act than not to act.”

We should really stop here and reflect on that for a second. Many—if not most—economists do, in fact, agree on that statement and have for a while.

But that’s not our point here, either.

Small but positive

Eric’s second point concerns the cost side of the ledger. The irony here is that Eric cites our analysis as highlighting that the costs of reducing emissions will be real, but small:

The second area of consensus concerns the short-term cost of climate action—the question of how expensive it will be to preserve a climate that is hospitable to humans. The Environmental Defense Fund pointed to this consensus last year when it published a study [PDF] of five nonpartisan academic and governmental economic forecasts and concluded that “the median projected impact of climate policy on U.S. GDP is less than one-half of one percent for the period 2010-2030, and under three-quarters of one percent through the middle of the century.”

That’s a mouthful.

In short, yes, the best economic studies show that there will be a cost to climate action. The costs are so small that they often fall within the general noise of model predictions, but they are there. There’s no denying that, and we never have. And yes, it was a much-cited EDF study [PDF] that makes this point, as well as a more recent update [PDF].

Just to be clear: Marc points to us as proponents of the “free lunch” theory, and then points to Eric as the best source on the costs—while Eric actually cites us as fairly and accurately surveying the available evidence on costs.

So did we contradict ourselves? Uh, no.

There is no contradiction between the following two assertions:

  1. There will be modest short-term economic costs associated with reducing emissions (although those will be much smaller than the economic costs of not reducing emissions!); and
  2. Policies to reduce emissions, like a cap-and-trade program, will lead to job creation. [click to continue…]

A few facts about “green” jobs

Given all the hype about green jobs—particularly the rosy projections about the green jobs of tomorrow—it’s welcome news when a credible source puts some facts on the table.

Would you care to guess how many green jobs there are in America?

No one can be sure, but a careful and comprehensive survey just released by the Pew Charitable Trusts turned up 770,000 of them, as of the end of 2007.

That’s a good number of jobs and they are spread across all 50 states, according to Pew.

But it’s a long way from there to 5 million, a number often tossed around by politicians and environmentalists who want to persuade voters that dealing with the threat of climate change is good way to create jobs.

Particularly in this downturn, environmental groups and politicians love to talk up green jobs. Environmental Defense has run commercials about green jobs. The American Council for an Energy-Efficient Economy issued a news release this week saying that the energy-efficiency provisions of Waxman-Markey would  by themselves, create “approximately 250,000 jobs…by 2020, with a total of 650,000 jobs generated by 2030.” President Obama said last year that spending $150 billion on the clean energy economy could create 5 million jobs.

By contrast, the Pew Report is restrained. It does not project the future. It does not attempt to link particular government policies with the growth of green jobs. It measured the growth of green jobs, but one of its authors admitted that no attempt was made to see if any of those jobs replaced others that disappeared. (Creating 1,000 new jobs to make homes more efficient might mean less work for the truck drivers who make deliveries of home heating oil.) Pew lays out a limited and relatively conservative definition of green jobs. People making wind turbines and solar panels are doing green jobs, as are handymen doing weatherization of homes. Farmers growing corn for ethanol are not. An arbitrary line, perhaps, but there it is.

The encouraging news from Pew is that the “clean energy economy” has for a decade or so been producing jobs faster than the rest of the American economy. Pew found that jobs in the clean energy economy grew at a national rate of 9.1 percent, while traditional jobs grew by only 3.7 percent between 1998 and 2007.

Pew also sought to put the “clean energy economy” into context:

America’s clean energy economy has grown despite a lack of sustained government support in the past decade. By 2007, more than 68,200 businesses across all 50 states and the District of Columbia accounted for about 770,000 jobs.

By comparison, the well-established fossil-fuel sector—including utilities, coal mining and oil and gas extraction, industries that have received significant government investment—comprised about 1.27 million workers in 2007.

Pew  produced state-by-state accounts of green jobs, a great way to publicize the issue in local media, and so lots of reporters called in to a telephone news conference announcing the results.

“It isn’t just California,” Pew’s Lori Grange said. “Every state has a piece of the clean energy economy….Trends point to explosive growth in this sector.” States like Ohio, Texas and Pennsylvania all added significant numbers of green jobs during the decade, she noted.

Buttressing that view was venture capitalist David Prend of Rockport Capital. “I believe we’re just in the first inning of this growth,” he said. “Clean technology is where infotech was 30 years ago and biotech was, maybe, 20 years ago.”

Let’s hope he’s right. I’d love to see clean technology grow and create millions of jobs. The question is, what’s the best way to spur that growth? And how deeply should the government be involved? Those questions are outside the purview of the Pew report.

Don’t forget: It’s relatively easy for the government to help spur the creation of new jobs. It can spend money on any number of things—schools, day care centers, social services for the elderly, roads, police, fighting in Iraq and Afghanistan. Jobs will follow. It can rescue GM or Chrysler, as it has, and save jobs, at least for now.

But it’s my view that questions about government policy are best examined on their own merits—and not through the narrow prism of “jobs.”

If it’s important for governments to deal with the threat of climate change—and of course it is—then the government should do what it needs to do.

If passing a cap-and-trade scheme, or subsidizing solar power, or setting efficiency standards for appliances will also help create new jobs, terrific. But if they don’t, they may be worth doing anyway.

Second thoughts on green jobs (and economists)

Here’s how page one of Saturday’s Wall Street Journal covered the big climate news from the EPA:

The Obama administration declared Friday that carbon dioxide and five other industrial emissions threaten the planet. The landmark decision lays the groundwork for federal efforts to cap carbon emissions—at a potential cost of billions of dollars to businesses and government.

The question of cost will dominate the climate debate in the weeks and months ahead. We’re mostly done arguing about climate science, thank goodness. Climate change is real. It’s here. It’s probably worse than most people understand. (As the amazingly prolific blogger Joe Romm wrote last week.) The questions now are all about money. If we choose to curb emissions, what will it cost? Who will pay? What will mean for to gasoline and electricity prices? What about jobs? These questions will decide one of the biggest fights Washington has seen in years.

Last week, I offered a few thoughts on the jobs question in a blogpost called The phony green jobs debate that made its way around the Internet and caused a kerfluffle. I argued, essentially, that the claims of environmental groups that climate regulation would create a wave of green jobs (especially in a couple of 30-second TV ads) were overblown and that it would be both more honest and more effective to engage people in a discussion of the costs and benefits of climate regulation. David Yarnold of the Environmental Defense Fund responded with his own blogpost. Folks in NRDC ‘s climate operation were displeased, as was economist Bob Pollin of the Political Economy Research Institute (PERI) at the University of Massachusetts, who has written widely about green jobs. (Disclosure: I’ve done freelance work for EDF and NRDC.) Evidently, I touched a nerve.

In retrospect, I think I was unfair to EDF, NRDC and to Pollin in at least one respect and for that I’m sorry. I lumped together the EDF and NRDC 30-second ads and Pollin’s analysis with a study from the Heritage Foundation and a report called Green Jobs Myths from the University of Illinois College of Law. The fact is, the Heritage study has been discredited (which I noted) and Pollin himself wrote an extensive rebuttal to Illinois study (which I didn’t know, because I didn’t ask him about it). By email, Pollin said:

In my view, the role of good journalism is not simply to seek out a safe middle position between contending positions, and quote someone who presents that safe, if unsubstantiated middle position.  The real job of serious journalism is to try to figure out whether one of the positions is right.  I haven’t seen anyone, including you, refute the main findings of my research.

He also wrote:

building a clean energy economy is a big source of job creation relative to spending money on fossil fuels.  The reason has nothing to do with “green” anything in particular.  It rather has to do with the shift to relatively more labor intensive activities, and to activities that have a higher domestic content and lower import content.  These basic results from my research have nothing to do with forecasting per se.  They fall right out of the industrial surveys of U.S. businesses, as organized by the Department of Commerce in their input-output models.

Both points are well taken. Pollin’s work is carefully done and as best as I can tell (see-I’ve learned my lesson) he’s right that no one has refuted him. So it stands to reason that any climate policy that moves us away from fossil fuels and towards clean energy and efficiency will be a net creator of jobs. What’s more, to the degree that a stimulus package or cap-and-trade program promote energy efficiency, they will help companies and individuals become more productive and less wasteful. That, too, should help create jobs. Of course, jobs will also be lost along the way—just not as many, if Pollin is right. Some manufacturing could leave the U.S. for countries without carbon caps or taxes. Building more Priuses might mean building fewer Hummers. More solar jobs might mean less coal jobs. Or so we can hope.

Having said that, I’m going to stand by my two main arguments about climate change economics. The first is that we need to be mindful about how little we understand about the economy, and how hard it is to forecast the future. That’s because unlike, say, physics or medicine, economics is a “science” in which it is all but impossible to do controlled experiments on a grand scale. There are too many moving parts. Economists still can’t agree on how and why the Great Depression ended. No wonder they didn’t forecast the Great Recession. On even as “simple” a matter as forecasting the price of oil—where you can extrapolate demand and know a fair bit about supply–their track record is horrible.

Peter Coy of Business Week had a big story the other day with the headline “Hey Economic Geniuses! What happened?” Among other things it said:

The rap on economists, only somewhat exaggerated, is that they are overconfident, unrealistic, and political. They claim a precision that neither their raw material nor their skill warrants. Too many assume that people behave like the mythical homo economicus, who is hyperrational and omniscient….

Critics are scathing. Nassim Nicholas Taleb, the scholar of rare events who wrote Fooled by Randomness and The Black Swan, says: “We have to build a society that doesn’t depend on forecasts by idiotic economists.” Says Paul Wilmott, a quantitative finance expert: “Economists’ models are just awful. They completely forget how important the human element is.”

I’m not suggesting we ignore economists. Most of the ones I know are smart and well-intentioned. Some of my best friends….oh, never mind. But I am saying that we approach them with a skeptical mindset, especially on an issue as fiendishly complex as the economics of climate change.

Bob Pollin pointed me to an appendix (PDF available here and surprisingly interesting) of one of his jobs reports where he makes a similar point:

Conducting economic forecasts through formal econometric models can produce useful information and predictions. However, by necessity, all such models must work with strong simplifying assumptions, since the actual operations of the U.S. economy are far too complex to be represented in full by any model. The difficulties in working with such models are compounded by the attempt not merely to describe the economy as it functions at present, but to attempt to predict how its operations will evolve into the future. The reason this is so difficult is because basic features of the economy’s future growth path are simply un-knowable at the time the forecasts are produced.

He goes on to write that “these problems deepen in the case of attempting to forecast the effects of cap-and-trade legislation on the U.S. economy over time.” So beware of economists bearing forecasts!

I’m also sticking with my second argument: That it’s a mistake for environmental groups to suggest or imply that climate change regulation will be cost-free. Now hold your fire, NRDC and EDF—I’m aware that you do serious work that acknowledges the costs of climate regulation. I’m a regular reader and fan of NRDC’s Switchboard and EDF’S Climate 411 where I learn from people like Laurie Johnson and Andy Stevenson and Gernot Wagner.

But in their political communications—emails, press releases and 30-second ads—the rhetoric can get overheated. So much so that the environmental groups could be putting their credibility at risk. Some headlines  and excerpts from NRDC, EDF and the Blue Green Alliance, an enviro-labor coalition:

Green Investment Creates Enormous Economic Opportunities: New Report Says U.S. Can Create Two Million Jobs in Two Years with Green Investment

Capping carbon is … an investment in our economy that will transform our energy sources and create millions of new jobs.

The President’s plan [on auto emissions standards] —including the next step of a cap on carbon pollution—means more new jobs, a rebirth for the American auto industry, and less global warming pollution.

A rebirth for the American auto industry! What’s next? Cap-and-trade as a weight-loss aid?

Environmentalists like to say that cap-and-trade is a win-win-win. Reduce the threat of global warming. Create “green” jobs. And lessen our dependence on foreign oil.

All true, but it’s also true that cap-and-trade will raise the price of gasoline and electricity. That’s what people mean when they talk about “putting a price on carbon.” That’s a good thing. It will encourage people and companies to use less coal and oil, and it will make low-carbon energy sources like wind, solar and nuclear more competitive.

Maybe I’m sounding too much like a reporter here. I’m asking advocates for cap-and-trade to acknowledge that the policy will cost some people their jobs, require others to stretch their household budgets, runs the risk of putting U.S. companies at a disadvantage if China and India don’t go along and, worst of all, might not even do the job of avoiding the worst impacts of global warming.

Guess what? We should do cap-and-trade anyway because, whatever the costs of action, the costs of inaction will be higher. As economist Frank Ackerman of Tufts said the other day on an NRDC call, the question of whether we should spend money to fight global warming isn’t like the question of whether you should spend money to buy a new car this year or wait until next. It’s more like the question of whether you want to repair the ever-widening cracks in the foundation of your house. This is serious, folks, and delay or indecision will only raise our costs. You don’t have to be an economist to know that.

The phony green jobs debate

As the battle over climate change legislation heats up, several Big Green groups–the Environmental Defense Fund, the Natural Resources Defense Council and the Sierra Club–are rolling out TV and Internet ads designed to persuade voters that regulating greenhouse gas emissions will create green jobs. David Yarnold, the president of EDF’s Action Fund, sums up the message in an email: “Carbon Caps = Hard Hats.” Clever. Here’s an ad from EDF’s campaign, launched in partnership with the United Steelworkers union and the Blue Green alliance, a group of enviromental groups and unions.
Think of this ad, and the one below, as the “Harry and Louise” ads of the campaign to pass global warming legislation. You remember Harry and Louise, right? They were the couple who turned a devilishly complicated issue, health care reform, into a soundbite (“If we let the government choose, we lose”) and helped kill the 1994 Clinton health plan. These ads take what may be an even more devilishly complicated issue, climate change regulation, and use images of brawny construction workers to turn it into an even shorter soundbite: “Green jobs.” Take a look at this spot from The Blue Green Alliance:

Maybe I missed it, but did you hear an environmental message in either of those ads?

Of course, there’s research to support the claims about green jobs. In the interests of full disclosure, I need to say here that I’ve been doing some freelance work for EDF and NRDC—organizations I admire a great deal. But these claims about green jobs deserve greater scrutiny.

Last June, for example, the Blue Green Alliance, Sierra Club, NRDC and the steelworkers issued a green jobs report from the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. It said:

…millions of U.S. workers—across a wide range of familiar occupations, states, and income and skill levels—will benefit from the project of defeating global warming and transforming the United States into a green economy.

A second report from PERI, issued last September under the auspices of the Center for American Progress, got more granular. In my home state of Maryland, for example, the authors project that a $100 billion green economic recovery program would create 36,739 jobs. They would be created in such industries as building retrofitting, mass transit and freight rail, smart grid, wind power, solar power and advanced biofuels.

It sounds great, doesn’t it?

Not according to the four lawyers and economists who produced “7 Myths About Green Jobs,” a 97-page report published by the University of Illinois College of Law.  They argue that “the green jobs literature is rife with internal contradictions, vague terminology, dubious science, and ignorance of basic economic principles.” Studies by conservative think tanks go further, claiming that climate legislation will destroy millions of jobs. A 2008 Heritage Foundation study claimed that passage of last year’s Lieberman-Warner bill would create “extraordinary perils for the American economy” and cause annual job losses of between 500,000 and 1,000,000 after a few years of job gains. (This report was pretty thoroughly discredited by NRDC.) The best thing I’ve read about this debate (and one of the most balanced) is this fine Slate article by Eric Pooley, my former editor at FORTUNE, who finds that there’s an emerging economic consensus that the costs of dealing with climate change are significant but manageable–and that given the risks, those costs are likely worth paying.

My point here is not that economists disagree. My point is that the climate change debate shouldn’t be about green jobs. It’s intellectually dishonest to pretend that we can forecast, with any degree of accuracy, the impact of a complicated government policy on a dynamic global economy decades into the future. Both sides know that their projections are based on a host of assumptions which may or may not come true. What if we decide as a nation to turn to nuclear energy as a source of low-carbon power? That probably won’t create many long-term jobs. What if there’s a breakthrough in the solar PV business in China? That may not bring green jobs here. Are farmers who grow corn for ethanol doing green jobs? That hasn’t turned out so well.

Let’s get real: We can’t predict oil prices 12 months out. Last spring, virtually no one anticipated the global financial crisis of last fall. And we are projecting the number of green jobs that will be created or lost on a state-by-state basis by a law that won’t take effect until 2012? Who are we kidding?

I called Russ Roberts, an economist at George Mason University who hosts the fine EconTalk podcast, for some guidance on how to think about green jobs and the economics of climate regulation.  “Creating green jobs is easy,” he told me. “We could employ millions of people picking up litter, and we could make them very good-paying jobs if we want. But of course that would make us poorer as a nation. There’s a cost to providing those jobs that would have to be borne by other people in the economy.”

It’s not just the cost of higher taxes that needs to be factored into the equation, he noted. To the degree that the government makes policy that favors, say, vast construction of wind turbines throughout the upper Midwest, the people doing those jobs will be drawn from somewhere else, maybe even from more productive work. If policy leads to the hiring of  thousands of contractors to do energy efficiency, the cost of building a new home or renovating your basement may go up because many of the good construction workers are busy.

“As voters and citizens and readers, what we want to think about is the big picture—are we moving in the right direction when it comes to environmental policy?” Roberts says. Put another way, are we spending enough money today to head off the threat of global warming in the future? Because if anyone tells you that we can deal with climate change at no cost, they probably shouldn’t be trusted.

Maybe that’s what bothers me about the green jobs ads. They’re like political campaign ads. They promise something for nothing. They treat the voters like children. They’re emotional and not educational. And they’re not helping to build a movement around climate change.

Other than that, they’re fine.

And I do hope they work.