Are Green Jobs an Economic Black Hole?


President Obama in a speech at the Southern California Edison Electric Vehicle Technical Center last month favorably cited Spain as an example of how to boost an economy by creating green jobs. "Around the world, nations are racing to lead in these industries of the future…. Spain generates almost 30 percent of its power by harnessing the wind, while we manage less than one percent," said Obama. 

A new study by researchers at Spain's King Juan Carlos University suggests that the president may want to rethink Spain as a model for stimulating the economy with green jobs. Among the report's findings are:

[W]e find that for every renewable energy job that the State manages to finance, Spain's experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created…

while it is not possible to directly translate Spain's experience with exactitude to claim that the U.S. would lose at least 6.6 million to 11 million jobs, as a direct consequence were it to actually create 3 to 5 million "green jobs" as promised (in addition to the jobs lost due to the opportunity cost of private capital employed in renewable energy), the study clearly reveals the tendency that the U.S. should expect such an outcome…

The study calculates that since 2000 Spain spent €571,138 to create each "green job", including subsidies of more than €1 million per wind industry job…

Each "green" megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.

These costs do not appear to be unique to Spain's approach but instead are largely inherent in schemes to promote renewable energy sources.

Of course, one study does not prove that federal green job creation is an economic black hole, but a still small voice in your head should be asking, if governments are so good at creating jobs and picking winning technologies, why doesn't the Soviet Union still exist? 

Whole Spanish green jobs study is available here. Read it and weep. See also my colleague Jacob Sullum's excellent column on the dangers of green job fetishism here.