One of my “favourite” authors writing extensively on the economics of climate change, Bjørn Lomborg, has attacked in his new article those who are predicting that the transition of economies to “green” ones is going to create a lot of new jobs – “green jobs”, as they are called. I am not a specialist in the area of job markets, but I would like to point out some flaws in Mr Lomborg’s argumentation.
Here is the first part of the argumentation I can’t let uncommented:
The fundamental problem is that green-energy technologies are still very inefficient and expensive compared to fossil fuels. Deploying less efficient, more expensive alternative-energy sources will hurt businesses and consumers, not help them.
If one considers market prices, Mr Lomborg is fairly right: although biomass and wind are becoming ever cheaper, green energies (especially solar energy) is very expensive compared to fossil fuels. But why is it? Because the market prices for fossil fuels don’t reflect their true costs: be it environmental ones (contribution to global warming through the whole life cycle; emissions of poisonous substances other than CO2; destruction of biotops at extraction sites – either through catastrophes (Gulf of Mexico), or, more often, through “normal” procedures, e.g. in the case of tar sands), be it health related ones (emissions of substances harmful to human beings, such as mercury, sulfur oxides, carbon monoxide…), be it economic ones (the dependence of especially industrial countries on fossil fuel imports), be it political ones (supporting regimes in the oil and gas exporting countries in order to sustain the needed supply). Furthermore, it is untrue that green energies are much more inefficient than fossil fuels: while a modern coal power plant has an efficiency factor of about 40-50%, for a hydro-electric power station it is about 60-90%, for wind mills it lies at over 50% (only solar energy sources in fact have lower factors).
The second point is about the impacts on productivity (and thus employment):
Alternative energy sources such as solar and wind create significantly more expensive fuel and electricity than traditional energy sources. Increasing the cost of electricity and fuel will hurt productivity, reduce overall employment, and cut the amount of disposable income that people have.
Let us ignore – for a moment – what I have written above. If one considers the matter in an isolated way, Mr Lomborg may be right. But since switching to green energies won’t solve the problem of global warming on its own, there is a need for a second strategy path: efficiency in energy usage (for those concerned with the “rebound effect”: you may read this and this). Increased efficiency in energy usage would ease, if not solve, the problem of decreased productivity in energy-intensive branches of the economy.
The third and last part of Mr Lomborg’s argumentation I would like to criticize is nothing new to those who have read some of his books:
Even if that is true, proponents might argue, investment in green jobs is nonetheless a good way to stimulate a sluggish economy. But [Gürcan] Gülen [the economists from whose analysis Lomborg drew his conclusions] shows that there are many other economic sectors, such as healthcare, that could actually create more jobs for the same amount of government investment.
Is that really an argument? Consequently treated it would mean that the State should invest (or incentivize investment) only in sectors where the returns are highest. But the actual task of the State’s investment (promotion) activities is to support those sectors that – normally – have few chances to be considered worth an investment by the markets. Furthermore, Mr Lomborg is suggesting (as is often the case) that there must be a trade-off: either the State is going to invest in green energies or in health care. But this is not true – it can, or actually must, be invested in both. That the one could create more jobs than the other doesn’t matter: or does Mr Lomborg want all of us to work in the health care sector? (to formulate it in a somewhat exaggerated way)
Lomborg’s conclusion is not really surprising (since this is his general conclusion in the climate change discussion):
In order for the whole planet to make a sustainable shift away from fossil fuels, we need to make low-carbon energy both cheaper and more efficient. That requires a substantial increase in research and development into next-generation green-energy alternatives. Today’s research budgets are tiny, and that desperately needs to change.
Would that be enough, I would say: great, Mr Lomborg. But investing in research and development won’t solve the global warming challenge. The reasons are manifold, but the most striking ones are: first, it is too late. We have to act now, instead of waiting for green energies to become as cheap as fossil fuels. Second, global warming is so huge a problem that we need a whole range of solutions – not just a single one.
The Sceptical Economist 