The high costs of green jobs

David Freddoso:

Spanish economist Gabriel Calzada caused the central economic planners' heads to explode in March 2009 when he released a study showing every "green job" the Spanish government was creating with its regime of open-ended subsidies was simultaneously devouring enough resources to create 2.2 jobs in Spain's private sector.
"Green jobs," the professor concluded, were economic losers, destroyers of wealth and productivity. What's worse, 70 percent of them were short-lived installation gigs, not long-term jobs at all.

Spain's socialist government, which had presented "green jobs" as the way out of the country's economic problems (perhaps that sounds familiar), reacted to Calzada's study with fury. The Industrial Ministry took the incredible step of trying to make his university disavow his work. But behind the scenes, the same government officials were quietly coming to the same conclusions as Calzada.

In the United States, Calzada's study upset the wind power lobby, environmentalists, and the Obama administration. American liberals tried to argue that Calzada had erred by doing what is obvious to everyone outside of government who uses money -- he accounted for the opportunity costs of government spending.

Imagine that -- an economist who doesn't assume that you can get something for nothing.

Since then, Calzada has been proven right in nearly every metric. Spain has a serious sovereign debt crisis -- not helped much by its commitment of 11 percent of Spain's gross domestic product to subsidize renewable energy. The renewables program will cost the Spanish crown four times what it had originally budgeted.


In reality, Calzada wasn't nearly bearish enough on green energy welfare. His study did not explore the consequences of the artificially high electricity prices the Spanish scheme has created for industry and residential customers.

He didn't try to measure the economic damage caused by misallocation of private investment. After all, thousands of Spaniards withdrew good investments and borrowed against home equity to install potentially worthless solar panels -- what if their capital had been invested to create real jobs instead of simply chasing government subsidies?

Green energy is inefficient energy. It costs more to produce and any potential payback is longer than the useful life of the equipment. The greenies try to compensate for this by driving up the cost of conventional carbon based energy. Manipulating markets is neve a sound economic policy.


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