GREEN GROWTH: FROM RELIGION TO REALITY - Sustainia

Chapter 1for new innovation and investment. Investments inenergy infrastructure depreciate over decades.176. Renewable energy does not, for the most part, offerimmediate competitive advantage to early adoptersthe way ICT investments did.Given these differences, the short-term focus on jobsis particularly damaging to the long-term prospects forgreen growth. Absent a renewed focus on how the investmentsin green energy might translate into broaderopportunities for the economy, the contribution of greeninvestment to growth—whether jobs, employment, orproductivity—will necessarily remain limited. In thiscontext, the real green growth challenge lies in how bestto structure and support markets for green investmentand innovation that can discover and express new opportunitiescreated by low-carbon energy for the economyas a whole. Anything less risks an energy policythat achieves only short-term job gains and may inadvertentlyprovoke a new wave of mercantilism in greenproducts.5.1 Mistaking jobs for growth: the myth of green jobsand the threat of green mercantilismIn the aftermath of the 2007-2009 financial crisis, the“green jobs” variant of the green growth argument gainedcurrency across the industrial world. United States PresidentBarack Obama, the European Union, and a rangeof American states and European countries have allsought to tie green energy investment to job creation.18As Barbier (2010) notes, this led to a significant quantityof economic stimulus funds directed to energy efficiency,renewable energy, and energy-related research anddevelopment. Support for these investments were buttressedby fears that insufficient domestic support for energyinvestment would lead to permanent disadvantagesin a new green technology frontier, particularly vis-à-visnew economic powerhouses like China.19"This emphasis on jobs and export competitivenessshould raise immediate concerns"This emphasis on jobs and export competitivenessshould raise immediate concerns on two fronts. First, afocus on job creation in the green energy sector alonecannot form the basis of sustained economic growth inadvanced industrial societies. If those jobs result fromKeynesian demand stimulus, as in 2007-2009, their viabilitynecessarily fades as the economy returns to fullemployment. But even if those jobs could stand on theirown, they would have limited potential for widespreademployment. As already discussed, those societies havefully built-out energy systems and relatively modestgrowth in energy demand. In this case “green jobs” willnecessarily replace “brown jobs” in operation of the energysystem; and the new “green jobs” created for the periodof system retrofitting will necessarily be short-lived, lastingonly as long as the retrofit itself. Finally, those “green”jobs will have limited impact on the overall employmentpicture, as they emphasize the energy sector alone ratherthan the economy as a whole.20 Thus even if the investmentin systems retrofits will lead to near-term job creation,the timeframe for those jobs is necessarily limited.The quality of those jobs is also open to criticism.Some argue that an investment in green electricity generatesmore jobs per unit installed capacity than an investmentin equivalent brown energy capacity.21 But this implicitlysuggests that the green energy industry achieves,at present, lower labor productivity than the fossil-fuelpower sector. If the goal is pure Keynesian job creation toemploy idle labor, then this justification may make sense.But as a long-term employment strategy, it cannot sustainhigh wages in advanced industrial economies.22Moreover, the quality of these jobs in high-wage advancedindustrial economies requires careful scrutiny.We can think of green jobs as coming in one of two categories:high-productivity producing the components ofthe energy system; and relatively lower-productivity jobsin the installation and servicing of these componentsand in other labor intensive domains such as energy efficiencyimprovements. The former, largely high productivitymanufacturing and design jobs, produce largelytraded goods. The latter, essentially construction andinstallation jobs, produce untraded goods. The advancedcountries’ stated goal of capturing the high-productivity“green collar” jobs as a path to industrial revitalizationhas given rise to risks of a new “green mercantilism.”Countries now openly express concerns that the failureto create domestic markets in green energy will lead toloss of global competitiveness, particularly to the developingworld. On the surface this is an excellent justificationfor domestic “green” investments. However, itrisks improper direct and indirect subsidies at home anda conflict over international access to markets abroad.This view of “green growth” as a zero-sum game portendsa counterproductive period of international competitionthat brings to mind the failures of the mercantile systemof the late 19th century or the import substitution periodof the mid-20th century.5.2 Beyond jobs and exports: systems transformationand sustained growthShort-term emphasis on green jobs or green export competitivenesswill not lay the foundations for the “greenindustrial revolution” predicted by advocates of greengrowth. But as we have seen, systemic investment in disruptivetechnological innovation may create new opportunitiesthroughout the economy. Industrial history providesmany examples, beyond ICT, of situations whereinnovations in one sector or technology domain enableddramatic growth in the rest of the economy. These examplesunderpin much of our understanding about the connectionbetween disruptive technologies and long-termeconomic growth. A few examples23 will suffice:• Steam power, which dramatically altered the amount of17 Varun Rai, David Victor, andMark Thurber make this point forcarbon capture and sequestrationin particular. The large financialand technological risks that CCSpresents, coupled with the hugeinvestment cost and regulatoryuncertainty, promise to forestallinnovation and investment. SeeRai, Victor, and Thurber, “Carboncapture and storage at scale: Lessonsfrom the growth of analogousenergy technologies” Energy Policy38(8), pp 4089-4098.18 For the European Union,see The European Commission(2007). For the Danish emphasison job creation from renewableenergy, see The Danish Government(2011). For related argumentsfrom prominent figures inthe public debate, see Jones (2008)and the European Green Party(2009).19 Chinese competition in renewableenergy industries featuredheavily in this debate. In 2010, theUnited States referred China to theWorld Trade Organization on thebasis of allegations that its subsidiesto its domestic wind turbineindustry constituted unlawful stateaid. China’s rapid expansion of capacityin renewable energy also ledit to capture 90% of the Californiasolar cell market. For the solarmarket, see Woody (2010) “Chinasnaps up California Solar Market”,The New York Times GreenBlog, 14 January, at http://green.blogs.nytimes.com/2010/01/14/china-snaps-up-california-solarmarket/#more-38129.For China’srapidly emerging wind industry,and Western responses, see KeithBradsher (2010), “To conquerwind power, China writes the rules”,The New York Times, 15 December2010, page A1; and MarkScott (2010), “GE, Vestas fall behindin China’s ‘Tough’ wind market”,The New York Times, 14 May.20 The scale of the energy sectorpoints to the limits of job creationin that sector alone. For instance,Denmark obtains about 10% of itsoverall exports from its wind energysector. But that sector employsonly 24,000 people, or about 1%of the Danish workforce. In mostWestern economies, the total valueof energy consumption runs about2-4% of GDP; not insignificant,but also not very large comparedwith the economy as a whole. Assuch, betting on massive job creationthrough renewable energyrings hollow.21 Daniel M. Kammen and DietlevEngel (2009) “Green Jobs and theClean Energy Economy” ThoughtLeadership Papers Series No. 4,Copenhagen Climate Council. Athttp://www.copenhagenclimatecouncil.com/dumpfile.php?file=ZmlsZWJveC8xODk=&filename=VExTMDQgX0dyZWVuSm9icy5wZGY=. Last referenced 1 March2011.10