March 3, 2010
By Stephen Murgatroyd
EDMONTON, AB, Mar. 3, 2010, Troy Media/ — There is a strong claim by politicians in a variety of countries that climate change policies and regulation, coupled with investments in green technologies, will create green jobs. Former US Vice President Al Gore suggests that the right kind of strategy could create 1.7 million US jobs. Michael Ignatieff, Canada’s Liberal leader, suggests that Canada could create, well a lot of green energy jobs with the right policies – cap and trade, investments in a smart-grid, non fossil fuel power policy and carbon taxes. British Prime Minister Gordon Brown speaks of 400,000 green jobs in eight years.
These claims are based, in part at least, on the 2007 IPCC Fourth Assessment Report, especially Chapter 11, which looks at the economic costs and opportunities linked to climate change action. Unfortunately, this chapter did not go through the normal double review process the IPCC always says is the hallmark of its quality assurance process. Had it done so, some key problems may have been caught.
Position supported by few peer-reviewed papers
The first problem is that there are few peer-reviewed papers which support the position taken in the summary for Chapter 11 in the Summary for Policy Makers associated with the IPCC fourth assessment. One of the authors of several IPCC documents and one of the world’s top economists, Richard Tol, has suggested that the basis for many of the claims are from so-called “grey” literature – magazines, pamphlets and other documents – rather than peer-reviewed literature. Despite the IPCC’s claims that its processes focus only on peer reviewed cases, it is now obvious from this and other chapters in the report that this is simply untrue.
The second problem is that a skeptical and thorough review would have revealed that the claims made for the economic impacts of carbon mitigation and other measures are based on computer models and simulations which are, in turn, based on the assumptions made by the modellers. One of the assumptions made is that policies on the environment will always be smart and well designed – something it is difficult to imagine coming out of the US Senate. In fact, one peer reviewed study of the EU policy to reduce CO2 emission by 20 per cent by 2020 – states that it is poorly designed as a strategy and will cost more than twice the amount needed to achieve the outcome, with a resultant loss of jobs.
The third problem is that some of the caveats disappeared between the various drafts for Chapter 11. For example, a key assumption in some models is that revenues from carbon taxes and emission permit auctions will be used to reduce taxes on labour. However if, instead of using this revenue to reduce taxes it is used to invest in technology (which is what US President Barack Obama plans), then jobs will be lost. Furthermore, there is no positive impact on employment and job creation if emission reductions are achieved by subsidies for renewables or if emission permits are given away for free, two actions commonplace amongst governments. Just look at Spain: According to a study released in 2009, for every “green job” created with government money over the last eight years 2.2 regular jobs were lost, and only one in 10 of the newly created green jobs became a permanent job (READ Taking the wind out of wind power).
Dr. Gabriel Calzada, an economics professor at Juan Carlos University in Madrid, wrote in his report Study of the Effects on Employment of Public Aid to Renewable Energy Sources that the United States should expect similar results: “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 nine jobs lost for every four created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.”
So we now have an uncertain basis for predictions with respect to green job growth, a string of caveats which, when taken together, suggest a high degree of risk in the predictions and firm evidence from the Spanish experience that the risk associated with a strong push for a green job economy are very serious indeed – especially now that Spain, together with Greece, Ireland and Portugal are on the EU’s “critical list” in terms of economic well being.
But don’t panic, some politicians say. We have another source for our confidence: the Stern Report, released in 2004. A political document (it came from the UK Finance Ministry), it suggests that tackling climate change will cost 20 times less than doing nothing, which actually underpins the Britain government’s policies, such as emission trading or energy-efficiency actions. The report also suggests that such policies will create a green economy, with thousands of new jobs.
But in a thorough review of the Stern Report, Richard Tol maintains that it uses only the most pessimistic impact studies, starts from a too-low discount rate and has no real cost-benefit analysis.
Stern Report “incompetent”
Calling the report “alarmist and incompetent,” Tol’ main criticisms of the Stern report are:
(a) the Stern Review Team used the scientific literature selectively and the bias systematically favoured the worst case scenario;
(b) they made technical errors (counting risks twice over, refusing to take into consideration the considerable attenuation of net damages obtainable via adaptation strategies, forgetting some of the economic costs of prevention policies, discrepancies between the damages as described and economic growth assumptions, in Africa in particular, etc.); and
(c) they manipulated the economic concepts and tools, in particular the discount rate, so as to paint the most alarming picture of expected damages if the international community failed to take early energetic action. Tol’s analysis, which is thorough, explores the implications of these problems in detail.
What are we to make of all of this? It is simple – we are being asked to place a bet but with a high level of risk that it may have the opposite impact to that intended (again, see Spain). The bet will involve a massive new tax, cap and trade regime and lifestyle changes in the hope that a large number of new green jobs will be created. Don’t you think we should demand better evidence that it will work? All of the evidence suggests that it is not a simple equation – green policies don’t equal green jobs. It is time for a real debate.
Channels: The Calgary Beacon, March 4, Epoch Times, March 17, the Montreal Gazette, April 1, 2010