Creating jobs in industries that depend on government assistance is not a sustainable way to stimulate the economy. Alternative energy, such as solar power, might not exist if it wasn’t being subsidized by taxpayers. Navigant Consulting estimated that if federal tax credits for solar power and wind energy were discontinued, these industries would lose 77 percent of their employees. According to the Energy Information Administration, solar and wind energy receive over 50 times more in subsidies per MWH than coal, and nearly 100 times more than natural gas.
On top of federal subsidies, Pennsylvania has “invested” nearly $1 billion in renewable energy projects. According to Gov. Rendell, this has put only 8,300 people to work while costing taxpayers over $120,000 per green job. Dan Kerr, a mechanical contractor specializing in alternative energy projects, admitted he doesn’t see “tax/rate payer provider funds truly making renewable energy projects more affordable over the long haul. Unless we see dramatic improvements in solar and wind technologies, they will continue to need an artificial boost through government mandates and incentives.”
Moreover, these subsidies aren’t actually creating jobs, on the whole. A Spanish study concluded that subsidizing renewable energy leads to a loss of 2.2 jobs for every one green job created. The study also found Spain needs to increase the cost of electricity by 31 percent to pay for its deficit, largely caused by renewable energy subsidies. Spain’s unemployment is 19 percent, indicating green job growth is not an effective way to stimulate an economy. A similar study in Italy found each green job displaced 4.8 jobs in the overall economy.
Legislation in Pennsylvania, such as House Bill 80 and House Bill 2405, would dig the hole deeper by mandating that utility companies purchase even more electricity from alternative sources than they are already required.
Alternative energy mandates arbitrarily decide which energy sources are “green.” Clean energy such as nuclear power and natural gas-which have minimal carbon dioxide emissions-do not make the list, while expensive sources like wind and solar do. Such bills replace sustainable energy jobs with jobs that are entirely dependent on taxpayer-funded subsidies, based on who has the best lobbyists.
Additionally, mandates kill jobs by raising electricity prices. States with binding renewable portfolio standards, like Pennsylvania, have electricity rates that are nearly 40 percent higher than states with no mandate. While state electricity costs are affected by other factors, alternative energy mandates necessitate higher energy prices. Pennsylvania’s utility companies predict that HB 80 will add between $9 billion and $12 billion to electricity costs to meet proposed mandates by 2024.
Proponents for such mandates cite a study by Black and Veatch which claims HB 80 will boost the economy and create thousands of jobs. However, this study is based on faulty assumptions and fails to look at the other side of the ledger. These include presuming passage of federal Cap and Trade legislation, which would make fossil energy more expensive (and alternative sources more competitive) and assuming federal and state subsidies for alternative fuels continue.
If the government levies heavy taxes on traditional energy sources and provides subsidies and tax credits to renewable projects, it will create more jobs in such fields. However, job losses in the traditional sectors hit with new taxes will far exceed the number of new “green jobs.” The Heritage Foundation estimated Pennsylvania, a state that gets nearly 50 percent of its energy from coal, will lose 46,762 jobs between 2012 and 2035 if Cap and Trade is passed.
A focus on green jobs discourages overall economic growth by redistributing private sector wealth to uncompetitive and unsustainable energy providers. Higher electricity prices hurt small businesses, resulting in fewer jobs. The plan to heavily subsidize “green” energy sources while simultaneously mandating their use is a prescription for economic decline rather than prosperity.
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Katrina Currie is a Research Associate for the Commonwealth Foundation (www.CommonwealthFoundation.org), a public policy education and research institute located in Harrisburg.