The false promise of green jobs

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“Wchicken i think climate, I think jobs – good wages, union jobs,” says Joe Biden, the American president. Ursula von der Leyen, head of the European Commission, says her “Green Deal” offers a “healthy planet” for future generations, as well as “good jobs and a solemn promise to leave no one behind”. . Sir Keir Starmer, Britain’s next prime minister, is pledging to support “a new energy company that will use Britain’s clean power for good British jobs”. The state intervenes. The planet will be saved. Jobs will come. And they will be good.

Politicians across the rich world agree that industrial policy—wheels aimed at changing the structure of the economy by boosting certain sectors—deserves a return. Almost everyone agrees that it should focus on climate change. But does it really make sense to combine the two? Industrial policy seeks prosperity in the form of economic growth and jobs; climate policy aims at lower emissions and prevention of global warming. Marrying two goals often means not doing well. As politicians pour trillions of dollars into green business policy, they increasingly have to choose between the two goals.

The argument for any climate change action starts with externalities (those costs or benefits that are not the responsibility of producers). A market is needed for pollution, because greenhouse gas emissions are cheap. So there is an oversupply, despite the fact that it hurts other people. One way to deal with this is by putting a price on carbon, as many countries are doing. But doing so could encourage investment in making dirty technologies more efficient, thereby allowing fossil fuels to extend their lead over clean technology.

Carbon pricing must therefore be combined with subsidies for clean technology research. In a paper published in 2016, Daron Acemoglu of the Massachusetts Institute of Technology and colleagues argue that under such a regime, subsidies would do most of the work in redirecting technological progress to energy. clean Only after alternatives to polluting technology become better and cheaper would carbon pricing take over by promoting them.

Would such a regime, even if it were sensible, satisfy the political desire for green jobs? Consider a lithium-ion battery, which powers electric vehicles. In 2019 the Nobel Prize in Chemistry went to three scientists for its development: John Goodenough, then at the University of Oxford, a British university; Stanley Whittingham of ExxonMobil, an American oil company; and Yoshino Akira of Asahi Kasei, a Japanese chemical company. But none of these countries control the production of such batteries. China does. Research produces its own set of externalities (positive ones), as knowledge tends to be shared. Since companies would prefer not to give competitors a chance, that leaves it out of supply.

The most effective climate change policy – taxing carbon and subsidizing research – is misguided. As Dani Rodrik of Harvard University, an advocate of industrial policy, has noted, the social return of investing in green research is not only higher than the private, so the international return is higher than the national one – meaning that both companies and governments tend not to invest in it. So the greenest policies may not create many jobs. In contrast, green policies that create jobs may at least have the merit of persuading voters to accept climate action at the expense of things that benefit other countries.

But as the rich world continues down this path, problems arise. Economists have traditionally criticized industrial policy on the grounds that governments are bad at it. Their inadequacy comes in two forms. First, politicians struggle to “pick winners”. They don’t have the ability to know which technology will win. Although the American government in the late 2000s offered a loan guarantee to Tesla, which eventually emerged as a successful electric car maker, it also offered support to Solyndra, a solar power company that went bankrupt. This lack of knowledge among politicians contributes to the second problem: rent seeking. Business policy offers a way for companies to capture public money through lobbying. Governments don’t cut off failing businesses, because that means admitting they lost public money in the first place.

The new economics of industrial policy, as put forward by Reka Juhasz of the University of British Columbia, Nathan Lane of the University of Oxford and Mr. Rodrik in a paper this year, rests on the idea that these problems can be solved or be resolved. to exaggerate A disciplined government that cuts down on bad investment can avoid waste. Clarity and transparency when it comes to the goals of politicians will help to weed out weak companies.

Hitting a beat

Maybe. But this is where climate and industrial policy become uneasy bedfellows. A company could deliver good jobs without being greener than its competitors. Is that a failure or a success? Is it worth an investment that cuts emissions while displacing workers? In addition, it is unclear whether, say, guaranteeing a loan to a loss-making cleantech company, such as a bailout for German wind turbine maker Siemens Gamesa, is confirmed on November 14, throwing good money. after bad or investment in climate. Recent strikes by American carmakers were partly motivated by the belief that manufacturing cleaner electric vehicles would mean fewer jobs than assembling their petrol-powered counterparts – a situation difficult for a government committed to a green business policy. Such a policy aims to improve international competitiveness, deliver high-paid work, make the economy grow, revitalize the poorest areas and cut emissions at the same time. In reality, these goals are often in conflict.

The more ambitious the business policy becomes, the harder it will be for politicians to exercise the discipline that advocates say is needed. Many governments, including America, also want industrial policy to strengthen national security, for example. Taken together, these goals risk an almighty mess.

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