The Center for American Progress has released a new study [.pdf] to much fanfare from the usual suspects. The study’s title says it all: “Out of the Running? How Germany, Spain, and China Are Seizing the Energy Opportunity and Why the United States Risks Getting Left Behind.”
In this context, of course, “seizing the energy opportunity” means that the government seizes tax dollars to help private companies invest in inefficient energy projects that could not survive in a free market. As your mother always told you, just because all the cool countries are jumping off an energy-boondoggle cliff, doesn’t mean Americans should too. It’s good to be “left behind” with all the affordable energy provided by fossil fuels.
CAP’s Vision
The Center for American Progress (CAP) study summarizes the apparently dire situation:
By 2020, clean energy will be one of the world’s biggest industries, totaling as much as $2.3 trillion.1 Over the past year, other countries made huge investments to seize the economic opportunity provided by the historic shift from fossil-based energy to renewable, low-waste electricity and fuel. These investments weren’t made out of thin air, but were a result of intentional public policies, which in turn provided a strong stimulus for new public and private investment in new clean-energy markets, infrastructure, and human resources. (p. 1, emphasis added)
We agree on one thing: The investments in inefficient energies didn’t come out of thin air. On the contrary, the type of “clean energy” programs that CAP is pushing would rely on money taken from taxpayers. Even private funding would largely be driven by government mandates that artificially penalize traditional energy sources.
[China, Germany, and Spain] invested in clean energy for short-term benefits and laid a solid foundation for future sustainable economic growth by either setting a price on carbon or implementing strong national energy performance standards or both, thus spurring innovation in new technologies that lower carbon emissions. A 2009 study by the CERNA Research Program on Technology Transfer and Climate Change found clear evidence that developed countries that ratified the Kyoto Protocol—each of which set a legally binding target to reduce its carbon emissions—saw a rise in green-tech innovation patents of more than 33 percent…Developed nations that didn’t initially ratify Kyoto—the United States and Australia—saw no noticeable change in their share of total green tech patents over the same time period. (pp. 1-2, emphasis added)
It is not surprising that when governments pick winners and losers in the energy sector, the winners do better. The CAP study simply takes for granted that the economy should be moving away from fossil fuels and into politically favored technologies, such as wind and solar. But if those are the wrong sectors to expand—at least for now—then the boost in patents in “green-tech” isn’t a blessing, but a curse. By the same token, if the government banned automobiles tomorrow, that would no doubt stimulate a flurry of patents in ten-speed bicycles and Conestoga wagons. This wouldn’t signal US leadership, it would just be silly and wasteful.
The same is true for “green-tech” investments. If the government places artificial penalties on high-carbon energy sources, then the country will be poorer in conventional terms, such as GDP or per capita income. Now, if the scholars at CAP want to argue that this impoverishment is worth it to avoid global warming, then they should go ahead and make that argument.
But the scholars at CAP know that the American people wouldn’t go for such a sales pitch, especially in the midst of a deep recession and unemployment hovering at 10 percent. That’s why CAP’s spin doctors say we can have our green cake and eat it too. They claim that not only will switching to less efficient energy sources (like solar and wind) save the planet, but it will also spur new job creation.
Ironically, Lindsay Graham himself let the marketing cat out of the bag, as quoted in the New York Times:
“The momentum around this large cap-and-trade bill to save the planet has been replaced by a business model: How do we create jobs and stay ahead of the Chinese and clean up the air?” Graham said earlier this week…”Once you start changing your perspective from ‘Iowa is going to be beachfront property’ to ‘How do you create jobs and clean up the air?’ you have a completely different focus,” he added.
US First Among Lemmings?
It is amazing that the green-energy boosters continue to cite Spain as a success story, despite the fact that their unemployment rate in December was more than 19 percent. The famous Calzada et al. study has chronicled the unsustainable bubble in Spanish renewables, a bubble inflated by government subsidies and mandates that popped once the support was only slightly scaled back.
Germany’s 8.2 percent unemployment is a tad better than the United States’. But this doesn’t surprise us, as the German government has been warning against runaway “stimulus” spending. German Chancellor Merkel’s government has been more fiscally responsible than the Obama Administration; of course their economy is on a better footing at the moment.
As for China, we also note that they are adding one coal-fired power plant a week, a nuclear plant a month, and are in the process of constructing the largest hydroelectric dams known to man. Will CAP put out a study warning that the US will get left behind in the scramble for coal, nuclear and hydropower? (CAP congratulates China for 16% of its power being from hydropower and wind, failing to mention that 95% of that combo is hydropower, principally from the new Three Gorges Dam.)
The CAP study favorably cites the Chinese tariffs on foreign-made turbine components, which are in place to boost job growth in the Chinese wind sector. But, of course, this just places an obstacle in the way of American manufacturers trying to export renewable technology to China. Taken to its logical extreme, the CAP mindset would eliminate the benefits of international trade altogether, so that every country’s workforce had to produce everything internally. That would “create jobs,” no doubt, but in the same way that a household would keep really busy if it had to grow its own food and sew its own clothes.
Conclusion
The CAP study urges the U.S. government to copy the worst economic ideas from around the world. When the government picks winners and losers, it doesn’t create wealth or jobs in the long run. On the contrary, government micromanagement will simply divert resources from efficient energy sources into inefficient ones. This will raise energy prices for consumers and retard job growth.
At some point down the road, it might make economic sense for the country to switch away from fossil fuels towards renewable technologies. But it doesn’t make sense right now. The proof is that private investors aren’t willing to put their own money on the line; they want the government to force taxpayers to foot the bill.
As Ben Lieberman of the Heritage Foundation observed, Americans shouldn’t be worried when other countries are “ahead of us” as they run off a cliff
