California's landmark climate law: Job killer or creator?
With the nation’s unemployment hovering near 10 percent, can we afford aggressive measures to reduce greenhouse gas emissions?
Proponents of Proposition 23 in California claim no. They claim that California should suspend its landmark climate and energy policy (AB 32) until its unemployment rate drops to 5.5 percent. Setting aside scientists’ warnings that we’re running out of time to address climate change, and setting aside the fact that the oil company funders of Proposition 23 also opposed AB 32 when it was passed in 2006, when California’s unemployment rate was lower than 5.5 percent, is there anything to be said for waiting until the employment picture looks less bleak?
Based on what economists have established about the relationship between climate policy and jobs, the answer is a resounding NO. There is surprising consensus among economists around the world (excepting those who work for right wing think tanks) on two main points:
1. Addressing climate change can lead to net job growth in the United States
With the U.S. likely facing high unemployment in coming years, green investments will create more jobs then other types of investment.
- Reduced oil imports would create jobs. Reducing oil imports can save hundreds of billions of dollars each year on imported oil. Rather than send this money abroad, it can be spent at home, creating jobs. A quick, back-of-the-envelope calculation [PDF] suggests that we have the potential to create 900,000 new jobs in the U.S. for every $100 billion decrease in oil imports.
- Carbon solutions invest in labor intensive domestic jobs and domestic resources. The solutions to climate change-ranging from renewable energy, to high-speed rail, to smart-grid investments, to sustainable biofuels-depend more on domestic resources, and also use more labor per dollar invested, than do fossil fuel alternatives. One recent study suggested that a switch towards carbon-reducing investment could create 1.7 million near term jobs.
- The United States can create jobs by re-assuming technology leadership. China is moving aggressively to capture leadership in solar, wind, high-speed rail, and other key clean energy solutions. But as recently as 1995, the U.S. was the technology leader in wind and ‘baseload solar’ — solar thermal. U.S. utilities today are purchasing these technologies from China, Denmark, and Spain. By reassuming technology leadership, and adopting a policy framework to support clean, homegrown energy industries, the U.S. can create new jobs by selling into an emerging, massive global market. Portugal’s recent success creating jobs by growing its own renewable energy industry demonstrates the tremendous possibilities.
- Investment in clean energy can mobilize capital to end the recession. The current downturn, resulting from the collapse of an asset bubble, is the hardest type from which to recover. In these types of recessions, self-corrective mechanisms are weak. Concerned about lack of future demand, businesses scale back investment, which has a multiplier effect, holding back recovery. A sustained national effort to rewire the country with clean energy, including a cap and trade system as a central driver, could mobilize large-scale private sector investment and initiate a positive feedback process whereby investment leads to jobs, which create higher income and demand, thereby generating greater investment, job creation, and economic growth over time. The case that carbon legislation can help end the recession was made recently by Economics Nobel Prize winner Paul Krugman.
2. Addressing climate change will not result in significant job loss
In spite of heated rhetoric claiming that past episodes of environmental regulation have been ‘job-killers,’ numerous independent studies show:
- Plant closings and layoffs as a result of environmental regulation are very rare. Repeated studies show that layoffs attributable to environmental regulations account for only 1/10th of 1 percent of all layoffs nationwide: around 1,000-3,000 jobs per year across the entire United States. For example, less than 7000 jobs were lost between 1990-1997 as a direct result of the Clean Air Act Amendments taking effect. Over that same period, 10 million U.S. workers were laid off for non-environmental reasons.
- Proposed climate legislation will not be costly and will have little overall negative impact on employment through 2030. In sharp contrast to the “sky-will-fall” claims of industry trade groups, independent academic and government studies of U.S. climate legislation, from MIT; Harvard’s Dale Jorgensen; the Energy Information Administration; The Research Triangle Institute; and the Department of Energy’s Pacific Northwest National Lab, see very low short-term costs and negligible impacts [PDF] on long-run job growth.
- Environmental spending creates jobs that offset losses. Compared to overall spending in the economy, on a per dollar basis, spending on environmental protection and clean-up employs twice as many workers in construction (11 versus 4 percent) and 25 percent more in manufacturing (20 versus 16 percent). A study [PDF] by Resources For the Future’s Morgenstern of the heavily regulated steel, petroleum, plastics, and pulp and paper industries concluded: “While environmental spending clearly has consequences for business and labor, the hypothesis that such spending significantly reduces employment in heavily polluting industries is not supported by the data.”
- Few firms flee the United States to “pollution havens” in poor countries. Environmental costs are generally below 2 percent [PDF] of total business costs. Firms that do leave the U.S. generally do so in pursuit of lower labor and health costs, expenditures forming a much higher percentage of their total costs. Economists searching for evidence [PDF] supporting widespread flight of polluting industries have not found significant effects. In the climate-change case, the handful of energy intensive industries that might be subject to competitive pressure from abroad can be shielded with World Trade Organization-sanctioned import tariffs.
- Climate action will heavily impact one group of workers: coal miners. With or without greenhouse gas controls, coal industry employment is predicted to fall significantly by 2025 as a result of mechanization. If carbon emissions are restricted, we are likely to see a further decline of jobs of about 1,500 per year. The nation has a clear obligation to invest heavily in adjustment assistance to help miners who lose from climate stabilization efforts.
Prop 23 is allegedly about saving jobs. But several decades of economic research have kicked the props out from under that argument. The facts are that climate investments will create green jobs, and lead to very small job losses in affect
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