California Could Feel Spain’s Pain
Barring voter intervention, Californians will soon suffer under full-blown European-style energy policies. These include mandated greenhouse gas emission reductions of a sort achieved to date only through economic collapse, and fantastic mandates for renewable energy that so far have caused economic hardship elsewhere.
Oddly, despite these policies having been tried throughout Western Europe at great cost and for no discernible environmental benefit, Californians are told their laws are the "world's first".
It is not because policies similar to those in Assembly Bill 32 have yet to be tried that you hear no shining examples of their success. The "world's first" pretense is likely employed to avoid discussing the harm the policies have already caused elsewhere.
A similarly odd phrase, "California must be a leader," is now invoked against Proposition 23, the Nov. 2 ballot measure to delay these policies until the state's economy significantly recovers.
Yet while promoting similar steps at the national level, President Barack Obama had serially directed Americans to examine several European experiments in orchestrating the "green economy." Chief among his examples was Spain. Whether or not related to what I and two other researchers found after taking this advice, Mr. Obama no longer directs Americans to gaze at our economic wonder.
In Spain we found that the economy, in fact, lost a net 2.2 jobs for every "green job" the state claimed credit for, just in an opportunity cost. That is, the private sector creates jobs much more efficiently than the state – less expensively and dedicated to produce goods and services that people really demand. We found the private section would have created that many more "real" jobs had the money not been removed and put toward politically divined ends. Think "stimulus jobs."
A Power Point presentation leaked from the Spain's socialist Zapatero government earlier this year actually suggests that the loss in terms of jobs is currently even higher.
In Spain we also found that green jobs mostly (9 out of 10) were temporary. That is, they are principally installation jobs. In Italy, researchers found that 4.8 jobs were lost for each green job created.
In Germany – another example frequently cited by Mr. Obama – researchers with the state-funded think tank RWI-Essen concluded that "Germany's promotion of renewable energies is ... a cautionary tale of massively expensive environmental and energy policy that is devoid of economic and environmental benefits."
Therefore, the claims that green-economy policies will create jobs are at once inherently true and patently false. They are true in that, of course, any time the state mandates that something be done, someone must be employed to do it.
Assume a state mandates a certain percentage of electricity come from particular sources – say, windmills, or running on treadmills – or transportation be of a certain variety – hybrid vehicles, or horse-drawn. No one disputes that this will create jobs in the windmill/treadmill installation and buggy-whip industries.
On net, however, green-economy mandates are job killers. In addition to jobs lost through opportunity cost, jobs are lost from the tougher economic environment for manufacturing in places with green-energy mandates. These make energy prices "necessarily skyrocket," to quote President Obama about cap and trade. For California, this would culminate years of creeping, heavy-handed mandates mimicking Europe.
For example, at least one European steel maker, Spain's Acerinox, exported its growth to South Africa, and to Kentucky, where it added 175 manufacturing jobs because, according to its then-CEO, it was uneconomic to invest in manufacturing facilities under the cap-and-trade, renewable energy mandates and other green economy schemes Spain adopted.
Rather unlike Europe, however, Californians are engaged in a debate over whether to re-take control of policies that many feel their political class has demonstrated an inability to handle responsibly. While opponents of this want to focus attention on the identity of employers who support Prop. 23, what are their own interests? Do their obvious financial stakes not indicate they stand to benefit from the very predictable outcome of AB32? When the state robs Peter to pay Paul, it can count on Paul's enthusiastic support. That is surely the case here.
With this referendum California's voters have a privilege not available to those in other areas subjected to the state-imposed green economy. The outcome is now up to them. But it should be determined on the basis of facts, not misleading talking points. And the facts are pretty clear of how these policies have worked out where they have been tried.
Gabriel Calzada is associate professor of economics at the King Juan Carlos University in Spain.