More from Left Foot Forward on cap and trade

October 09, 2009 10:10 AM

Left Foot Forward continue to push forward irrelevant or misleading evidence in an attempt to pretend that cap and trade doesn't significantly increase energy prices and that such a policy won't kill jobs.


They've misunderstood my point about the Climate Group survey.  The point is simply that a survey of a small number of big businesses doesn't accurately capture the effect of cap and trade on employment.  Particularly when some of those businesses are making windfall profits on this policy and have an interest in casting it in a good light, Centrica are one of the companies profiting under the ETS in particular.  Beyond that, companies tend to dislike openly questioning environmental policy, they see doing so as politically risky.  Firms will play it safe and for that reason, and plenty of others, analysing the effect of this scheme on jobs using a survey isn't an empirically sound method.


Most of the other studies that LFF cite compare the number of jobs created by investing in renewables with the number created by investing in fossil fuel energy, and one criticises Professor Calzada's study for not doing likewise.  That misses the point that the money spent on subsidising renewables doesn't just redirect investment from fossil fuel power but imposes a substantial burden on energy consumers in higher prices or taxpayers who pay for direct support.  That implies the correct comparison to subsidies is the one that Professor Calzada drew with the whole economy in most cases.  The Institute for Energy Research sums up (PDF) the problems with many of the studies LFF cite:

 


"Energy is the lifeblood of the economy. The primary objective of the energy sector is to supply cost-effective energy to the broader economy, allowing it to grow and increase the standard of living of its citizens. Artificially pumping up employment in the energy sector per se—and thereby driving down productivity, while driving up costs to the broader economy—is counterproductive to overall net job creation and economic growth. It is a sign of increased efficiency if more energy can be produced and delivered with fewer workers, because this expands the overall output potential of the economy. Yet the green jobs studies that we analyze in this report reach the opposite conclusion, and favor energy sources that require more workers to yield a given amount of energy. By analogy, the number of workers in the U.S. devoted to agriculture has steadily declined over the last century, and this is a healthy sign of progress in the U.S. economy. Government efforts to reverse the trend, and force more workers back into agriculture, would not “create jobs” in the long-run, but would simply raise food prices and shrink other sectors."

A major German study (not available outside the academic firewall) also supports the idea that the destruction of jobs through higher energy prices will quickly outweigh the number of jobs created in the renewables industry.  And, Germany is - for now - a relatively positive environment for creating jobs by investing in renewable energy as it actually produces the turbines and solar panels that are installed on a significant scale.  However, the solar panel industry is leaving even Germany, meaning that the effect on employment will become more negative.


In the end, the case on jobs is quite simple.  If you increase the price of one of the major inputs for a range of manufacturing industries by a fifth that will make it considerably harder for them to compete.  That will lead, in short order, to jobs being lost on a substantial scale.  It won't take long for that to outweigh the relatively small number of jobs that are created installing and running renewable energy facilities.


It's worth noting that some of the sources LFF draw on are either quite different to how they are billed in the blog, or just very weak, if you follow the links:




  • They describe one source as the Department of Energy.  It says at the bottom of the document that the institute which produced it is DOE funded but operated for them by the Alliance for Sustainable Energy, LLC.  That's like citing a New Economics Foundation report and describing it as coming from DEFRA (our report - PDF - on taxpayer funded lobbying and political campaigning showed that the NEF does get DEFRA funding).  I've described the critical weakness in their analysis above.
  • Their source showing that fossil fuels get more subsidy than renewables doesn't refer to the UK but the US (before it implements cap and trade, which will massively swing the balance).  Even then, it's a bit amateurish and misleading as it doesn't put the figures in the context of the amount of energy each source produces.  A more accurate picture of US federal subsidies is provided by an Energy Information Administration report (PDF), which shows that solar and wind power get far more (more than ten times as much) than coal, gas and even nuclear power for every MWh produced.
  • The Child Poverty Action Group report on fuel poverty simply asserts a point that the data shows to be inaccurate, it therefore isn't a relevant source.  LFF continue to cite a Sustainable Development Commission report rather than looking at the simple numbers, cited by my colleague in the speech which started this dispute, from the department that was responsible for running most of these policies which show that climate change policies account for 14% of domestic electricity bills and 21% of industrial electricity bills.  Ofgem also think (PDF, pg. 4) environmental policies are very significant, though they produce an estimate lower than BERR's.


Left Foot Forward continue to push forward irrelevant or misleading evidence in an attempt to pretend that cap and trade doesn't significantly increase energy prices and that such a policy won't kill jobs.


They've misunderstood my point about the Climate Group survey.  The point is simply that a survey of a small number of big businesses doesn't accurately capture the effect of cap and trade on employment.  Particularly when some of those businesses are making windfall profits on this policy and have an interest in casting it in a good light, Centrica are one of the companies profiting under the ETS in particular.  Beyond that, companies tend to dislike openly questioning environmental policy, they see doing so as politically risky.  Firms will play it safe and for that reason, and plenty of others, analysing the effect of this scheme on jobs using a survey isn't an empirically sound method.


Most of the other studies that LFF cite compare the number of jobs created by investing in renewables with the number created by investing in fossil fuel energy, and one criticises Professor Calzada's study for not doing likewise.  That misses the point that the money spent on subsidising renewables doesn't just redirect investment from fossil fuel power but imposes a substantial burden on energy consumers in higher prices or taxpayers who pay for direct support.  That implies the correct comparison to subsidies is the one that Professor Calzada drew with the whole economy in most cases.  The Institute for Energy Research sums up (PDF) the problems with many of the studies LFF cite:

 


"Energy is the lifeblood of the economy. The primary objective of the energy sector is to supply cost-effective energy to the broader economy, allowing it to grow and increase the standard of living of its citizens. Artificially pumping up employment in the energy sector per se—and thereby driving down productivity, while driving up costs to the broader economy—is counterproductive to overall net job creation and economic growth. It is a sign of increased efficiency if more energy can be produced and delivered with fewer workers, because this expands the overall output potential of the economy. Yet the green jobs studies that we analyze in this report reach the opposite conclusion, and favor energy sources that require more workers to yield a given amount of energy. By analogy, the number of workers in the U.S. devoted to agriculture has steadily declined over the last century, and this is a healthy sign of progress in the U.S. economy. Government efforts to reverse the trend, and force more workers back into agriculture, would not “create jobs” in the long-run, but would simply raise food prices and shrink other sectors."

A major German study (not available outside the academic firewall) also supports the idea that the destruction of jobs through higher energy prices will quickly outweigh the number of jobs created in the renewables industry.  And, Germany is - for now - a relatively positive environment for creating jobs by investing in renewable energy as it actually produces the turbines and solar panels that are installed on a significant scale.  However, the solar panel industry is leaving even Germany, meaning that the effect on employment will become more negative.


In the end, the case on jobs is quite simple.  If you increase the price of one of the major inputs for a range of manufacturing industries by a fifth that will make it considerably harder for them to compete.  That will lead, in short order, to jobs being lost on a substantial scale.  It won't take long for that to outweigh the relatively small number of jobs that are created installing and running renewable energy facilities.


It's worth noting that some of the sources LFF draw on are either quite different to how they are billed in the blog, or just very weak, if you follow the links:




  • They describe one source as the Department of Energy.  It says at the bottom of the document that the institute which produced it is DOE funded but operated for them by the Alliance for Sustainable Energy, LLC.  That's like citing a New Economics Foundation report and describing it as coming from DEFRA (our report - PDF - on taxpayer funded lobbying and political campaigning showed that the NEF does get DEFRA funding).  I've described the critical weakness in their analysis above.
  • Their source showing that fossil fuels get more subsidy than renewables doesn't refer to the UK but the US (before it implements cap and trade, which will massively swing the balance).  Even then, it's a bit amateurish and misleading as it doesn't put the figures in the context of the amount of energy each source produces.  A more accurate picture of US federal subsidies is provided by an Energy Information Administration report (PDF), which shows that solar and wind power get far more (more than ten times as much) than coal, gas and even nuclear power for every MWh produced.
  • The Child Poverty Action Group report on fuel poverty simply asserts a point that the data shows to be inaccurate, it therefore isn't a relevant source.  LFF continue to cite a Sustainable Development Commission report rather than looking at the simple numbers, cited by my colleague in the speech which started this dispute, from the department that was responsible for running most of these policies which show that climate change policies account for 14% of domestic electricity bills and 21% of industrial electricity bills.  Ofgem also think (PDF, pg. 4) environmental policies are very significant, though they produce an estimate lower than BERR's.


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