Yesterday, President Obama met with his Jobs and Competitiveness Council and delivered remarks at Cree, a lighting manufacturing facility in Durham, North Carolina. He discussed the importance of the “clean energy revolution” that will help jumpstart the economy. But the green energy policies President Obama has been advertising are anti-job creation and anti-competitiveness more than anything. Here’s why.
President Obama liberally uses the word investments when he talks about government funding for green technologies, and when he does, he commits the “free lunch” fallacy that plagues our politicians who believe we can use taxpayer funds to spend our way to an economic recovery.
Government spending will create some jobs to build whatever politicians want us to build, but this diverts labor, capital, and materials from the private sector that could be used more efficiently to create even more jobs. The net effect is that subsidized green jobs destroy jobs elsewhere in the economy.
And the reason companies need the subsidies, loan guarantees, tax credits, mandates, and preferential regulatory treatment is that they’re not competitive without them. Even with the subsidies, some of these green firms are struggling to stay afloat. My colleague David Kreutzer recently testified on the issue of green jobs, noting that three of the four loan guarantee projects Obama labeled as success stories are not so successful:
The first, Solyndra, received a loan guarantee for $535 million in the fall of 2009. In the spring of 2010, it failed to complete its initial public offering after an independent audit questioned the ongoing viability of the firm. Then, in the fall of 2010, the firm closed one of its manufacturing facilities and laid off 180 workers.
The second, Beacon Power, received a $43 million loan guarantee in July of 2009. Since then, its stock price has dropped by half—a period during which the Dow-Jones Industrial Average has increased over 40 percent.
The third, First Wind Holdings, received a $117 million loan guarantee in March of 2010 but withdrew its initial public offering in October of 2010.
The fourth, Nevada Geothermal Power’s Blue Mountain geothermal project, appears on track. Nevada Geothermal has entered into a 20-year power purchase agreement with the Nevada utility NV Power.
This brings us back to Cree, the manufacturing facility that produces light emitting diodes (LEDs). LEDs are one of the government-approved technologies that stand to benefit from the lighting standards enacted in 2007 that will phase out the incandescent bulb. Cree was an obvious choice for President Obama’s visit and speech for two reasons.
First, Tim Carney at The Washington Examiner points out that “Cree has received more than $78 million in federal grants, according to USASpending.gov, and more than $96 million in federal contracts.” Second, as a result of the lighting standards, lighting manufacturing facilities in Niles, Ohio; Winchester, Virginia; and Lexington, Kentucky; don’t exist anymore. So those options were out.
The process of job creation and job destruction is not necessarily a bad thing; it’s the businesses that innovate and produce goods that consumers value that make America’s economic engine run. But the government light bulb ban is unnecessarily killing jobs by manipulating the market while government handouts are artificially propping up other businesses.
In fact, Cree’s quarterly report essentially states that the restoration of consumer choice could result in reduced sales: “These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products.”
LEDs (or compact fluorescents or halogen builds) may be a better choice than incandescent bulbs, but consumers can make intelligent decisions on their own without the government taking away their freedom to choose. Right now, consumers prefer incandescent bulbs because they’re cheaper, and they enjoy the light they give off as opposed to other light bulbs.
Some are realizing that energy efficiency isn’t as great as the government initially purported. And just as fuel-efficiency standards for automobiles incentivize consumers to drive more, if energy-efficient bulbs are saving households money, won’t they leave the lights on longer?
Green jobs policies and lighting standards are policies driven by a mix of special interest politics and concern that energy use in the U.S. is producing too much carbon dioxide. They won’t provide the economic stimulus America needs and are a waste of valuable resources.
Nicolas Loris is a Research Assistant at The Heritage Foundation . http://www.heritage.org/ Roe Institute for Economic Policy Studies. Loris studies energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy.