Balancing Clean Energy Costs and Green Jobs

What’s more important—creating jobs in the energy sector or creating jobs in the rest of the economy? In some cases, energy transitions can do both, when new energy technology both results in expanding employment within the energy sector and drives economy-wide job growth as well. But that’s not always the case. In an interesting new post on “green jobs” at the Haas School of Business Energy Institute blog, Andrew Campbell points out that we frequently highlight the jobs created by the growth of clean energy while ignoring those that have been lost.

Imagine that we counted jobs created by manufacturing ATM machines and coding software for them but didn’t account for all the bank tellers’ jobs that have been lost. That’s essentially what we do when we talk about green jobs. We tout the creation of new jobs in the wind and solar sectors but don’t account for the jobs lost in the coal sector, for instance. If you claim, as many have, that the inexorable rise of wind and solar are major contributing factors to the decline of coal, then you can’t ignore the loss of coal jobs when tallying up the job benefits of the growth of renewables.

But there is a further dimension to discussions of green jobs and the costs and benefits of clean energy that has been almost entirely absent from the green jobs discussion—that is the role that energy plays more broadly in the economy. In many cases, the job impacts of energy costs, positive or negative, on the macro-economy dwarf job creation within the energy sector.

The International Monetary Fund estimates, for instance, that a 10% change in the price of oil has a 0.2% impact on GDP. Energy price increases often bring slower economic growth and even, as has been the case on numerous occasions over the last several decades, recession, with attendant slower job creation or even job losses. Falling energy prices bring faster economic growth and job creation. Low natural gas prices over the last decade have proven a boon to consumers, reducing their heating and electrical bills substantially, and for manufacturers, who in recent years have begun bringing production back to the US to take advantage of cheaper energy. Low oil prices more recently have brought similar benefits to consumers and industry. Both have increased employment broadly throughout the economy.

Whether natural gas, wind and solar, or next-generation nuclear, cheap, clean energy will likely bring economy-wide job creation that dwarfs whatever job creation were to occur within the energy sector. Costly clean energy, by contrast, may bring job creation within some segments of the energy sector but the broader impacts on job creation are likely to be negative.

Energy is the master resource and the master substitute, a key input to virtually every sector of the global economy and the key catalyst that enables and moderates complex interactions between labor, capital, resources, and technology. To evaluate the employment benefits of growing clean energy deployment, therefore, it is necessary not only to look at job growth and losses across the entire energy sector but across the entire economy.