Green jobs pressure generates risk for renewables

By Will Pearson

Among the fallout from the stagnant economy in OECD nations has been the effect on the development of alternative technologies. The lure of so-called green-collar jobs remains an attractive way to win support for expensive clean energy subsidies. But it is a move that can leave governments open to criticism when jobs fail to appear. In fact, pursuing the idea that clean technologies will create jobs poses risks to the alternative energy industry in at least two areas. The first is that governments could scale back support if the number of new jobs falls short of lofty hopes. Secondly, the pressure to create jobs could trigger protectionist policies that may be challenged by other countries.

In the United States, for example, Solyndra’s bankruptcy has meant the Obama administration’s boasts about green-collar job creation have come under intense scrutiny (along with federal financing mechanisms for renewable energy projects). Obama administration critics maintain that the government risked taxpayer dollars on projects using unproven technologies. The critique is amplified by the faltering economic recovery in the United States and dismal job creation statistics from recent months.

The media have latched on to the Obama administration’s pledges for jobs growth as part of clean technology support and how these numbers are reported, resulting in more negative headlines for the U.S. alternative energy industry. But the media has overlooked the critical role that federal financing mechanisms have played in providing investment for the sector. Investment in solar photovoltaic power has become much more competitive in recent years, resulting in a lower cost for end users.

There are plenty of examples, however, of governments withdrawing support for green technology, especially when costs rise and the promise of jobs remains unfilled. In 2010, Germany accounted for half of the solar panels installed worldwide, but solar power’s role is greatly diminished in the new energy policy formulated after the Fukushima disaster. Instead of trying to compete in this sector, the German government has swung its support to offshore wind. A lingering question is whether Germany will be more protective of its offshore wind sector than it was of its solar industry.

The ongoing emphasis on spurring the creation of green-collar jobs and domestic manufacturing capacity also exposes the renewable energy industry to WTO challenges, which could result in incentive programs being ended. The United States is reportedly preparing to lodge a complaint against China’s solar industry subsidy program only a few years after filing a case against Chinese wind power companies. Other cases are also ongoing. Japan’s complaint to the WTO last October against the Canadian province of Ontario is currently under consideration, while the European Union submitted a similar complaint to the WTO in August. In July, the U.S. wind company, Mesa Power, submitted a NAFTA complaint against Ontario for the same reason.

Will Pearson is an analyst with Eurasia Group’s Global Natural Resources practice.