Imagine you are a carmaker and that you have the choice of building one of two electric vehicle designs. Identical in all other respects, they have just one difference: the first takes 100 man-hours of labour to build and the second 200. Which do you pick?
In the real world, of course, the answer is the first. At least if you want to stay in the carmaking business for very long.
But that’s not how it works when it comes to environmental policy. Take the UK government’s “10 Point Plan for a Green Industrial Revolution”, the document it unveiled last month setting out how the UK would meet its ambitious goal of reaching net-zero emissions by 2050.
When you’re planning to replace much of the nation’s energy infrastructure to a tight fixed deadline, you might think the biggest concern would be how much you’d have to spend to get there. Not just the upfront expenditure. There’s also the worry that we presently lack all the technology needed to decarbonise without hiking UK energy costs.
Not that you would have caught much of an echo of this from prime minister Boris Johnson’s blithe introduction. This promised a “green recovery — with high-skilled, high-paid jobs that offer the extra satisfaction of helping to make our nation cleaner, greener and more beautiful”. The document even contained breakdowns of where the promised 250,000 new posts might be expected: 60,000 in offshore wind, 8,000 in hydrogen production, and so on.
True, Mr Johnson is not the first to make such sweeping statements. UK governments have long tried to sugar the pill of paying for green investment with the questionable notion that the economy will boom as a result.
But focusing on jobs is back-to-front thinking. That is not, of course, to say that green spending will not create any employment. According to the latest future energy scenarios from National Grid ESO, the total cost (capex, fuel and operating expenditure) of getting to net-zero is of the order of a thumping £160bn a year over the next three decades. It is hard to imagine that this wouldn’t create some jobs along the way.
What is more doubtful is the size of the net gain, if any. Let’s take the offshore wind industry, which employs around 11,000 in the UK, directly and through the supply chain, according to its trade body, Renewables UK. Yet those green jobs haven’t sprung from nowhere. They have come at the cost of others, notably in the coal industry. Over the past decade, as environmental rules have tightened, it has shed a similar number, both in mining and coal-fired power station staff.
Nor is there any obvious reason you should want to see green energy generating an employment bonanza. Jobs are, as any self-respecting economist would tell you, a cost. Of more importance is the output created by these new workers and the impact on alternative production and employment.
Consider, for instance, the need to retrofit the UK’s 29m homes to reduce their so-called carbon footprint. This is a vast undertaking, potentially costing hundreds of billions. The economic returns are sufficiently uncertain that it is unlikely to be financed without significant state subsidy. (A previous, less ambitious attempt to encourage people to do it — the “Green Deal” — was taken up by almost no one.) But where are all these workers to come from? Most likely by diverting people from other, possibly more economically valuable, pursuits.
Given the large volume of subsidies aimed at green technologies — almost £10bn a year at last count — it would of course be nice if Britain had developed some exporting industries in these areas. But this hasn’t happened, perhaps because the UK was late to the party. And given the scale of the required investment, it makes sense to acquire equipment at the lowest cost.
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There’s a doubtless apocryphal story about the US economist Milton Friedman visiting some giant dam project in China and asking why, instead of modern earthmoving equipment, the workers had shovels. On being told that the scheme was a jobs programme, he replied: “Oh, I thought it was a dam you were building. If it’s jobs you want, why not give them spoons?”
The UK’s decision to reduce emissions should stand on its own merits, bearing in mind the costs and the likely success of the policy given the country’s small contribution to global emissions. Mr Johnson should focus on keeping the associated borrowings to a minimum. Forget talk of green jobs and industrial renaissance. And put away those spoons.
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