Going green could bring some new jobs to North Carolina.
That was the conclusion of a report presented Tuesday to a legislative panel, which heard that the state could net 300,000 more jobs by 2020 by implementing energy efficiency programs and producing more renewable energy.
See below for some more details and a comment or two (warning: 1000+ words).
The preliminary report is an attempt to quantify the economic result of more than 30 policy options suggested by an advisory committee established to help lawmakers develop a global warming response plan. All the recommendations of the Climate Action Plan Advisory Group, if approved, would return the state to 1990 levels of greenhouse gas emissions within 13 years.
The report, based on an economic model the basis of which has been used by several other states, found that following the recommendations would create in North Carolina about 328,000 cumulative annual net jobs by 2020 and generate $14.2 billion in cumulative income.
But that's just a small percentage of the 5 million jobs now in North Carolina that generate $250 billion in income, said ... an Appalachian State University graduate research assistant and report co-author.
"We see mildly positive impact, but in terms of the scale of the economy, these are not earth-shattering figures," Ponder told the Legislative Commission on Global Climate Change. The commission is meeting to recommend to the General Assembly whether to create more policies to lower emissions.
The General Assembly this year ordered electric utilities to generate 12.5 percent of their power from alternative energy sources or through energy savings by 2021.
Many of the new jobs would come from within the agribusiness and waste industries, through such recommendations as producing more ethanol and biodiesel for fuel and trapping gas from animal manure and landfills to generate electricity, the report said.
I haven't seen this report since it did not originate in the economics department at ASU, but I usually view these claims of win-win environmental policy as dubious.
Most (all?) of the Climate Action Plan Advisory Group recommendations involve command and control regulations. The government demands energy efficient lightbulbs, etc. Switching to renewable energy production might increase some jobs if wind farms in the mountains and the ocean takes off, plus there is lots of pig poop in NC. But a big increase in these sorts of jobs seems unlikely.
Using a simple demand and supply analysis, government regulations of the second sort, renewable energy forcing, will increase the costs of production as firms switch from low cost production technologies to high cost technologies (if the new technologies recommended by the Climate Action Plan Advisory Group). The increased production costs will decrease the supply of goods and services and increase prices. With the decreased production of goods and services the demand for labor will fall, jobs will be lost and incomes will fall.
In order for climate policy to create jobs and increase income significant energy efficiencies must be forced by the new technology mandates. I believe that there are some energy efficiencies out there that firms have not adopted due to inertia or nearsightedness. If adopted, production costs will fall (in the long run), supply will increase, prices will fall, jobs will be gained and incomes increase.
I'm very skeptical that the positive effect will overtake the negative effect, especially to the extent that the report claims. The report predicts an increase of 328,000 "cumulative annual" new jobs. What does that mean? Cumulative is adding up over time. Annual is the number created each year. Is a cumulative job counted a number of years? For example, suppose a job is created in 2010 and lasts through 2021. Then a cumulative job is equal to 12 (1 job for each of the 12 years). That's double counting of jobs over time and an overstatement of the annual impact.
If we are double counting, the true number, avoiding double counting, is about 40,000 annual new jobs from 2009-2012. 40,000 new jobs is a 1% increase in the number of jobs in 2009. I agree. That is a small increase. So why double-count and inflate to 328,000 and make it sound big?
Going the other way and dropping the cumulative part (for fun) ...
According to the BLS, the total number of jobs in NC was about 3,965,479 at the end of 2006 (using data from the Quarterly Census of Employment and Wages). Using the job growth of 2003-2006 to project out to 2021, there will be 5,177,904 jobs in NC in 2021.
Doing the math, the 328,000 annual net jobs represents a 6.3% increase. I disagree that this is a small increase. According to the BLS, the current unemployment rate in North Carolina is 4.9%. In order to increase the number of jobs by this amount, all of the unemployed workers must become employed and there must be an increase in the labor force participation rate.
So let me back up. The 4.9% unemployment rate is the number of people looking for work for pay divided by the labor force. The labor force is the sum of the number of people working for pay and the number looking for work for pay. The labor force participation rate is the labor force divided by the working age population.
The current labor force participation rate in the U.S. is 66%. Assuming that the NC labor force participation rate is equivalent to the national rate, this implies that there are 267,000 unemployed people in 2021. In order to increase jobs by 328,000, the labor force participation rate must increase to 1% with all of the new entrants getting jobs. At that point the unemployment rate in NC will be 0%. A fantasy.
Why would the labor force participation rate increase? Only if these new agribusiness jobs, turning manure into energy, are better paying than current job opportunities in North Carolina. Not likely.
- I don't trust the model output (i.e., net job growth is likely negative as a result of command and control climate change policy).
- The model output doesn't make sense (i.e., 328,000 annual new jobs can not materialize by 2021 with command and control climate policy).
- The model output doesn't make much difference (40,000 annual new jobs is not significant).