Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Environmental Fanatics and Governments That Do Their Bidding Are Preventing Economic Recovery
Government subsidies to “green” energy financed by government borrowing may be the principal cause of the economic crisis gripping the Eurozone and the world. According to a Forbes story, based on a United Nation’s report, global investment in renewable energy reached $257 billion in 2011. China was responsible for almost one-fifth of total global investment, spending $52 billion on renewable energy last year. The United States was close behind with investments of $51 billion, Germany, Italy and India rounded out the list of the top five countries. In 2011, solar led the way as far as global investment in renewable energy, with investment surging to $147 billion, a year-on-year increase of 52 percent, due to strong demand for rooftop photovoltaic installations in Germany, Italy, China and Britain. Large-scale solar thermal installations in Spain and the United States also contributed to growth during the year. Wind power investment slipped 12 percent to $84 billion as a result of uncertainty about energy policy in Europe and fewer new installations in China, according to the report.
Spain was forced to end its subsidies to “green” energy last year because the subsidies brought Spain to the brink of bankruptcy and created few jobs. Unemployment in Spain is over 20%. Its trade deficit grew and the government was running out of euros. Prof. Gabriel Calzada, an economics professor at King Juan Carlos University in Madrid, concluded that 2.2 jobs are lost for each permanent job "created" by wind and solar plants. The professor believes that subsidizing renewable energy in the U.S. may likewise be destroying two jobs for every one created and he testified to that effect before a U.S. congressional committee. He repeated his findings in a recent interview with Ed Lasky, editor of the blog American Thinker.
American economists have pooh-poohed Calzada’s conclusions. As Keynesians, they consider any increase in government expenditures, especially expenditures financed by government debt, to be economically stimulating. The economic stagnation since 2008 should have convinced them that there was no multiplier if the failure of the “new deal” in the 1930s had not already done so. Temporary jobs are created installing wind and solar plants but few permanent jobs. And the fact that the 2009 stimulus package had hardly any effect on employment or GDP ought to have alerted economists that mere spending has no multiplier effects. Keynesian theory needs to be reexamined. We’ve had a federal budget deficit of over a trillion dollars in each of the past three years and GDP growth has fallen to an annual rate of less than two percent.
Consider the economics of a solar farm. State and federal government subsidies including grants, guaranteed loans, free land, and tax credits amount on average to more than two-thirds of the required capital. The subsidy is financed by government borrowing and the debt service (interest) will have to be paid for by taxpayers and as will the principal when the debt matures.
Solar and wind energy is more expensive to produce than energy from fossil fuels, estimated 15 to 25% more than energy from fossil fuels in the case of wind and more than that in the case of solar energy. The energy cannot be sold without a subsidy. To avoid a government subsidy, the states order the utilities to purchase wind and solar energy at their higher prices. The consumers of electricity, households and businesses end up bearing the costs. The utilities have other additional costs because they cannot rely on a constant supply of electricity from the wind and solar plants. They must have back-up capacity to produce electricity when the alternative sources are unable to function adequately.
The environmental fanatics have gotten the EPA to war on coal and other fossil fuels. The invention of fracking is enabling the U.S. to become energy self sufficient and the fanatics have attempted to prevent the miracle of plentiful supplies of fossil fuel. They seem to be succeeding in their war on coal. They seem deliberately to be preventing economic growth.
The higher prices for electricity put manufacturers who export at a competitive disadvantage. Much of the solar panels and wind turbines and other parts are imported.
A minuscule number of workers are required to operate wind and solar energy plants. The required investment is sometimes a billion dollars or more and may require only forty employees. The cost per permanent job created could amount to as much as $25 million per job. Solar and wind energy are never justified by their employment effects. Green energy has negative effect on employment.
Taxpayers are alleged to benefit by the reduction of emissions, principally carbon-dioxide. Carbon dioxide is not toxic. There is no evidence that taxpayers benefit at all from a reduction in the growth of carbon emissions. Given that plants thrive on carbon dioxide, there are some benefits associated with increased emissions of CO2. It is alleged that man-made carbon emissions cause global warming. Some physicists believe that the sun’s effects on the amount of cosmic rays affects cloud cover and cause climate change not man’s activities. An experiment is underway at CERN’s nuclear laboratory in Switzerland to test this hypothesis.
Although Prof. Calzada may be wrong about the number of jobs lost as a result of the premature investment in “green” energy, the number is clearly substantial. The growth of employment is substantial in North Dakota, Pennsylvania, Canada to mention a few areas benefitting from the production of fossil fuels. It would be economically beneficial to put so-called “green” energy on the back burner until the cost of natural gas rises enough to make wind and solar installations competitive, without the enormous subsidies that are perpetuating the current economic crisis in Europe and the economic stagnation in the U.S.
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