End the Green Economy

For the better part of the last fifteen years of my career, I have spent much time among advocates of the "green economy": one where we consider the triple bottom line of economic, environmental, and social performance.  This has spawned a whole new language of economic development around the word green including "green jobs",  "green materials", "green practices", etc.  For the most part, the industry has applied these labels in an attempt to convey that certain products or services have more value to a consumer, and therefore, can justify higher costs.  In some cases, these higher costs come from small implementation that has not yet reached scale to create economic advantages, and in some cases, the new strategy or technology avoids producing harms that conventional approaches do which means higher costs.  On the other hand, sometimes, people just want to charge more, and hope that labeling something "green" will motivate people to spend more than they might.  Regardless of the motivation, there is one thing that now becomes clear to me.

We must end the green economy.

By advocating for a green economy, we automatically set up a conflict between the current economy and another one that challenges it.  This sets up a debate where those succeeding in the current economy control the conversation by constantly challenging the new economy (or subset of the economy) and proposing all types of calamitous consequences if we follow this new path.  People naturally resist change and cling to the comfortable, so this line of reasoning has great traction and creates roadblocks to achieving the goals of better quality of life.  Instead of presenting this new economy - rife with unanswered questions about the true implications of full implementation - with its "green" moniker and advocating for wholesale revolution, we should consider a better path.

Those who advocate for a "green economy" out of altruistic reasons seek better quality of life for all.  This means that in making one person's life better by providing access to reliable energy, we cannot reduce the quality of life for another by polluting their community.  For those that advocate on this level, the more desirable plan should focus more on challenging the failings of the current economy rather than presenting a wholesale collapse and rebuild.  The current economy is supposed to distribute resources adequately and fairly.  When it does not, we need to challenge that.  The current economy is supposed to assign all of the costs and consequences associated with a product or service to that product or service.  When it does not, we need to challenge that.  The current economy is supposed to provide clear information to all parties in a transaction so that each may make a rational decision.  When it does not, we need to challenge that.

One of the failings of the discussion of the green economy comes from the instant association that many have with "green" meaning increased regulation.  Although any time we discuss asking more of industry, we often devolve to regulation because of a combination of industry resistance and political posturing, the changes in the economy can come in many forms.  For every significant benefit realized by improving CAFE standards through regulation, we have equal benefit through Energy Star labeling that allows industry to determine the method of performance.  Whereas intense scrutiny of power plant and refinery emissions for toxins has protected waterway and airstreams effectively over the past generations, we have achieved equal successes through market-based forces like cap-and-trade (specifically for sulfur and nitrous-oxide emissions from power plants).  In all of these cases, the most important part of the discussion was not the IF but the HOW.  The current debate on implementing a "green economy" still centers on the IF...we need to move it to the HOW.

How do we do that?  It starts by demanding more of the current economy.  We should pepper our leaders - both industrial and political - with questions about performance.  Why do people in West Virginia have to suffer the negative effects of coal ash dumping in order for people in DC to get power?  Why can companies spend millions of dollars lobbying against technologies such as rooftop solar that compete in the marketplace, while avoiding making required changes in their power plants to reduce emissions?  Why do industries not have the requirement to maintain the atmosphere, waterways, and earth at the same level of natural state as it was before their operations?  Why should an employee accept endangering their life for reasons unrelated to the job they do?

The time has come to turn the debate from one about "why a green economy?" to "why the current economy?".  Over the past several decades, we have seen quality of life gains plateau or even recede. While other countries continue to grow across classes, we see the large portion of our population less well off now than they were twenty years ago.  Those of us who advocate for the results of the green economy know that it will not only improve our quality of life, but produce a more stable economy.  In order to get there, though, we need to drop the conversation that puts us on the defensive, and instead make the advocates of the current way of doing things defend their system.

You want jobs? Efficiency not mining

Over the next several weeks, the media will cover ad nauseum President Obama's decision on the Keystone XL pipeline that developers plan to run through the upper Midwest to connect the tar sands mining operations of Canada with the Gulf Coast export terminals of Texas.  Ignoring for now the potential cost in human life due to increased emissions of carbon soot and carbon dioxide, the increased risk to drinking water and arable land from pipeline breaks (which happen regularly), and the increased environmental damage to the Gulf Coast region where the tar sands refining operations will take place, the pipeline makes no sense from the point of view of a financial investment.  Depending on the source, the pipeline plans to create between 1,000 and 5,000 temporary jobs, 50 and 1,000 permanent jobs, and potentially influence the development of as many as 20,000 jobs.  It will cost at least $5.3 billion, and none of the fuel produced from the delivery and refining processes will go to support American machinery...it will all go to a burgeoning Latin American market.  This pipeline represents profits for the corporation that owns it, not energy independence for the US or Canada.  The jobs created by the investment - even if they happen at the highest level imagined - do not justify the expense, and we have much better ways to invest the capital.

For the sake of analysis, I consider a temporary job to have the value of one-tenth that of a permanent job; this assumes that a permanent job will last on the order of ten years, and the temporary job around a year.  This puts the range of direct, combined jobs at somewhere between 150 and 1,500.  At an investment of $5.3 billion, the investment-to-job ratio sits at around $35 million to $3.5 million per job.

The best alternative to the Keystone XL pipeline, energy efficiency investments, not only avoid all the human health problems KXL will cause, but it also creates more - and better - jobs.  Two recent energy efficiency programs serve as a basis for this argument.  The Energy Impact Illinois (EI2) program used ARRA money to match utility incentive program and private homeowner contributions to winterize homes and reduce the demand for heating energy.  In the US Southeast, ARRA funds also contributed to the Better Building Neighborhood Program (BBNP) which operated in the same fashion.  For each of these programs, the investment-to-jobs ratio looks like this:

Program                    Investment                      Jobs created                      Ratio         
EI2                               $24.0M                              140                          $171,428/job
BBMP                          $37.9M                              350                          $108,285/job

For an investment in energy efficiency on the scale of Keystone XL, the $5.3 billion investment would mean somewhere between 30,000 and 50,000 permanent jobs.  With a simple return on investment (ROI) somewhere in the 10-50% range for the direct savings (reduced utility costs), and a multiplier effect resulting in an ROI of up to 375% regionally from the boost to jobs and economic growth.

For decades, many have argued against investments in renewable energy and energy efficiency because they "cost too much".  This argument had merit on the renewable energy side when new technologies had no scale or access to market, and on the energy efficiency side when energy costs remained artificially low due to market manipulation and the absence of externalities (like the additional healthcare costs and property damage that results from burning fossil fuels).  The charge that clean energy costs too much no longer holds water.  Investments in energy efficiency bring greater ROI than investments in fossil fuels, and result in hundreds of times more jobs.  In a time when we see coal plants shuttered because owners cannot afford to pay for maintenance, and power producers investing in wind over natural gas, the time is right to stop investment in fossil fuel projects that will lead to forty more years of guaranteed, high volume use of fossil fuels.  The time is right to say, "No!" to Keystone XL, and instead put that money into energy efficiency (first) then renewable energy.

Because it will put Americans back to work and make our quality of life better.  Is that not what we should expect from our economy?