How Can Governments Stimulate the Creation of Green Jobs?

Recently a friend of mine asked me what the government could do to stimulate the creation of green jobs. He was meeting with state-level officials the next day. I told him that since we are in a free market economy, the first law governing us is the law of supply and demand. No demand, no supply; no supply, no jobs. So a sure way for a government (federal, state or local) to stimulate the creation of green jobs is to stimulate the demand for green products.

Of course, it is also possible to work on the supply side by helping manufacturers in the hope that prices will drop to stimulate demand, but that's a more risky proposition that can end up creating excess inventory. The federal government and some states have attempted to stimulate the creation of green manufacturing jobs by introducing several financial aid programs for manufacturers such as tax breaks or loan guarantees (beneficiaries include Tesla Motors, Calera and BrightSource Energy.) But helping manufacturers boost production does not make consumers want to buy their products. The risk of theses financial aid tools is that production will increase, but inventories of unsold goods will increase also. For these financial programs to be successful, the manufacturers must use them either to lower their prices or become more competitive. Lowering the price of manufactured goods will affect demand in some way, but the cost reduction must reach the consumer to be effective. But it's difficult to achieve when there are intermediaries between manufacturers and consumers such as distributors, retailers, and installers. In addition, it would be hard for the government to legally place obligations on the part of the manufacturers to use the financial aid programs to lower prices; it could be construed as price fixing or manipulation.

There are many ways for a government to stimulate demand, but the three that have been used with most success are consumer incentives, direct government purchases, and government mandates. Some indirect means have been used as well, such as the mandatory reduction of carbon emissions by cars, trucks, power plants and factories.

Consumer Incentives
Consumer incentives have been used extensively in the past few years, and especially the past 2 years. They range from popular tax breaks to allowing hybrid car owners to use high-occupancy vehicle lanes regardless of the number of passengers in the car. The cash-for-clunkers and first-time home buyer programs were some of the most successful. There currently exist federal and state-level incentives for all sorts of home improvements that reduce electricity consumption (insulation, windows, doors). The federal government and most states also offer tax rebates to home owners who purchase wind turbines or solar panels and these tax rebates make the purchase of wind turbines or solar panels very attractive (sometimes reaching 50% of the total cost).

Direct Government Purchases
Governments (federal, state and local) can purchase all sorts of green products for their own use, such as hybrid cars for their fleets, and solar panels or wind turbines for government buildings. Substantial works have also started to make government buildings LEED compliant. There is a great article on GreenTechMedia showing Ten Ways the Feds Are Leading the Green Charge.

Government Mandates
Government mandates fall into 2 main categories:

• Governments can stimulate the production of clean energy by mandating that energy/electric production within a state or county includes a minimum of energy produced from clean or renewable sources.
• Governments can also mandate that contractors that bid on state or county jobs utilize some minimum level of renewable energy, or that their truck or car fleets include a minimum of hybrids. A great example of this kind of mandate is the city of Cleveland, OH.

As a taxpayer and consumer, I prefer consumer incentives; that's a great way for my tax dollars to come back to me. Mandates are fine too, but their effects are indirect and can be hard to measure. Government purchases of green products can be controversial, especially when they increase spending.

Where are the Green Jobs?

The Obama administration has promised the creation of millions of green jobs in the next few years. Well, it hasn’t started yet… these jobs are nowhere to be seen. And I know what I’m talking about: I’ve been looking for them for over a year.

I have to tell you I’m not a job seeker. I’m self employed and the creator of theGreenJobBank. That’s why I’m looking for green jobs. There are basically two types of places you find them online: a green job board, and an employer website’s career section. There are about 50 to 75 green job boards, so it’s relatively easy to find them. A few Google searches, a few hours of browsing, and voila! . As for employers, (you noticed I didn’t say “green” employer because it’s very hard to define,) we’ll see about them later.

When I started The Green Job Bank in late 2008/early 2009, after a few weeks of crawling the web, I got about 1800 – 2,000 jobs that were less than 60 days old, from many of these boards and dozen of green employers websites . That’s not much, but remember, that was in the middle of the economic crisis. Today, I’ve got just over 7,000. That’s much, much better. 3.5 times more. Yes… but I still don’t feel very good about it… I’ll feel better when it’s 70,000 green jobs, that way we would have some hope that we’re on the right track for millions of green jobs created in the next few years.

It’s interesting to look at what people call green companies, and what companies call themselves green. And it’s highly relevant to the discussion, because the more companies are called green, the more jobs are called green, and the more the Obama administration and a lot of others can claim victory.

Example: is BP (British Petroleum) a green company? They have a solar division operating out or Frederick, MD, called BP Solar. So BP is a green company? I don’t think so. BP Solar is, but it’s such a minuscule part of BP that it accounts for a negligible part of BP’s revenue and number of employees. As a matter of fact, BP Solar decided a few weeks ago to close down the manufacturing side of the operation to relocate it in Asia, and lay-off 320 employees. Only a fraction of the employees will remain in non-manufacturing jobs. In general I would not call any of the big oil companies green just because they invest in some green technologies. For me to call them green, their green activity would have to become a significant part of their revenue (more than 50% in my opinion, but that’s debatable).

At the other end of the spectrum of green companies, we’ve got the ones that are undeniably green: startup companies. Most of them do only one thing, so it’s easy to classify them. BridgeLux, GridPoint, Tesla Motors, Abound Solar, BioFuelBox and many more are typical examples of the new green technology companies. These are the hardcore, 100% green companies, and they create 100% green jobs (yes, even the accountants and the lawyers have green jobs there).

Now here's a question: you’ve got the local contractor who’s putting new windows and siding on your neighbor’s house; he’s using “green” windows, and “green” insulation under the siding. Is that a green company? I don’t think so. Yes, the contractor is using green products, but he would use any material that makes him money. And your neighbor needed new windows and siding. He would have replaced these windows anyway, green materials or not. He’s being opportunistic, good to the environment, he’s going to save some money on electricity, and pay less taxes. So everybody’s happy; Obama, you, me, your neighbor and his contractor. But the contractor’s company is not a green company, and the contractor’s job is not a green job.

So where are the green jobs? 7,000 isn’t close to a good start…