Ideas@TheCentre – The CIS newsletter (Sydney), 4 March 2011

Politicians love ‘creating’ jobs, especially when these jobs serve a ‘greater good,’ such as fighting climate change. Greens leader Bob Brown recently praised Germany’s renewable energy policy.

Brown believes that investment in green technologies saved Germany’s economy from the global financial crisis. This in itself is a questionable assertion: the German GDP fell by 4.7% in 2009, and despite a 3.6% growth in 2010, output has not returned to pre-crisis levels.

Senator Brown also claims that ‘330,000 extra jobs have been created in Germany because of legislation moving to a clean, green energy future.’ If only.

The figure of 330,000 green energy jobs may well be true if you add up all employees working in industries such as wind energy, biomass and solar power. But were these ‘extra’ jobs ‘created’ as a result of green legislation? And at what cost?

First, it is necessary to count the costs of the alleged green jobs miracle. A study by the respected economic research institute RWI concluded that every single worker in these industries had been supported to the tune of €175,000 ($240,000). Given this enormous subsidy, it is remarkable how few jobs have been created.

In Germany, subsidies for renewable energies are paid for by energy users. Renewable energy suppliers can feed their production into the grid at guaranteed high prices; the additional cost of green electricity is passed on to private and business energy users.

As consumers have to pay more for power than they would have otherwise, they cannot spend the money elsewhere. Job losses then occur in other industries. In particular, high energy costs threaten energy-intensive industries such aluminium smelting, steel and cement.

The future of Germany’s largest aluminium smelter Rheinwerk, employing more than 600 people in the city of Neuss, hangs in the balance as high energy costs leave it uncompetitive. The weekly Die Zeit recently reported that Rheinwerk is only producing at 10% capacity despite a growing global demand for aluminium.

Aluminium is not an exception. According to the RWI study, net employment effects of green energies are minimal and may well be negative. Instead of creating ‘extra’ jobs, renewable energies are destroying jobs. These lost jobs are dispersed across the economy and not always easy to spot.

This week, EU Energy Commissioner Günther Oettinger warned that high energy taxes had triggered a ‘creeping process of deindustrialisation’ in Germany. As regulatory elements accounted for more than 40% of energy costs, companies were moving their activities abroad, he said. Far from creating green industries, German eco-subsidies have led to industrial decline.

Maybe that is what Senator Brown would like to see in Australia as well.