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Restrictions on Greenhouse Gas Emissions Increase Employment in a Downturn
The models that show that restrictions on greenhouse gas (GHG) emissions cost jobs are full employment models. The story in these models is that restrictions on GHG make the economy less efficient, thereby reducing labor productivity. Lower labor productivity causes wages to fall, which means that fewer people are willing to work. Therefore, restrictions on GHG emissions cost jobs.
This is probably worth repeating about 200,000 times since almost no one who talks or writes about the subject seems to have a clue. This basic point would have been worth noting in an NYT article that cites the oil industry's complaint: βIn the midst of a severe recession with 10.2 percent national unemployment, our economy, the creation of jobs and consumer impact should take much greater precedence over attempts to impress international bureaucrats during an annual convention.β
The NYT should have pointed out that the industry spokesperson is either deliberately lying or does not understand how the economy works. In a downturn, the government can create jobs by reducing GHG emissions, for example, by paying workers to insulate buildings, paying people to buy more fuel efficient cars (cash for clunkers), or subsidizing the use of clean energy such as solar or wind power.
While these government subsidies would pull away resources from other sectors if the economy were fully employed, this is not an issue, "in the midst of a severe recession with 10.2 percent national unemployment." The article should have pointed this fact out to readers.
--Dean Baker
COMMENTS (3)
The original post by the President of the National Petrochemical & Refiners Association did not make a macroeconomic argument.
Instead he claimed that domestic refineries will be hit with costs that their foreign competitors will not face, leading to job loss in the U.S.
The relevant quote is:
"For the domestic refining community, NPRA estimates the compliance cost for refinery process emissions under cap-and-trade legislation, with carbon priced conservatively at $20 a ton, would be $4.1 billion a year. The cost associated with consumer emissions, for which refiners are inexplicably made accountable under both bills, would be $63 billion a year. At the conservative cost of more than $67 billion a year β which would actually increase year after year as the cost of carbon rises β cap-and-trade legislation will drive domestic gasoline and diesel production overseas, resulting in lost jobs for American workers .."
A simple gasoline tax increase makes more sense to me.
Posted by: AndrewDover | November 26, 2009 11:11 PM
Restrictions on GHG emissions are likely to cause many job-losses among my factory-worker neighbors, some of whom are too old and frail to take easily to the house-insulating trade. Moreover there's the numbers issue. If you remove large numbers of jobs for factory-workers, you will almost necessarily exceed the capacity of the community to reabsorb them, even with a few training programs thrown in. So old people are forced to relocate in a very tough economy. Not a compassionate program, as currently designed.
Posted by: Jorge | November 27, 2009 8:25 AM
"The story in these models is that restrictions on GHG make the economy less efficient, thereby reducing labor productivity. Lower labor productivity causes wages to fall, which means that fewer people are willing to work. Therefore, restrictions on GHG emissions cost jobs."
That whole argument is bogus. If it were true, European and Japanese industry must have much lower productivity because their energy costs are way higher. Of course the opposite is true. Investing in efficiency makes you, yes, more efficient. The United States economy is currently the least efficient among developed nations. That is why over the past years, it has been dependent on credit financed consumption and on the construction sector, the latter being relatively sheltered from international competition. Now that these two pillars of the economy have crumbled, the US will have to face reality and increase its efficiency.
"Restrictions on GHG emissions are likely to cause many job-losses among my factory-worker neighbors" That is complete BS. Us manufacturing has lost millions of jobs while NOT reducing emissions. Why would it be bad for the remaining factory workers if US industry would finally start doing what more successful countries have been doing for decades?
Posted by: piglet | November 27, 2009 1:26 PM