The Economic Challenge: Jobs and Clean Tech Growth
The United States stands at a critical moment with regard to the relationship between our economy and our energy system. Our economic future is threatened by continued dependence on foreign oil and other fossil fuels. Our electric grid and transportation system are inefficient. We are losing the lead in development of alternative energy technologies to countries like Germany and China. We are vulnerable to volatility and speculation in our energy markets. In short, the United States cannot continue business as usual and expect to maintain our current level of economic competitiveness.
Fortunately, the energy and climate challenges we are facing represent an unprecedented opportunity for an innovation-driven economic revival in which clean energy solutions-built by American workers-are marketed around the world. Investments in renewable energy create, on average, three to five times as many jobs as similar investments in fossil-fuel energy systems. Rather than energy dollars going to expensive fuels that are quickly burned up, energy dollars that go into renewable energy systems go to actual workers building machines that, once assembled, run on free fuel for their operating lifetimes.
The world will need to invest $26 trillion over the next 2 decades in order to meet our energy needs. Clean energy is likely make up an increasing share of this investment with each passing year, and the International Energy Agency estimates that, globally, $5.7 trillion will be invested in renewable electricity generation alone between 2010 and 2035. The nations that move aggressively to support their young clean energy industry and workers will have a leg up in leading this key growth sector. With more than 90 percent of the increase in global energy demand coming from outside the 34 wealthy industrial, the clean energy sector represents an opportunity to help countries develop alternatives to the fossil fuel development pathway followed by the United States and other developed countries. Further, with half of the current U.S. trade deficit coming from imported oil, clean energy represents a huge export market that has the potential to reverse our energy-driven trade imbalance.
Clean energy is already an important player in the world's energy markets. For example, the 2009 market for wind turbine installations was worth $63 billion and more than 600,000 people are now directly employed in the industry. In the U.S., there were 39 new announced or expanded wind manufacturing facilities in 2009, and more than 200 facilities in production. Over 60 percent of the value of wind turbines installed in America is now produced domestically, an increase from 25 percent in 2004. Total U.S. wind turbine manufacturing capacity is expected to reach 12,000 megawatts per year by 2012. Coal mining jobs have dropped precipitously - by more than 60 percent - over the past 30 years (246,300 in 1980 to 80,000 in 2010). Meanwhile, the wind industry has taken off. Since 2007, wind jobs have increased 70 percent and have surpassed coal mining jobs to employ 85,000 workers across all 50 states. The solar industry doubled the number of people working in the industry in the United States from 2009 to 2010, to 93,000 workers in all 50 states.
The energy efficiency sector is a huge untapped resource with the potential to increase economic productivity and save U.S. consumers money. McKinsey & Company research has found that the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent within a decade. Such action would eliminate more than $1.2 trillion in waste, far more than the $520 billion in required upfront investment. California regulators have similarly found that state efficiency programs produce savings at a rate of two dollars or more for every dollar invested. According to the Union of Concerned Scientists, a requirement on utilities to meet a certain share of their load through energy efficiency measures, in combination with an RES, would reap huge savings for U.S. consumers. The average U.S. household would save nearly $100 annually on their energy costs in 2030, and electricity and natural gas expenditures would be reduced by a total of $113 billion through 2030.
The Pew Environment Group has found that clean energy jobs grew 2.5 times faster than jobs in the U.S. overall between 1998 to 2007, and 770,000 people are now employed in clean energy jobs across the country. China is estimated to now have more than 1 million people employed directly through the clean energy sector. The German renewable energy sector increased to more than 300,000 in 2009, nearly half in the last five years.
While opponents of clean energy and climate protection have proliferated arguments intended to undermine the scientific consensus on climate change and stall policy action, many in the financial community that put real investment capital at risk have analyzed the climate change threat, drawn clear conclusions, and moved capital to the markets where policies reflect this threat. One large financial institution, Deutsche Bank, went so far as to partner with the expert scientists at the Earth Institute at Columbia University to determine the validity of climate skeptic claims. The central conclusion of this large institutional investor was clear: "the primary claims of the skeptics do not undermine the assertion that human-made climate change is already happening and is a serious long-term threat." It is therefore no surprise that Deutsche Bank, with nearly $7 billion in climate change-related investments under management, has placed only about $45 million into that sector in the United States, instead focusing investments in China and Western Europe.
The United States has fallen behind China in building a robust clean energy sector. In 2009, $35 billion was invested in the Chinese clean energy sector, nearly twice the amount invested in the United States. During the coming decade, China has pledged to support $738 billion in investment in their domestic clean energy sector. In less than a decade, China has gone from manufacturing less than 1 percent of the world's solar panels to nearly half. Upwards of 95 percent of these solar modules are exported. This $15 billion in solar exports is more valuable than America's corn, beef, and chicken exports combined.
Some of China's clean energy programs may be illegal violations of international trade agreements. On September 9, 2010, the United Steelworkers union filed a comprehensive trade case with the United States Trade Representative (USTR) alleging an array of Chinese policies and practices that threaten the future of America's clean energy sector. The case, which USTR began officially investigating on October 15, 2010, alleges that China has utilized hundreds of billions of dollars in subsidies, performance requirements, preferential practices and other illegal trade activities to advance its control of the sector.
As mature industries increasingly move overseas to access cheaper labor, technology and innovation-driven sectors will become the key to sustaining economic growth and creating good jobs. It has been estimated that over 90 percent of new economic growth results from public and private sector investments in innovation. By this measure, the established energy industry now dominated by massive companies and outdated business models is decidedly not a high-growth, job-creating, innovation-oriented sector. While investment in research and development (R&D) is roughly 3 percent of gross domestic product, it is roughly one-tenth that level in the energy sector. By contrast, R&D investments in the medical and biotechnology field are roughly 15 percent of sales, almost 40 times more than in the energy field. Policies that increase competition and open markets to new technologies and business models will accelerate the transition to an innovation-oriented, job-creating energy sector.
Meanwhile, the Big Five oil and gas companies are raking in record-breaking profits. Despite $485 billion in profits over the last 5 years, ExxonMobil, BP, Shell, and Chevron reduced their U.S. workforce by more than 10,000 people. Instead of favoring greater exploration or alternative energy investments as the price of oil has raced upwards, the oil majors have preferred to increase stock buybacks, which grew from $10 billion in 2003 to $60 billion in 2006. Exploration spending from the five largest oil companies was flat or decreased during this period. In 2009, the major oil companies invested more than $56 billion in dividends and stock repurchases and less than $4 billion on all types of research and development.
Putting Americans back to work on retrofitting buildings to improve energy efficiency, expanding mass transit and freight rail, constructing a "smart" electrical grid, building and installing wind and solar energy systems, as well as developing next-generation biofuels would ensure the clean energy technology revolution brings working Americans along with it.