Sunday, July 14, 2024

The illusory potential of green jobs

There is no doubt that climate change has become an integral part of political discourse in the world’s most powerful countries. Politicians from America, Europe and the UK have all made promises to deliver green jobs in the pursuit of combating climate change. But does the logic of combining industrial policy and climate change make sense? Could it lead to one objective being sacrificed for the other? These are the questions that are increasingly being asked as trillions of dollars are being poured into green industrial policy.

One of the main arguments in favor of climate change measures is the existence of externalities, which are costs or benefits that are not borne by producers. This is seen in the oversupply of greenhouse gases, even though they impose costs on others. Putting a price on carbon is one way to address this, but doing so alone may encourage investment in making dirty technologies more efficient, ultimately allowing fossil fuels to retain their lead over clean tech. Therefore, combining carbon prices with subsidies for clean-tech research is essential.

However, concerns arise about the desire for green jobs amidst a prudent regime like this. For example, research has shown that the most efficient climate-change policy – taxing carbon and subsidizing research – may not create many jobs. This is a significant consideration, especially for governments that are accountable to voters who are leery of spending on things that benefit other countries. But as the rich world proceeds, it will continue to encounter difficulties, such as governments’ inability to pick winners and the potential for rent-seeking among companies.

Despite these challenges, it is possible to find solutions or at least alleviate the problems. A disciplined government that cuts off bad investment, clarity and transparency in setting goals, and measures to help politicians jettison failing companies can help address these issues. However, the uncomfortable reality remains that a firm could deliver good jobs while remaining no greener than its competitors. This presents a conundrum – is an investment that cuts emissions while displacing workers a worthwhile one?

As the rich world continues down this path, the complexities of combining climate and industrial policy will become increasingly evident. The most ambitious industrial policy goals may end up conflicting with one another, making it difficult for politicians to exercise the control advocated by proponents. Therefore, it is crucial to balance the competing aims of boosting national security, delivering high-paying work, making the economy grow, revitalizing poorer regions, and cutting emissions. Achieving these goals simultaneously is no small feat.

In conclusion, the combined objectives of industrial policy and climate change are fraught with challenges. Policymakers face a difficult road ahead as they navigate the trade-offs and complexities of delivering on green jobs while pursuing meaningful action against climate change. It is essential to strike a balance and acknowledge that the competing aims of these policies may present more challenges than anticipated.

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