The inclusion of
green technologies into the world’s energy production sectors presents a number
of opportunities for both developing and developed countries alike to pursue a
pro-jobs agenda while improving mankind’s environmental stance. However, because these new technologies
are in their relative infancies, support from governmental institutions are
critical to provide entrepreneurs with the necessary incentives to overcome
start-up costs and keep these technologies cost-efficient until technological
advances can bring operating costs down.
In providing these incentives, it is imperative for governments to provide a stable policy foundation to give businesses the time to make plans
for growth in the intermediate-to-long term. Yet, both domestic and international governments continue to
equivocate and push policy decisions off towards the future, instead of
creating this foundation for the present.
This piece aims to show why sound and well-reasoned green energy policy
should be a critical facet of any government’s vision for the future of the
country it represents.
The
last few years have seen remarkable investments by developed and developing
nations alike towards alternative energy initiatives in both the public and
private sectors. A combination of
tax credits, combined with billions in current and proposed expenditures in
2011 alone, has helped to subsidize both technological advancements and utility
construction towards wind, solar, geothermal, and tidal energy sources. Rising oil prices and public pressure
provided the impetus for these investments, but recently the trend towards
alternative energy sources has begun to stall. Total investment in green technologies (public and private
sector) has dropped 28% from 2011 fourth-quarter earnings (Q4) to a current 27
billion in funds between the United States and Europe. This represents a decrease of 22% from
the previous year’s Q4 levels, and that pattern appears likely to continue in
the future. The primary tax credit
for wind power in the United States, the Production Tax Credit, will expire at
the end of 2012 unless renewed by Congress, and European governments are
simultaneously looking to cull alternative energy investment as part of a
general Union shift towards austerity and elimination of nonessential
government services. These policy
changes have not gone unnoticed by the private sector; by the end of Q4 in
2011, private sector investment was down 87% from Q1 of the same year due to
the slowing performance of alternative energy stocks. A lack of coherent governmental policy vision for this
sector will continue to hamper stock performances, and consequently act as a
drag on private market investment into this field. Providing a more stable policy foundation will help to
ensure that nascent green technology companies can compete with established
energy sources and carve out their own markets in the near future.
Additionally,
in today’s job-starved economies, investment in green energy can provide a new,
and environmentally responsible, source of employment opportunities. Recently, leaders in the European Union
met to discuss a new, pro-growth agenda to stave off an impending recession for
the continent. In their proposals,
they discussed the impact of a green energy focus in providing millions of jobs
over the next decade, commenting that “Job growth in the green economy has been
positive throughout the recession and is [forecast] to remain quite
strong. Only the energy efficiency
and renewable energy sectors could create 5 million jobs by 2020”. To this effect, they propose a
combination of environmental tax increases to encourage carbon-neutral industry
formation, and a shift of taxation policies away from labor activities and
towards energy and emissions outputs as a deterrent to traditional energy
usage. The commission’s
representatives state that this pairing of tax strategies could lead to the
creation of as many as 1.5 million new jobs, in addition to the two million
jobs that can be created from enacting “energy-efficiency measures”, and the
500 thousand jobs created from the “increased recycling of key materials”. Overall, the plan argues that over 20
million jobs could be created by 2020 if the reforms are adopted by EU member states.
While
the Brussels plan offers promise as a starting point for a general transition
towards an alternative energy economy, it is too early to tell at this point
whether the plan will be ratified by the Union’s members. It is important to keep in mind that
the climate in Europe is currently not conducive to additional spending and
taxation, as Europe’s leaders are taking a page out of the Austrian school of
economic thought and pursuing a general program of austerity in the hope that
fiscal discipline will stimulate economic growth. Across the pond, the US is in an election year, and partisan
gridlock in Congress will keep many policy initiatives from being enacted. Nevertheless, it is imperative that
green energy incentives and investment be continued, even in the face of
prevailing attitudes towards budgetary constraints. We have already seen that, without government support,
private sector investment can drop off markedly because of the inherent risks
associated with emerging energy markets.
It will take a solid, stable, long-term policy base to provide markets
with the reassurance to invest in alternative energy utilities. If the proper incentives are put into
place today, green energy will continue to be a growth industry throughout the
coming decade, and provide developed and emerging economies alike with a source
of desirable employment.
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