BIOMASS INTEL

Last night, in his first State of the Union address since taking office in 2009, President Obama tried to galvanize lawmakers around the task of creating jobs and revamping the US economy.  The takeaway message: clean energy is good for jobs and jobs are good for clean energy.

Unfortunately, it’s a little more complex.  Clean energy is (and always has been) a central component of the President’s agenda — from infrastructure, worker training, and energy security — and he has embraced the need to transition towards a more energy efficient, self-reliant, and innovative energy infrastructure.  In the clean energy world, these goals are tough to argue with, but what do his recommendations mean for renewable energy, and specifically, biopower, biofuels, and biodiesel?

To answer the question, this article focuses on the trouble with overemphasizing job creation in the context of “the race” Obama eluded to during his speech when he challenged lawmakers to revamp the economy in order to maintain a competitive advantage:

I’ve been told that addressing our larger challenges is too ambitious; such an effort would be too contentious.  I’ve been told that our political system is too gridlocked, and that we should just put things on hold for a while.

I have one simple question: How long should we wait? How long should America put its future on hold?

You see, Washington has been telling us to wait for decades, even as the problems have grown worse.  Meanwhile, China is not waiting to revamp its economy.  Germany is not waiting.  India is not waiting.  These nations — they’re not standing still.  These nations aren’t playing for second place.  They’re putting more emphasis on math and science. They’re rebuilding their infrastructure.  They’re making serious investments in clean energy because they want those jobs.  Well, I do not accept second place for the United States of America.

and later:

[T]he nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation.

The message was clear: act now to protect US economic interests and ensure that it remains the most innovative, advanced and prolific economy in the world.  It’s difficult to argue with the notion that one should revamp their economy…but how?  Let’s start with the numbers.

The Recovery Act (“Stimulus”) committed $112 billion towards green initiatives, including $20 billion in green tax incentives.  Of that, $786.5 million went directly to advanced biofuels and more has trickled through the Department of Energy’s (“DOE”) ARPA-E program for “breakthrough” technologies.  These dollars have begun to take effect, but it will be some time before we can assess their impact.

As a comparison, despite its questionable environmental track record, HSBC estimates that of China’s roughly $586 billion package, $221 billion has green features, making it the largest green stimulus package in the world.  And according to the Climate Group, in 2007, China ranked second in the world in terms of the absolute dollar amount invested in renewable energy.  It spent $12 billion, which put it just behind Germany’s $14 billion.  China has also toyed with spending $440 billion to $660 billion dedicated solely to new energy development over the next decade.  If those expectations are fulfilled, China could emerge as the unquestioned global leader in clean energy production.  Obama makes a point.

Dollar for dollar, the US probably won’t compete, unless (borrowed) money currently being spent in Afghanistan and Iraq is somehow redirected…but that is another story.  Despite the US’ relative frugality, it isn’t necessarily out of the game.  The US currently enjoys a distinct advantage — technological know-how and an economy that rewards innovation — and tapping into as well as maximizing that potential is where Obama’s message really comes to roost.

US universities are making breakthroughs every day with innovative, clean energy technologies.  But commercializing those breakthroughs has remained a bit of a nightmare for a whole host of reasons.  The comparative cost of manufacturing in the US to say, China, is one such challenge.  But there is no reason why the US shouldn’t remain the world’s leader in breakthrough technologies and license those technologies abroad, at a profit.

The difficulty, of course, has always been trying to justify exporting manufacturing jobs abroad.  While the economy needs jobs sooner, Obama’s emphasis on job creation in the clean energy sector may be putting the cart before the horse.  For its part, the Stimulus package has always been about jobs.  Every proposal submitted to the DOE had to quantify the number of jobs created by specific projects.  Sure, Obama had to sell jobs last night, in this economy he has to.  Period.  Similarly, legislators have to show a direct correlation between spending and job creation.  But this doesn’t necessarily mean clean energy should be expected to carry US job creation on its back…at least not yet.  Without sufficient demand, it can’t.  The US will be setting itself up for a calamity if it expects anything else, and at the expense of the green economy.

The US needs a robust market for clean energy first, one where alternative fuels, renewable energy generation, and efficiency are price competitive to existing technologies.  Sufficient demand will ensure that the  jobs stick around.

The key to making clean energy more competitive and stimulating self-sustaining job growth is to recalibrate subsidies and taxes to reduce price discrepancies between “dirty” energy and clean energy.  While I don’t disagree with ensuring that biofuels meet rigid environmental requirements, life cycle analyses of fossil fuels should be held to the same environmental standards, and taxes at the pump should reflect their inherent externalities.  Scientists, economists, environmentalists, opinion leaders, and business leaders from across the political spectrum support a carbon tax.  Cap-and-trade is a start, but it won’t sustain a clean energy economy on its own.

The situation we are facing now is one in which subsidies and price signals can immediately make or break an entire segment of the clean energy economy because, too often, the rug is literally pulled right out from underneath particular industries…and at critical times.  The biodiesel industry knows this all to well where 23,000 jobs have essentially been wiped out due to lapsing tax credits.  No job in the world is going to resuscitate that industry on its own.

The point is that all the talk about jobs for clean energy really doesn’t change much for the industry.  In that race with the Axis of Green, subsidies, tax breaks, renewable portfolio standards, renewable fuel standards, low carbon fuel standards, and finally, cap-and-trade, will all play a key role in creating a robust market for clean energy technology…the jobs will follow.

Image: Flickr/Wa-J