President Obama has repeatedly committed his administration to pursuing a "[renewable-energy] strategy that's cleaner, cheaper, and full of new jobs." Back in 2008, he pledged to create 5 million jobs over the course of ten years by investing in renewable resources. He highlighted the jobs focus during the October 16 presidential debate: "I expect those new energy sources to be built right here in the United States. That's going to help [young graduates] get a job."
Green may be good but, as the figure below shows, the jobs come at a hefty cost.
The Joint Committee on Taxation estimates that energy-related tax preferences will cost Americans $5.4 billion this year. Half of this, $2.7 billion, will benefit green sectors: $1 billion in nuclear subsidies, $1.3 billion in wind energy credits for electricity production, and $400 million in solar-energy property credits.
So-called "section 1603″ renewable energy grants, part of the 2009 fiscal stimulus package, will cost taxpayers a further $5.8 billion. If we assume that the grants are awarded across sectors in the last five months of this year as they were in the first seven, then the nuclear, solar, and wind energy sectors will receive $4 billion of this, boosting total green-sector subsidies to $6.7 billion this year.
Taxpayers will also provide $700 million in energy-efficient property credits. The credits apply mainly to solar, though we don't know the precise allocation – so we leave it out of the figure, which therefore understates the cost of solar-backed jobs.
Dividing the total wind, solar, and nuclear subsidies by the mere 252,000 jobs these sectors currently support in the United States, they are generating jobs at an average annual cost to taxpayers of over $29,000. Wind jobs cost taxpayers nearly $47,000 per job per year.
By way of comparison, the coal, oil, and gas sectors receive $2.7 billion in subsidies annually, and employ about 1.4 million Americans. The taxpayer-cost per job in these sectors is therefore just over $1,900.
The bottom line is that green-energy jobs cost taxpayers, on average, 15 times more than oil, gas, and coal jobs. Wind-backed jobs cost 25 times more. With improvements in hydraulic fracturing and horizontal drilling, this cost gap may actually grow in the coming years, rather than decline as renewables advocates often assume. The Department of Energy forecasts that American production of hydrocarbon fuels, which currently account for ¾ of U.S. energy generation, will average a record 11.4 million barrels a day next year, only slightly below the 11.6 million a day produced by Saudi Arabia.
Given the current state of energy-production technology, green jobs don't come cheap. Since those jobs will have to rise twentyfold in the next six years in order for the president to meet his five million green job pledge, hefty new tax hikes will be needed to support them.
Benn Steil is director of international economics at the Council on Foreign Relations and co-winner of the 2010 Hayek Book Prize. Dinah Walker is an analyst, and Romil Chouhan a research associate, at the Council.
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