OurEnergyPolicy.org (Washington, DC)
Energy Policy Experts & Economists Discuss Jobs, the Energy Sector, and Government
Since the 111th Congress’ attempt at comprehensive climate and energy legislation, the prevailing U.S. narrative on energy and energy policy has been one of “jobs” and “job creation.” The Keystone XL pipeline debate has, by and large, been framed by advocates on either side of the issue as a trade-off between protecting the environment and creating jobs. The expansion of natural gas’s role in both domestic energy production and power supply has most frequently been couched in much the same way. Recent Gallup polls indicate that the persistently weak economy is contributing to a shift in national priorities vis-à-vis these trade-offs, perhaps also driven by effective framing by advocates of domestic energy production as a jobs issue. (See figure 1.)
“Americans Split on Energy vs. Environment Trade-Off
Forty-seven percent prioritize energy production; 44%, environmental protection.”
In an April 13-17, 2012 CBS News/New York Times poll, 48% of respondents said the economy and jobs are the most important problem facing the country today.
As part of its ongoing discussion programs, OurEnergyPolicy.org – a nonpartisan organization dedicated to advancing the national energy policy discourse by convening diverse, expert perspectives in public dialogue – hosted a panel discussion at the Capitol Visitor’s Center in Washington, DC on February 19th, 2012. The panel was entitled “Jobs, the Energy Sector, and Government” and it brought together three distinguished energy policy experts in a wide-ranging discussion of the role of the energy sector in job creation, and the role of government in inspiring such job creation.
The experts participating on the panel were Kenneth Green, Resident Scholar at the American Enterprise Institute; Jigar Shah, founder of Sun Edison, CEO of Jigar Shah Consulting, and a board member of the Carbon War Room; and Robert Topel, distinguished professor of Urban and Labor Economics at the University of Chicago. Yossie Hollander, founder and chairman of OurEnergyPolicy.org, moderated the discussion, which touched on subsidies and incentives, and the interplay of energy policy, the private sector, and job creation.
Kenneth Green, speaking first, rejected what he characterized as the dominant energy policy advocacy paradigm – “that energy is bad, that we’re addicted, we’re dependent” and endorsed the idea that energy is central to liberal democracy, that as energy use grows, so does society. Green offered that the U.S. should, in considering choices between types and sources of energy, ask the following:
“Does it increase consumer choice and consumer empowerment? Does it increase the power of the markets to provide the right kind of energy at the right price and the right place at the right time and efficiently allocate energy resources? Does it preserve abundance and the ability to let us grow when our economy roars? Do we have capacity to grow as opposed to just sustain? Is it affordable?”
Jigar Shah opened his remarks with observations on the high level of technological innovation in energy today. He noted that despite the fact that a number of emergent technologies have met key milestones and are cheaper than the energy sources they would replace, even absent subsidies, they still don’t work on the necessary scale. He described this as market failure caused by misaligned or missing incentives.
Robert Topel led with the question of whether energy policy was appropriate whatsoever, commenting that the private sector is more efficient in spending tax dollars than government. He also commented that “job creation is not in and of itself a sensible policy goal,” but rather that economic efficiency is a policy goal, and that jobs are the outcome.
“[Government policy] really can’t create jobs,” said Topel. “It can be an impediment to creating productive economic activities, but the creator of those economic opportunities is the private sector. So the public sector can facilitate that kind of thing, but it is not itself the creator of productive opportunities.”
Topel also touched on “rent seeking,” wherein industries seek and lobby for subsidies and tax breaks. By and large, he sees contemporary energy policy as the encouragement of rent seeking to the detriment of market efficiency and notes that policies built around subsidies cause rent seeking.
Shah also challenged the efficacy of subsidies as a policy tool, saying they have the danger of creating a “path of dependence,” and suggested that America’s current reliance on oil and coal can be traced in part to long-running subsidies. To bring emergent energy technologies like wind and solar to scale, Shah argued that we need to “level the playing field.” Emergent energy technologies should be brought to maturity by way of some subsidies, according to Shah, at which point the subsidies should be phased out.
The panel responded to a question from a representative of the Natural Gas Supply Association, and weighed in on the dramatic shift in natural gas prices over the last five years. Green downplayed the notion that U.S. natural gas discoveries are “revolutionary.”
“We seem to have vastly bigger resources than we thought,” said Green. “It’s unclear the size of them, because both — well, everybody has an incentive to misstate things in one direction or the other, so the environmental movement has incentives to understate. The industry has incentives to overstate.”
Shah rooted the ascent of natural gas to oil companies using the fuel as part of the reserve-replacement ratio–a metric used by investors to judge the operating performance of an oil and gas exploration and production company. Shah then suggested that other fuels are thus at a disadvantage because they aren’t counted towards a company’s reserve-replacement ratio. He went on to say that natural gas is on an equal footing in electricity production, but at a disadvantage in liquid fuels, arguing that the U.S. auto industry isn’t rushing to make natural gas- or methanol-friendly vehicles, while EPA regulations would further complicate widespread adoption of natural gas as a liquid fuel.
Clean Energy Report’s Dave Clarke, noting the panel’s apparent preference for limited subsidies and regulations, asked how such a regulatory and legislative regime would address climate change and greenhouse gas emissions.
Shah offered that the technologies needed to achieve GHG reductions already exist, but that a level playing field is necessary for those technologies to compete and supersede existing ones. Topel added that a carbon tax would be self-defeating in that it would “offshore” carbon emissions. He added that solutions need to come from “innovations on the supply side,” but that higher energy prices were necessary to drive those innovations.
Responding to an audience question on funding for basic energy R&D, the panel agreed that the federal government should be a primary investor, whether through the military or other civilian agencies, but that the government must also develop policies that creates fair and equal “rules of the game” to allow new technologies developed in basic R&D to make it past the bench and into the marketplace.
“There’s two pieces to this,” said Shah. “One is actually performing R&D, which is we need to do basic research, someone should pay for it, but the other part of it is actually inspiring investors on the other side that there is actually a level playing field for which reason they would actually invest in the conclusions of the basic R&D and actually take it to the next level. Today, we don’t have that.”
Having touched on a wide variety of issues related to energy jobs and the role of government in facilitating or complicating their creation, the panel concluded with the question: Is it the role of government to enable or encourage the creation of energy jobs?
Though many thoughtful related positions were outlined, no clear consensus on this question emerged from this expert discussion, but it is certain that this issue and extensive discussion of it will continue throughout this election year.
 Gallup, March 23, 2012. “Americans Split on Energy vs. Environment Trade-Off
Forty-seven percent prioritize energy production; 44%, environmental protection.”
 Przybyla, H. (2012, May 1). Oil drilling advocates drive presidential debate with ads. Retrieved from http://www.bloomberg.com/news/2012-05-01/oil-drilling-advocates-driving-presidenti-debate-with-ads.html