‘Green economy’ has become the new global buzzword. To environmentalists the green economy is about greening and making more sustainable our production and supply chains, as well as our consumption patterns. To many politicians, however, green economy is synonymous with the competition for green jobs – the desire to keep whatever new jobs it generates within territorial boundaries and, once they come about, to protect these jobs as much as possible.
Given these radically different goals, confusion can emerge over industrial policy and environmental policy associated with green jobs. Nowhere is this confusion more visible than in the area of renewable energy.
Production is global
Much of the competition over green jobs ignores the fact that production chains have gone global. We no longer live in a world in which Product A is entirely manufactured in Country A and then sold to Country B. Most Product As are produced in multiple locations around the globe and, if these products are ‘green’, then the ‘green jobs’ associated with production are equally spread out.
Take American silicon modules for solar panels, labelled as ‘Made in the US’. Much of the material used in their production are sourced from China, Europe or Japan. The same is true of Chinese photovoltaic cells labelled as ‘Made in China’. Much of the equipment used in their manufacture is imported from Germany, Switzerland or the US.
Politicians who hope to boost jobs by forcing local producers to buy local equipment and components, or by penalising the entry of competing green goods into their territory, are trying to roll back the clock on the increased levels of efficiency and specialisation already attained on a global scale.
In a world of global supply chains, an average country imports roughly 40 per cent of its own exports. Shooting down imports, therefore, amounts to shooting one’s own foot. The desire to monopolise green jobs runs counter to the rising tide of global value chains.
Politicians also wrongly focus only on manufacture, neglecting the many jobs associated with the green services that are an equally vital part of the green economy, including installation and maintenance.
The World Resources Institute has run a wide array of calculations on the jobs generated in the renewable energy economy and their distribution.
In the US, 25 per cent of the 1,00,000 full-time workers estimated to be employed in the solar power industry are in manufacture. The rest are involved in R&D, solar panel installation, project development, finance, sales and distribution.
In the American wind sector, 33,000 jobs lie in manufacture but 39,000 others are in installation, operation and maintenance. The same proportions hold in many other countries.
Here lies a vital message for policy-makers: The best way to create green jobs is to set environmental targets and then let markets do their job. In the renewable energy sector, more jobs are created in the actual deployment of clean energy – jobs which by definition can only be local – than are created in manufacture.
While a better understanding of the functioning of global value chains certainly helps demystify the quest for green jobs, it helps with another issue as well.
Made in the world
China-bashing has now become a popular sport, both in the West and in other Asian countries. It is not uncommon to hear in the press that China has conquered global solar power production at the expense of countries such as Germany and the US – in short, that it’s stolen green energy jobs from those countries.
The reality, however, is that China is a mere assembly point for various imported components.
As the World Resources Institute puts it, few jobs in China have been created in the production of polycrystalline silicon materials because most of the raw materials are imported, and more than 90 per cent of photovoltaic products are exported to foreign markets. China has not, by any stretch of the imagination, monopolised green solar-energy jobs.
These findings also apply to the solar energy trade balance between China and the rest of the world, once we realise that what is ‘Made in China’ is actually ‘Made in the World’.
The message is simple: In today’s highly interconnected world, protectionism simply does not protect. If today’s price of a solar panel has fallen to a fraction of what it used to be – and it halved in 2011 – the response should not be to search for ways to keep foreign solar panels out of domestic markets and thereby raise prices once again. Rather we should be trying to boost demand for solar power so that it matches panel supply.
The best way to do that is through stable, well-designed renewable energy deployment policies. Environmental targets, not job targets or trade protectionism, should be the way forward.