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Leo Hindery, Jr. Headshot

Clean Energy Here -- Not So Clean Hands Over There

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This Thursday, March 4, I am addressing the Apollo Alliance on Clean Energy and Good Jobs on the subject of "How to Make the U.S. a Leader in the Clean Energy Economy," a topic made urgent in the midst of the ongoing Great Recession by the promising reality that 'the deployment of just wind and solar power has the potential to support globally 20 million new jobs by 2030 and trillions of dollars in revenue.'

I believe that the answers -- four in number -- are actually pretty simple:

First -- and foremost -- we need to be much more capable and efficient in getting stimulus and private monies out the door into 'things green' and into improved infrastructure.

Second, we need to immediately level the global trade playing field, especially with China, which is already our biggest competitor in the green economy.

Third, we need a buy-domestic program that generally mirrors the programs of our major trading partners, especially China's.

Fourth, because the green economy is very heavily weighted toward manufacturing, we need an all-of-government manufacturing policy that results in a near-term doubling of the sector's employees and, compared to services, of its relative contribution to GDP.

Let's take them in order.

Foremost, we need to find focus and have a nationwide sense of urgency regarding this issue, with a lot less rhetoric from the Obama administration and a lot more forceful advocacy.

The non-partisan GAO and the inspector general of the Department of Energy have just put out scathing reports regarding government's inability to invest quickly and efficiently in anything, green or otherwise. As just one painful example, the biggest states have to date met less than 2% of their now year-old stimulus-funded weatherization goals (cold-weather New York is at just 0.62%), even though building retrofits are by far the most immediately accessible 'shovel-ready' job-creation opportunity. And only God knows why we haven't declared a federal economic emergency in order to streamline obtaining required permits and approvals.

By contrast, the other major developed countries -- and China -- are factors better both at bringing government and the private sector together to advance the green economy, and at actually spending, in a timely fashion, project-based stimulus funds. Japan, for example, has, on a macro level, done an excellent job of combining very large-scale government-sponsored R&D (about $3.5 billion a year) and state-supported industrial development to improve energy efficiency and develop its renewable energy industry. Germany, in turn, is very advantageously using targeted subsidies to improve energy efficiency in manufacturing - in less than one year's time, its new 500 million Euros program for industry has generated a massive 10 billion Euros of follow-on investments that will produce significant long-term energy savings for the country.

Greatly compounding our problems from just not being very 'efficient' is our unwillingness to date to establish a National Infrastructure Bank (or NIB), a new entity which we desperately need in order to accelerate investments in things green and in infrastructure of all kinds.

As far back as February 2007, in a legislative initiative for Congress called the Horizon Project which I chaired, we identified the need for an NIB and for incentives for private funding. Long before this Great Recession began we knew that thoughtful investments in infrastructure were one of the top two ways to create lots of jobs, provided the spending was coupled with buy-domestic requirements. (The other way is employment programs for the roughly 5 million unemployed out-of-school youth.) And with the passage of time, we now know the specifics of this: each $1 billion spent creates on average 25,000 new jobs, and when the investments are for high-tech green things such as improving energy efficiency in manufacturing facilities, smart grids and smart meters, and large-scale building retrofits, the new-jobs figure is much greater.

An NIB would immediately increase many-fold, and at much lower costs, the infrastructure investment capacities of our federal, state and local governments; it would make such investments less dependent on annual appropriations and thus counter the almost knee-jerk political objections to them; and it would allow these governments to leverage and partner with private capital markets, large fiduciary and institutional investors, and foreign central banks.

As for leveling the trade playing field, no responsible American economist disagrees with the President's recent (albeit overdue) conclusion that China's currency is significantly undervalued compared to the U.S. dollar, by at least 25% and up to 40%. Yet currency manipulation is just one of China's many unfair trade practices: 90%. of China's domination in manufactured goods vis-à-vis the U.S. is due not to its much-discussed relatively low labor costs but to its subsidies on plant sitings, financing, taxes and currency and to its extremely low environmental standards.

Only responsible trade agreement enforcement on our part -- enforcement that aggressively targets all illegal subsidies and poor environmental practices -- can turn this trade imbalance around. And when we finally get around to enforcing agreements and not just negotiating them, we need to pay particular attention to China's role in the global green economy. Already China is making all of its domestic expenditures under procurement rules that effectively lock out the U.S. and other nations from importing green components to it and that have thus already positioned the country to be the world's largest exporter of 'things green'. As Senator Lindsay Graham (R-SC) recently said, every day "is a day that China uses to dominate the green economy. It has made a long-term strategic decision and they are going gang-busters."

To put this in context, while our federal government's stimulus package devotes only $80 billion to the green economy, China's comparable central government investment figure is $217 billion -- and just last year alone, China spent overall, government-wise and 'privately', $440 billion on clean energy. But more important than any of China's numbers is the fact that 100% of whatever is spent in the country will go to Chinese manufacturers and companies because of China's "Indigenous Innovation Production Accreditation Program", which it promulgated on November 15, 2009 and which limits central and provincial government procurement of any sort to goods with "indigenous innovation", which simply means "made in China".

So next, we obviously need to adopt our own buy-domestic requirements related to all federal government procurement, 'green' or otherwise, which generally mirror the buy-domestic programs of our major trading partners and last as long. Foolishly, America is almost alone among the major nations in not having such a program, yet no single stimulus effort would do more to resuscitate U.S. employment, especially manufacturing, and jumpstart our green manufacturing.

Even the U.S. Chamber of Commerce -- the biggest toady in the land when it comes to kowtowing to unfair trade practices that discriminate against American workers -- is finally on the record in opposition to (quote) "China's state-led and export-led development model and its intensifying discriminatory and discretionary innovation and industrial policies" (unquote).

Finally, we very much need to understand the sharp differences between manufacturing and service jobs. Some in the administration and Congress still wrong-headedly believe that a "job is a job" and that the decline in our nation's manufactured goods (and, by extension, the labor force that makes them) can be made up by a favorable trade balance in such products as software, legal services, university tuition, and motion pictures. This latter contention is simply absurd, and as for a job being a job, manufacturing indisputably has the largest multiplier effect by far of all job sectors.

Manufacturing creates $1.40 of additional economic activity for each $1.00 of direct spending and, even more important, 2.5 other jobs on average for each direct job in the sector. And at the high-tech upper end of manufacturing, where the green economy 'resides', for each new job created directly, as many as 16 associated jobs are created. By contrast, each new service job creates on average no more than 1.6 associated jobs.

******

In addition to the four things we need to do, there is at once one overriding perspective we can't lose sight of in the green economy, and that is Energy Secretary Chu's and others' contention that the goal of the green economy must be to make clean energy cheap in reality, not disguise its cost with, on the one hand, tax subsidies for wind and solar and, on the other, tax penalties for fossil fuels.

The simple fact is that it's not possible, given the way other major economies in the world subsidize their industries, to maintain any semblance of a balanced and internationally competitive middle class American economy if we pursue a policy of systematically (and artificially) increasing the cost of energy and resources through 'feed-in' tariffs or otherwise. And if we do so, then we will clearly thwart our goal of promoting, both for export and for import substitution, more value-added manufacturing (and more value-added agriculture and mining). And we will also be thwarting our newest national goal of "Mak[ing] the U.S. a Leader in the Clean Energy Economy".

The last thing we should do is reverse the trend of the last three centuries and move away from capital-intensive and resource-intensive technologies to activities that are not. If we 'decarbonize' our environment by shifting from coal to low-carbon natural gas and no-carbon nuclear, which are very energy intensive and efficient, we will continue to move forward -- but if we shift from coal only to biomass, wind and water, then we will go backward in time.

Leo Hindery, Jr. chairs the US Economy/Smart Globalization Initiative at the New America Foundation and is a member of the Council on Foreign Relations. He is the former chief executive of AT&T Broadband and other major media and telecom companies.

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