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I have published the following editorial in City AM, a British
WHEN is a job not a job? Answer: when it is a green job. Jobs in
an industry that raises the price of energy effectively destroy
jobs elsewhere; jobs in an industry that cuts the cost of energy
create extra jobs elsewhere.
The entire argument for green jobs is a version of Frederic
Bastiat's broken-window fallacy. The great nineteenth century
French economist pointed out that breaking a window may provide
work for the glazier, but takes work from the tailor, because the
window owner has to postpone ordering a new suit because he has to
pay for the window.
You will hear claims from Chris Huhne, the anti-energy secretary,
and the green-greed brigade that trousers his subsidies for their
wind and solar farms, about how many jobs they are creating in
renewable energy. But since every one of these jobs is subsidised
by higher electricity bills and extra taxes, the creation of those
jobs is a cost to the rest of us. The anti-carbon and renewable
agenda is not only killing jobs by closing steel mills, aluminium
smelters and power stations, but preventing the creation of new
jobs at hairdressers, restaurants and electricians by putting up
their costs and taking money from their customers' pockets.
We now have an estimate, from meticulous work in a new report by
the Renewable Energy Foundation, of just how costly those subsidies
are going to get in a few years' time: £15bn a year, or 1 per cent
of GDP. Ouch. That's more than this year's growth.
Contrast that with news from the United States that, according to
a report from IHS Global Insight, the cheap shale gas revolution
now in full flow has created 148,000 jobs directly within the gas
industry and - by making energy cheaper - has created at least
another 450,000 jobs elsewhere in the economy. By 2015, the total
impact of shale gas will be 870,000 new jobs, says the report.
Shale gas now provides more than a quarter of American gas from a
standing start about five years ago. Its effect has been dramatic.
Whereas gas prices rose sharply here in the last two years, pushed
up by oil prices, the Libyan civil war (which constricted supply)
and the Japanese earthquake (which boosted demand), by contrast
they stayed low in the United States.
This is the first time in decades gas prices on opposite sides of
the Atlantic have diverged so sharply. Cheap gas in America has
caused a rush into using gas for electricity generation, the
cancellation of coal and nuclear plants, the mothballing of gas
import terminals, the revival of the US chemical industry, a fall
in the price of farmers' input costs (nitrogen fertiliser is made
with natural gas) and the beginning of the conversion of some urban
transport fleets to running on natural gas.
Oh, and by the way, with one exception in Wyoming, shale gas
drilling has still not caused any verified cases of groundwater
contamination. The environmental risks of gas are real but small
compared with the documented impact that wind power has on eagles,
bats, landscapes and pollution in Inner Mongolia (where the metals
that go into their magnets are mined and refined), or that biofuels
have on hunger and rainforest destruction.
Britain can get some of these benefits of the shale gas revolution
whatever happens. We already have. Last Christmas, when all wind
turbines stood helplessly still during the great freeze, three
cargoes of liquefied natural gas heading for the United States from
Qatar actually turned around and came to the Isle of Grain instead;
that kept our boilers going, kept prices from rising faster than
they did and in the long run staved off job losses.
Thus, if we were the only country - or part of the only continent
- not to exploit the new resource of shale gas within our own
borders, we might still get some of the indirect benefits. But we
would also lose the revenues and the direct jobs that come with gas
drilling. We would also lose competitiveness to countries with
Back in 1800, Britain was becoming the richest country in the
world with the fastest economic growth and the fastest job creation
- the China of its day. That was not because we had suddenly become
cleverer than everybody else at inventing things. It was because we
had stumbled upon limitless, dense and above all cheap energy in
the form of coal, and harnessed it to mechanise industry, cheaply
amplifying the labour productivity of each person so much that he
could be paid high wages.
That lesson - that cheap energy is an employment multiplier, while
costly energy is an employment divider - has been forgotten. Please
let us recall it before the green jobs myth causes more