Thorns Amid Green Shoots

Politicians in the US are expressing concern that the stimulus package could be creating more jobs in other countries than it does at home. But that's the reality of an interconnected world. The stimulus package commits billions of dollars for green energy projects in an attempt to combat both global warming and create jobs in the US. But many projects require global sourcing due to the complexity of the equipment or prior American policy. Wind turbines have over 8,000 parts, requiring American companies to spend stimulus dollars outside the US because not all parts are manufactured domestically. Alternatively, due to “not-in-our-backyard” policies on the back of the Three Mile Island reactor fiasco in 1979, the technical know-how to build nuclear power plants emigrated from the US long ago. So if Washington is serious about rejuvenating the industry, it will have to buy from overseas. In the end, if the US wants a quick fix to its employment woes it will need to invest not just at home, but also abroad. – YaleGlobal

Thorns Amid Green Shoots

Stimulating green energy in the US is creating more jobs in China than in the US – an inevitable corollary
Nayan Chanda
Wednesday, March 17, 2010

Can you combat global warming and create jobs? Can you develop green energy on your own and spurn globalisation? Answers to these questions are becoming clearer as countries struggle to revive their economies through investment in green technologies. The answers may not please many politicians. “It just makes your blood boil,” fumed New York’s influential Senator Charles Schumer on learning that the stimulus package he voted for may be creating jobs in the wrong places. US President Barack Obama’s economic stimulus plan, designed to create American jobs and usher in an era of renewable energy, has run smack into the reality of an interconnected world where nothing can be neatly packed within a national border. Being green in the US may mean new jobs for Chinese workers.

It made perfect sense for Obama to try to fulfil his two key policy objectives with the same Recovery and Reinvestment Act that Congress passed last year. During his presidential campaign, Obama spoke repeatedly about how the new US economy would be driven by green technology and promised to double renewable energy capacity by 2012. Indeed, in the six months since the stimulus plan has been adopted, investment in renewable energy has nearly doubled. Critics within his own party, though, are crying foul amid charge that the stimulus money has been creating more jobs in China, Vietnam and European countries than for the US tax-payers. The case that has ignited a firestorm is that of a Texas company, which — with the help of some $450 million in stimulus funds — plans to build a massive 240-turbine wind farm to generate 600 MW of electricity. The only catch is that the company has formed a joint venture with a Chinese firm to source these turbines. Schumer, like other legislators, is all for clean energy but would have serious misgivings if it creates 3,000 jobs in China and only 300 in the US.

Schumer and three other senators have written to Treasury Secretary Timothy Geithner to place a moratorium on the Recovery Act until Congress can insert a ‘buy American’ provision to future energy projects funded under the Act. At present, this requirement applies only to government procurement. Schumer claims that nearly 70 per cent of the wind farm projects that have received grants to date have installed turbines manufactured abroad.

Trouble is also brewing on another alternative energy front. After shunning construction of new nuclear power stations after the Three Mile Island reactor accident in 1979, the new administration has embraced nuclear power as one of the solutions to climate change and energy dependence. Building nuclear reactors was also seen as a major job creator worthy of government stimulus — that is until the workers’ union raised the alarm. Having been largely out of business for 30 years, the nuclear industry has mostly moved out of the US to the extent that building new plants — like those planned in Georgia — would require the import of major components from Japan and South Korea. The fact is that nuclear power generation has been embraced abroad while the US shunned it; as a result, reliance on foreign design and components — and jobs for foreigners — is unavoidable.

As the US government, facing persistent 10 per cent unemployment, focuses on the slogan of “jobs, jobs, jobs”, politicians are waking up to an integrated world, where jobs in the US often mean jobs elsewhere as well. A wind turbine comprises 8,000 parts, nearly half of which have to be sourced from China, Germany, Spain and Brazil. Even newly industrialising Vietnam supplies huge steel towers for wind turbines in the US. Energy Secretary Steven Chu has argued that importing components is necessary to jumpstart a green energy industry that has been neglected for so long. But such explanations provide cold comfort to Congressional leaders focused on bringing the bacon home to their constituencies. Westinghouse, once a US nuclear industry leader, says that at least 20 per cent of the cost of building a reactor must be spent abroad.

As in wind turbine industry, in nuclear power too China has the fastest-growing industry in the world. If the US cares about saving money and jumpstarting its own green industry, it has no option but to source components from China. But to create jobs at home the US may have to both dilute its own environmental agenda while also discouraging China’s burgeoning green industry.

The author is director of publications at the Yale Center for the Study of Globalization, and Editor of YaleGlobal Online.

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