Economy of green

CURWOOD: Ramping up a fundamental change in the energy business to create green jobs is not exactly a small task. Trillions of dollars and millions of people are still tied to fossil fuels. But oil and gas would lose billions in subsidies that would then be devoted to renewable fuels if a bill that just passed the House of Representatives can get through the Senate and past a presidential veto. Still, when the next president takes office, there will be calls to make good on the promises to generate green jobs.

Nobel Prize-winning economist Joseph Stiglitz chaired the Council of Economic Advisors during the Clinton Administration. I asked him what steps the federal government needs to take to stimulate the creation of green energy jobs.

STIGLITZ: By and large the private sector works pretty well, if the incentives are right. The problem right now is the incentives aren’t right. There aren’t the right incentives that reflect the true, what you might call ‘green costs’ associated with anything we do. There aren’t the costs reflecting the scarcity of water, the scarcity of our atmosphere, global warming ? these aren’t reflected in the prices and the result of this is firms don’t have the right incentives to do the right thing.

CURWOOD: How do you change that?

STIGLITZ: In one way or another, you have to price these things that we’ve traditionally treated as free ? realize that they are scarce. For instance, a carbon tax would take into account the fact that every time emissions are created, it increases the cost. And that’s a social cost. It’s a cost that everybody in the world suffers. So if you charge for every ton of carbon that’s emitted in the atmosphere, a certain amount- that will induce people to economize on emissions and that will provide the incentives to innovate, the incentives to invest in the right way. Many of these investments are long-term investments, and so you have to assure people that this is not just a temporary tax, this is something that’s a long-term problem of our globe. It’s not going to go away in a year or two; it’s with us forever.

Dr. Joseph Stiglitz is a professor at the Columbia University Business School, and won the 2001 Nobel prize for economics.(Courtesy of Joseph Stiglitz)

CURWOOD: Now, for example you may know people ? this may have happened to you yourself. You’re interested in putting in solar panels or geothermal and you tried to call somebody to come in and install this, and you find that nobody knows how to do this. How do you deal with training people to respond to this change?

STIGLITZ: Well I think there may need to be a government program to put a little bit of impetus into it initially ? do some of the training, provide some of the seed capital ? to help the private sector, jumpstart the private sector. But you know, Americans are very adaptable. Fifteen years ago, there wasn’t such a thing called the Internet, but we learned very quickly how to adapt to this new world and I think the same thing’s true about green jobs.

CURWOOD: What went wrong with ethanol? That’s a lot of green employment there for farmers and yet a farmer right now in Iowa can only get $1.70 a gallon for his ethanol when it sells for $2.40 in New York because I guess there’s transportation problems, infrastructure. What went wrong when the government planning for that?

STIGLITZ: Well actually the problems with ethanol are far deeper. The fact is America should not be producing corn-based ethanol. American corn-based ethanol entails a 50 cents a gallon subsidy and we’re at the same time taxing sugar-based ethanol imported from Brazil by 50 cents a gallon. The fact is that corn-based ethanol has been, you might say, a swindle that has been imposed on America in the name of green jobs, in order to subsidize a few corporate interests. If you look at the actual green benefit of corn-based ethanol, it’s actually very weak. And if we had a comprehensive accounting ? a green accounting ? that talked about the transportation costs, the production costs, how much resources are used in the production of this, we would find it a real problem.

CURWOOD: Professor Stiglitz, what’s the potential for green jobs? I mean, how many could there be in your view?

STIGLITZ: This is probably the big new industry of this century. The Internet was the big thing at the end of the last century. I think adapting our entire economy to the new realities is going to be the main spur to our economy in the coming decade.

CURWOOD: So what we do about green jobs will really determine how well we grow or don’t grow.

STIGLITZ: That’s right.

CURWOOD: Joseph Stiglitz chaired the Council of Economic Advisors during the Clinton administration.