Huhne must heed lessons of US to fulfil “250,000 green jobs” pledge

Clare McNeil is a Research Fellow at the Institute for Public Policy Research (IPPR)

Chris Huhne, the energy secretary, says the government’s ‘Green Deal’ programme could create 250,000 ‘green jobs’ at its peak, to aid the economic recovery. But findings in a report (pdf) published this week by IPPR on the US green jobs agenda suggest this could be far harder to achieve than the government expects.

When standing in 2008, President Obama pledged to create five million green jobs over 10 years. Once in power he dedicated one eighth of Stimulus Act investment – around $90 billion – to building a clean economy.

Of this at least $5.5bn spent was invested in buildings retrofit programmes specifically and $20bn more widely on energy efficiency. Public works style programmes in home insulation and energy efficiency retrofitting were to provide hundreds of thousands of ‘shovel-ready’ jobs to put Americans back to work.

The President bet heavily on the investment generating jobs in the short-term as well as the longer-term gains from the green energy incentives.

Two years later, and a report (pdf), Sizing the Clean Economy, from the Brookings Institute, shows how green jobs growth in the US is in fact being driven by emerging energy technologies such as wave power and solar thermal, rather than the energy efficiency sector.

See Table 2:

The stimulus funding has saved many jobs in the construction sector that would otherwise have been lost, but the ‘green army’ in every community has not materialised. The same Brookings report found only around 60,000 jobs nationally were created in the buildings-related energy efficiency sector between 2003 and 2010. Several energy efficiency-related sectors saw a net jobs loss.

The biggest factor behind this is the devastating impact of the housing-centred recession, causing mass layoffs in the construction sector, which currently has an unemployment rate in the US of 16 per cent, making it difficult for new entrants to find work. But the policy design was also flawed.

The residential retrofit market was under-developed and transaction costs too high for property owners. It was difficult to persuade homeowners, many of whom were facing far higher mortgage repayments or even the threat of losing their homes, to take on additional debt.

The UK government’s Green Deal home insulation scheme hopes to avoid this through its ‘golden rule’, where payments for work will not cost any more than the savings they achieve. But if Mr Huhne wants to see a 250,000-strong green army in the UK, the lesson is clear: you won’t get jobs or policy success without the right combination of smart policy design and healthy market conditions.