National Journal Experts Blog: Look Beyond the U.S. Market

The following is one of two cross-posted contributions from ITIF to National Journal.

Job growth in clean energy is a tricky subject. As Brookings found, green sector employment has increased substantially in recent years, and this trend is to be applauded. But a key economic challenge is to make sure that we aren’t just swapping green jobs for fossil energy jobs, and are actually achieving netjob growth. And an important way to do that is to look beyond the US market.

Think of it this way: over the past 40 years, energy expenditures have tended to account for less than 10 percent of GDP, only rising above that threshold in the crisis-riddled 1970s. There is little reason to expect energy consumption to account for an increasing share of the economy; in fact, we want the opposite to happen, through lower energy costs and ever-declining energy intensity. But if we’re using less energy, and paying less for it, then relying on domestic consumption for green job growth will have its limits.

So while the domestic market is important, we also need to place major emphasis on foreign energy trade. As Josh Freedpoints out, the global clean energy market will likely be worth trillions in the decades ahead, in large part due to increased energy use in the developing world. If we’re serious about achieving net employment growth in the green economy, making sure we are the world’s supplier of clean energy is essential.

From a trade perspective, getting off foreign oil is perhaps the smartest thing we can do. It would essentially cut our trade deficit in half and bring energy jobs home. It’s physically impossible to fully replace foreign oil with domestic drilling, or to insulate domestic consumers from global price spikes. Liquid-based fuels from coal are not sustainable in the long run. The eventual answer might be advanced biofuels grown by American farmers, or electric vehicles running on clean American electricity, or hydrogen fuel cells, or a mix of these – we need to drive hard at all solutions with promise, to make them competitive with petroleum. Unfortunately, innovation requires public investment, as my colleague Matthew Stepp argued below. It always has. Congress may be uninterested in making these investments now, but they’ll have to eventually if we’re to break the tether of fuel imports.

But creating viable alternatives is but one piece of the green jobs puzzle. We can’t export it if we can’t build it; yet American manufacturing has declined for decades, and suffers from ongoing underinvestment. Senator Wyden’s office found last yearthat the US is already running a $4 billion trade deficit in clean technologies, mostly driven by wind and solar. We need a broad-based strategy to build the domestic clean energy supply chain, improve access to capital, incent training, and boost competitiveness. If Congress can’t put in place measures to advance domestic manufacturing and the jobs that come with it, then the states should.

Along with these efforts must come greater promotion of US exports, through international agreements, trade missions, greater access to export financing, and other means. But even if we fully ramp up domestic manufacturing and export support, American firms face unfair trade barriers around the world. Trade partners can impose tariffs on clean energy products, require domestic sourcing for new power plants, erect purposefully onerous technical standards, or engage in outright intellectual property theft. Such practices are outside the spirit of existing trade agreements, and should be aggressively prosecuted by US trade representatives through the WTO. Doing so would no doubt benefit US firms and the jobs they can create. There may be little federal appetite to invest in innovation and competitiveness at the moment, but knocking down trade barriers requires no new revenues, and thus is a logical near-term step.