Green Energy, Green Jobs and Green Guarantees

Nicolas Loris /

It’s no surprise the stimulus bill is loaded with green energy initiatives. Ideally, the bill can kill two birds with one stone by creating green jobs; it can solve our environmental and recessionary concerns in one fell swoop.

But what have we learned so far?

1.) A green jobs initiative may actually hurt the economy by slowing growth and increasing unemployment. It’s a net job killer – see California.

2.) Green jobs don’t necessarily mean good jobs. A recently released report shows that many green jobs do not pay well. And where do low-paying jobs often go? Out of the country. So to stimulate our economy, we’re not creating jobs, but instead displacing them with low-paying jobs that have a higher probability of being outsourced.

3.) NEPA: Yet Another Reason the Stimulus is Guaranteed to Fail

4.) Non-Existent Unemployed Climate Modelers Get $140 Million

Also included are loan guarantees in which alternative and renewable energy sources are eligible, including nuclear energy. Undoubtedly, this has raised some concerns among environmental groups and other anti-nuclear activists. Do they have a point? The answer is yes but for the wrong reasons.

For the activists and environmentalists that argue nuclear energy is an outdated technology, it’s not clean, it’s not safe and it’s expensive – they’re simply wrong. They use these arguments to argue against loan guarantees for nuclear, but it is important to understand how loan guarantees could help or hinder nuclear power or other energy sources. Heritage Research Fellow Jack Spencer outlines how loan guarantees distort the market:

They remove incentives to decrease costs. The loan guarantee discounts the cost to build a project, and this artificial price reduction allows the recipient’s project to be market viable at a point where it otherwise would not be.
They stifle competition and innovation both between sectors and within sectors. The loan guarantee artificially reduces the cost of capital, which allows a recipient to offer its product at below actual cost. This removes the incentive to look for less expensive or more competitive options.
They perpetuate the regulatory status quo. Because each nuclear technology produces a unique waste stream that has its own characteristics, some reactor types would be more attractive than others depending on how the waste was being managed. But so long as nuclear operators do not have to consider waste management, reactors with attractive waste characteristics can be ignored.
They suppress private-sector financing solutions. Companies invest in major projects with substantial risk all the time and do so without government loan guarantees. If they believe that the potential reward justifies the risk, they figure out a way to secure financing. This might include forming a consortium with other firms to share risk or developing an industry insurance scheme of some sort. Numerous companies exist in the private sector to insure large projects. Finding a way to develop an investment is at the heart of capitalism.

We at The Heritage Foundation aren’t automatically pro nuclear energy. We do often write about the advantages of nuclear (see here), but like any other product, it should able to live or die in the free market. The reality is we don’t know what would happen to nuclear energy industry if the market were truly free. Nostradamus doesn’t work at The Heritage Foundation but if we had to shake one of those magic eight balls and ask it if nuclear energy would succeed in the free market, we’d expect to see an answer like this: All signs point to yes.