Have 250.000 Spanish jobs been sacrificed for the folly of saving the planet?

Spain is one of the leading countries in Europe for Renewables. In 2013 output broke new records, with renewables accounting for 21.1% of Spanish electricity demand, with wind and hydroelectric power production increasing by 12% and 16%, respectively on 2012.

This is to the detriment of the Spanish economy for three financial reasons.

First is the huge amount now likely being spent on wind power subsidies. In 2013 output from wind farms was about 54GWh, or 12% higher than the 48.5GWh produced in 2012. Assuming an average subsidy of €54MWh (the rate for onshore wind turbines in the UK) that would be €2.9billion in subsidies.

Second, there is the huge amount now likely being spent on solar power. Spain is home to the massive Anadasol Solar Power Station. The three sections are expected to produce 495GWh per year, which at 38% of capacity seems a tad high. This will have a guaranteed price of €270 per megawatt. In the UK, the wholesale price is about £45 or €60 a megawatt. The excess cost (or subsidy) is therefore €210MWh, or €100million a year. At this rate, the total 8.2GWh produced by photovoltaics would have attracted a subsidy of €1.7bn in subsidies.

The combined estimated subsidy is worth €4.6bn is equivalent to 0.3% of GDP. Total subsidies are likely to be much more.

Third is the disastrous foray in solar panels lead to huge amounts of investments in solar schemes. In 2008 there were an estimated 30,000 jobs supported in the boom years. These jobs disappeared with the bust. With this sudden boom, caused by extremely generous subsidies, the quality of the panels was poor and overpriced. Many investors would not have got their money back even if the subsidies had remained. Now they will be saddled in debt, with no income. These borrowing were often state-backed. According to Bloomberg this fund was €24bn at the end of 2011. If some of this has to be written off, then there could be a material impact on deficit reduction plans, and thus the levels of unemployment. Government backing loss-making projects costs jobs.

This claim can be cross-checked. In the same Bloomberg article the Renewable Energy Producers Association (Asociación de productores de energías renovables or APPA) was quoted as saying that the renewables industry sustains about 110,000 Spanish jobs. In 2011 Verso Economics, a Kirkcaldy-based outfit, wrote a report about the effect of renewables jobs in Scotland and the impact on the wider UK. Whilst the report found that the jobs in renewables were largely neutral with Scotland – one job lost in the wider economy for each gained in renewables – in the wider UK economy for each job gained in Scottish renewables 3.7 jobs were lost in the wider UK economy. (report here, and reported at Caledonian Mercury, BBC and Scottish Sceptic) If this were replicated in Spain, the net impact of 110,000 jobs in renewables would be 400,000 jobs less jobs in the wider Spanish economy. Without renewables more than 250,000 people could be in work, or over 1% of the labor force.

Why I call Spain’s attempt to save the planet a folly, are the same reasons for calling Britain’s attempts a folly. Any emissions reductions in Europe will be more than offset by many times over from the emerging economies elsewhere. In reducing emissions, Spain will increase unemployment and reduce growth. But future generations will still bear over 80% of any consequences of warming than if no rich country did anything. In the current situation, I believe that a lot of Spanish people might object to their country being called “rich” anyway.

Update 20/11/14 – minor editing.

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5 Comments

  1. Raff

     /  19/11/2014

    This is deeply unconvincing. And I find it it more than a little ironic that a climate science sceptic should offer the result of a computer model as proof of anything. And an economic model at that!

    You seem to be suggesting that, had the money not been spent on renewables, it might have been used for tax cuts or some other fictional government spending; this would have been used so much better and created 250,000 jobs. That seems rather counter intuitive. We know that private spending went, in part at least, into building up a huge housing bubble. And we know also that government spending is no more a guarantee of good outcomes than private spending (many people say it is worse).

    Incidentally, cutting taxes rather assumes that the budget is in surplus – i.e. not borrowing. I don’t know whether Spain was in surplus but if it wasn’t then a tax cut would have amounted to borrowing money to give to affluent Spaniards (the poor pay little tax). And Spain’s later bust had a lot to do with using the Euro and consequently having no control over its own interest rates. This reduced central control over an overheating economy. The sensible action in these circumstances would perhaps have been to reduce spending (even on renewables) and paid down national debt. That would have created no jobs but might have deflated the bubble a little and reduced the pain later.

    Reply
    • manicbeancounter

       /  20/11/2014

      You make so many errors it is difficult to know where to begin.
      – Aid projects that have been successful usually are those with clearly defined with set objectives. Those that fail have vague objectives.
      – Sceptics are a mixed bunch, so your generalisation about all rejecting climate models is incorrect. Many would say they are running too hot. Further, there are different types of models in economics. The graphical/mathematical models of textbooks are different from the empirically based short-term forecast models. The computer simulation models on the lines of the climate models are different again.
      – The subsidies for renewables do not come out of general taxation, but are added to utility bills. In the UK the 30% rise in electric and gas bills from 2009 to 2012 was mostly due to this factor.
      – It you actually read what I wrote, you would see that I was not trying to explain the entire Spanish crisis in terms of renewables. Unemployment is currently 25% or 5.9million, so 250,000 jobs is quite small.
      – If you had studied economics, or read The Economist for a few years, you would know that reducing tax rates can sometimes increase revenue. Much to everyone’s surprise (including my own) Ronald Reagan’s tax cuts in the 1980s did just that.
      – The crisis was not caused by an excess of spending. It was caused by an excess of credit which was fed into the housing markets and consumer credit.

      Reply
  2. Raff

     /  22/11/2014

    Name some prominent sceptics who acknowledge that we should take heed of what climate models tell us. I’ve never come across one. You have said of economic models that, “At there best their forecasts at little better than the dumb forecast that next period will be the same as last period.” I share your scepticism of economic models. Economics is a social science, it deals with people whose behaviour, unlike climate, does not follow physical laws. Yet you base your analysis of Spain on an economic model.

    The UK renewables subsidies are not relevant to Spanish unemployment.

    Reading the Economist doesn’t make you an economist. But it should make you familiar with the questionable nature of the Laffer curve, which is what you are referring to indirectly. Here’s a choice quote:

    “Even Reagan, a supply-sider persuaded by Arthur Laffer’s pretty curves that his tax cuts would pay for themselves, raised taxes when they did not.”

    http://www.economist.com/node/18897489

    Or for more detail you could check out:

    http://www.economist.com/blogs/democracyinamerica/2012/08/romneys-tax-plan

    Wiki, on Reaganomics says, “Federal revenue share of GDP fell from 19.6% in fiscal 1981 to 17.3% in 1984, before rising back to 18.4% by fiscal year 1989. Personal income tax revenues fell during this period relative to GDP, while payroll tax revenues rose relative to GDP”.

    So can you support your suggestion that the Reagan tax cuts increased revenue? It seems non-trivial given the evidence against.

    Your claim, as I understand it, is that had there been no spending on renewables, unemployment would have been 250,000 lower. To support it you use the sort of doubtful economic model that you yourself question and a belief in an economic concept that is generally derided.

    And you suggest that I need to read some economics!

    Reply
    • manicbeancounter

       /  23/11/2014

      Raff,
      We have a different view on models. To think that current climate models are rubbish does not mean a total rejection of modelling in climatology. My dispute with climate models is similar to my dispute with extreme versions of economic planning models. There is no clearly defined set of equations that can fully define reality. In both it is impossible to empirically define the equations, as both the parameters AND the structure of those equations are always changing. In both economics and climatology our understanding will always be limited to mere pattern predictions. I might post on it at later date. Others, who have a knowledge of the various strands of economic thought, may start to grasp where I coming from here. They should then relate it to the wiki definition of climatology here, particularly the statement

      Climate is governed by physical laws which can be expressed as differential equations.

      When I said “If you had studied economics, or read The Economist for a few years” I was recommending that you followed my lead. I have a BA in Economics and for at least eight years subscribed to the Economist within a twenty year period. I do not know about recently, but The Economist used to argue its case whilst recognizing other viewpoints. I found it most helpful when I disagreed with its arguments. Although my degree was from a Polytechnic, it taught me to compare and contrast different points of view. It used to be said that if you got two economists to talk on a subject that you would get three different opinions. I believe this was an understatement.
      The “Laffar Curve” is a tautology. It is the particular application that the majority of economists dispute. Keynesians have long recognized also that tax cuts in a minor recession can raise the total revenue from taxes.
      If you look further into the Reagan tax cuts, there were actually two tranches – in 1981 and 1986. It was the latter I was referring to. The biggest tax cuts were to those on the top rate of income tax. In 1981 the top rate was reduced from 70% to 50% and in 1986 reduced again to 28%. This is what the Joint Economic Committee of US Congress said in 1996

      The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

      The Wiki article that you quote was on total tax take. It omits to mention that in the early 1980s there was a recession and the late 1980s a boom in the USA, which would have impacted as well. Raff, understanding the term “ceteris paribus” will help you understand why you miss the mark here. Understanding the term is also fundamental to comprehending the first of the three types of economics models I alluded to in my comment of Nov 20, 2014 at 9:50 PM – the graphical/mathematical models of textbooks.

      Reply
      • Raff

         /  23/11/2014

        A tautology? Laffer is a name and curve is a line that is not straight. How can that be a tautology? It is clear that plotting tax income against tax rate does not yield a straight line and it is very likely that there is a point at which income starts decreasing as the rate goes up. But it is probably impossible to determine at which tax rate that point occurs and so the curve is essentially useless.

        You said that reducing tax rates can sometimes increase revenue: “Much to everyone’s surprise (including my own) Ronald Reagan’s tax cuts in the 1980s did just that.”

        I pointed you to some articles in The Economist (a reliable source, as you had recommended it to me) that show the Reagan claim to be wrong.

        Now you say, without apparently noticing the contradiction, that:

        1. Keynesians have long recognised also that tax cuts in a minor recession can raise the total revenue from taxes.

        2. When you claimed Reagan’s tax cuts raised revenue, you were referring not to the 1981 cuts, which were done during a recession, but to the 1986 cuts, which were not.

        Your reference to “ceteris paribus” – all else being equal – is irrelevant in economics. In economics, all else is *never* equal. That is the problem with economics and economic forecasts, upon which your 250,000 estimate rests.

        Reply

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