New paper finds government green energy stimulus programs are ineffective, but popular because ‘you never want a serious crisis to go to waste’

A new paper entitled "Criticizing green stimulus" published in Wiley Interdisciplinary Reviews: Climate Change finds that government green energy stimulus programs are "relatively ineffective as fiscal stimulus, or as green instruments, or as both." A prime example would be Obama's 2009 $50 billion green stimulus package, which promised to create 5 million fake 'green jobs', such as putting gas in a school bus, being an oil lobbyist, or working at a bike shop, antique dealer, or used record store. However, the bill only created a total of 5,510 direct and indirect green jobs at a cost of $1.63 million each. The paper asks, "Finally why, if green stimulus is likely to be relatively ineffective, has it garnered so much support? The answer perhaps lies in the realm of politics rather than economics, in particular the famous ‘Rahm Emmanuel Doctrine’ that ‘you never want a serious crisis to go to waste’."

Criticizing green stimulus

Milan Brahmbhatt*

The outbreak of the global economic crisis in 2008 led to a revival of interest in fiscal policy as an instrument for counter-cyclical stimulus. A feature of this revival was a focus on undertaking ‘Green Stimulus’ as a way to stimulate short-run economic activity while also advancing long-term environmental goals, such as tackling climate change. The thesis of this paper is that, while some elements of Green Stimulus may have met the stated dual objectives, many are likely to have been relatively ineffective as fiscal stimulus, or as green instruments, or as both. We note some general reasons to qualify the case for Green Stimulus before taking a look at the limited empirical evidence on the effectiveness of Green Stimulus, as well as at some flaws of specific Green Stimulus policy instruments adopted in many countries, for example Renewable Energy and ‘Green Infrastructure’. Finally why, if green stimulus is likely to be relatively ineffective, has it garnered so much support? The answer perhaps lies in the realm of politics rather than economics, in particular the famous ‘Rahm Emmanuel Doctrine’ that ‘you never want a serious crisis to go to waste’.