Ángel Martín Oro

Instituto Juan de Mariana

Vilnius, 12 September 2013

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Govt revenue in selected European countries (2001=100)

France Germany Greece Ireland Lithuania Portugal Spain

Context: Macro-level bubble:Government revenue

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Govt revenue in selected European countries (2001=100)

France Germany Greece Ireland Portugal Spain

Macro-level bubble:Government revenue

2

100

120

140

160

180

200

220

240

260

280

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Govt spending in selected European countries (2001=100)

France Germany Greece Ireland Portugal Spain

Macro-level bubble:Government spending

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Macro-level bubble:Fiscal balance & Unemployment

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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Un

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tota

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Fis

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% o

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DP

)

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Boom & Bust cycles

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“Study of the effects on employment of public aid to renewableenergy sources” (March 2009). Calzada, G. et al. King JuanCarlos University.

Obama (2009):

“think of what‟s happening in countries like

Spain, Germany and Japan, where they are making real

investments in renewable energy. They are surging ahead

of us, poised to take the lead in these new industries.”

Renewable Energy: the Spanish model

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Renewables must be boosted with public resources

Perverse system in place (electricity tariff deficit)

Very generous premiums over RE established, with

attractive state-guaranteed returns

Huge boom in new installed capacity, out of control

causing the system‟s costs (tariff deficit) skyrocket

Need to correct unsustainable imbalances causes

the bust

Renewables boom & bust

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Evolution & structure of installedcapacity of the Special Regime (MW)

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A subsidy-led boom

Subsidies to solar energyrose from €190m in 2007 to€3.5 billion in 2012 (an 18-fold increase). Total subsidies to all renewablesreached €8.1 billion in 2012

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Evolution of the tariff deficit(accumulated about 30bn €)

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Solar boom went bust

“Mr X is the victim of a bungled, overambitious renewablesprogramme. Governments everywherewant to turn green and createenvironmentally friendly jobs. But as Spain shows, good intentions are notenough. If the policies are wrong, thebenefits are wasted, the jobsdisappear, the costs remain -and business investors bear the brunt.” (TheEconomist)

28 JUL 201311

What about green jobs?

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Green jobs: myth or reality?

European Commission‟s White Paper „Energy for the

future: renewable sources of energy‟ (1997): it is quite

clear that a pro-active move towards such energy sources

will lead to significant new employment opportunities.

At what cost? Throwing vast amounts of public money…

Main result of the study (2009): 2.2 jobs destroyed for

every “green job” created

“The solar-energy business has lost tens of thousands of

jobs from its peak.” (The Economist, 2013)13

Higher debt (tariff deficit)

Higher energy prices

Lower competitiveness, delocalization & deindustrialization

Regulatory uncertainty

Less investment in the sector

Net job losses

Capital missallocation

Consequences of this misguidedgreen jobs policy

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Europe vs. The US

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In a nutshell

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Ángel Martín Oro

TW @a_martinoro // amartin@juandemariana.org

Instituto Juan de Mariana

Main reference:

“Study of the effects on employment of public aid to renewableenergy sources” (March 2009). Calzada, G. et al. King Juan Carlos

University.

Thank you