Fund Balance

Fund Balance is a sustainable non-discretionary infrastructure investment practice and social innovation developer. We work with companies and foundations that design and meet the need for a healthy and thriving civilization and planet. We are part of the movement to create a lightweight, open source, bioregional, resilient community.

We provide investment research, capital access and consulting for investors and entrepreneurs in all asset classes. Clients and collaborators include E3 Bank |Dorr Asset | Inflection Point Capital | Nura Life Sciences | Like Minds | Mission Markets | Project Sea Clear | The World Bank’s Green Bond program | FarmlandLP.com and more.

By Walter Borden

“The conservation of natural resources is the fundamental problem. Unless we solve that problem it will avail us little to solve all others.”  Theodore Roosevelt

What’s In a Petrodollar?
Fossil Fuel producing nations should extract their resources consistent with the health needs of their people, air, land, and water.  History shows us that regulation plays an essential role in this mandate. Energy marketers insist regulations are counterproductive. Implied though not often stated, nations like Russia and China can more easily form capital and drive labor demand from fossil fuel exploitation because they can act largely unencumbered by regulation. This unproven assumption ignores the escalating costs of unconstrained fossil fuel extraction to present and future generations. Should we be more concerned about poisoning our planet for future generations than leaving large amounts of debt for them? I argue yes. Does the regulation of fossil fuel extraction impede aggregate labor demand? The evidence indicates no. The earth is the source of all money so worrying about debt instead of planetary health puts the cart before the horse. A sick, weakened planet will create less value, profit, and wealth.  Concurrently, as oil supplies wane, systemic risk will form around basing currencies on fossil fuels, oil in particular. Searches for fossil fuel resources will grow into fierce and destabilizing conflicts. Increasingly scarce tracts of clean, fertile land can only deepen them.

Unregulated Nations and Quality of Air, Water, Land and Life
Russia and its oil country exemplify the realities of unregulated, petrodollar capitalism. Its oil producing areas constitute what experts describe as our planet’s worst ecological oil catastrophe. Based on reporting from the Associated Press, estimates are that roughly one Deepwater Horizon-scale leakage occurs about every two months. Outdated infrastructure, minimal and unenforced regulation allow for oil to contaminate soil, kill plant life, and damage habitats for mammals and birds. State-funded research shows 10-15 percent of Russian oil leakage enters rivers with nearly 500,000 tons flowing into the Arctic.

Source: Bureau of Labor Statistics

From Chernobyl to more recent paper mill pollution seeping into Siberia’s Lake Baikal, which holds one-fifth of the world’s supply of fresh water, Russia’s lax regulatory posture renders great swaths of territory uninhabitable and fallow. Russian oil spills are more numerous than in any other oil-producing nation. “Oil gets spilled literally every day,” said Dr. Grigory Barenboim, senior researcher at the Russian Academy of Sciences’ Institute of Water Problems. His is not alone. And by all accounts the estimate is conservative since under Russian law, leaks less than 8 tons rate as “incidents” and can thus go unreported. By contrast, the U.S., the world’s third-largest oil producer, logged 341 pipeline ruptures in 2010 — compared to Russia’s 18,000 — according to the U.S. Department of Transportation.

The republic of Komi, just south of the Arctic Circle, is the scene of Russia’s largest oil spill. Up to 40 kilometers of two local rivers were polluted, killing thousands of fish. Respiratory diseases rose by over 28 percent in the year following the leak. Komi’s officials blamed neglected infrastructure and oil companies reporting that “companies that extract hydrocarbons focus on making profits rather than how to use the resources rationally.”

Representatives of Lukoil denied claims that they try to conceal spills and leaks saying that no more than 2.7 tons leaked last year from its production areas in Komi. Government officials and environmentalists agree however that such spills and mismanagement typify most any oil field in Russia. They point to outdated systems used by oil companies, but also add that large scale oil spills are not confined to abandoned or aging fields. Major accidents happen at brand new pipelines.

At least 400 tons leaked from a new Transneft pipeline in two separate accidents in Russia’s Far East last year. It brings Russian oil from Eastern Siberia to China and went operational just months before the spills. Oil executives complain that oil spills that routinely happen in plain sight cost too much money to repair. Officials and citizens alike find it hard if not impossible to hold authorities accountable. In the Komi area for example, some 90 percent of the local population comprises oil workers and their families. They point out how they have relocated from other regions of Russian and depend on the industry for their livelihood.

Oil Spill. Eleanor Bay, Alaska

Is there any reason to believe that reduced regulation in the U.S. would lead to different outcomes than seen in Russia? Does there have to be a trade off between employment and keeping ecosystems healthy in Russia, the US, or any other oil bearing nation?

Ruth Greenspan Bell of the World Resources Institute recently pointed out, “Looking only at job losses inevitably ignores a larger truth: environmental spending creates jobs that offset losses.”  She notes that compared to overall spending in the economy, on a per dollar basis, spending on environmental protection and clean-up employs:

• Over twice as many workers in construction
• 25 percent more in manufacturing
• Plant closings and layoffs comprise only one tenth of 1 percent of all layoffs nationwide.
• From 1990-1997 period, 10 million U.S. workers were laid off for non-environmental reasons.

Bell cites a recent report to Congress compiled by the White House Office of Management and Budget, which examined the costs and benefits of environmental regulations. Looking at federal regulations between 1999 and 2009 in which the relevant agencies both estimated and monetized the benefits and costs of those rules, the OMB analysis estimated that the annual benefits of regulation totaled between $128 billion and $616 billion. The annual costs: between $43 billion and $55 billion.

Nonetheless it is held as orthodoxy by many that environmental protection laws i.e. regulations regardless of application are bad for everyone in the economy.

Regulations do not impede labor demand in the ways claimed by polluters and their publicists. But do renewable technologies that mitigate the costs of oil to our society actually increase labor supply and stifle aggregate demand for it, or is renewable energy poised to help tighten labor markets in the long run and thus help families secure their futures? Bloomberg New Energy Finance recently reported that for the first time, global investments in renewable electricity have exceeded investments in fossil fuel power plants. Some of the facts laid out in their reporting:

• The number of solar jobs in America has doubled since 2009
• Today more than 100,000 Americans work in the solar industry at more than 5,000 companies in every single state.
• These include manufacturing, installation, and supply chain jobs.
• The installed base of solar power in the United States doubled
• The solar industry is growing at a rate of 69 percent annually
• The cost of solar panels has fallen 30 percent over just the last two years, continuing a long-term downward trend in the price of solar.

Solar is becoming more cost-competitive with conventional fossil fuels and some estimate photovoltaic solar will achieve price parity by 2020. Two of the world’s three largest employers, the United States Department of Defense and Walmart are looking to solar. Walmart is installing solar panels at 130 stores in California because its solar program has significantly reduced its energy expenses. The United States Marine Corps utilizes solar energy with battery storage to fully power forward operating bases in Afghanistan. Marine Colonel Bob Charette says renewable energy is “about saving lives” by reducing the number of dangerous fuel convoys needed for resupply. The People’s Liberation Army of China is the third, and China is well known for its aggressive push towards renewables as well as towards securing fossil fuels and mineral resources from the Americas to Africa.

There are encouraging signs that the private sector is beginning to understand the urgency of carbon pollution rates and take action. Fund Balance associate South Pole Carbon recently performed a Carbon Scan of S&P 500. It provided a carbon footprint of a USD 1 million investment into the S&P 500:

• Total Emissions for a USD 1 million investment amount to 188 tons of CO2.
• Offsetting those emissions with high quality emission reduction projects costs an investor USD 2,632 (26 basis points in relative terms).
• Roughly 60% of the overall emissions come from just 3.7% utilities exposure meaning just 5 out of the 500 companies are responsible for over a quarter of the emissions.

The private sector has a role to play as well. This analysis shows that News Corp and Google are already climate neutral due to their own offsetting. Rupert Murdoch stated that News Corporation is carbon neutral: “But achieving net zero carbon emissions was never our only goal…Today, I’m pleased to share some of our successes across the Company, as well as our long-term commitment to environmental sustainability.” Quite a statement from the Chairman of a Corporation that counts Saudi Royalty as its second largest shareholder.

Dubai Under Cloud Cover

What Does All This Mean?
The information above is indicative of a great many other studies: nations with sufficient and adequately funded regulatory law compared to those with little to no regulatory law and enforcement have less carbon pollution and higher standards of living. It points to two other policy imperatives.

First, nations such as the US and Norway that strictly regulate pollution maintain healthier environments and have higher living standards than those that do not. They are also better positioned to thrive in an era of constrained access to fossil fuels as the health of their aquifers and atmospheres renders them more productive.

Second, there can be no doubt of the continued need for fossil fuel energy resources for the immediate future. During this process what can we do to protect our food and water supply and its viability for future generations and their ability to live and create wealth? History provides few examples of mining and energy concerns protecting resources if not required. Society can and should incrementally redirect the funding and effort to extract fossil fuels towards renewables. This includes those resources utilized for lobbying,  deregulation, and publicity campaigns designed to produce the misconception of legitimate scientific debate that Global Warming is primarily man made. Society must honestly and rigorously assess regulations that may interfere with short term job creation and adapt job training, industrial, and agricultural programs accordingly. Policy must encourage steady elimination of the linkage between our currencies and oil. Cultivate Heliodollars.

Such redirection should include subsidies. As energy concerns move to the Arctic and other remote ecosystems to exploit hard-to-get oil and gas reserves, let’s listen to scientists and policy makers as they register concern for potential environmental calamities. These will just as surely affect the entire planet’s ability to support life and create wealth in future generations as inherited balance sheet debt among nation states.

What Can We Conclude?
When our air and water are protected from exposure to excessive carbon dioxide or mercury the entire Earth profits. 20th century notions of wealth and productivity should adapt as they did when the great nation states abandoned slavery as an economic system within the rule of law. All of this means that moving forward even GDP as a measure of value will necessarily serve a limited role in climate and economic scenarios. Petrodollars may no longer serve as the best store of wealth.

We need policies that address preservation of the resources that provide us with food and water. This requires the will and action to regulate polluters, building on the successes these regulations bring  to the United Sates, and remaining mindful of current and future realities for “pollutacracies” like Russia. This requires new thinking and refinement of money and debt. A  recent economic analysis found coal-generated electricity imposing more in public health costs than the electricity is worth on the market. In short our current approach to resource extraction, sustenance cultivation, and wealth preservation “reduces the Earth Herself and Her People to a form of slavery via economic vampirism” as Fund Balance partner Leland Lehrman recently wrote.

The urgency of this matter does not reduce well to comfortable partisan positioning. President Obama has dismissed environmentalists as “pointy headed greens.” His Commerce Secretary William Daley actively works to prevent new EPA regulations. As recently as 2007, GOP stalwarts such as Lindsay Graham and Newt Gingrich acknowledged the urgency of Global Warming only to totally reverse their positions even as the science solidified around a consensus that Global Warming is real and manmade. And contrary to popular belief, the Obama administration is on track to approve fewer regulations than their predecessor.

This isn’t to say all regulations are useful only that the characteristics of nations whose energy industries are well regulated help define their economic opportunity and public health.

Regulations and the rule of law are at the heart of what has protected America’s resources from over-exploitation. Abraham Lincoln moved to protect California’s Yosemite Valley in 1864 laying the groundwork for Yosemite National Park.  Theodore Roosevelt later created hundreds of national forests and bird sanctuaries as well as  reclamation projects during his tenure. Dwight D. Eisenhower established the Arctic National Wildlife Refuge. Richard Nixon signed almost every major piece of environmental legislation that we know of today.

Sunset at North Pole. Photo/composite by Brian Krassenstein

While campaigning, President Obama proclaimed his “intergenerational” perspective and recognition that “we are borrowing this planet from our children and our grandchildren.” After years of supporting the coal industry in Illinois, he supported cutting carbon emissions 80 percent by 2050. There was to be a much greater commitment to conservation. So far little has been done. While Congressional intransigence, well funded lobbying, and PR campaigns often broadcast on News Corporation’s Fox News network matter, there has also been scarce leadership from the Obama administration.

Weakening environmental regulations does little to create jobs and and makes us both poorer and sicker. Enforceable and enforced regulations protect future generations’ wealth and health. We need to transition away from reliance on petrodollars as a medium of exchange. The oil industry in Komi, Russia has been sapping nature for decades, killing or forcing out reindeer and fish. Locals like 63-year-old Yuri Bratenkov recount that when big oil leaves, only poisoned terrain is left in its wake. “Fishing, hunting — it’s all gone”.

Mayor Bloomberg, Chair C40

Is Michael Bloomberg really getting serious about sustainability and the climate?

Is the upcoming free and now completely full ESG 2011 USA event a huddle of the region’s best sustainability practitioners? We’ll be getting the scoop from Bloomberg CEO Daniel Doctoroff, and Thomas DiNapoli, Comptroller of the State of NY, the top official of the massive $150B New York Common Retirement Fund.

Talks leading up to the C40 (top 40 cities) conference just prior to Rio+20 are starting to raise the bar on fixing the problem of urban emissions (60-80% of the total).

Mayor Bloomberg is the Chair of the C40.

Here’s his welcome message to C40 Sao Paulo attendees:

Former London Mayor Nicky Gavron: “Every single financial centre is at sea level.”

“Over the past six years, C40 Summits have brought together mayors of the world’s largest cities to share information on their respective experiences in dealing with climate change. This is our fourth Summit, the first to be hosted in the Southern Hemisphere, and my first as Chair of the C40.

For the first time in history, cities are home to more than half of the world’s population, and together account for more than 80% of the world’s greenhouse gas emissions. The Summit in São Paulo will provide us with an excellent opportunity to explore and exchange new ideas and initiatives, and to discuss new partnerships among mayors and governors that can address climate change and promote sustainability. ”

The race is on.

London’s former mayor Nicky Gavron tipped everyone’s hand with a pointed comment about the geographical location of the world’s financial centers:

“Big cities need to raise the game because they’re so responsible for such a high proportion of greenhouse gas [GHG] emissions and they’re very vulnerable to [climate change],” Gavron told Environmental Finance. Around 60% of global GHGs come from cities. “Every single financial centre is at sea level.”

Simultaneously it seems, Bloomberg’s home page just created a new top level tab, “Sustainability”, featuring some of the excellent work of Bloomberg New Energy Finance.

Having recently investigated the ESG features of a BNEF equipped Bloomberg terminal, I can tell you: it rocks.

Mayor Bloomberg also passed legislation improving the buy local profile of his NYC Administration:

Buy Local, the Mayor Says

So screamed the headline from Matt Flegenheimer’s NY Times blog:

By Walter Borden

Energy and pollution salesmen extol the market value of fossil fuels underneath our land and sea based on a certain doctrine. It asserts that job creation requires prolific fossil fuel extraction, and consequently, such operations deserve taxpayer entitlements and subsidies. These operators argue further that vast sums of wealth go unformed if we do not extract and sell fossil fuels. To restrain their immediate extraction will impoverish laborers, immiserate business owners, and impede capital creation. I have addressed how renewable energy and cleantech create jobs. This post primarily concerns the morality of continuing to structure economies around climate destroying carbon emissions.

The consensus of the world’s scientists and a plurality of its policy makers is that fossil fuel dependency will extract a terrible and deadly price from future generations. Yet we are told that questions of ecology must always defer to classical economic ones. Very little mainstream thinking addresses why and how this doctrine is prerequisite for thriving labor markets.

But this doctrine in question has nonetheless been extremely influential.

Historical precedents do exist for civilizations abandoning a specific market and writing down large sums of perceived value based on moral reasoning. At the end of the Civil War the value of slaves held in the U.S. was estimated to be approximately $2 Billion USD, approximately $70 Billion in 2011 USD. Yet, at the end of the Civil War this value was entirely written down. Abolition of chattel slavery meant morality superseding profit. Recently publicized results from BEST confirm earth is warming rapidly.  Adding to the scientific consensus that global warming is man made, should we not apply similar moral reasoning to our fossil fueled society?

Clearly then continued extraction and consumption of fossil fuels has a definite moral component. Oil, coal, and natural gas might be there and possess an imputed market value, but does this constitute a prima facie argument for their extraction or rationalize the pollution created? An instructive case in point is the XL pipeline. We are told that building it will help free the US from dependency on foreign oil. Leaving aside for a second this dubious assumption, let us look at Nebraska. Many of XL’s would-be owners sell on the open international market and no covenants exist for any portion of the crude to be reserved for the U.S and Canada, though some Canadian officials are threatening to selectively provide the oil to other nations should the U.S. decline to participate.

The proposed XL Pipeline would cut over and across the Ogallala Aquifer. Ogallala emanates from Nebraska to roughly 27% of the irrigated land in the United States according to the United States Geological Survey. It yields about 30% of the nation’s ground water used for irrigation. The aquifer system provides drinking water to 82% of the people who live within its boundary. Regardless of how small the chances for a major spill might be in the estimation of industry funded analyses, after a year of operation, the project’s forerunner, Keystone 1, had leaked 13 times and was shut down temporarily by regulators. But is any chance at all too much of a risk? This is, as financial engineers might say, an awful lot of Value at Risk (VAR). And in a financial context, while current models for VAR don’t value systems like aquifers, isn’t it time they do so?

Do questions like this point to a critical qualitative difference between dirty energy and clean energy jobs? In the New York Times recently:

“But the energy industries eat one another’s lunch. Jay Apt, executive director of the Energy Industry Center at Carnegie Mellon University in Pittsburgh, said it was possible to calculate the amount of electricity produced at a coal plant per person who works there…Build enough solar plants and some coal plants will shut down; that would amount to firing Peter to hire Paul.”

This is specious logic. A fossil fuel energy job definitionally is not a clean energy job. The price the public pays in polluted water and a toxified atmosphere for dirty energy jobs is a clear and present danger and all the more so for future generations. As much so as our public debt since the earth is the source of all money, and all the riches in the world cannot replace a poisoned planet.

Clearly there are some uses for petroleum for which no immediate replacement options exist yet: medicine and agriculture. Medicine needs large amounts of petroleum for plastic and agriculture for fertilizers. We must preserve carbon resources for our health and food supply and work to deploy renewable energy resource for our civilization’s energy needs. This must happen in concert with adopting new policies for the storage and transfer of value. We need to plan increasingly for energy consumption in terms of “negawatts” — the unit of energy that can be saved and not used. Not only are most conservati­on solutions cheaper to implement than new power plants or exploiting new and farther-to­-get-to oil fields, they will leave healthy climates and sustainable economies for future generations.

Humans Impact the Ocean. Courtesy of NOAA

What will the price for future generations be for our failure to realize rapid and concentrated deployment of renewable energy infrastructure? The rest of the world has figured this out, making the US less efficient than other nations with each passing year. Many strong and mature technologies for the US to utilize exist. Yet massive subsidies doled out to oil, gas, coal and nuclear power suppliers further drive degradation of our climate systems.

The more America makes fossil fuels artificial­ly cheap the greater the burden we create for future generations. This is because in the US nearly all “external costs” are associated with energy usage side effects (pollution­, risk of a meltdown, massive military costs) and are borne by the taxpayer. The suppliers as well as the direct purchasers­ of energy are allowed to pretend that pollution has no societal cost, i.e impact on their neighbors irrespective of participation in the market. Naturally then they strongly resist conservati­on efforts. Energy producers like any marketer will resist attempts to reduce demand for their products and to hold them in abeyance since such efforts impact both the amount sold as well as the price. Just as the Confederacy did with respect to the holding slaves. It’s worth noting that by the outbreak of the US Civil War many nations had abolished slavery yet the Confederacy continued to promote slavery markets.

The legacy of the W.P.A. further points to the moral imperatives for a nationwide effort to deploy clean energy for the security and sustainability of future generations as well as to address the unemployment crisis in the US. According to historian Nick Taylor the W.P.A.:

“….employed 8.5 million people in its eight years, and there were always eligible people on the waiting list for jobs….brought America’s infrastructure into the twentieth century, adding 650,000 miles of roads and 78,000 bridges to the country’s transportation network. It improved the nation’s health with water and sewer treatment systems and new hospitals that were among 125,000 new WPA-built civilian and military buildings. “

Recent studies such as BEST reinforce the position of US National Academy of Sciences that anthropogenic global warming should be “regarded as settled facts”. Our economic competitors like Germany and China regularly surpass the U.S in renewable energy investments. The argument that oil, gas, and coal possess market value is not a sufficient condition to pollute air, poison aquifers, and degrade our climate. History also shows that often writing down one asset allows for new benefits to emerge. As chemists, engineers, and farmers focus more tightly on renewable and clean technology innovation humanity can progress to more rational economic and ecologic modes for utilizing our shared resources. By some estimates, the EU gets about 60% more GDP out of its total energy use than America. As a moral imperative we owe it to future generations to catch-up.

We do indeed have a great deal of value at risk when we threaten the capacity of aquifers and oceans to produce food and of forests to clean air. Now then is the time to apply much greater moral and ethical scrutiny to fossil fuel extraction even if it indicates that some profit must be sacrificed and entire asset classes written down for a certain gilded few.

The Context and Implications of American International Group vs. Bank of America
by Leland Lehrman

AIG vs Bank of America

Like Godzilla and King Kong in the Japanese movies, the lawsuit between AIG and Bank of America appears set in a kind of apocalyptic timeframe with cliffhanger debt ceiling negotiations happening during record heat waves, climate disruption and collapsing stock markets. Top corporate leaders, socially close and invested in the same system, nevertheless fight over the bones of a resource constrained “economy.”

Tyler Durden, the pseudonymous editor of the hotly commented and rebellious financial blog zerohedge.com called the AIG lawsuit against Bank of America “ironic.” The fight club anti-establishment trader points out that “it is AIG which takes down the financial system for the second time after its lawsuit against BAC filed last night kills Bank of America.” As gory as the details are, they are less important than the larger themes.

The Phoenix, “penciled” in by the Economist for 2018 is slated to rise from the ashes of other currencies. Following the crash of 1987, the anonymous editors in London wrote

“Thirty years from now, Americans, Japanese, Europeans, and people in many other rich countries, and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much

Economist Calls for Global Currency, 1988

disruption to economic life in the last twentieth century…Something will be, almost certainly in the course of 1988. And not long after the next currency agreement is signed it will go the same way as the last one. It will collapse. Governments are far from ready to subordinate their domestic objectives to the goal of international stability. Several more big exchange-rate upsets, a few more stockmarket crashes and probably a slump or two will be needed before politicians are willing to face squarely up to that choice. This points to a muddled sequence of emergency followed by a patch-up followed by emergency, stretching out far beyond 2018 – except for two things. As time passes, the damage caused by currency instability is gradually going to mount; and the very tends that will make it mount are making the utopia of monetary union feasible.”

There are other time-tested ways to handle currency instability using fixed exchange rates and asset backing for example. Were these “quaint” tools of Bretton Woods and earlier monetary regimes discarded in favor of inherently unstable hedging instruments known as derivatives because a period of systemic instability was useful to provide the appearance of the necessity of centralized global governance and currency?

Only a truly sovereign people can repudiate a debt yoke deceptively laid on its shoulders by a predatory financial class. Michael Lewis’ book Liar’s Poker offers example after example of the shark-like demeanor of bond traders and financial captains, endlessly feeding off pension funds around the world so arrogantly for so long that the eventual backlash they encounter is considered uppity.

So where can that sovereign people be found today? Increasingly in the street.

The Arab Spring, paralleled on May 25th by the rise of the European acampada culture in Spain, richly updates the flavor and genetic code of human evolution. Rather than a function of arms, evolution is now a function of the courage to assemble and live together physically and peacefully long enough to develop new, more representative social and governance forms. “Build a new model that makes the existing model obsolete,” as Buckminster Fuller once said. Manuel Castells beautifully illustrated the good news from Spain in a thought piece for Adbusters’ most recent issue, wherein he described one new model from a few angles: “Everything is worked out through functional theme-based autonomous multiple commissions, coordinated by an intercommission whose members rotated…What is transformative is the process more than the product.”

Ignoring youth is no longer an option

Those who have not been reading Adbusters or its constellation of authors may not be aware that the intellectual tradition of evolution, liberation and its political philosophy are alive and well. Even if not well enough informed of the historic manipulation of the revolutionary form by those it opposes, the modern evolution contains seeds of joy, primarily derived from its focus on biology, physical community, cooperation, and ecology. My heart soars as I read the words of Saul Newman on the latest iteration of the socio-political sphere:

“Democracy today consists in the invention or reinvention of spaces, movements, ways of life, economic exchanges and political practices that resist the imprint of the state and which foster relations of equal liberty. The struggles that take place today against capitalism and the state are democratic struggles. At the same time, however, we might sound a certain note of dissatisfaction with the term “democracy.” We can echo Bakunin, who finds the term democracy “not sufficient.” As Derrida himself said of democracy: “[A]s a term it’s not sacred. I can some day or other, say, ‘No, it’s not the right term. The situation allows or demands that we use another term …’” The situation is changing, and the new forms of autonomous politics that are currently emerging demand the use of another term: anarchism.”

There is a range of human political organization, from the indigenous, no-contact tribes to the power elite in their underground bunkers. I see a balance point in the networked ecovillage. Although the evolutionary discourse is sometimes scarred by the nihilistic intellectualism and desperate madness of the urban prisoner, there is a broader coalition here. Indigenous people, campesinos, environmentalists, libertarians, farmers and independent businesspeople are now coming to winnow the past together, separating that which we will take into our future, and that we will leave behind. This same process is at work in the well-known cooperation between liberal Representative and Presidential candidate Dennis Kucinich and his libertarian counterpart Ron Paul. Kucinich’s office once acknowledged to Tina Richards, campaign manager for Adam Kokesh in 2008 that Kucinich and Paul work more closely with each other than with those in their own party. Stitching together the legitimate philosophical, humanistic, and ecological impulses of both right and left will produce a populist coalition that finally overwhelms the influence of money, especially as the influence of money decays along with its value.

The importance of the Arab Spring flies far beyond the national, racial, and religious issues of its particular geographic location. The style of the modern revolution, invented by Gandhi and popularized by Martin Luther King and the student movements of the Sixties, has now penetrated all the way to Tel Aviv, where a record 250,000 people camped on Rothschild Boulevard earlier this month to demand social justice, fair access to housing and regime change. Look at the video. These are not just peace rallies, but permanent gatherings to address systemic issues widely appreciated by a broad and diverse cross section of humanity. And they are coming to a city near you. Actions in September in New York and October in Washington, DC are brewing. These US events, as much as they have in common with those of our recent and distant past, will all be of the species Tunis – Egyptus Tahriri.

#occupywallstreet

And thus we come to the most important question of all. As Kalle Lasn puts it, what is our one demand? Let us not be bound by the soundbite and twitter feed. Our power to do good derives from our ability to slow down, and make time for the important things in life. Let us take the time to think on this question – ruminating upon it – as even the best answers are usually fleeting and temporary by contrast to the eternal questions.

Before imagining an answer today, let me describe my assumptions. If we are to accept, as I believe we can, that there is a place for the rational, technological civilization with its comforts and culture in brotherhood alongside the indigenous way, we must examine it carefully to determine the heredity of its inherent flaws, so manifestly apparent today. If I were to name the flaw in this civilization’s design from which so many other ills derive, I might point to the money issuance methodology by which collective decision-making is accomplished. No other intellectual tradition has served so effectively to ensnare more and more of the Earth in the compounding growth of its “interest.”

But interest in what?

The inherent mathematical impossibility of long term compound growth in a physical world was revealed by silverback asset manager Jeremy Grantham in his April 2011 newsletter:

Jeremy Grantham: Not exactly a radical

“Failure to Appreciate the Impossibility of Sustained Compound Growth:

I briefly referred to our lack of numeracy as a species, and I would like to look at one aspect of this in greater detail: our inability to understand and internalize the effects of compound growth. This incapacity has played a large role in our willingness to ignore the effects of our compounding growth in demand on limited resources. Four years ago I was talking to a group of super quants, mostly PhDs in mathematics, about finance and the environment. I used the growth rate of the global economy back then – 4.5% for two years, back to back – and I argued that it was the growth rate to which we now aspired. To point to the ludicrous unsustainability of this compound growth I suggested that we imagine the Ancient Egyptians (an example I had offered in my July 2008 Letter) whose gods, pharaohs, language, and general culture lasted for well over 3,000 years. Starting with only a cubic meter of physical possessions (to make calculations easy), I asked how much physical wealth they would have had 3,000 years later at 4.5% compounded growth. Now, these were trained mathematicians, so I teased them: “Come on, make a guess. Internalize the general idea. You know it’s a very big number.” And the answers came back: “Miles deep around the planet,” “No, it’s much bigger than that, from here to the moon.” Big quantities to be sure, but no one came close. In fact, not one of these potential experts came within one billionth of 1% of the actual number, which is approximately 1057, a number so vast that it could not be squeezed into a billion of our Solar Systems.”

Juxtaposing the logical impossibility of compound growth to the unfazed obsession with it by almost the entirety of the financial, business and political class reveals that the primary decision-making capacity of the originators of currency is faulty at best.

Money, like mathematics and music, is largely based on abstractions and assumptions, some of which bother to harmonize with Nature, some of which do not. Like a bad organist in a crumbling church playing the discordant music of the malcontent, today’s arbiters of issuance have succeeded even in raising doubt about the capacity of the global mind to deviate from an increasingly disastrous course, and thus have thrown doubt upon the value of mind itself.

Solar Rooftiles on Saint Silas Church, Central London

Abstraction falls into an even larger and older category: the tool. Some tools are associated more with creation, some with destruction. Can we say with certainty that money is a tool more like a spade than a sword? After years of reflection on the subject, I cannot say for certain. But if we can answer this fairly yes, then shall we not simply commission a new composer and organist? Perhaps we might rebuild the church and its garden, a LEED certified organic CSA, with solar panels and a biomass combined heat and power unit to keep it warm and well-lit for the needy citizens we welcome to sanctuary during the stormy months ahead – as Godzilla and King Kong fight over the bones of the “economy.”

“Reality leaves a lot to the imagination.” — John Lennon

Imagination, that force which when coupled with discipline, drives the arts. Such a force is necessary to successfully protect and sustain our biosphere as it represents the best alternative to cynicism and defeatism. My work, involvement, and strong passion for the arts catalyze a lifelong love and respect for our improbable orb, the earth. A few examples of this force which are set out below as well as Beethoven’s 6th always leap to mind. Clearly many members of the artistic community share this sense of connection.

A selection of images of Andy Goldsworthy's work

My first collaborative project out of college was an effort to broadcast an image of the earth from outer space onto the Jumbotron in Times Square. At this time, the World Wide Web remained a research project in labs and universities including the one I attended. So I learned early on what an amazing treasure of earth imagery was stored at NASA, the JPL, and other labs. This project partially resulted from my studies in Kenya at the Athi River research station. Each night the research assistants would lie in the savanna watching satellites pass overhead in their equatorial orbits. Witnessing the absolutely divine beauty of our planet in Africa, from other ecosystems such as the Togiak River basin in Alaska and much of the the American West, and in the woodlands of Alabama where I roamed growing up, has made me a naturalist at heart. So, knowing that the earth was entering a crisis, I wanted people to simply see her from space everyday as they scurried about one of her busiest intersections.

My grant application to the Whitney Museum’s fellowship program to rent the Big Screen in order to broadcast the images of our planet was rejected. That hardly slowed me down. Seeing these images and thinking of what I know of astronomy and astrophysics, the shear improbability of Planet Earth has always struck me. For this reason alone, it seems we should cherish the earth and its unlikely ability to support and sustain a broad and diverse array of life forms.

Looking at our solar system, our galaxy the Milky Way and beyond, we notice one thing: most planets are rocky and uniform, lack an atmosphere, or are so stormy and gaseous as to not credibly support life. A great many are too close to their sun or too far away to sustain life. (This essay is not to say one way or the other if life as we conceive it exists out there.)

My travels to Africa, which included skin diving in the Indian Ocean, particularly heightened my sense of the earth’s lungs and plasma- its forests and oceans. In travels since to places such as Beijing, China, it grew increasingly clear that Earth was entering a serious crisis.

Surely since the first rain dances began, art has transmitted an acceptance that humanity’s dominion over the earth is limited, and that somehow every technological discovery is limited in its ability to help mankind. The Christian Bible charges mankind with stewardship over the earth, as does the Koran and numerous other religious texts.  This is not to say we do not need technology or agriculture. We do.  The very satellites I watched traverse the sky in Kenya are now used to observe earth and alert us to the rapid degradations in her life support systems.  In short, sustainable agriculture and tool-making are essential for a thriving civilization.

Artistic expression reinforces the notion that both agriculture and technology are critical for the survival of our civilization. Artists, along with farmers and technologists, have after all, strong histories of technological innovation. They have done so in provisioning means for survival and media for creating deeper connections amongst humankind. In the 21^st century, we see new challenges in the how we must shape the methods of agriculture and technology. This will help us sustain our planet, which had literally a vanishingly small chance of existing.

For the sake of brevity, excuse me if I leave it to you, the reader, to think of your own examples. There are many: I will touch on just a few. I think of Shakespeare’s sonnets and

Silent Evolution, and underwater reef by Jason DeCaires Taylor

Jonathon Franzen’s recent novel Freedom. Interpretive movement, from the rain dances of the Anasazi to Igor Stravinsky’s Rite of Spring, share a seamless flow of connection to the earth through their rhythm and movement.  Film making brings appreciation of ecosystems to the fore through such works as Avatar and Godfrey Reggio’s Qatsi trilogy. One of our collaborators at Fund-Balance, Jessica Baron, has given us a great exemplar as well with the Green Song Book from her work to preserve and protect arts education via Guitars in the Classroom. Artists get it.

As someone who studied visual art formally for over a decade, I have a great many favorites from this discipline. The work of Andy Goldsworthy always captures my imagination. Another British artist Jason DeCaires Taylor’s recent Silent Evolution presents the convergence of past and present, human and ocean. I hope you will seek out the works of these artists if you are not yet familiar with them.

Another important way that imagination helps us  “remain in light” with respect to the crisis that our earth faces is cultivating empathy, the ability to imagine what it is like to be in another creature’s skin or circumstance. The arts amplify my consideration of what it’s like for someone else and their life in their time and space.

From perhaps a broader perspective, Aristotle’s prescient distinction between “oikonomia”, use value of products in the real economy, and “chrematistics” the maximization of exchange value measured by money, seems as relevant now as then. Contemporary finance and resource extraction operate irrespective of their environmental impact and hence lack empathy for natural systems they destroy. These pursuits fail to employ imagination towards finding ways to minimize such degradation and thus sustain the very systems that create capital and wealth. The arts generate value for objects and/or expressions beyond crude additions of the cost of materials. This is a deeply human mode of thinking that our civilization should factor back into our economies and ecologies. And to wit, artists have a long, hallowed, and harrowed tradition of working together with very limited resources to solve problems.

It may seem counter intuitive to some, but artists can inform business, banking, and policy making in the 21st century just as they have with Kabuki dances in Japan and in the plazas of Florence during the Renaissance. In this century, if Wall Street practiced empathy and took a long view of culture and civilization while they calculated their winning formulas while spinning their deals, abundance might occur without the depletion of the very land beneath our feet, without disregard for degradation of our air and water, and with respect for the mineral resources held deep in the earth. This in turn protects and preserves the means by which wealth happens. In sum, to protect the earth, we must protect the arts.

So I encourage you to join me in looking at the great Pacific garbage patch- a flotilla of discarded plastic in the South Pacific-estimated to be the size of Texas and the expanding dead-zones in our oceans with expansive imagination. I also encourage you to read a great essay by a great artist, Sigourney Weaver. She describes how empathy for women’s rights can preserve and reinforce a balance between ecosystems and human civilization.  She writes

“Two groundbreaking studies, one from the U.S. National Center for Atmospheric Research and one from the Futures Group, found that simply by meeting women’s existing needs for voluntary family planning, we could reduce carbon emissions by between 8 and 15 percent. That is the equivalent of stopping all deforestation today. Empowering women to make critical decisions in their own lives can help solve the biggest environmental and humanitarian challenge of our time”.

This is another recent example of an artist using empathy and imagination to point to solutions for a major problem confronting civilization.

In the early 90’s, I participated in a project in which I enlisted a choreographer and composer to create a dance piece and compose music to be performed against a backdrop of images of the dancers’ brains via PET scans. It was a challenging and expensive endeavor. The concept was to present both the internal rhythm and flow of each dancer with each viewer’s external perception. My hope was that this effort to reveal the beauty of life both within and without would reinforce the audience’s sense of its sanctity.

That one got turned down as well with no explanation, just a simple rejection notice. Perhaps that was for the best as it doubtlessly led me to consider the need for development of green technology and the far nobler pursuit of finding sustainable means with which to power it. And, in turn, we at Fund Balance who with our newest partners join in putting imagination and empathy to work in order to inspire and inform investing in sustainability.

By Walter Borden



By Walter Borden

California can show Washington, where climate legislation has stalled, that [by] putting a price on carbon — you can go about it in a way that is gradual….We are on the right track.   –George Schultz

Summary

The dynamics of green job creation are presented and analyzed in relation and response to a publication from the American Enterprise Institute (AEI) titled The Myth of Green Jobs. Formal critiques are referenced relating to weaknesses identified in the AEI paper’s research methodology and conclusions. This response challenges the contention that subsidies to stimulate renewable energy job creation are wasteful. Fund Balance argues that just as the fossil fuel industry required subsidy at its outset, renewable energy efforts require the same.  Benefits of public sector involvement via regulation and the seeding of innovation to help create labor pools and markets for renewable energy are described. Imperatives for our economy and society regarding addressing manmade global warming are discussed. The argument that for future generations to inherit a healthy planet and civilization so that they will not have to pay the bill for fossil fuel driven profligacy is advanced.

Stimulating Jobs in the Renewable Industry Sector

An essay published earlier this year titled the Myth of Green Jobs questions whether efforts to create “green jobs” are worth public investment.  It asserts Green Jobs replace more jobs than they create, and that subsidies for green jobs and renewable energy are misallocations of capital. A formal definition of Green Jobs is never offered. But, it seems to be any job  that A) does not involve fossil fuel and B) involves nascent and early-stage renewable energy technologies and whose state in the innovation cycle means they lack the price reductions of scale.

The National Renewable Energy Laboratory prepared a thorough technical critique of the methodology and conclusions of one of the essay’s most referenced studies: Study of the effects on employment of public aid to renewable energy sources,” written by researchers at Spain’s King Juan Carlos University. Its lead author, Gabriel Calzada Alvarez popularized the notion that for every 1 green job created in Spain 2.2 were destroyed. A notion repeated often on Fox News, whose parent company incidentally declared itself 100% Carbon Neutral in April 2011. This widely cited ratio cannot be verified based on Dr. Alvarez’s methodology in a  review of the paper by Fund Balance and elsewhere as noted above and below. However, before a further look at what is wrong with the AEI essay, a review of some of its arguments follows.

The essay states:  “A good example [of green jobs helping the economy] is the baseless assumption that there is a pool of qualified people not otherwise employed by private industry, immediately available, and willing to take newly created, government-subsidized, green jobs. Transferring skilled workers from jobs that produce value (profits) to “green jobs” created by government fiat is an inefficient way to deploy capital in a free market economy.”

The argument is made that the costs (taxes and government borrowing) of creating “green jobs” involves redeploying capital that would otherwise be used for investment or developing new products. This AEI essay asserts that these costs impose an economic opportunity loss to the free market. Its authors assume that government subsidized green jobs, paid for with deficit spending in the cases it cites, can only be temporary and never become permanent via transition to the private sector where they ultimately may be the most productive.

In reference to worker retraining and job creation, no data is provided supporting the argument that the private sector retrains workers with greater efficiency or to what extent it does so at all. In terms of how the AEI essay presents green job creation, official estimates are 188,000 in Spain, yet Alvarez and his co-authors use a figure of 50,000 for their calculations. Importantly, the study appears to restrict its analysis only to cleantech jobs. It does not incorporate jobs created as a result of energy efficiency retrofitting, conservation in new construction, or light/high-speed rail. Spanish incentives in support of Renewable Energy technologies has been in the form of Feed In Tariffs (FITs) that have reached levels up to $0.60/kWh of energy produced. This varies markedly from the typical U.S. approach of employing Producer Tax Credits (PTCs) to stimulate growth which are typically on the order of $0.02/kWh.

The AEI Essay also argues, “Green jobs merely replace jobs in other sectors and actually contribute less to economic growth.” This assumes all growth is good, something addressed later herein.  Further, comparing Spanish efforts to the United States makes little sense because the US has different incentive structures. 

Subsidies and Energy Costs

A theme of the AEI essay is that public policy is inefficient in creation of new areas of labor demand compared to private policy and sector driven efforts. It contends that since such efforts fail in Europe that the United States should not expect better results. Every generation facing deep economic crisis, and not every one does, must meet the challenge of creating jobs in the face of deficits and low GNP/GDP growth rates. History shows that the public sector can perform a definite, substantial, and positive role in such circumstances. The Works Project Administration, NASA, the lunar landing program, DARPA, and the internet exemplify such contributions. In these cases transitions of government subsidized labor to private sector employment strongly stimulated job and capital creation. And, these programs were mostly financed in times of deficit spending.

Fossil fuel extraction and distribution systems enjoy generous subsidies in the U.S. in  comparison to renewable and green subsidies according to the data in Chart One. In California, the world’s 8^th largest economy, this process of using public resource and regulation to seed new markets for transfer of these technologies to the private sector has already begun. The AEI study refers to this as central planning and market-making by fiat. Former Secretary of State George P. Schultz along with Farallon Captial’s Founder Thomas Steyer make the case for public efforts to fertilize private entrepreneurship, to create jobs, and to secure economic and national security with renewable energy programs via their work on California’s proposition 32.

Chart One

The authors of the AEI essay contend that wind and solar power have raised household energy prices by 7.5 percent in Germany and Denmark resulting in the highest electricity prices in the European Union.  Are these prices artificial?  Or, do they reflect the real price of energy given that prices for fossil and fissile energy sources enjoy higher subsidy in the U.S than the E.U. Spain reached a peak of 40% in wind power this last March. How many barrels of oil weren’t imported as a result? What impact will this have on Spain’s energy costs as a function of this diminished need to purchase those quantities of oil? Certainly, on a general level, it improves their trade balance and reduces their dependence on Middle Eastern oil cartels.

The Cato Institute, a libertarian think-thank, released a study in 2005 on the subject of oil subsidies and energy costs. They report that the US spent between $30 to $60 billion a year safeguarding oil supplies in the Middle East during the 1990s even though its imports from that region totaled only about $10 billion a year over the decade. When the cost of maintaining the Strategic Petroleum Reserve and other oil protection services such as the coast guard clearing shipping lanes and providing navigational support to oil tankers are added,  actual subsidies to Big Oil are between $78 to $158 billion. So indeed, the US pays energy prices below what a purely free market would set.

Given the theme that since these initiatives have failed in the EU – making energy  more expensive there – why should we expect different outcomes in the US, the AEI essay argues. Outside of subsidies, prices for energy, in particular gasoline, do clearly appear distorted. And, in some cases to the upside with one root cause being un-regulated speculation. Since 1997 US oil consumption has dropped over a million barrels a day while refining capacity has dropped by about 1 percent. A bounty from this has been lower CO2 emissions. Why then if demand is dropping while available supply is increasing have costs gone up?  “It’s harder and harder for any reasonable observer to dismiss the role of excessive speculation in this market,” a professional Wall Street investor testified before Congress repeatedly stating that speculators are pushing prices up well beyond what supply and demand warrants.

In any event, swinging elections around rising oil prices is a cynical, short term strategy that might get a particular candidate elected, but in reality, no party will be able to control costs. Peak Oil is here, or arriving very soon, and immediate unregulated drilling in the Gulf of Mexico and ANWR will barely, if at all, brunt the impact of that physical reality on daily life and the economy. For example, drilling all the oil from the Gulf of Mexico would only add 500,000 barrels a day to the 89 million currently consumed by the US.  Drilling for more oil may create more jobs in the short term, but the AEI essay does not show how this would offset the lost green job creation or how energy prices in the US would be affected. Exxon Mobil, for its part, advertises that all the oil we need can be found in oil shale regions such as the Green River deposit.  Its claims that it could be extracted for between $20 and $30 per barrel, but it does not account for the impact on the environment or the need for a high volume of water to prepare it for market.

The true cost of gas for US citizens at the pump is the delivery price plus the taxes US citizens pay to subsidize the oil industry plus the the added volatility in price stability driven by energy speculators plus the ecological and social costs (BP spill, healthcare). Suddenly, oil is not as cheap as we all would hope, nor is its price being set by hypothecated market forces. And, much like with corn-ethanol, these taxpayers dollars are making fossil fuels artificially more competitive and keeping cleaner alternatives down. Price increases flow to a considerable extent from a lack of regulation on energy speculation.

Lastly, some would argue to remove subsidies for all, but this would confer an unequitable advantage for big oil. This industry has enjoyed massive subsidies for a century.  It is mature and well capitalized enough to innovate and create value and profit. Renewable energy merits, for the sake of fairness, our planet’s health and our legacy for future generations, the same public support during its infancy.

This means the public may be called upon to incubate renewable and cleantech with funds and subsidies until, like the internet and fossil fuel distribution systems, they generate enough profit to sustain themselves and produce prosperity.  The AEI essay cautions about public sector job creation and central planning but never addresses why non-renewable energy concerns merit subsidization, what their removal might mean for the real cost of nonrenewables, and how a lack of smart regulation can distort energy prices above price ranges that would be expected by supply and demand dynamics.

The Human Impact: Jobs and Carbon Markets

The Myth of Green Jobs presents case studies from Denmark, Germany, Italy, Spain, and the U.K. suggesting that Green jobs eliminate Brown jobs disproportionately. Regulation and publicly funded efforts to spur growth of such jobs are deemed inefficient.  Further, benefits arising from such efforts, having not materialized in just a few years time are judged inconsequential and detrimental. So, for example, a bill is currently moving through the legislature of California to require a third of the state’s electricity to come from renewable sources. Adherents to aformentioned AEI rationales argue that such policies will necessarily inhibit job creation. The AEI essay’s logic is that any subsidized labor creation, irrespective of its impact on the environment or ability to buffer our civilization’s exposure to a fossil fuel energy constrained future, is bad business with the possible exception of Brown jobs. Apparently, their view is that Brown jobs increase public prosperity more effectively.

An important counterpoint about green and renewable-based job development in Spain was made by Tracey de Morsella at greeneconomy.com.

“It is crucial to understand the magnitude of the investments made in Spain throughout the last 10 years: for all the renewable energy sources (solar, wind, wave), the initial investment is upwards of 95% of the total costs, whereas maintenance and operational costs are residual. In this respect renewables are similar to nuclear power, and unlike coal or oil-based power plants, where a large portion of the costs is the fuel itself. This explains much of the enormous costs per green job: the benefits for the investing country only start to become visible many years after the investment has been made. Also, was the value of the produced energy, being the primary goal of the investment, taken into account?”

As for the U.S., California’s policy to promote rooftop solar arrays and the 12,000 to 20,000 new megawatts of renewable energy yielded at diminishing to zero fuel costs from these arrays must not matter in the AEI’s big picture. Such projects allocate capital in ways inferior to the purported free market to which the AEI argument is tailored. But one has to ask, why then are so many leaders from the private sector in California active in using public works to lay the groundwork for private labor demand? Certainly such public support was one factor in Apple’s new patent for solar powered computers and cell phones.  In Michigan, Dow chemical benefited from worker retraining programs, and now has a successful solar shingle manufacturing plant in Michigan. New Jersey, home to more Superfund toxic waste clean-up sites per capita than any other state, through a combination of a stringent legislative energy mandate by state government and a generous carbon offset program has made it the nation’s second largest producer of solar power despite its relatively low solar resource, trailing only California.

In California, Farallon Capital Managing Director Thomas Steyer works to promote promote energy efficiency by reaching out to owners of the state’s 9 billion square feet of commercial office space to educate them about energy audits and gaining access to retrofit programs. According to Steyer, “No one has sent out staff before to help them change their behavior. Saving energy, not just building new renewables, is the killer app.”

Outside of efforts in California, one of the world’s unquestioned leaders in new technology, innovations that create economic benefit will not only concern sexy new technologies. Certainly Europe and China are ahead in areas like wind turbines and solar. A great deal of job creation will also be in more protean areas: insulation, energy efficient design, and localized agriculture. At any rate, technological innovation has proven fairly resistant to monopolies, so ground can be gained quickly with the right incentives.

Therefore policy innovation and its impact on energy costs in California and New Jersey should be looked at as well over the coming months. This is why California’s Cap and Trade system promises to teach our nation so much. It will provide guidance towards a set of rules for a market-oriented system that starts to price in the generally externalized costs of Brown jobs. Initial public R&D joined with public investment (the kind of things that often must be done directly by the government inititially) will allow for a cap and trade system to price greenhouse gas emissions and let the private sector take over. Even Koch Industries acknowledges that such markets create additional pools of liquidity and quietly tap them in Europe. As cap and trade boots up in one of the world’s great economic laboratories for innovation, other US states will get a valuable case study. Some would argue that case study accrues to their economic and public health benefit.  One thing the U.S. already knows from the E.U. Carbon Credit trade – it generates cash flow for industry groups and licenses sold by governments. As licensing operations arrive into the mainstream, corporate accounting practices will finally have to adapt to the real cost and revenue functions of full-cost, socially and environmentally aware accounting. At that point, the world will be surprised and delighted to wake up in a time when coal and oil are no longer made “cheap” through an accounting sleight of hand that internalizes profits and socializes costs.

Some favor a straight carbon tax over a cap and trade system. However, international coordination may work better and easier with cap and trade as it is more politically viable now that the U.S. republicans, like Pawlenty and Graham have flip-flopped. Verification of other nations’ implementation of carbon taxes seems destined for prolonged dispute. Monitoring CO2 emissions is much more feasible. Good regulation will, as always, be necessary in order to prevent abuse and fraud.

The AEI essay also never mentions what the downside of failing to create green jobs may be. Nor does it address the fact that new industries definitionally destroy obsolete jobs. Deficit hawks, down-sizing and right-sizing investment bankers in AEI’s orbit often argue in favor of the need to eliminate jobs in order to eventually create new ones. Creative destruction is their mantra, as long as the status quo energy economy is not threatened.  No clear argument is advanced that subsidizing green job creation inhibits labor and capital formation in the mid-term.  Even if this is so, is that necessarily negative? Are they really saying that we need to ruin the planet for future generations so that we can maintain an economy that poisons our environment but provides large amounts of jobs, convenience and profit?

The Imperative of Creating Green Jobs

Any activity that stimulates labor demand is good argues the AEI paper. Activity that filters job growth in any instance is understood to be bad. Therefore, economy and the environment can be separated, and environmental regulation is an economic burden and/or some sort of luxury that stands in the way of prosperity and self-reliance. Yet, the environment is the source from which all economy flows, and it must be protected. Difficult balancing acts as to whether say, an oil rig employee or fisherman’s job matters more to the economy increasingly challenge every serious policy maker and entrepreneur. Fund Balance presupposes no easy answers.

The AEI essay asserts that environmental regulations inhibit economic growth, and those that seek to incentivize green job creation are naive. Certain efforts in this area may well be misguided. That said, it is important to also ask why the countries with the strictest environmental regulations tend to be the wealthiest, happiest and most stable (SOURCE)? We might also look at the States of the Union, where environmental protection is not correlated with poverty and unemployment, but rather with prosperity.

Take West Virginia, the heart of coal country, at the center of mountaintop removal. Consequently, it has some of our most polluted land and waterways coupled with the highest incidences of industry-related accidents and illnesses and some of the weakest, long standing environmental regulations in the US. Developers are not clamoring to build on land saturated with mercury and arsenic. Collapsing real estate values are among the top unaccounted externalities of brown industries.

Has the avoidance of environmental responsibility contributed to prosperity in West Virginia?  One cannot find a West Virginia economic boom now or in recent memory. It has the 49th lowest per-capita income in the nation and unemployment is more than a point higher than the national average. Yet, states like West Virginia have some of the loudest anti-environment voices. Many rally around the coal companies, which claim that stronger environmental regulations will cost jobs, impede their state, and hurt their people. It is difficult to find data that lots of citizens want to move there as a result of its low tax rates.

The state of Florida recently rejected Federal funds for high–speed trains, yet this state ranks among the nation’s highest in terms of unemployment and lack of healthcare access. It will be interesting to see how the other states that snapped up the funding will fare in terms of long-term job creation as a result of this economic stimulus and critical infrastructure investment.

The green job imperative and its related economics therefore must also be considered in terms of impact on public health. States with higher CO2 pollution rates quite often have higher rates of illness. How does higher exposure to brown job pollution effect the health and productivity of our populations?  The answers to these questions have material economic repercussions, consider the tobacco industry lawsuit for reference. This is another question that Fund Balance will be exploring in the coming months.

The Public Role in Economic Responses to Global Climate Crisis

Adapting economies away from non-renewable labor towards green jobs no doubt renders some jobs obsolete. Fund Balance welcomes an analytical discourse on this issue, but those opposed to renewable energy fail to do so in The Myth of Green Jobs. There are a number of issues, not all of which validate cherished assumptions of some renewable energy advocates, that must be addressed. For example, what are the environmental and public health impacts of wind turbines on birds, bats and humans? Another assumption we accept as false is that the transition from non-renewable economies to renewable ones will be painless and involve no sacrifice. The question really boils down to will it be even harder to adapt later – when the stakes are even higher – than to start now. We think the answer is yes. More aggressive and attractive approaches to limiting carbon pollution with a straight tax may not be politically feasible right now, but any and all efforts to aggressively, and at least fairly price the externalities that are impacting our economy and ecosystem are welcome and appropriate.

It remains a stretch to suggest that green jobs may be a partial cause of Spain and some other EU nations’ economic problems. At this time, there has been no scientific study or policy analysis released that proves such, or that details exactly how green jobs cause unemployment. High unemployment on its own, in countries with historically high unemployment even during good times, is not in and of itself, proof that the cause of unemployment is green jobs or investments in renewable energy from the public sector.

Benefits outside of direct job growth matter as well: significant economic and ecologic upside occurs when solar power allows businesses and homeowners to feed energy into the grid rather than just selling their excess power, as happens now. Many new homes come with solar panels fitted, but there is still room for  value creation in their installation.  Anecdotal evidence is emerging that homes fitted with solar panels are more valuable.  Such developments, combined with policy efforts listed above, are poised to give American panel-makers the scale they need to regain the market lead they have lost to their Chinese and German rivals. More importantly, value created from such solar installations are important if we are to properly value savings generated by the carbon offsets the shine through from them.

Some readers of the The Myth of Green Jobs could be forgiven for assuming that its authors would support eliminating public funds for the interstate highway system, bridges, rail system, postal/communication systems, or electric grid. Further, efforts towards renewables are said in the AEI essay to have attracted black-marketeers and corruption. It states, “experiments with renewable energy in Europe have led to job loss, higher energy prices, and corruption.” No information is given indicating that corruption in the renewable energy sector is greater relative to any other sector or industry. For reasons that will be understandable to many, AEI does not try to argue that there is no corruption in the oil industry. Nevertheless, they seem to imply that in an unconvincing sort of way.

Spending during the Great Depression to create roads, bridges, and other infrastructure increased demand for labor, equipment, and materials. Based on the historical record, there is no reason that green jobs should crowd out other types of jobs because public investments are supporting the private sector.  There is ample historical data available demonstrating that public investment in the nation’s physical economic infrastructure improves private-sector performance by raising average productivity and contributing to private-sector growth.

The question seems to be about how to establish the role of government in the creation of renewable energy, labor and markets? Thus far, supply side arguments have not helped us understand why the corporate sector, with the largest cash hoard relative to GDP on record, consistently fails in this regard. What little is left of US regulations can’t be blamed for preventing the deployment of these massive capital reserves on our nation’s crumbling infrastructure or the drag bad infrastructure creates on productivity and job growth. We know that ultimately the private sector will make the investment, but the groundwork must be laid by the public sector and implemented through sound policy.

History shows that government has to provide the incentives. When costs are imposed on others, and there is no incentive to reduce those costs, markets become distorted. This is why it’s time to eliminate Big Oil subsidies and ensure that susbsidies for renewables are targeted and limited in duration. Climate change, as Paul Krugman says “is the mother of all externalities.” It’s a global, non-discrete phenomenon and the private sector by itself is not going to deal with it. As Dr. Krugman also observes, “Left without any government intervention, we’re just going to basically par-boil the planet….”

In 2006, then President George W. Bush’s Climate Change Science Program formally declared,“clear evidence of human influences on the climate system.” There was a time that the GOP leadership was osmosing towards policy driven action on climate change and crisis. We should all hope that the recent vote in the house to repeal the science of global warming via Section 2(b)(4) of H.R.910, is more show than substance.

The overwhelming consensus on man-made global warming, referred to in the Bush administration report, emerges from climate experts and is confirmed by an independent study that surveys all climate scientists who have publicly signed declarations supporting or rejecting the consensus. They find between 97% to 98% of climate experts support the consensus (Anderegg 2010). Moreover, they examine the number of publications by each scientist as a measure of expertise in climate science. They find the average number of publications by unconvinced scientists is around half the number by scientists convinced by the evidence. Not only is there a vast difference in the number of convinced versus unconvinced scientists, there is also a considerable gap in expertise between the two groups. Hence, the more they are subject matter experts, the more convinced they are that man-made climate change is real and an issue.

Conclusion

In The Myth of Green Jobs the author writes, “To understand the fallacy of the government creating green jobs through subsidies and regulations, we have to refer to the writing of French economist Frédéric Bastiat.” Back in 1850, Bastiat defined a “broken window” fallacy to be where a window is destroyed jobs have been created jobs as someone has to replace the window and the materials must be bought etc. In the end, as the argument goes,  job destruction in such a case is an illusion creating jobs only by destroying many more. Perhaps this logical fallacy, rather than being applied to Green Jobs, should be applied to destroying watersheds and habitable land in order to extract natural gas and coal. The myth of Brown Jobs, as it were. This AEI essay and its assumptions bring to mind another French thinker from the 18^th century, Voltaire. His character, in Candide, Dr. Pangloss describes every problem faced by an enlightened man as nothing more than a predicable outcome in this best of all possible worlds.

Several myths come to mind from reading this AEI essay:

1. Fossil fuel companies have large profit margins (the dolphins will pay for the oil spills).
2. Public funds and policy play no role in private sector innovation and job creation.
3. The planetary cost of explosive C02 pollution has no place on balance sheets.
4. In this best of all possible worlds, our civilization is impervious to the effects of an addictive resource that is both dwindling rapidly and choking the planet.

The Myth of Green Jobs is an essay that would make Dr. Pangloss proud.

© Fund Balance, 2011.