GREEN JOBS AND RED TAPE:

ASSESSING FEDERAL EFFORTS TO

ENCOURAGE EMPLOYMENT
HEARING
BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS AND

OVERSIGHT

COMMITTEE ON SCIENCE, SPACE, AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
WEDNESDAY, APRIL 13, 2011

Serial No. 11214

Printed for the use of the Committee on Science, Space, and Technology

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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,
EDDIE BERNICE JOHNSON, Texas
Wisconsin
JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas
LYNN C. WOOLSEY, California
DANA ROHRABACHER, California
ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland
DAVID WU, Oregon
FRANK D. LUCAS, Oklahoma
BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois
DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri
GABRIELLE GIFFORDS, Arizona
RANDY NEUGEBAUER, Texas
DONNA F. EDWARDS, Maryland
MICHAEL T. MCCAUL, Texas
MARCIA L. FUDGE, Ohio
N, New Mexico
PAUL C. BROUN, Georgia
BEN R. LUJA
SANDY ADAMS, Florida
PAUL D. TONKO, New York
BENJAMIN QUAYLE, Arizona
JERRY MCNERNEY, California
JOHN P. SARBANES, Maryland
CHARLES J. CHUCK FLEISCHMANN,
TERRI A. SEWELL, Alabama
Tennessee
FREDERICA S. WILSON, Florida
E. SCOTT RIGELL, Virginia
HANSEN CLARKE, Michigan
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY

SUBCOMMITTEE

ON

INVESTIGATIONS

AND

OVERSIGHT

HON. PAUL C. BROUN, Georgia, Chair

F. JAMES SENSENBRENNER, JR.,
DONNA F. EDWARDS, Maryland
Wisconsin
ZOE LOFGREN, California
SANDY ADAMS, Florida
BRAD MILLER, North Carolina
RANDY HULTGREN, Illinois
JERRY MCNERNEY, California
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas

(II)

CONTENTS
Wednesday, April 13, 2011
Page

Witness List .............................................................................................................

Hearing Charter ......................................................................................................

2
3

Opening Statements
Statement by Representative Paul C. Broun, Chairman, Subcommittee on
Investigations and Oversight, Committee on Science, Space, and Technology, U.S. House of Representatives ...............................................................
Written Statement ............................................................................................
Statement by Representative Donna F. Edwards, Ranking Minority Member,
Subcommittee on Investigations and Oversight, Committee on Science,
Space, and Technology, U.S. House of Representatives ....................................
Written Statement ............................................................................................

7
8
9
10

Witnesses:
Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute
Oral Statement .................................................................................................
Written Statement ............................................................................................
Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate
Change, The Heritage Foundation
Oral Statement .................................................................................................
Written Statement ............................................................................................
Dr. Josh Bivens, Economist, Economic Policy Institute
Oral Statement .................................................................................................
Written Statement ............................................................................................
Dr. David W. Montgomery, Vice President, NERA Economic Consulting
Oral Statement .................................................................................................
Written Statement ............................................................................................
Mr. William Kovacs, Senior Vice President, Environment, Technology, & Regulatory Affairs, U.S. Chamber of Commerce
Oral Statement .................................................................................................
Written Statement ............................................................................................

12
15
29
31
38
40
54
55
62
65

Appendix: Answers to Post-Hearing Questions

Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute ....
Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate
Change, The Heritage Foundation .....................................................................
Dr. David W. Montgomery, Vice President, NERA Economic Consulting ..........
Mr. William Kovacs, Senior Vice President, Environment, Technology, & Regulatory Affairs, U.S. Chamber of Commerce .....................................................

(III)

158
162
164
167

GREEN JOBS AND RED TAPE:

ASSESSING FEDERAL EFFORTS TO
ENCOURAGE EMPLOYMENT
WEDNESDAY, APRIL 13, 2011

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT,
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:05 p.m., in Room
2318 of the Rayburn House Office Building, Hon. Paul Broun
[Chairman of the Subcommittee] presiding.

(1)

3
HEARING CHARTER

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT
U.S. HOUSE OF REPRESENTATIVES

Green Jobs and Red Tape:

Assessing Federal Efforts to
Encourage Employment
WEDNESDAY, APRIL 13, 2011
2:00 P.M.4:00 P.M.
2318 RAYBURN HOUSE OFFICE BUILDING

Purpose
The Subcommittee on Investigations and Oversight meets on April 13, 2011 to examine the issue of green jobs and efforts to create them. The term green jobs generally refers to employment in the alternative energy and energy efficiency industries. One of the primary goals of the recent growth in federal incentives and funding for alternative energy sources and energy efficiency industries has been the creation of green jobs.
The hearing will examine international efforts to create green jobs, as well as historical efforts domestically, including the American Recovery and Reinvestment Act.
In light of the Administrations recently announced Winning the Future initiative,
the Subcommittee will explore the effectiveness of loan guarantees, subsidies, tax
incentives, regulations, mandates, research, and other federal efforts to create green
jobs. Under House Rules, the Committee has jurisdiction over all energy research,
development, and demonstration projects; all environmental research and development; as well as the commercial development of energy technologies.
Background
Pre-2009 Incentives
Prior to enactment of the American Recovery and Reinvestment Act of 2009
(ARRA), the federal government provided a series of tax incentives for users and
producers of green energy. These incentives were continued, and in many cases, expanded with the enactment of ARRA. These pre-existing incentives included tax
credits for:
Biofuel production
Solar and fuel cell investments
Energy efficient appliances
Energy efficient commercial buildings
Energy efficient new homes
Renewable energy production
Residential solar and fuel cell installation
A range of tax credits for alternative fuel automobile technologies
In addition to tax incentives, renewable energy portfolio mandates are also a
means by which the public sector attempts to create green jobs. Currently, there is
no federal renewable energy portfolio mandate, but 43 states have renewable energy
portfolio mandates set by their State Public Utility Commissions that require a percentage of each states energy usage to be generated by renewable energy sources
such as solar, wind, biomass and hydroelectric. For example, the state with the biggest long-term commitment, Maine, will require 40 percent of its energy to be generated by renewable sources by 2017 while the state with the lowest long-term commitment, Pennsylvania, will require only eight percent by 2020. Seven states have
either non-binding targets or non-percentage goals.
Similar to mandates, regulations are often used as a method of encouraging green
jobs development. By placing restrictions and limitations on certain energy sectors,
governments can artificially influence the market by creating a disincentive for cer-

4
tain energy sources and technologies, therefore making others more financially viable. This increased demand creates jobs in a new sector, but as some argue, this
comes at the detriment of employment in the regulated sector. Proponents of regulation as an incentive for job growth argue that the market is already unbalanced
when it fails to adequately take into account externalities such as environmental
impacts, and regulations simply force the market to account for those externalities.
Loan guarantees are yet another way the federal government attempts to bring
about green jobs. Created as part of the Energy Policy Act of 2005, the program
leverages federal dollars by allowing the Department of Energy to guarantee the
debt of privately owned clean energy developers and manufacturing companies instead of investing directly into these companies through grants or tax subsidies.
Additional federal efforts aimed at increasing green job growth include subsidies,
direct expenditures, and research and development. Subsidies and direct expenditures seek to directly affect the energy industry by providing funds to producers or
consumers of energy. Federal research and development spending focuses on a variety of goals, such as increasing U.S. energy supplies, or improving the efficiency of
various energy production, transformation, and end-use technologies. Research and
development expenditures do not directly affect current energy production and
prices, but, if successful, they could affect future production and prices.
ARRA Funding
ARRA contained over $60 billion in tax credits and grants to fund various federal,
state, local, and private sector efforts related to alternative energy and energy efficiency including $21.6 billion in tax credits for renewable energy and $45.2 billion
for direct appropriations. These funds were in addition to pre-existing tax incentives
and federally funded research and development efforts in the same areas. ARRA
funding and incentives for alternative energy and energy efficiency had several purposes:
Research and development by public and private scientists to develop new
sources of energy and to lower the cost of existing technologies
Reductions in overall energy usage through tax incentives and grants to reward particular actions and investments
Commercialization of alternative energy technologies
Job creation in these sectors of the economy
ARRA tax credits expanded pre-existing incentives for renewable energy and created several new ones, resulting in more projects becoming financially feasible.
ARRA direct appropriations were used for significantly more research and development, increased block grants to states for weatherization of residential properties
and consumer purchases of energy efficient appliances, federal grants for advanced
battery manufacturing, alternative fueled vehicles, increases in federal building energy efficiency, smart grid development, and loan guarantee programs. The vast majority of the jobs created by ARRA are believed to be in weatherization projects of
residential homes.
To address concerns that new funding benefit Americans, Section 1605 of ARRA
contained a Buy American provision that required stimulus funds to be spent only
on American steel, iron, and manufactured items, subject to three exceptions for
non-availability, unreasonable cost, and inconsistent with the public interest. The
Department of Energys Office of Energy Efficiency and Renewable Energy (EERE)
is responsible for issuing these waivers. To date, EERE has issued 44 non-availability categorical waivers and three public interest waivers, two of which are no
longer in effect. The categorical waiver items cover a range of items, from specific
products such as LED lamps for television studio lights to broad categories such as
all Energy Star rated in-wall air conditioners. It appears that no statistics have
been collected to determine how many jobs have been created overseas as a result
of these categorical waivers, some of which cover broad areas of manufacturing. In
addition, large scale wind projects have turned to wind turbines in Europe and
China to build American wind farms. These projects have received project waivers
to allow the importation of foreign manufactured wind turbines.
FY12 Budget Proposal
This February the Administration released its Winning the Future initiative, as
well as the Strategy for American Innovation, and the Startup American campaigns. The goal of these proposals is to bring greater income, higher quality jobs,
and improved health and quality of life to all citizens. Some of the main goals outlined in these agendas include:

5
The development of a Clean Energy Standard which would call for 80 percent
of the nations electricity from clean sources by 2035
Increased funding for the Advanced Research Projects AgencyEnergy
(ARPAE)
The creation of three Energy Innovation Hubs
The Reauthorization of the Clean Energy Manufacturing Tax Credit
Funding to reach the goal of one million advanced technology vehicles on the
road by 2015
Two $1 billion initiatives for investing in early-stage seed financing and other
incentives to invest in high-growth startups
Permanent extension of the Research and Experimentation Tax Credit
Issues
Defining and Calculating Green Jobs
Jobs are typically considered green when they involve alternative energy or increased energy efficiency. More uncertain is how to count jobs that are somewhat
related such as the truck drivers who deliver solar panels across America, the state
employees who process the tax credits for energy efficient appliances, and the consultants that advise cities and states on how to improve energy efficiency. At its
broadest scope, green jobs could include:
Factory workers that manufacture solar panels, wind turbines, etc.
Architects and engineers who design these manufactured goods
Construction workers who increase the energy efficiency of existing homes
and buildings by installing insulation, caulking doors, and installing new
more efficient windows
Factory workers who manufacture the same insulation, caulk, and windows
Truck drivers who deliver energy efficient appliances to job sites
Construction workers that install solar panels, wind turbines, etc.
However, many of these jobs would still exist even if they were not green in nature. Architects and factory workers would still be needed to design and build components for coal mines and natural gas plants. Less efficient windows still need to
be manufactured by the same workers, delivered by the same truck drivers, and installed by the same construction workers. Coal miners would be as in demand as
they were before, if not more so, should alternative energy projects not be subsidized
to the extent they are today.
Energy Savings
A great deal of uncertainty surrounds the energy savings resulting from the
ARRA funding. Initially, ARRA grant applicants were required to estimate the energy savings that would result from their proposed projects. However, the Department of Energys Office of Inspector General found that original estimates for the
energy savings due to ARRA projects were wildly overestimated:
For example, the sum of the states estimates for anticipated energy savings was
88 billion MBtus based on their initial proposed SEP projects. However, our review
of this estimate found that it contained a number of errors and inconsistencies.
Management agreed, pointing out that the estimate was not realistic or achievable
since the United States total energy consumption is estimated at 100 billion MBtus.
The Department is no longer collecting energy savings estimates.
Regulatory Impediments and Underutilized Authority
The creation of jobs that also benefit the environment is a goal shared by many.
Unfortunately, the ability to create green jobs can be stymied by regulatory and
legal challenges. For example, a wind energy project proposed to be located off Cape
Cod called Cape Wind originally filed for its permits in 2001 and has repeatedly
faced legal challenges from those opposed to the location of wind turbines offshore.
Finally in January 2011, the Army Corps of Engineers issued one of the last permits
required for construction to proceed.
Other projects related to green energy such as the construction of Midwestern
transmission lines to deliver wind power to large cities have also faced strong opposition. The U.S. Chamber issued a report in March 2011 entitled, Project No Project,
highlighting permitting problems and legal challenges faced by energy projects nationwide.

6
In addition to regulatory hurdles, a number of existing authorities relating to
green jobs are underutilized. U.S. government agencies have the authority to enter
into energy savings performance contracts (ESPCs) under which private sector entities pay to improve the energy efficiency of federal buildings in return for keeping
the savings to pay for their investments with some profit. ESPCs require minimal
federal funding and shift the costs of upgrading energy efficiency in federal buildings to the private sector.
Additional Issues
Additional questions relative to green jobs include the following.
Do incentives actually produce a net increase in jobs?
Are they an efficient way to increase jobs?
Are jobs the correct economic output the country should be measuring?
On a job-for-job basis, should green jobs be subsidized more than non-green
jobs?
Could the same amount of money spent on creating green jobs be more effective in creating jobs in other non-green industries?
Could federal funds spent on renewable projects have a greater employment
and environmental impact if the same funds were spent on other energy
projects?
Will these newly created jobs be permanent or will they remain in existence
only until subsidies for them expire?
Are these jobs created domestically, or overseas?
Can these international jobs statistics be accurately tracked?
Are we borrowing money to create these investments and create these jobs?
Where are we borrowing this money from?
Are we funding foreign companies?
Are domestic companies doing this work overseas?
Have U.S. subsidies and incentives helped foreign countries expand their own
industries to the detriment of the U.S.?
How does the growth of foreign green industries impact the U.S.?
What metrics should decide whether federal funding related to green jobs is
successful and a wise use of scarce federal funds?
Should federal funding be shifted more towards basic research and development?
Witnesses
Dr. Kenneth P. Green, Resident Scholar, The American Enterprise Institute
Dr. David Kreutzer, Research Fellow in Energy Economics and Climate
Change, The Heritage Foundation
Dr. Josh Bivens, Economist, Economic Policy Institute
Dr. David W. Montgomery, Vice President, NERA Economic Consulting
Mr. William Kovacs, Director of Environment, Technology & Regulatory Affairs Division, U.S. Chamber of Commerce

7
Chairman BROUN. The Subcommittee on Investigations and
Oversight will come to order. Good afternoon. Welcome to todays
hearing entitled, Green Jobs and Red Tape: Assessing Federal Efforts to Encourage Employment. You will find in front of you packets containing our witnesses panel written testimony, biographies,
and truth in testimony disclosures.
I recognize myself now for five minutes for an opening statement.
The economic crisis of 2008, provided a new Administration with
the opportunity to expand governments role in a number of different areas. One of the most prominent was the energy sector.
This expansion was meant to be, timely targeted and temporary, yet spending is still ongoing today. One of the highlights
of the Stimulus Bills energy agenda was the goal of creating green
jobs that would spur employment, aid the environment, make us
most secure, and keep us competitive.
With the Presidents 2012, budget, the President is asking Congress to double down on that strategy. The Start-up America Campaign, the Clean Energy Initiative, and the Strategy for American
Innovation extends and expands many of the same initiatives put
forth in the Stimulus Bill.
In the course of reviewing the Presidents FY 12, budget, the
Science, Space, and Technology Committee heard from a number of
agency officials about the importance of maintaining and expanding these green economy investments. This hearing is the first opportunity to hear perspectives from outside entities.
It is important to realize the context that we are assessing these
proposals. When the President took office, the average price of gasoline was $1.84 a gallon. Today the average price is around $3.79
a gallon. This should come as no surprise. In 2008, before he became the Secretary of Energy, Dr. Stephen Chu, stated, Somehow
we have to figure out how to boost the price of gasoline to the levels in Europe. Gasoline in Europe is roughly $8 a gallon.
In a 2008, interview with the San Francisco Chronicle, President
Obama, then candidate Obama, stated that, Under my plan of a
cap and trade system, electricity rates would necessarily skyrocket. Necessarily skyrocket. That is what he wants to do.
It seems as though this Administrations energy and green jobs
agenda are both built less upon stimulating our economy and creating domestic jobs and more on picking winners and losers and financing foreign investment and production.
On one hand, the Administration is limiting development of oil
production in the outer continental shelf. On the other hand it is
promoting the development of oil off the coast of Brazil. On a recent trip to Brazil President Obama stated Americans, want to
help with technology and support to develop these oil reserves safely, and when you are ready to start selling, we want to be one of
your best customers.
On one hand the President advocates for federal investments and
green technologies as an economic stimulus and jobs creator. On
the other hand U.S. taxpayer dollars are purchasing renewable energy equipment manufactured in Europe and in Asia.
A 2010 report by the Investigative Reporting Workshop found
that more than $1.6 billion in Stimulus funds were used to buy foreign-manufactured products. If the goal is to create jobs here in

8
America, I am not sure that this is the right method. It seems to
me that the left hand does not know what the far left hand is
doing.
There are a number of important policies that will ensure economic prosperity here in the United States. A competitive tax policy that maintains and entices corporate activity, a legal system
that respects contracts and patents, thereby rewarding innovation,
a stable regulatory environment that both protects public health
and safety and encourages economic activity, and a highly-educated
and trained workforce capable of meeting 21st century challenges
are all imperative to prosperity.
Unfortunately, we find ourselves with the highest corporate tax
rate in the developed world, an Administration that stated it seeks
to, share all intellectual property as much as possible, and an
ever-expanding regulatory system strangling small businesses and
killing jobs.
Today we will hear from outside experts on what role government incentives such as loan guarantees, subsidies, tax incentives,
mandates, R&D, and regulations can or should play in augmenting
these principles.
[The prepared statement of Mr. Broun follows:]
PREPARED STATEMENT

OF

CHAIRMAN PAUL BROUN

The economic crisis of 2008 provided a new Administration with the opportunity
to expand governments role in a number of different areasone of the most prominent was the energy sector. This expansion was meant to be timely, targeted, and
temporary, yet spending is still ongoing today. One of the highlights of the stimulus
bills energy agenda was the goal of creating green jobs that would spur employment, aid the environment, make us more secure, and keep us competitive.
With the Presidents FY12 budget, the President is asking Congress to double
down on that strategy. The Startup America Campaign, the Clean Energy Initiative,
and the Strategy for American Innovation extends and expands many of the same
initiatives put forth in the stimulus bill. In the course of reviewing the Presidents
FY 12 budget, the Science, Space, and Technology Committee heard from a number
of agency officials about the importance of maintaining and expanding these green
economy investments. This hearing is the first opportunity to hear perspectives from
outside entities.
It is important to realize the context that we are assessing these proposals. When
the President took office the average price of gas was around $1.84 a gallon. Today
the average price is around $3.79 a gallon. This should come as no surprise. In
2008, before he became the Secretary of Energy, Stephen Chu stated Somehow we
have to figure out how to boost the price of gasoline to the levels in Europe. Gasoline in Europe is roughly $8 a gallon. In a 2008 interview with the San Francisco
Chronicle, President Obama (then Candidate Obama) stated that under my plan
of a cap and trade system electricity rates would necessarily skyrocket. It seems
as though this Administrations energy and green jobs agendas are built less upon
stimulating our economy and creating domestic jobs, and more on picking winners
and losers and financing foreign investment and production.
On one hand, the Administration is limiting development of oil production in the
Outer Continental Shelf. On the other hand, it is promoting the development of oil
off the coast of Brazil. On a recent trip to Brazil, President Obama stated Americans
want to help with technology and support to develop these oil reserves safely, and
when you are ready to start selling, we want to be one of your best customers.
On one hand, the President advocates for federal investments in green technologies as an economic stimulus and jobs creator. On the other hand, U.S. taxpayer
dollars are purchasing renewable energy equipment manufactured in Europe and
Asia. A 2010 report by the Investigative Reporting Workshop found that more than
$1.6 billion in stimulus funds were used to buy foreign manufactured products. If
the goal is to create jobs here in America, Im not sure that this is the right method.
There are a number of important policies that will ensure economic prosperity
here in the U.S.A competitive tax policy that maintains and entices corporate activity, a legal system that respects contracts and patents thereby rewarding innova-

9
tion, a stable regulatory environment that both protects public health and safety
and encourages economic activity, and a highly educated and trained workforce capable of meeting 21st century challenges are all imperative to prosperity. Unfortunately, we fmd ourselves with the highest corporate tax rate in the developed world,
an Administration that stated it seeks to share all intellectual property as much
as possible, and an ever expanding regulatory system strangling small business
and killing jobs.
Today we will hear from outside experts on what role government incentives such
as loan guarantees, subsidies, tax incentives, mandates, R&D, and regulations can
or should play in augmenting these principles.

Chairman BROUN. Now the chair recognizes my Ranking Member, Ms. Edwards, for an opening statement. Ms. Edwards, you are
recognized for five minutes.
Ms. EDWARDS. Thank you, Mr. Chairman, and thank you to our
witnesses today.
Interesting hearing that we have. The idea that government cannot make public investment choices that benefit the country actually flies in the face of our Nations actual history. Canals, railways, roads, ports, highways, airports, the electrical grid, and the
Internet are all products of government activities. The government
has used different tools at different times to encourage these investments, but all of it was accomplished through government initiative.
Building our current infrastructure created jobs and established
the base for a national economy that has been among the most creative and productive in the world. As we see new competitors rise
around the world and as we face new environmental challenges
and energy supply issues, we need to make sure we step up and
prove that we are just as innovative and dynamic as the Americans
who came before us.
The collapse of the housing market bubble in 2008, brought the
country to the edge of an economic disaster with high unemployment and drying up of capital for businesses to meet their day-today expenses, much less look for opportunities to expand. And
while we like to think that the normal, that normal economic times
find consumer demand the bedrock of our economic prosperity, in
the months after September, 2008, the times were hardly normal.
Consumers reeled from collapsing value in their homes and investments, high unemployment left even those with a job feeling deeply
insecure about their financial future, and when faced with these
real conditions, it would be foolish to think that consumer demand
alone was going to pull the economy out of a nosedive of what could
have been a full-blown depression.
The American Recovery and Reinvestment Act or Recovery Act
was adopted by Congress and signed into law by President Obama
with the twin goals of getting America back to work and funding
projects that would create a more modern, robust infrastructure,
21st century infrastructure, to support economic growth for future
generations.
The fact that the infrastructure could also reduce our dependence
on imported oil and help reduce our carbon emissions, producing a
cleaner environment and fighting global climate change was actually an added social benefit, and despite the investments of the Recovery Act, much still remains to be done. We are no longer officially out of thewe are officially out of the recession, but we need

10
to create almost 14 million jobs in order to get Americans back to
work.
I believe that we have to make sustained commitment to public
investment in our infrastructure and our research enterprise, and
in supporting innovation. I dont believe that government is incapable of choosing wisely about public investments, and I do not believe that the government has no effective role in the face of high
unemployment. Congress cant just sit on its hands while people
are losing their jobs, their security, their homes, and their future.
The government has many tools at its disposal to help.
I am particularly interested in seeing the research and development tax credit made permanent and to increasing the domestic
production activities deduction for property manufactured in the
United States, which was the result of research and development
done here. In fact, I have introduced along with my colleague from
Maryland and colleague on the full committee, Roscoe Bartlett,
H.R. 689, the 21st Century Reinvestment Act, that would do just
that.
The Information, Technology, and Innovation Foundation issued
a report in 2006, that found that the U.S. had gone from offering
the most generous research and development tax credit, that we
had dropped to number 17 by 2004. An effective way to get people
back to productive work and to reward innovation is to reward
companies that innovate and create jobs here in America domestically.
I look forward to the testimony of our witnesses as we explore
these issues today, less investigation and oversight and much more
in exploration.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Edwards follows:]
PREPARED STATEMENT

OF

RANKING MEMBER DONNA EDWARDS

The idea that the government cannot make public investment choices that benefit
the country flies in the face of our nations actual history. Canals, railways, roads,
ports, highways, airports, the electrical grid and the internet are all the product of
government activities.
The government has used different tools at different times to encourage these investments, but all of it was accomplished through government initiative.
Building our current infrastructure created jobs and established the base for a national economy that has been among the most creative and productive in the world.
As we see new competitors rising around the world, and as we face new environmental challenges and energy supply issues, we need to make sure we step up and
prove that we are just as innovative and as dynamic as the Americans that came
before us.
The collapse of the housing market bubble in 2008 brought the country to the
edge of economic disaster with high unemployment and a drying up of capital for
businesses to meet their day-to-day expenses, much less look for opportunities to expand.
While we like to think that normal economic times find consumer demand the
bedrock of our economic prosperity, in the months after September, 2008, the times
were hardly normal. Consumers reeled from collapsing value in their homes and investments. High unemployment left even those with a job insecure about their financial future.
Faced with these real conditions, it would be foolish to think that consumer demand was going to pull the economy out of the nose dive of what could have become
a full-blown depression.
The American Recovery and Reinvestment Act (ARRA) was adopted by Congress
and signed into law by the President with the twin goals of getting Americans back
to work and funding projects that would create a more modern, robust infrastructure to support economic growth for future generations.

11
The fact that the infrastructure could also reduce our dependence on imported oil
and help reduce our carbon emissions producing a cleaner environment and fighting
global climate change was an added social benefit.
Despite the investments of ARRA, much remains to be done. While we are no
longer officially in a recession, we need to create almost 14 million jobs to get all
Americans back to work.
I believe that we need to make a sustained commitment to public investment in
our infrastructure, in our research enterprise and in supporting innovation. I do not
believe that the government is incapable of choosing wisely about public investments. I do not believe that the government has no effective role in the face of high
unemployment. Congress cannot just sit on its hands while people are losing their
jobs, their security, their homes and their future.
The government has many tools at its disposal to help. I am particularly interested in seeing the R&D tax credit made permanent and increase the domestic production activities deduction for property manufactured in the U.S. which was the
result of R&D done here. With bipartisan support, I have introduced a bill, H.R.
689, that would accomplish all this.
The Information Technology and Innovation Foundation issued a report in 2006
that found the U.S. had gone from offering the most generous R&D tax credit, we
had dropped to number 17 by 2004. An effective way to get people back to productive work, and to reward innovation, is to reward companies that innovate and create jobs in America.
I look forward to the testimony of our witnesses.

Chairman BROUN. Thank you, Ms. Edwards. If there are members who wish to submit additional opening statements, your statements will be added to the record at this point.
At this time I would like to introduce our panel of witnesses. Dr.
Kenneth Green is a Resident Scholar at the American Enterprise
Institute. Dr. David Kreutzer, is that correct? Kreutzer. Okay. I
cant spell, and I cant pronounce my name. It is Broun spelled
with a U, but anyway, Doctor, I apologize. Dr. Kreutzer is the Research Fellow in Energy, Economics, and Climate Change at the
Heritage Foundation. Dr. Josh Bivens is an Economist with the
Economic Policy Institute. Dr. David Montgomery is a Senior Vice
President at NERA Economic Consulting, and Mr. William Kovacs
is a Senior Vice President for Environment, Technology, and Regulatory Affairs at the U.S. Chamber of Commerce.
I welcome all of you all here today and appreciate you all coming
and participating. As our witnesses should know, spoken testimony
is limited to five minutes each, so, please, we are facing some votes
here shortly, so ifwe want to try to get through this and not be
here all afternoon. If you all would try to limit your spoken testimony to five minutes or less. Your full written testimony will be
put in the record. And then each committee member will have five
minutes to ask questions.
It is the practice of the Subcommittee on Investigations and
Oversight to receive testimony under oath. Do any of you have any
objections to taking an oath?
[No audible response.]
Chairman BROUN. Dr. Montgomery, I dont seeokay. Let the
record reflect that all witnesses are willing to take an oath by
shaking their head that they had no objections to doing so.
You also may be represented by counsel. Do you, any of you have
counsel with you here today?
[No audible response.]
Chairman BROUN. Okay. Let the record reflect that all witnesses
indicated they have no counsel. Now, if all of you would please
stand and raise your right hand.

12
[Witnesses sworn.]
Chairman BROUN. Thank you very much, gentlemen. Let the
record reflect that all the witnesses participating have taken the
oath.
Now I recognize our first witness, Dr. Kenneth Green, of the
American Enterprise Institute. You are recognized for five minutes.
Dr. Green.
STATEMENT OF DR. KENNETH GREEN, RESIDENT SCHOLAR AT
THE AMERICAN ENTERPRISE INSTITUTE

Mr. GREEN. Thank you, Chairman Broun, Ranking Member Edwards, members of the subcommittee, for having me here today. At
the end of my testimony I have appended a pertinent study that
I recently completed for AEI titled, The Myth of Green Energy
Jobs: The European Experience. Much of my testimony is derived
from that paper.
My testimony represents my personal views only, and should not
be construed as the official position of AEI or any other person or
organization.
The question of green job creation is simply a variant on the general question of whether or not government creates jobs by intervening in the marketplace. The question has been debated since at
least the 1850s, when Frederic Bastiat, a French journalist and
politician, wrote, What is Seen and What is Not Seen, an essay
that should be mandatory reading for anyone interested in public
policy.
Bastiat framed the idea of government creation in the broken
windows fallacy. As he explained, imagine some shopkeepers have
their windows broken by a boy throwing rocks. At first, everyone
is horrified, and they blame the boy. But then someone points out
that, well, it is not really all that bad because now jobs have been
created for the window makers, the glass blowers, glaziers. And so
really there was no loss because you have new jobs in making windows.
But, of course, did the child do a public good by breaking the
window, the bakers window, and making a job for the glaziers?
And the answer is, no, because beforehand the baker would have
used his money perhaps to expand his bakery, put on a coffee shop,
hire a new baker, and instead he used the money to replace a perfectly good window. So the village as a whole has lost the value of
the window and has not gained any new jobs as a result.
So lets look atthe analogy holds just as well when the government breaks jobs in one sector, breaks windows in one sector of the
economy and uses the money it takes from there to create jobs elsewhere.
When they pick product A over product B, what is seen is the
new sales of product A. What is not seen are the loss of sales of
product B and the associated job losses.
So to look at our possible green future, lets look at what happened in Europe recently where they have been very aggressive in
pushing for green energy on the premise that it will create green
jobs, green technologies, and green economy.
I will start with Spain.

13
In March of 2009, researchers at the Universidad Rey Juan Carlos released a study examining what happened in Spain as a result
of their push into green energy. The study calculates that from
2000 to 2009, it cost them $815,000 each to create a green job, rising to $1.5 million to create a green job in the wind industry.
And they calculate that for every job created in the green energy
industry, 2.2 jobs were destroyed elsewhere in the general economy.
Now to Italy, where a study performed by the Bruno Leoni Institute, found an even worse experience. They found that because
green jobs were so expensive to create in Italy, that for every green
job created in the green energy sector, five to seven jobs could have
been created in the general economy for the same amount of
money.
They also found that the majority of these green jobs were temporary, following through on existing plans they calculated for
2020, would create, indeed, create quite a few jobs, up to 112,000,
but 60 percent of them would be temporary.
Now, the United Kingdom. A recent report by the consultancy
Verso Economics found that for every job created in the United
Kingdom in renewable energy, 3.7 jobs were lost in the general
economy. What is interesting about that particular study is it uses
a methodology that the Scottish government itself uses to calculate
job losses as a result of taxes, of taxation. It uses a model that the
other studies I mentioned were criticized for not using and yet it
comes up with the same result as the other two studies.
Before I conclude, I was asked to comment a bit about the American Recovery and Reinvestment Act of 2009, and its effectiveness
in creating green jobs. A news article in 2010, September, pointed
out that only 20 billion of the 92 billion allocated for renewable energy projects had been spent, and according to the Department of
Energy, as was mentioned earlier, much of that was spent abroad,
creating green jobs in China, Spain, and South Korea.
For example, a report by the American University found that 11
U.S. wind farms used their Stimulus grants to buy wind turbines
made abroad, 695 out of about 1,000 wind turbines purchased with
Stimulus grants were made elsewhere. The Department of Energy
reports that for some green stimulus projects, 80 percent of the
spending was abroad.
So given that most of the green stimulus is unspent and much
of what has been spent has been spent elsewhere, it is hard to see
how it had a significant impact on creating green jobs here in the
United States. And dont take only my word for it, April 11, 2011,
the EPA put out an at-a-glance form, and this report says that they
are unable to determine what the results were of their Stimulus
spending, whether it created any jobs at all because while they can
track having spent the money, they could not figure out what was
done with it. So it is unlikely that we have seen an explosion of
green jobs.
In conclusion, the idea that government can create jobs on net
in the economy is a myth, and painting the myth green doesnt
make it any less of a myth. The experience of Europe, which has
preceded us in the quest for a new economy, is uniformly negative

14
and is proving unsustainable, with subsidies being cut back and
feed-in tariffs reduced.
And, not to discount American exceptionalism and ingenuity,
there is absolutely no reason to believe that things would happen
differently here. Green energy requires significant subsidization.
By definition, that means that jobs in the wind and solar industry
will be more expensive to create than those in the general economy
and that means less jobs on net.
I thank you for the opportunity to testify, and I look forward to
your questions.
[The prepared statement of Mr. Green follows:]

15
PREPARED STATEMENT

OF

DR. KENNETH GREEN, RESIDENT SCHOLAR, THE AMERICAN

ENTERPRISE INSTITUTE

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Chairman BROUN. Thank you, Dr. Green.
I now recognize our next witness, Dr. David Kreutzer.
Mr. KREUTZER. I will read my statement here. It says, my name
is David Kreutzer.
Chairman BROUN. Kreutzer.
Mr. KREUTZER. And I have to confess that I had to call your receptionist to figure out how to pronounce your name. I hope I get
it right.
Chairman BROUN. You are recognized for five minutes, Doctor.
Mr. KREUTZER. Okay. Thank you.
STATEMENT OF DR. DAVID KREUTZER, RESEARCH FELLOW IN
ENERGY, ECONOMICS, AND CLIMATE CHANGE, THE HERITAGE FOUNDATION

Mr. KREUTZER. I am Research Fellow in Energy Economics and

Climate Change at The Heritage Foundation. The views I express
in this testimony are my own and should not be construed as representing any official position of The Heritage Foundation.
Chairman Broun, Ranking Member Edwards, and distinguished
members of the committee, thank you for giving me this opportunity to discuss the employment impacts of federal energy and climate policies.
I would like to make two fundamental points today. The first is
that government regulation is costly. The second is that government spending is costly. Both of these statements are true whether
the economy is at full employment or in a recession.
Now, let me also say that government spending and regulation
can have benefits, but we need to compare those benefits to the
costs instead of pretending that there are no costs.
Too often proponents of spending and regulation focus on the jobs
and income going to those who receive the government money or
who provide the necessary goods and services for compliance with
the regulations. They ignore the losses to the other parts of the
economy that are needed to finance these jobs.
A report by the Blue Green Alliance and the Economic Policy Institute sets out an analogy to try to explain why an apparently ineffective Stimulus program was actually effective but undersized.
Though probably not the intent of the authors, and I believe in a
few minutes we will hear about that, the analogy captures the
flawed logic of virtually every green jobs study I have seen.
Here is the quote from that report. A good metaphor for this
controversy is the temperature in a log cabin on a cold winters
night. Say the weather is forecast for the temperature to reach 30
degrees. To stay warm you decide to burn three logs in a fireplace.
You do the math and chemistry and calculate that burning these
three logs will generate enough heat to bring the inside of the
cabin to 50 degrees or 20 degrees warmer than the ambient temperature. But the forecast is wrong, and instead ofand instead
temperatures plummet to 10 degrees, and burning the logs only results in a cabin temperature of 30 degrees. Has log burning failed
as a strategy to generate heat?
The flaw in this analogy is that there isnt any woodshed. The
only available logs come from the walls of the cabin. It would be
no surprise that burning more of the wall does not make the cabin

30
warmer. Likewise, there is no money shed from which the government can finance all the green subsidies and programs. These resources are extracted from other parts of the economy. They do not
and cannot come from outside of the economy.
Yes, when firms receive government subsidies, there may be additional jobs with those firms, just as it may get warmer right by
the fireplace when more logs are torn from the wall and burned.
But just as the overall cabin temperature will plummet, the overall
economy suffers as resources are taken from better uses and put
to less valued ones.
There is no money shed to finance the cost of complying with a
cap-and-trade regime such as Waxman-Markey. Indeed, Heritage
analysis estimated that such legislation would reduce national income as measured by gross domestic product by nearly $9 trillion
over the first 25 years of the program can cause employment losses
of nearly 2.5 million jobs.
There is no money shed to pay compliance costs of EPA regulations. There is no money shed to subsidize loan guarantees. Let me
just use one example of the examples from my written testimony.
The case of Solyndra. In the fall of 2009, Solyndra, a solar panel
manufacturer, received a loan guarantee of $535 million. That is in
the fall of 2009. In the spring of 2010, half a year later or less,
Solyndra failed to successfully complete its initial public offering
because an independent audit questioned the viability of the company as people werent going to buy the stocks. In the fall of 2010,
Solyndra actually closed one of its manufacturing facilities that had
been in operation when they got the loan.
There is no money shed to finance green Stimulus programs.
Even in a time of recession with under-utilized resources there are
costs to government expenditure whether it is purchasing military
jets, building highways, or subsidizing green energy projects.
But even if government spending can stimulate the economy, and
that doesnt mean there are no costs, but if the government can
stimulate the economy, the spending needs to be correctly timed,
and the targets should be those with the best return for the money.
Spending that raises electricity rates does not fit this bill.
Figure six from the Blue Green Alliance Economic Policy Institute report, reproduced in my written testimony, purports to show
that GDP, consumption, and employment all improved after the enactment of the ARRA Stimulus Bill.
However, using the measures offered in the chart, okay, rates of
change at an annualized rate, it clearly shows that all three measures of economic activity were turning the corner months before
any Stimulus spending started.
Thank you.
[The prepared statement of Mr. Kreutzer follows:]

31
PREPARED STATEMENT OF DR. DAVID KREUTZER, RESEARCH FELLOW IN ENERGY,
ECONOMICS, AND CLIMATE CHANGE, THE HERITAGE FOUNDATION

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Chairman BROUN. Thank you, Dr. Kreutzer. Is that better?
Thank you, Dr. Kreutzer.
Our next witness is Dr. Josh Bivens with Economic Policy Institute. You are recognized for five minutes, Doctor.
STATEMENT OF DR. JOSH BIVENS, ECONOMIST, ECONOMIC
POLICY INSTITUTE

Mr. BIVENS. I would like to thank the chairman and members of

the committee for the opportunity to testify today. I am Josh
Bivens. I am an economist at the Economic Policy Institute. Todays testimonies reflect only my own views.
I would make a couple relatively quick points about the efficacy
of what we are going to call green investments. I mean, essentially
they have two benefits. One is in the short run we have a pressing
problem of very high unemployment rates, and the reason why we
have those high unemployment rates is because there is a shortfall
in demand for goods and services in the economy. Green investments will help plug that shortfall, bring down the unemployment
rate in the short run.
In the longer run the reasons why you undertake green investments is because it is recognized that we need to transition to a
cleaner energy economy for many reasons, one just for the health
of citizens of the United States, coal-fired power plants are very
bad for that health, and also to deal with the effects of climate
change.
Let me take these in order. Obviously the most pressing problem
facing the U.S. economy over the short-time horizon is high rates
of unemployment, and we know why unemployment is high today.
There is a shortfall of demand in the economy because an $8 trillion bubble in home prices destroyed household balance sheets,
made households cut back on spending, destroyed the residential
construction industry, cascaded throughout the economy, had businesses cutting back their capital spending because customers
stopped coming through the door. Essentially, it is clear why unemployment is high today. There is a shortfall of demand in the U.S.
economy.
The shock to private sector demand stemming from the bursting
housing bubble is actually larger than the shock that led to the
Great Depression. A key reason why we didnt have a second depression is that we allowed fiscal support, debt finance, increases
in spending, and decreases in taxes to act as a shock absorber.
Until the economy reaches pre-recession unemployment rates, further fiscal support would provide similarly welcome downward
pressure on the unemployment rate.
For the simple purpose of propping up demand in our economy
hit by a negative spending shock, you know, most kinds of spending and transfer payments are going to be as good as the others,
but the architects of the American Recovery and Reinvestment Act,
since we decided to make sure that many of these investments are
long-term gains as well, and so they essentially were dedicated to
providing a down payment on making a needed transition to a
clean energy economy.
The effects of ARRA have become controversial among policymakers, and that is really odd because these effects are not con-

39
troversial at all among professional economic forecasters. People in
the private sector and the public sector whose salary depends on
knowing what is going to happen in the economy over the next couple of years are unanimous that the Recovery Act boosted GDP,
jobs, and reduced the unemployment rate.
The argument against the effectiveness of RA is kind of through
a simple feat. It didnt work because we know it cannot work. It
essentially says that any money borrowed by the government to finance Stimulus takes money out of the hands of households and
businesses who will spend less.
You know, this is just wrong. The recession happened because
households and businesses were saving too much to generate
enough demand to keep unemployment low. If the government
didnt do anything, that would be the end of the story. We would
be stuck at a high unemployment economy for quite some time.
If the government instead decided to accommodate the savings
that households and businesses were already doing, the savings
was already there, if they just accommodated the savings by swapping money for treasury bonds and then spending the money on
public sector investments to generate demand, then you would put
more people to work, and that is exactly what has happened.
Essentially, opponents of Stimulus want to argue that public
spending chases away private spending by competing with it for
scarce resources, but scarce resources are not the problem in the
U.S. economy right now. Labor, not scarce. There is four and a half
unemployed workers for every job in the economy. Corporations are
sitting on record amounts of cash ready to finance investment. The
problem is not scarce resources. The problem is demand, and green
investments help solve that problem.
In the longer term, say longer than five years, assuming once,
again, we get to some tolerable unemployment rate, the primary
benefit of green investments isnt in boosting the net number of
jobs in the U.S. economy, rather the benefits are in making the
U.S. economy more productive and better poised to meet the demand of transitioning to a cleaner energy economy in the future.
In my written testimony I go over the evidence that says a larger
stock of public capital, public investments would do much to boost
U.S. productivity. I wont rehash that here.
Last, I just want to sort of address the argument that green investment is just picking winners that the private sector is somehow
by definition better at doing. Yeah. I dont think that is right. I
mean, one, policy failures have so far not given the private sector
the right price signals to incentivize green investment. You know,
greenhouse gas emissions are free for individual emitters, but they
are very costly for other stakeholders in the economy until this externality is priced, you know, the best way to price it would be
through market-based programs like cap-and-trade. I know that is
not going to happen soon. There is going to be stunning incentive
for the private sector to undertake the optimal amount of green investment so the government has to step in and do some of it.
And further, many of these green investments are for public
goods, goods that are less viable, less excludable than private
goods, and or have features of natural monopolies. This is the textbook example of goods that should be provided by the government,

40
not the private sector, so the idea that we are chasing away the
private sector from providing these goods and services I think is
pretty clearly wrong.
So I would like to just thank you again for the opportunity to testify, and I am happy to answer any questions you might have.
[The prepared statement of Dr. Bivens follows:]
PREPARED STATEMENT

OF

DR. JOSH BIVENS, ECONOMIST, ECONOMIC POLICY

INSTITUTE

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Chairman BROUN. Thank you, Dr. Bivens.
Our next witness is Dr. David Montgomery with NERA Economic
Consulting. I recognize you for five minutes, sir.
STATEMENT OF DR. DAVID W. MONTGOMERY, VICE
PRESIDENT, NERA ECONOMIC CONSULTING

Mr. MONTGOMERY. Thank you, Chairman Broun and Ranking

Member Edwards. I am honored, again, by your invitation to appear before the subcommittee.
I have recently joined NERA Economic Consulting as a Senior
Vice President, but today I am testifying entirely on my own behalf. These are my own independent opinions and conclusions, do
not necessarily represent the positions of my employer or any of its
clients.
I have two primary recommendations. First, stop using green
technology as an engine of macro-economic policy. That approach
takes resources away from R&D that could lead to fundamental
technology advances, it increases the cost of meeting environmental
goals, and it is inferior macro-economic policy as well.
Second, take some of the resources now being spent unnecessarily on demonstration and deployment and put them to work
cushioning real research and the onset of the inevitable and necessary era of fiscal austerity.
It would also be helpful to create new institutional arrangement
to assure continuity of energy R&D funding and prevent that funding from being starved in the future by the huge budgetary demands of large-scale demonstrations of unready or excessively costly technologies.
As you consider reductions in spending it is critically important
to preserve the current levels of funding for basic and applied energy research. All the rest of the direct funding, subsidies, loan
guarantees, and standards to promote large-scale technology, demonstration, and deployment need to be examined critically because
most can go without sacrificing either environmental goals orand
at a great saving to the taxpayer.
Why are reductions in basic research so harmful? It is not possible to get the best science and technological advances with stop,
go, stop funding. Good researchers will not tolerate being torqued
around. They will go back to fields of research where that does not
happen, and the flow of discovery that is required for breakthrough
applications will stop.
And why can reducing direct support for green energy be so beneficial? That support is a solution in search of a problem. Cost-effective environmental programs apply directly to the emissions that
cause harm. That is what we environmental economists have been
trying to teach our students at least for the 30 years I have been
in the game. Tilting the playing field to favor specific technologies
only forces American industry to adopt more costly ways of meeting
the requirements of environmental laws and regulations.
There is already every incentive for industry to choose the most
cost-effective means to meet those requirements, and I cannot understand how we now think that energy is a public good since it
has been provided cost effectively by the private sector for centuries.

55
The only virtue green technologies can claim is superior performance and identifiable environmental dimensions. So environmental
programs, not technology subsidies and mandates, should guide
their adoption. In some specific cases particular kinds of support
for technology demonstration might be justified.
But history and economics make it clear that these are the exceptions, and allowing the exceptions also opens the door to a flood
of rent-seeking pleas for support and earmarks.
Government funding for basic and applied research is still needed to provide the flow of discoveries on which cleaner and cheaper
technologies will be based. Every priorunfortunately, every prior
Congress that has been faced with the choice has sacrificed the unquestioned long-term benefits of R&D to maintain jobs through
fundamentally-unnecessary and wasteful subsidies for existing
technologies.
I urge you to change that dismal record.
I havent used up much of my time. I would be happy in the future to debate some points of macro-economic policy, but I wanted
to focus on R&D.
Thank you.
[The prepared statement of Mr. Montgomery follows:]
PREPARED STATEMENT

OF

DR. DAVID W. MONTGOMERY, VICE PRESIDENT, NERA

ECONOMIC CONSULTING

Mr. Chairman and Members of the Subcommittee:

I am honored by your invitation to testify today. I am an economist and have recently joined NERA Economic Consulting as Senior Vice President. I will start with
a brief word about my qualifications.
I have studied energy R&D and energy technology programs since the late 1 970s,
when as a member of the faculty at Caltech I participated in a major study of the
economics of R&D supported by the National Science Foundation. More recently I
was coauthor of a statement of principles for energy R&D policy with some of the
most distinguished academic experts in the field. At the Congressional Budget Office
I was deeply involved in all the issues of this hearing, as my Natural Resource and
Commerce Division was continuously active in analyzing Federal R&D programs
and industrial policy. I have published many papers in peer-reviewed journals on
related subjects, and I was honored by the Association of Environmental and Resource
Economists with their 2004 award for a publication of enduring quality for my
pioneering work on emission trading. I taught environmental economics at the California Institute of Technology and economic theory at Caltech and Stanford University. I was Assistant Director for Natural Resources and Commerce at CBO and
until recently I led the group at Charles River
Associates that developed a pioneering set of economic models and used them in
studies of virtually every major proposal for climate and energy policies over the
past decade.
My testimony today will take a broad view of the subject. I will address the common-sense economics of federal efforts to create green jobs through federal R&D
funding and through the use of loan guarantees, standards, subsidies, regulations,
and tax incentives to promote green technologies. My statements in this testimony
represent my own opinions and conclusions and do not necessarily represent positions of my employer or any of its clients . . .
Summary
It is a fundamental error in policymaking and economics to design or justify federal support for new energy technologies as a jobs program. It subverts the entire
purpose of government involvement in R&D, and is the greatest single cause of the
continued failure of energy technology programs.

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Some advocates claim that Federal spending on green technologies is a
triple winner; instead, it is at best a triple also-ran. 1 No single policy tool
can at the same time and in a cost effective way develop new energy sources, protect
the environment, and reduce cyclical employment. A closer look shows that current
efforts to do these three things at once must, lead to doing none of them well or
even adequately.
1. Promoting new energy technology: The federal government has a limited but
vital role in the quest for new energy technology. But the right division of labor between public sector and private sector is absolutely crucial to success. Government
should focus on basic and applied research. There, its intervention is essential; yet
it is in these activities that the U.S. government traditionally allocates the smallest
part of the Energy R&D budget. The policies promoting use of current green technology starve needed research in favor of demonstration and deployment of high
cost current technology. The stimulus package tilted the balance still farther in the
wrong direction.
2. Cost-effective environmental protection: Current programs to promote a Green
economy actually raise the costs of reaching environmental goals. Well-designed environmental policies would provide incentives to choose least-cost means of compliance. In contrast, current green jobs policies mandate use of specific technologies;
yet these may often not be the most cost-effective means to the desired end. Some
current policies even use subsidies to tilt the playing field. If such schemes work
at all, they do so by encouraging the choice of needlessly costly means while shifting
the added costs onto the taxpayers.
3. Stimulus: To be efficient, energy R&D and investment incentives must be predictable, consistent, and sustained over a long period of time. But in a recession,
fiscal policy experts all agree that the most effective jobs program spends its funds
as quickly as possible and phases out the funding as the economy improves. Thus,
energy research and investment are strikingly ill-suited to the task of leading the
economy out of a down turn. The attempt to force these activities into so inapt a
role is bound to frustrate the goals of both energy policy and economic stimulus.
Purposes of government intervention:
Efforts to use government spending to create Green jobs lose sight of the real
objectives of government intervention in energy technology and R&D. Economists
call these reasons externalities, but they can be viewed simply as the problems
that government intervention is designed to solve. There are two areas in which
markets cannot be expected to bring about the most socially desirable outcomes
without some fonn of government intervention, and these are R&D and environmental protection. There is less complete agreement among economists about the
appropriate role of government in dealing with the business cycle, but for my testimony today I will assume that a third policy goal, more rapid recovery from the recession, is also relevant. The current mix of subsidies for technology deployment
through the use of loan guarantees, standards, subsidies, regulations, and tax incentives has only a haphazard relationship to these three externalities, and cannot do
a good job of dealing with any of them.
R&D
Government must play a role in R&D because it is impossible for researchers and
innovators to capture for themselves the full value of the information that their activities provide to society.This spillover effect is a positive externality, but it also
implies that without active government intervention there will be less R&D than
is socially optimal. The market failures associated withR&D are greatest in the
early stages of basic and applied research: as activity moves into demonstration of
technologies and their commercial deployment there are increasingly effective ways
to protect intellectual propertyincluding patents, trade secrets, and in-house development for innovators and investors to appropriate an adequate share of the
gains their innovations provide to society. Thus governments role should be greatest
in funding of basic and applied research and fade away as projects move toward
large scale demonstration. 2
In all sectors of the economy except energy, U.S. government funding is concentrated in basic and applied research as theory and experience demonstrates that
1 Jason Walsh, Josh Bivens and Ethan Pollack Rebuilding Green The American Recovery and
Reinvestment Act and the Green Economy, Blue-Green Alliance and Economic Policy Institute,
February 2011.
2 In support of this point, see Richard Newell, A U.S. Innovation Strategy for Climate Change
Mitigation. The Brookings Institution Discussion Paper 200815 December 2008 p. 20 ff.

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it should be. Energy R&D programs tend to take too few risks, because they concentrate funding on pre-selected potential winners that are carried forward long
after they have ceased to warrant continued government support. In large part,
these failings can be directly attributed to the widespread perception of energy technology funding as a jobs program.
A statement written by a number of the most distinguished experts in the economics of R&D described the kinds of policies that would be effective in promoting
technological advances in energy: 3
Government R&D policy should encourage more risk-taking and tolerate failures
that could provide valuable information. This can be accomplished by adopting parallel project funding and management strategies and by shifting the mix of R&D
investment towards more exploratory R&D that is characterized by greater uncertainty in the distribution of project payoffs. The single greatest impediment to an
R&D program that is directed at achieving a commercial objective is that it will be
distorted to deliver subsidies to favored firms, industries, and other organized interests. The best institutional protections for minimizing these distortions are
multiyear appropriations, agency independence in making grants, use of peer review
with clear criteria for project selection, and payments based on progress and outputs
rather than cost recovery.
The idea of parallel approaches is very important, and as I will discuss later it
is rarely seen in Federal energy R&D. Studies of successful R&D show that a parallel approach, in which many early-stage, high-risk projects are funded with the
expectation that most will fail, would be provide far more information than the current approach, and would increase the likelihood of breakthrough discoveries.
The statement also emphasized that commitments must be long-term and stable:
Policy commitments must be stable over long periods of time. Climate change is
a longrun problem and will not be solved by transitory programs aiming at harvesting available short-run improvements in energy efficiency or low-carbon energy.
A much more stable commitment to funding and incentives for R&D is required to
do better than the limited results of energy R&D efforts in the 1970s and 80s.
What should be equally clear is that a series of temporary, politically unstable,
targeted subsidies, financial incentives, or even mandates for deploying specific
green technologies will not provide adequate incentives for the R&D that would
bring about large-scale technological change.
Environmental and other externalities of energy production and use
Another rationale for energy R&D comes from externalities associated with energy
production and use. Effective programs to address these externalitiessuch as the
Clean Air Act Title IV program that through a cap and trade program put a price
on sulfur emissions from utilitiescreated clear incentives for the private sector to
develop and deploy new control technologies. One of the few things that most economists agree on is that a clear, credible, consistent and stable policy that puts a price
on C02 emissions will lead to cost-effective technology deployment and provide a demand-driven inducement to innovation. Federal support for energy R&D motivated
by these externalities also needs to be concentrated on basic and applied research,
as existing environmental regulations and new policies focused on the direct causes
of environmental concernsuch as greenhouse gas problemsprovide the incentives
for innovators to take these research findings into commercial demonstration and
deployment.
Even energy security is dealt with most efficiently by programs that directly increase domestic production of crude oil and reduce consumption oil consumption in
a balanced way. The ideal in terms of cost-effectiveness is an import fee, not a set
of targeted subsidies and mandates for costly or technologically unavailable substitutes for oi1. 4 Production of more fossil fuels is a direct andon an appropriate
scalemore cost-effective way to reduce oil imports than promotion of non-petroleum fuels through regulation (Renewable Fuels Standards) or subsidies (ethanol).
Many of the environmental consequences of energy production and use are already extensively regulated. Greenhouse gas emissions have not been regulated
until now, but are the subject of proposed EPA regulations and much legislation.
Development of newand indeed radically newenergy technologies is critical to
3 A Statement on the Appropriate Role for Research and Development in Climate Policy
Kenneth J. Arrow, Linda Cohen, Paul A. David, Robert W. Hahn, Charles D. Kolstad, Lee Lane,
W. David Montgomery, Richard R. Nelson, Roger G. Noll and Anne E. Smith. Economists Voice,
February 2009, Vol 6, No. i.
4 D. Bohi and W. D. Montgomery. Oil Prices, Energy Security, and Import Policy. With Washington, DC: Resources forthe Future, 1982.

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our ability to reduce greenhouse gas emissions sufficiently to stabilize temperatures
at some level without unacceptable economic harm. For other externalities, this is
less clear. Development of new technologies for production and use of fossil fuels or
other forms of energy is already motivated by a perceived need for more cost-effective options for compliance with policies that address other externalities.
Recovery
Recovery from the recession is a policy problem distinct from either R&D or energy externalities, and requires its own distinct toolkit. Economists differ seriously
about the best strategy to pursue to address an economic downturn like the one we
have faced. All agree that monetary policy in some form is necessary, but many are
critical of using government spending to stimulate the economy because of the longterm consequences of increased debt and the difficulty of making the spending be
effective and timely. Too often fiscal measures are so slow to get money into the
economy that they only ramp up funding after the economy is well on its way to
recovery, so that rather than reducing unemployment deficit spending ends up increasing inflationary pressures. Moreover, temporary stimulus programs create constituencies that lobby to keep the spending going long after stimulus is no longer
needed.
The basic principles of public finance for reducing cyclical unemployment are to
choose methods of spending that get money into the economy as quickly as possible.
Public works projects that have already been chosen as desirable investments by
passing through the authorization process are good candidates. But the projects
must be ones that can be ramped up quickly and also ramped down without waste
or diminishing their value or effectiveness. Technology development that requires
this kind of long term and stable funding does not satisfy these criteria.
Another basic principle is that the stimulus comes from spending, and many different programs offer the same opportunity for job creation if they receive the
money. Thus job creation does not serve to justify one form of spending over another. Choosing which among many competing uses of funds should be the recipient
of stimulus funding is not different from normal authorization and appropriations,
except for the need for speed to avoid missing the window when stimulus is needed.
A program that cannot pass a normal cost-benefit test has no business being chosen
as a recipient of stimulus funding.
Why Energy R&D and Green Economy programs achieve none of the policy
goals well
There is no such thing as a triple winner in economic policy. Economists have
long observed that as many different instruments are required as there are distinct
externalities. Using one policy instrument to address three different market failures
assures that none will be addressed well or cost-effectively.
Energy R&D failures are largely attributable to an inability to resist treating technology investment as a jobs program
R&D is carried out by governments, for-profit and not-for-profit entities, and national and multinational institutions. These institutions perform a wide variety of
R&D as illustrated in Table 1. This suggests that the problem of appropriability is
greatest in basic research, important in applied research, and smaller in development and later stages of demonstration, commercialization and deployment.
Perhaps the most striking feature of the governments energy spending is the relatively low priority that it accords to R&D in general and basic and applied research
in particular. In fact, in terms of total spending, deployment subsidies dominate.
The following figure shows the relative resource commitments and the relatively
modest role of basic and applied research in the Federal program. Thus even before
the stimulus package, Federal funding was highly biased toward development where
the private sector is capable of handling a much larger role if the technologies being
advanced to that state promise to be commercially successful. Federal funding for
this stage has been needed largely because too many unpromising technologies are
advanced beyond basic and applied research.

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These funding patterns can be attributed to three serious failings in the total energy technology program:
Large scale demonstration projects that provide jobs in politically influential regions drain funds from basic and applied research,
Deployment subsidies that benefit specific constituencies are rationalized as creating jobs even if the technologies are not cost-effective, and
Failing projects are not cancelled because of the jobs involved.
And each of these failings arises because of favoring jobs over the most effective
way of promoting technological advance.
It is not surprising, therefore, that energy R&D had a long history of waste and
failure. Cohen and Noll describe a dynamic based on incentives of executive agency
staff and Congressional incumbents that leads to the conclusion that R&D programs
will investigate too few risky alternatives in the early stages of research, commit
prematurely to large scale demonstration, and continue to fund large scale projects
long after their failure has become evident. 5 This is exactly the opposite of the stable, long-term research program required to stimulate breakthrough research and
introduce game-changing technologies.
Newell, in the study cited earlier, expands on this point:
A number of specific market problems have been suggested as rationales for technology deployment policies. These market problems include information problems
related to energy-efficiency investment decisions, knowledge spillovers from learning
during deployment, asymmetric information between project developers and lenders,
network effects in large integrated systems, and incomplete insurance markets for
liability associated with specific technologies (Newell 2007b). Although such problems are often cited in justifying deployment policies, these policies in practice often
go much farther in promoting particular technologies than a response to a legitimate market problem would require. Therefore, while conceptually sound rationales
may exist for implementing these policies in specific circumstances, economists and
others tend to be skeptical that many of them, as actually proposed and implemented, would provide a cost-effective addition to market-based emissions policies.
Critics also point out deployment policies intended to last only during the early
stages of commercialization and deployment often create vested interests that make
the policies difficult to end .
. . . the most notable failures in government energy R&D funding (e.g., the Synthetic Fuels Corporation, Clinch River Breeder Reactor) tend to be associated with
large-scale demonstration projects-using up large portions of limited R&D budgets
in the process (Cohen and Noll 1991). The recent experience with the FutureGen
Initiative for clean-coal power tends to reinforce this perspective. 6
The nature of the electoral process biases authorization and appropriation processes against basic and applied energy research. Supporting R&D projects that yield
large, but diffuse, net benefits and those only after a long time, is a poor re-election
strategy. However, when an R&D project reaches a large enough scale, it begins to
have distributive significance. At that stage, the project may become politically relevant to legislators interested in re-election (Cohen et al 1991).
Energy R&D managers also exhibit an unwillingness to propose a sufficiently
wide range of risky alternative approaches to achieve real breakthroughs. High-risk
approaches with high potential may not come to their attention, since in the early
stage of R&D there are significant agency problems in communicating the nature
and potential of an approach (Cohen et al 1991).
Career advancement is also more likely to come from successful projects rather
than accumulation of useful information about approaches that do not work. This
limits the set of alternatives considered for funding and leads to far too little risktaking in government R&D and too narrow a view of possible avenues of approach.
This dynamic introduces a series of perverse incentives.
First, it encourages officials to move technologies too swiftly to the phase of largescale demonstration. As a result, these projects often run into technical problems
that could have been resolved much more cost-effectively at a smaller scale, and to
end up having chosen the wrong route overall.
Second, congressional involvement has often led to poor projects surviving long
after they should have been terminated. Representatives gain electoral credit for
continued funding of local facilities and lose almost no electoral credit because the
funding is accomplishing nothing.
5 Linda R. Cohen, and Roger G. Noll (With Jeffrey S. Banks, Susan A. Edelman, and William
M. Pegram). The Technology Pork Barrel. Washington, D.C.: The Brookings Institution, 1991.
6 Newell, ibid.

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Third, the excess resources that demonstration projects consume, either because
they are launched prematurely or because they linger too long on political life support, are likely to crowd out more valuable earlier phase research. In effect, projects
at the early stage of development are not politically appealing because further work
on them is not expensive enough to have distributive significance.
Fourth, the rush to demonstration may distort the selection of technologies toward
those that are more mature rather than toward those that are more promising.
Where there is path dependency in technology selection such distortions may have
long-term consequences.
In addition to the effects of the high political discount rate on a premature rush
to demonstration at high cost, choosing the location and design of projects by earmarking to benefit influential constituents is unlikely to lead to the choice of the
best qualified and most cost-effective organization to carry out an R&D project.
All of these characteristics are found in the expanded set of programs that were
introduced in the stimulus package and are rationalized as a program to create a
Green Economy. The history of energy R&D suggests that they will not promote
technological advance effectively and that they will lead to waste of taxpayers resources.
Green energy subsidies raise the cost of environmental policy
Cost-effective environmental policies lead to a choice of technologies that achieve
the goals of the policies at minimum cost. A price on pollution -like the price of sulfur or NOx allowancesmotivates every emitter to choose methods of reducing
emissions that cost less per ton removed than the price of allowances. With a fixed
cap on emissions, the allowance market causes the price of allowances to adjust
until sufficient investments are made in pollution control that the cap is achieved.
Introducing mandates for specific Green solutions, such as a Renewable
Portfolio Standard or credits for manufacturing renewable energy equipment, only
forces utilities to choose more costly renewable energy technologies over less costly
solutions, because the cap will be met in either case.
A performance-based emission standard does not achieve the broad cost-minimization that an emission trading system would do, but it does provide an incentive for
regulated entities to choose the method of compliance with the standard that minimizes cost. A good example is the reformulated gasoline standard, which allows
flexible choice of fuel components as long as the required emission performance is
achieved. Adding a set of renewable fuel standards on top of the reformulated gasoline emission standards only increases the cost of meeting the emission standards,
because the renewable fuel standards require that gasoline already compliant with
emission standards be replaced with a much more costly alternative fuel that in
some cases actually makes compliance with the emission standard more difficult.
This is a general phenomenon. Regulations or incentives that deal directly with
the emissions, or more generally the externality, in question are always more costeffective than incentives or subsidies that tilt the playing field in favor of one set
of technologies that would not have been chosen as an environmental solution without the subsidies. And the cost is absorbed by the taxpayer.
Energy R&D and technology investment have none of the characteristics of
the optimal policy to create jobs in a recession
First, they ignore the timing of proposed policies relative to the business cycle.
One of the first principles of fiscal policy to counter recessions is to make sure that
funds are expended quickly, and the most common political mistake is to authorize
spending that will only hit its peak after the economy is well on the way to recovery.
That mistake in timing means that the opportunity to help the economy out of the
recession is missed, and that when spending does occur it fuels inflation and drives
out other, more productive investments. Current regulatory programs and subsidies
and loan guarantees for green technology fail this test. Even if some spending in
these programs did ramp up quickly, most of the expenditures would still largely
be made after even pessimists think the economy will be well on the way to recovery. In that case, workers supported by green technology subsidies will have to be
drawn away from other jobs, just as the mandated investment will be drawn away
from other areas where it would contribute to economic growth. The total result is
no net job gain and an overall drag on the economy.
Even if the expenditures for green technology were timely, they cannot take credit
for the benefits of economic stimulus. As even Green Jobs advocates admit, about
the same job benefits can be expected to come from any additional stimulus spending, so that job benefits do not differentiate between different kinds of spending.
This kind of job analysis is a sheer waste of time and resources, because every pro-

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posal for more expenditure can make identical claims. In a slack economy, any increase in spending will create some jobs. The way to get the most out of fiscal stimulus is by putting additional spending into the areas in which a temporary funding
increase provides the greatest return to the economy overall, and that does not include R&D or investment that requires stable and permanent incentives.
Conclusion: What About the Green Economy
There are serious reasons of public policy for federal support of basic and applied
research that could lead to breakthroughs in energy technology and for policies that
deal with environmental protection and global climate change. Very specific kinds
of measures are appropriate for each.
Federal R&D funding deals with the market failure in R&D that leads to less
than optimal R&D effort across the board in the economy. Programs like Title IV
sulfur trading deal cost-effectively with SOx emissions, and a carbon tax could address greenhouse gas emissions at lower cost than any set of subsidies and standards. But even the best-designed regulatory , programs have costs, as I have discussed in four previous appearances before House and Senate Committees in the
past two months. They do not create additional jobs for the economy as a whole,
but they do raise energy costs and lower worker compensation and the standard of
living of the average household. Ideally, environmental and climate policies will be
designed so that the benefits of addressing various forms of pollution and global climate change will exceed their costs.
Energy R&D has the potential of leading to future technologies that can lower the
cost of energy, but R&D has a cost as well. R&D requires both money and, more
importantly, an adequate supply of qualified scientific researchers. Shifting the direction of research toward energy diverts dollars and researchers away from other
fields, unless there is both a net increase in total R&D funding and additional investment in education and training.
What, then, is the purpose of programs to promote a Green Economy? The vast
majority of Green Economy funding is not going to basic and applied research, it
is going to loan guarantees, standards, subsidies, regulations, and tax incentives for
demonstration and, mostly, deployment of current technology. Environmental regulations and climate policy already address the externalities that provide a reason
for government intervention. They provide incentives for private businesses to adopt
clean energy or green technologies and practices when they are cost-effective
ways of complying with environmental regulations and policies, and leave them free
to do otherwise when green is not cost-effective. Therefore, federal funding and
standards to promote adoption of green technology are unnecessary to achieve the
environmental goals that have been accepted in public policy. For the economy as
a whole, these large expenditures and requirements only serve to increase the cost
of achieving the goals of environmental policy by predetermining which technologies
will be favored. They do, of course, increase investment in favored technologies, but
they do so at the expense of investment in more cost-effective alternatives and the
consumer who always pays the bill.

Chairman BROUN. Thank you, Dr. Montgomery.

Just for the information of members of the committee, we have
a vote on, and for the witnesses, we have a vote on now. We will
be able to hear Mr. Kovacs testimony. After Mr. Kovacs testimony
we will recess and reconvene 10 minutes after the last of four votes
begins.
So, if you would, please, come right back after you vote, and we
will get back as quickly as we can. We apologize for the interruption, but, unfortunately, we have got the votes.
So, now I want to recognize our final witness, Mr. William
Kovacs, U.S. Chamber. Mr. Kovacs, you have got five minutes.
STATEMENT OF MR. WILLIAM KOVACS, SENIOR VICE PRESIDENT, ENVIRONMENT, TECHNOLOGY, & REGULATORY AFFAIRS, U.S. CHAMBER OF COMMERCE

Mr. KOVACS. Thank you, Chairman Broun, Ranking Member Edwards, and the members of the committee. You have asked me to
address two issues; one, the impediments to the development of

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private sector energy projects, including the creation of green energy jobs and to identify under-utilized federal programs that could
spur job growth without new statutory authority.
There are actions Congress could take, and they could take them
now with anywithout any appropriated funds that would create
tens of thousands of clean energy and energy-efficiency jobs, generate billions of dollars in additional GDP, expand the development
of clean energy technology, and substantially reduce the energy use
of the worlds largest energy user, the Federal Government.
You can do this by doing two simple things without any federal
funding. One is you need to streamline the permitting process for
private sector energy projects, and two, we need to maximize the
implementation of the Energy Savings Performance Contracts that
Congress passed in 2007.
Let me expand on both of these. If you look at page four on
in my testimony, it is a map of what we call our Project No Project,
and that is an identification of projects in March of 2010, that were
stopped by permitting challenges across the United States, and
what is so fascinating about this is that the only common thread
is that they were stopped by sequential challenges. They would
start with one law, move to another law, move to another law, and
because the statute of limitations is generally six years, you can be
the last person in your law school class and hold it up for ten
years. It doesntit is not a trick.
But what is so important is that in this process, when we did the
economic study, if these projects had all moved forward during the
seven-year period of time which would have been the construction
period, they would have generated about $1.1 trillion in new GDP,
and it would have created about 1.9 million jobs a year. And then
for the 20 or 30 years that they were in existence they would have
produced more jobs.
We recognize within the study that you couldnt build them all
at once. There wasnt the people, there werent the materials. So
we did a sensitivity analysis, and even if you took whatever was
happening and lets say we did the largest project in any state, you
still had a $.5 trillion in GDP and hundreds of thousands of jobs,
and we did that for nuclear or all renewables, pick your choice. But
some of the projects, if a large group would have gone forward, you
still would have created the jobs.
The solution there is permanent streamlining. Congress has handled this issue many times. You handled it in the Highway Bill in
2005. You literally created the time to get through the process for
NEPA in half from about 72 months to 38 months. You did it in
the Stimulus Project with requiring the use of NEPA in as expeditiously a manner as possible. That allowed 180,000 out of 250,000
projects to get into the marketplace quickly.
The second point that I want to talk about is energy-savings performance contracts. In a climate of fiscal restraint you literally
have an $80 billion pool of contracts that you can move immediately. An Energy Savings Performance Contract is a statutorilyestablished, private sector partnership in which the private sector
energy service company installs in federal buildings all the energy
efficient equipment at its own expense and is paid from the energy
savings over a 20 to 25-year period of time.

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You are probably all familiar with it. This building is subject to
one of the Energy Savings Performance Contracts as well as the
other House buildings. The energy service company guarantees the
proposed energy savings and takes full responsibility for any of the
shortfalls. So there is absolutely no risk to the Federal Government. It is an $80 billion authorization that can be triggered literally by the Federal Government wanting to do this.
One of the things that we havethat has been very clear is that
there have been two problems with this issue. One is because it is
outside of what we would call just using appropriations, the federal
contractors in the Department of Energy that manage these programs really are not familiar with it, and they could use more
training, and that is based on basically GAO reports.
And the second is I think the Stimulus from what we can tell
from both the GAO reports and the obligated funds under the
Stimulus, because appropriated funds were available, it was easier
for the Department of Energy to move and use the appropriated
funds first rather than the Energy Savings Performance Contract.
So what happens is you ended up in the last year with only six
projects totally $104 million when you have an $80 billion authorization.
Oak Ridge National Labs indicated that this would create 40 billion jobs, $21 billion in saved energy, and take ten million cars off
the road.
In my last 10 seconds I recommend that solutions and executive
order get the President behind us. This is an excellent law, and if
he makes itif he requires this to be used first before appropriated
funds, that would move it along. We need training and then finally
Congressional oversight.
Thank you very much.
[The prepared statement of Mr. Kovacs follows:]
PREPARED STATEMENT OF MR. WILLIAM KOVACS, SENIOR VICE PRESIDENT,
ENVIRONMENT, TECHNOLOGY, & REGULATORY AFFAIRS, U.S. CHAMBER OF COMMERCE

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Chairman BROUN. Thank you, Mr. Kovacs. I appreciate all the
witnesses staying pretty much within your five minutes and Dr.
Montgomery, for you being even under time. If I remember last
time you were here, you were under time also, and I appreciate
that very much.
Unfortunately, we have got about six minutes or 61/2 minutes
on this vote. You all can stand, the witnesses can stand at ease.
The committee will recess until 10 minutes after the last vote begins.
[Whereupon, at 2:42 p.m. the subcommittee recessed, to reconvene at 3:28 p.m., the same day.]
Chairman BROUN. I call to order the continuation of this hearing,
and I thank our witnesses for your forbearance in our going to vote,
and we tried to rush back here to minimize you alls time. So I
thank you all for your testimony, and I want to remind members
that the committee rules limit questions to five minutes, and the
chair at this point will open the round of questions. I recognize myself for five minutes.
Federal efforts to create green jobs costs money. Our Nation is
currently very heavily in debt and running a huge deficit that is
unsustainable.
Where are we getting the money to fund these projects, and what
impact does that have on the overall economy?
I would like anyone whoDr. Green is nodding his head, so I
will give you first go at that.
Mr. GREEN. Other than printing up money the government
doesnt have any money, and therefore, when it gives money to subsidize an industry or to create jobs in a certain sector or to subsidize battery production and so forth, it takes that money from another part of the productive economy.
Unless you subscribe to the mattress theory of capital, which is
that people actually stick their capital under a mattress and dont
have it working somewhere in the economy, either in their bank or
in their savings account or in investments, it is simply the truth
that the government scoops money out of the economy here, and
they hand it over here. They take their cut along the way, and the
jobs they create are more expensive than would be created in the
market, and you have less jobs.
Chairman BROUN. Dr. Kreutzer.
Mr. KREUTZER. I would say even if people did put their money
in their mattress, you have to follow the real resources, all right,
and if you are somehow going to build a new high-tech economy entirely with people from the unemployment line, you know, then
that is where the cost would be low. But that isnt what happens.
I mean, we use resources that have an opportunity cost.
Chairman BROUN. I think Mr. Kovacs, I saw that you were nodding. Did you want to
Mr. KOVACS. I am happy to take a crack at it.
Chairman BROUN. Dr. Bivens.
Mr. BIVENS. I mean, the short answer is they are borrowing it,
and now is a perfect time to borrow it because U.S. households and
businesses are saving at historic rates because they are terrified
because of the recession, they have lost a lot of wealth, and they
are taking that savings that otherwise would not go to productive

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use, and they are making sure that there is enough demand in the
economy to fill the hole caused by the bursting of the housing bubble.
Chairman BROUN. Mr. Kovacs. Or Dr. Montgomery. We will just
go right down the line. Dr. Montgomery.
Mr. MONTGOMERY. Thank you. I think that the notion of real resources really is the important one, that that is what most of the
green jobs studies miss, that you have to ask where the money is,
where the funding is coming from, and that means what the real
resources are, what is the capital and labor that is building green
technology, what would it be doing otherwise.
And if the government has to provide subsidies to get that capital labor into green technologies, that means it costs more than
what the alternative would have been.
So, yes, that is the sense in which there is a cost, but I think
in terms of fiscal stimulus, there really is an error in thinking that
we can justify spending on green jobs as a short-term stimulus, because it is probably the worst way to spend short-term money.
What we need to do forevery fiscal economist agrees, I think,
that in the recession what you want to do is you want to get money
into peoples hands as fast as possible, you want to ramp that
spending up rapidly, and then you want to ramp it down just as
rapidly when you are coming out of the recession.
What you want to do for R&D and technology development is
provide a long-term, stable set of incentives as I was describing before. That is exactly the opposite of the program. That is the last
program you would want to try to ramp up and ramp down to do
something about the recession, even if you believe that fiscal policy
is going to work.
Chairman BROUN. Mr. Kovacs.
Mr. KOVACS. Well, I certainly dont want to sound like a broken
record, but I do want to push the Energy Savings Performance
Contracts. In some way, shape, or form they have been around
since 1985. They are a bipartisan effort. All the money is put forth
through the private sector. You arethe government is guaranteed
that they will not pay any more than their energy costs. They theoretically will save about $21 billion depending on how the contract,
depending on how long the equipment lasts beyond the contract period. They take, you know, what is the equivalent of ten million
cars off the road, but more than anything the government is guaranteed that it will not pay more, and it creates jobs.
Chairman BROUN. Thank you, Mr. Kovacs. I have three-quarters
of a minute left, so I will ask Dr. Kreutzer, I think you brought up
Evergreen Solar. They received $20 million in funds to build a
plant in Devens, Massachusetts. Shortly after receiving those funds
Evergreen Solar shuttered the plant, fired 800 workers, is now
moving its operations to China.
What presentswasnt it you, Dr. Kreutzer thatoh, Dr. Green.
Okay. Dr. Green then, what prevents other companies from doing
the same?
Mr. GREEN. Absolutely nothing, and in fact, all the incentives
point in the opposite direction. China has temporarily at least cornered the market on the rare earth elements which are used to
make advanced technologies, including cell phones, wind turbines,

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solar panels, and the like, and they are instituting cuts in exports
of those materials.
And so if you want to produce and have access to these materials
and lower labor rates and lower environmental standards for production, and it isthese are quite damaging technologies to
produce, you want to go build them in China.
So the incentive is to actually take the Stimulustake government money here, do your R&D here, and then take what you have
learned to the low-cost production in China.
Chairman BROUN. Thank you, Dr. Green. My time is up, and I
recognize Ms. Edwards for five minutes.
Ms. EDWARDS. Thank you, Mr. Chairman, and thank you to our
witnesses. I just have one quick question, and you can just answer
yes or no, and then we will get to the meat of it.
I am curious as to whether you or your organization, the organizations that you represent supported the American Recovery and
Reinvestment Act, the Stimulus Package?
Mr. GREEN. AEI as an institution does not take official positions.
Some of our scholars did, and some of the scholars didnt, I believe.
Ms. EDWARDS. Did you?
Mr. GREEN. No, I did not.
Ms. EDWARDS. Thank you.
Mr. KREUTZER. Yeah. That is not my area of energy, and I am
not speaking for Heritage, but I dont believe they supported it.
Ms. EDWARDS. Thank you. Dr. Bivens.
Mr. BIVENS. Our institute did support it.
Ms. EDWARDS. Thank you. Dr. Montgomery.
Mr. MONTGOMERY. No. Consulting firms clearly dont support legislation one way or the other.
Ms. EDWARDS. Did you?
Mr. MONTGOMERY. I feel that my job is to try to explain when
I am asked what the likely consequences of decisions are and
Ms. EDWARDS. So you dont have a position on the American Recovery and Reinvestment Act?
Mr. MONTGOMERY. I would be happy to, as I am today, discussing
what I think its effects were. I dont know whether you mean that
is a position or not, but these are certainly my professional opinions about what the effects of the act
Ms. EDWARDS. But you didnt have a position at the time whether you supported or opposed the Recovery Act?
Mr. MONTGOMERY. What do you mean by a position?
Ms. EDWARDS. Did you support or oppose the Recovery Act? Did
you
Mr. MONTGOMERY. In what context?
Ms. EDWARDS. support
Mr. MONTGOMERY. Party conversation or
Ms. EDWARDS. Let me finish my question, please. Did you support the Presidents signing into law and the passage out of this
Congress of the American Recovery and Reinvestment Act?
Mr. MONTGOMERY. Well, I am not a member of Congress, so I
didnt get to vote on it one way or the other.
Ms. EDWARDS. Thank you. Mr. Kovacs.
Mr. KOVACS. The Chamber supported it.

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Ms. EDWARDS. Thank you. I am just curious when it was passed,
it was, you know, I think it was because of a collapse in consumer
demand and a financial system that really was on the brink of disaster and job losses, and so I am curious as to each of you, if there
is a situation that doesnt justify the government stepping in to create jobs and restore confidence in the economy such as the time
that we experienced from 2008, and beyond, what would it be?
Dr. Green.
Mr. GREEN. Since I am not an economist, macro, micro, or otherwise, this is a personal opinion, and there arethere were different
wayswas it legitimate for the government to step in? Probably so.
I am actually not anti-government. I think government is widely
important. It is like fire. It is a necessary thing. It is great in the
fireplace, it is wonderful on the stove, it is not so good on the carpets and on the drapes.
But there are different ways that I think it could have been implemented that I would have preferred, which is why I didnt support it.
Ms. EDWARDS. Thank you. Dr. Bivens, is there an appropriate
time when the government should intervene in cases of high unemployment and collapse of confidence in the market?
Mr. BIVENS. Absolutely. I mean, in specific over the past couple
of years why it was so appropriate for the American Recovery Act
to be passed is because our primary tool for fighting recession is
Federal Reserve Policy, had already pretty much maxed out its conventional ammunition. There was very much little extra the fed
could do, something else had to come in and try to support the
economy. That is what made it so appropriate in this context.
Ms. EDWARDS. And so you come to a conclusion in your testimony
that jobs were created, the economy was stabilized. How do you
know that? From an economic perspective and from an evaluation
perspective. How do you know that?
Mr. BIVENS. I reference the sort of consensus among forecasters,
and that is not evidence in and of itself, but what it reflects is that
there is a lot of strong evidence underlying it.
One is just the timing of the act. It works very well when the
downward spiral was arrested. Two, you do economic simulations
where you try to construct, and this is what the Council for Economic Advisors did when they did their quarterly reports on the
Recovery Act, and you can get a baseline path of how the economy
would have done given the trajectory of economic variables as the
crisis hit and then see how it actually did do relative to that
counter-factual baseline. And then, three, you know, you use the
multipliers that have gotten such a bad name in this debate, you
know, given the amount of spending on food stamps or public sector investment. People act like these multipliers come from thin
air. They dont come from thin air. They come from lots and lots
of empirical research of the affect of government spending in environments like we saw in 2008, that is when the interest rate is at
or zero-lower bound, when you have got the threat of deflation in
those environments, past government spending has provided very
large multipliers. That is where those come from. So that is where
I got those.

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Ms. EDWARDS. Thank you, and then lastly, Mr. Kovacs, can you
imagine an environment today in which we wouldnt have done
thepassed the Recovery Act and what that would mean to the
businesses that you represent?
Mr. KOVACS. Well, actually, I think we, as the Chamber put it,
an enormous amount of constructive thought into trying to work
with Congress. One of the provisions that we had been lobbying for
was what Senators Barrasso and Boxer put in, which was the way
that you have to treat NEPA. In other words, it has to be handled
in the most expeditious way possible, and we had no idea how
many projects were really going to be impacted, but we knew there
werent that many shovel-ready projects.
In the end according to the Administration that provision was
used over 180,000 times, so we think that we added to really making the act work.
Ms. EDWARDS. Thank you, Mr. Chairman.
Chairman BROUN. Okay. TheI guess, Mr. Miller, you are recognized for five minutes. I was just looking around to see who was
here, so you are recognized for five minutes. Congressman Miller,
you are recognized for five minutes.
Mr. MILLER. All right. Thank you. Dr. Green, you just a moment
ago said that you are not an economist macro and micro. Actually
my information is that your Ph.D. is in environmental science and
engineering. You have a B.S. in biology and a Masters in molecular genetics.
Did you take macro and micro in college?
Mr. GREEN. Yes, sir. Yes, Congressman. As part of my doctorate
at UCLA, the program I was in was an inter-disciplinary and policy-oriented doctoral program in which we had a core course on decision-making theory that included economics.
Furthermore, I have worked at and with economists now for 16
years, including for three years editing a journal on the think tank
that was primarily economic studies. So I am not an economist, but
that does not mean I am not versed in economics.
Mr. MILLER. Okay, but you dont have an academic credential
that wouldyou would not be qualified to peer review for a peerreviewed economics journal, would you?
Mr. GREEN. I believe I have, but I will leave that to your judgment.
Mr. MILLER. Okay, but all of your testimony today is on economics. Correct?
Mr. GREEN. Essentially. Yes.
Mr. MILLER. Okay. In the three studies that you refer to are all
economic studies. Isnt that correct?
Mr. GREEN. Yes.
Mr. MILLER. Okay. Do you know if those studies were peer reviewed?
Mr. GREEN. I am not aware of whether they were peer reviewed
or not, but then, again, I dont hold a peer review as a particular
guarantor of accuracy, and that has been clearly documented in the
university.
Mr. MILLER. Okay. Do you know if those studies have been criticized by other economists as methodologically unsound?

89
Mr. GREEN. Well, yes, naturally. I mean, all studies in this area
are criticized, including
Mr. MILLER. Isnt that one of the reason for peer reviews is to
have a discussion back and forth between those who are familiar
with methodology about whether the studies are methodologically
sound?
Mr. GREEN. Sure, and my guess is, yes, they actually did consult
with their peers to have their research findings checked.
Mr. MILLER. Okay.
Mr. GREEN. However, even peer-reviewed studies are a source of
debate. Look at the IPCC, look at all the studies
Mr. MILLER. Do you know the extent to whichdo you know if
they got any funding from the fossil fuel industries?
Mr. GREEN. I have no idea what their sources of funding are.
Mr. MILLER. You dont know that they did?
Mr. GREEN. I dont know what their sources of funding are at all.
Mr. MILLER. Okay. You are a fellow at the American Enterprise
Institute. You say that you are here expressing your own opinion.
I assume you are not on unpaid leave today, and in fact, if we look
at the website for AEI in a few days they will probably tout your
testimony today as a credential for you.
Tell us what support AEI gets from the fossil fuel industry.
Mr. GREEN. Well, first to correct the record, I am a resident
scholar at AEI.
Mr. MILLER. Okay.
Mr. GREEN. It is an arbitrary distinction or distinction that only
matters inside, but for the record that is the case.
I have no idea to tell you the truth what the fossil fuel industry
donates to AEI. The scholars are walled off from the fundraising
process entirely, and I couldnt begin to tell you.
Mr. MILLER. Okay.
Mr. GREEN. Or any other donor to AEI.
Mr. MILLER. All right. Dr. Bivens, are you familiar with the
three studies that Dr. Green wrote about?
Mr. BIVENS. I am familiar with two of the three, the Spanish and
Italian, but I have not read the Scottish one.
Mr. MILLER. Okay. Whatyou presumably are qualified to peer
review them as an economist. What is your peer review?
Mr. BIVENS. I think they are pretty bad. I mean, essentially they
compare the labor intensity of jobs supported by green investments
versus some economy-wide average, and because the labor intensity
is lower, they decide that money could be more profitably spent
somewhere else in the economy.
I mean, that is ridiculous. If you just look at jobs in the utility
sector in the United States today, they are not labor intensive at
all. It is not a real shock, you know. These are very capital-intensive industries, so the idea that you could somehow just stop
spending on utilities in the U.S. economy today and devote the
money to other activities and create more jobs that the utility sector is killing jobs, that is an insane way to think of the issue.
So basically they have come up with the blockbuster finding that
utilities are not very labor intensive, which was not a surprise to
anyone.

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Mr. MILLER. Okay. A lot of the testimony today has been that
government support distorts the market, and I see some heads nodding yes, that is correct. That is what your testimony is, that presumably if government is supporting something in one way, presumably alternative energy is in competition with coal, with oil and
gas, with nuclear, and by supporting alternative energies, it distorts what the market would otherwise do.
Since 1948, there has been $91 billion in funding for nuclear energy. Excuse me. There has been a total ofthat is correct. Ninetyone billion for nuclear energy, 46 billion for fossil energy, and 11
percent or 21 billion for alternative energy. That is wind and solar
and everything else together.
Has that distorted the marketplace at all? Mr. Green. Dr. Green.
Mr. GREEN. I would like to say, first of all, one has to keep these
things in perspective. When you look at subsidies per megawatt
hour, you do not see a dominance in the oil and petrochemical sector.
I testified before I believe all subsidies distort markets and all
subsidies in the energy field, in the markets should be removed to
everyone, fossil fuels, nuclear power, wind, solar, alternative, battery technology. It doesnt really matter.
Mr. MILLER. Mr. Kovacs, do you have an opinion on this?
Mr. KOVACS. I mean, look. We have, you know, we have generally supported the advancement of technology at various stages.
We for years have supported the advancement and the funding of
all the technologies in the Energy Policy Act of 2005, 2007. We believe that one of the ways to begin addressing some of the issues
that we have in this country is through technology, and obviously
funding is a part of it.
You know, to that extent we have supported it, and I think in
the end one of the things we are here today to talk about is to say,
okay, it seems as though the climate has changed, we have borrowed a lot of money as a Nation, and we are here to try to give
ideas as to how we might cooperate and do both energy efficiency,
promote technology, and have it done through the private sector.
So, but, yes, we have always supported the technology efforts.
Mr. MILLER. My time has expired, Mr. Chairman.
Chairman BROUN. Yes, it has, but if you would like to ask an
economist, Dr. Montgomery, those economic questions you asked of
the other witnesses, I will be glad to give you a few more minutes
for Dr. Montgomery to answer.
Mr. MILLER. Which ones particularly do you want to
Chairman BROUN. Well, you asked an economist whether they
wereDr. Montgomery is an economist if you want to ask him the
question about investment.
Mr. MILLER. Well, certainly.
Chairman BROUN. I would be glad to give you extra
Mr. MILLER. Dr. Montgomery, well, do you agree that government support, subsidies, whatever, distorts the marketplace, the
decisions that we made in the marketplace or otherwise?
Mr. MONTGOMERY. Yes, I do, and in particular I think that the
yes, and that there is a difference between distorting the marketplace and intervening in order to deal with true externalities like
environmental protection. And I was trying to make that distinc-

91
tion in my testimony and rapidly in my five minutes, that it is a
perfectly legitimate role and something which we have done quite
successfully in many areas to establish cost-effective regulations
that deal directly with emissions.
Like the Title IV Sulfur Program under the Clean Air Act. That
is the right way to direct technology into cleaner energy because
it deals with the emissions. Where the distortions come in is when
the government picks the technologies by funding the technologies
directly rather than concentrating on what the consequences of the
technologies are and letting nuclear renewable energy, natural gas,
and others fight it out on a level playing field to see which one has
the best way of meeting the environmental goals.
Mr. MILLER. Okay. How about the ultra deep water and unconventional natural gas and other Petroleum Research Fund? Does
that fall within thatthat doesnt seem to have anything to do
with the environment. It seems to be simply with doing the research tohow to drill down to two miles.
Mr. MONTGOMERY. I think the other part of my testimony was
that there is a general market failure in R&D which leads to a lack
of adequate investment across the board in the economy, including
in the energy sector in the basic and applied research that provides
new ideas on which innovations are built.
Now, I dont know whether that particular fund is doing that
kind of basic and applied research or is doing something that the
oil industry could have done perfectly well all by itself without having that money put into it.
But I would call that spending on technology development that
may or may not be justified, depending on whether it is at the
basic research end of the scale where government has an appropriate role.
Chairman BROUN. The gentlemans time has expired. Just in
fairness.
The gentlelady, Ms. Lofgren, you are recognized for five minutes.
Ms. LOFGREN. Thanks very much. You know, I come from Silicon
Valley where the tech sector is very excited about clean energy. I
mean, it is not just the government programs that has given a tiny
leg up to the industry but also the venture capital world. That is
the biggest area of new growth, and people believe in business and
also in the academic world that this has a tremendous future, not
only in energy production but clearly in terms of job creation, and
it is the next big thing that we dont want to miss out on.
And as I review the testimony today, I do have a concern. There
seems to be a questioning of government investment in clean energy and green jobs. Now, Mr. Miller mentioned the disparity in
terms of research dollars which the Congressional Research Service
has advised us of with most of the money going into nuclear and
the most of the rest going into fossil and really just a small percentage going into clean energy, but I think that is part of the
story.
We have, and I have heard no willingness on the other side of
the aisle to take a look at the tax breaks that we are giving in the
fossil fuel arena, especially to oil companies.
Dr. Bivens, it seems to me if you add in the disparity in research
funding with the tax breaks given to oil companies that nobody ap-

92
parently is talking about repealing, you know, what does this do
to the kind of a level playing field for the clean energy industry?
Doesnt it make sense when we are subsidizing the oil industry and
when we are disproportionately funding nuclear and fossil fuels to
at least provide some assistance to this fledgling part of the energy
economy, the high-tech sector?
Mr. BIVENS. Yeah. I mean, I would say I am not an expert on
exactly how much in the way of benefits the fossil fuel industry
gets, but I think your point is a good one, and I would add, you
know, that besides the direct benefits, subsidies, tax breaks going
to the fossil fuel sector, I think the single biggest subsidy is our
failure to price emissions that are harmful to other economic stakeholders. That is a huge subsidy, and so I think until we correct
that one, we are just not giving the private sector near enough incentive to do the green investment on its own, so I think public sector incentives to give that, give those incentives are a very good
way to go.
Ms. LOFGREN. I was interested in Dr. Montgomerys comment in
the exchange with Mr. Miller about the value of regulation to set
standards that then people or industries will work to. I am wondering the Governor of California just upped the renewable energy
portfolio requirement to a third today, and what I hear from industry is that if they know what it is they are supposed to do, they
can do it. But what they need is some standards and what are the
rules, and would you support, would you think that that would
help? What California is doing?
You know, our energy consumption has remained flat while the
population has grown about 25, 30 percent.
Mr. MONTGOMERY. I have done a lot of work on Californias AB
32 implementation, so I will resist the temptation to talk about all
of it.
Ms. LOFGREN. Thank you.
Mr. MONTGOMERY. I think the clean energy standard is a good
example of a program which actually increases the cost of achieving the actual environmental objectives, and this is something we
discussed at great length with the Air Resources Board and with
the Economic and Allocation Advisory Committee. Larry Gould who
chairs it from Stanford. That a cap-and-trade program in California
would have been sufficient to achieve the goals of AB32.
Adding the Clean Energy Standard to it serves only to limit the
choices that utilities have for what kind of energy they are going
to use to meet that standard, and it forces utilities to bear more
of the burden.
Ms. LOFGREN. It is interesting, if I can, I have limited time, I
dont want to be abrupt or rude, but the utilities certainly dont feel
that way. In fact, PG&E which is the major utility and is the utility in my part of the State, pulled out of the Chamber of Commerce
when they didnt support the cap-and-trade bill that the Congress
had.
Dr. Bivens, do you share that point of view? I mean, not that
California is so perfect, we have our challenges, but from an energy
point of view we are making tremendous progress.
Mr. BIVENS. That general point of view that California has been
a real leader in keeping energy consumption down relative to the

93
rest of the country, absolutely, and I will say, you know, I bet I
could construct an absolutely platonic, perfect energy policy that
follows textbook economics and gets us to exactly where we need
to go. That is not the world we live in. I mean, right now we have
just got the market failing every day to put a price on emissions
that harm other economic stakeholders, and so we should find a
second best way to do the job until we get the platonic ideal.
Ms. LOFGREN. Well, I think that is correct, and certainly the
State of California has set the standard in many ways by setting
fuel efficiency standards when the Nation would not, and because
it is such a large market, it actually did move fuel efficiency in the
Nation, and we are doing the same thing with air quality, energy
consumption, renewable uses, and the like.
I want to just switch briefly because I am almost out of time to
the role of basic science research, which there is no way industry
has the funds to do that kind of pre-competitive pre-commercial research, and I have a very deep concern that if we dont do adequate
investments in basic research, university-based, or in the national
labs, that we are going to have a big problem in the future and specifically some of the reductions that are being proposed, for example, the Stanford Linear Accelerator, which is doing X-ray photography in a way where they will actually be able to see at a molecular level photosynthesis, which has tremendous potential in terms
of energy.
What is your take on the budgets, budget discussions on basic research, Dr. Bivens? What would those cuts do for our future competitively from a jobs point of view and from an energy point of
view?
Mr. BIVENS. Yeah. I pretty much totally agree with you. I think
cutting investments in basic research and a rush to budget austerity is kind of the definition of penny wise, pound foolish. I just
dont think we should do it.
Ms. LOFGREN. Dr. Montgomery, do you have a point of view on
that?
Mr. MONTGOMERY. Yes, I absolutely agree. In fact, that was what
I put into my opening statement to try to emphasize it more than
my written testimony did. Absolutely that the highestthat as you
look at cutting the budget, it is very important that you protect the
level of funding that we are now putting into basic energy research,
not let it get cut.
The problem is that it has generally been starved by Congress
in order to continue funding the subsidies and deployment of existing technologies, and that is because of the jobs that that creates.
I think we have to
Ms. LOFGREN. Well, there are jobs in basic science research, too.
Mr. MONTGOMERY. There are, and that is just fine, but dont lose
sightbut dont concentrate so much on jobs that you put money
into things instead of basic.
Ms. LOFGREN. I think we are the richest country in the world.
We can do both, and I yield back.
Chairman BROUN. The gentlelady yields back.
Now, the chairman recognizes Mr. Hultgren for five minutes.
Mr. HULTGREN. Thank you, Mr. Chairman. Just a couple of questions, and I am sorry, there is a couple different committees meet-

94
ing the same time, and I wish I could have been here for the whole
time, but we will spend more time going over your testimony and
things, but I did want just some clarification if I could.
And I guess I will, Dr. Montgomery, if I can address this to you
at first, the Administration has made a high profile effort to invest
a significant amount of taxpayer money on green jobs. How should
Congress evaluate various job creation proposals? Any suggestions
that you would have for us?
Mr. MONTGOMERY. Yeah. I would say ignore everything anybody
says about jobs. You should be evaluating programs on their merits
in terms of what do they cost, how do they address a specific externality or public policy problem, are they going to be increasing or
reducing the cost of energy. The jobs calculation I think isthe
jobs argument is pure smokescreen. Everybody can argue that they
are going to be creating jobs if you give them money or losing jobs
if you dont give them money. You have to actually look at the merits of what the money is doing.
Mr. HULTGREN. Mr. Kovacs, would you agree with that, and I
guess just kind of a follow-up question. What is the appropriate
cost that we should expect to pay? You know, is it $100,000 per job
or $1 million per job or $10 million per job? Where do we start
making a decision that this is too much, it is not being effective?
Mr. KOVACS. Well, our research doesnt confirm or deny any of
that, but what it does state factually was that at least in March
of 2010, there were 351 developers around the United States who
were willing to put in $570 billion in direct investment that would
have created roughly about $1.1 trillion as you have the multiplier
effects with about 1.9 million jobs.
And what we are trying to say is the thing that held up that investment was the fact that departments were challenged and challenged and challenged, and if youthe goal isnt necessarily an environmental goal because every kind of facility was challenged, and
40 percent of the facilities that were challenged were all renewables. And there are 24 nuclear and I forget how many transmission, which would actually take the renewable power from the
plains into Minnesota or Chicago.
So you have a pot of money, and you have developers who are
willing to risk their money to build these facilities. So the easier
way to do it is to let the private sector do it, and the market will
begin to sort itself out. Some will get permits, some wont, but even
if you took just one facility per state, you still get to about $400
billion in direct investment. That is needed at this time.
Mr. HULTGREN. Thanks, Mr. Kovacs, and I agree. It frustrates
me when I see sometimes we are picking winners and losers or
pushing an agenda that the market just doesnt want, and you
know, there are some issues there I think thatso I appreciate
your input there.
Dr. Green, if I could ask you, would youare there other federal
efforts that could be more efficientthat could just work more efficiently to help unemployed American and also stimulate the
growth of the green economy? Are there things that you see that
we could be focusing on that you would recommend?
Mr. GREEN. I lack the hubris to make suggestions like that. That
would be better asked of someone who was more focused on sort

95
of how economic stimulus works. I can recommend any of our
economists at AEI for that.
Mr. HULTGREN. Great. I will move right next door if I could with
that question, Dr. Kreutzer. If you have any suggestions, are there
things, you know, federal efforts that could be more efficiently used
to help people who are unemployed other than some of these green
jobs initiatives?
Mr. KREUTZER. Yeah. Well, lets look at some of the things. First
of all, we could have a separate discussion about the general benefit of federal funding of research, but the Stimulus Package
doesnt fit that. We are trying to promote the economy. In the Stimulus Package they had a carve out of $140 million for climate data
modeling. I checked with climatologists. They didnt know any unemployed climate data modelers.
We had a $5 billion program for weatherization. The state auditor in New Jersey, Stephen Eells, looked at the money that was
being spent in New Jersey. Five percent of the funding was spent
documented on nothing, close to ten percent they couldnt even tell
where it had been spent, eight percent was overspent. They spent,
you know, $22 on a light bulb that cost $1.50.
In short, out of 5 billion if you use that ratio, 1 billion is wasted.
So you could do a lot better stimulus with the economy by not
wasting billions of dollars by not ramping up money for people that
are already employed.
When it comes to the impact, there was a debate earlier on
whether we had the studies that Dr. Green cited were peer reviewed, as though they didnt matter if they werent, but here is
a statement from the Congressional Budget Office, okay, last year
on the impact of policies to reduce greenhouse gas emissions on
employment. This is a quote. In particular, job losses in the industries that shrink would lower unemployment, excuse me, would
lower employment more than job gains in other industries would
increase employment, thereby raising the overall unemployment
rate.
So it is not fossil fuel funded researchers that are coming up
with this. This is very general, consistent from economists. We had
a panel at the Heritage Foundation in September of 2009. We had
economists from the EIA, we had economists from the EPA, we had
economists from the Congressional Budget Office, we had economists from the Brookings Institution. All of them analyzing the employment and the simulative impact of Waxman-Markey. None of
them found that it stimulated the economy.
The debate was entirely over how much did it cost. Nobody found
economic growth from that. The question is is it worth that? That
is a reasonable debate to have, but you cant pretend that it is free.
Mr. HULTGREN. I am out of time. Thank you very much. I yield
back.
Chairman BROUN. The gentlemans time has expired.
I want to thank the witnesses for you alls valuable testimony
here today. It has been very enlightening, and I thank the members for your questions.
Members of the subcommittee have additional questions for the
witnesses, and I will ask all of you all to respond to those questions
in writing. The record will remain open for two weeks for addi-

96
tional comments from members, and if you would, please get those
answers in writing back to us within that two-week period.
The witnesses are excused and
Ms. EDWARDS. Mr. Chairman, I just have a question. I would ask
unanimous consent that we be allowed to include materials for the
record that were shared with the majority staff prior to the hearing.
Chairman BROUN. Okay. I think that has been agreed to. So ordered.
Ms. EDWARDS. Thank you.
[The materials follow:]

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Chairman BROUN. Anything else? Okay. Witnesses excused. The
hearing is now adjourned, and thank you all very much.
[Whereupon, at 4:05 p.m., the Subcommittee was adjourned.]

Appendix

ANSWERS

TO

POST-HEARING QUESTIONS

(157)

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ANSWERS

TO

POST-HEARING QUESTIONS

Responses by Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute

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Responses by Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate Change, The Heritage Foundation

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Responses by Dr. David W. Montgomery, Vice President, NERA Economic Consulting

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Responses by Mr. William Kovacs, Senior Vice President, Environment, Technology,
& Regulatory Affairs, U.S. Chamber of Commerce

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