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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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The Inconvenient Truth About A Green Revolution

The Inconvenient Truth About A Green Revolution

 “Green energy is the future!” “Green energy will create tens of thousands of new jobs!” Statements like these have become the new mantra for green energy advocates even as fossil fuel emissions have fallen dramatically thanks at least in part to the rise of natural gas. Fossil fuel emissions today are roughly 10% lower than they were a decade ago in the United States according to the EPA. Combined with the precipitous decline in oil prices, green energy generation has become less economically appealing and less environmentally necessary. This has led to increased emphasis on the employment aspects of green energy. Related: Could The World Cope With Almost Limitless Energy?

A recent panel of climate scientists concluded that by 2020 around 1 million new green energy jobs would be created if the US, European Union, and China all adhere to their climate goals. This statistic is predicated on these countries managing to switch from producing conventional fossil fuel energy to green energy sources. By 2050 around 3 million new green energy jobs would be created if all conventional fossil fuels are phased out by that point and replaced with renewable energy sources.

These figures sound great initially, but there is a catch. For those jobs to materialize, fossil fuels have to be phased out. And once those fossil fuels are phased out, a lot of existing jobs will disappear.

How many jobs will disappear as the “green revolution” picks up steam?

That question is a little hard to answer especially since the climate scientists are referencing jobs created in three different regions of the world and China and the EU do not have the level of detailed labor statistics that the US does. But in the US alone there are hundreds of thousands of jobs in the oil and gas extraction field and that industry has been a critical growth engine for the economy ever since the Great Recession. Just based on the size of the US, EU, and Chinese economies, the ~200,000 US oil extraction jobs imply more than 500,000 such jobs around the world. And that is before any of the other aspects of conventional energy usage are considered. Related: Has The Bakken Peaked?

The exact number of US jobs in the energy industry is hotly debated with industry sources citing a figure close to 10 million US jobs supported by US energy. Environmentalists dispute that figure, but even they agree that the figure is at least 2 million.

So what does all of this information mean for the US energy industry and the “Green Collar” jobs of the future? Among other things, the math indicates that the green revolution will likely destroy jobs rather than create them. Even if we use the environmentalist figures of 2 million US jobs just in the oil industry and assume that this covers all fossil fuels that would be phased out by a green revolution, that still implies at least 5 million jobs would be lost between the US, China, and EU combined in a green revolution. Related: Has The U.S. Reached “Peak Oil” At Current Price Levels?

Jobs gains of 1 to 3 million offset by job losses of at least 5 million are unlikely to result in a ground swell of popular support. And all of this assumes the 1-3 million job materialize as expected, a proposition that has not always worked out so well in the past. The loss of millions of jobs and displacement of millions of working families is not likely to sit well with the general public. Those kind of figures could well end up stirring up revolt or revolution in less stable countries around the world. Eastern Europe and Russia already have their share of internal turmoil as the situation in Ukraine shows, and these are also some of the economies most dependent on oil and gas. It is ironic, but if scientists’ predictions end up being correct, the inevitable result of the green revolution may be pools of red.

By Michael McDonald for Oilprice.com

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  • John Scior on April 16 2015 said:
    Do you meanpools of red as in blood. because I'm not sure you are aware of it , but there have been a number of conflicts over oil and fossil fuels in recent years. Also,the Green revolution will notoccur overnight. By your reasoning, we should go back to whale oil for illumination and buggies for transportation to save all the whaling and buggy manufacturing jobs. The act is that as a growing population and more difficult to extract oil become ralities, economics will force the hand to a transition to greener enery sources. in your calculations of the switch to natuarl gas ( which is by the way a fossil fuel ) do you include the exhaust of flaring of uneconomically recoverable methane into the atmosphere ?I sincerely doubt that this is the case. Also, the contraction in energy recovery jobs herein the US is not because weve made a switch to alternate energy sources. We are as addicted to oil more than ever. It has come about because the oil producing countries have maintained their production if not enhanced it as other previous producers who were out of the market have come back to their production. (ie Iraq and Libya ) This has resulted in a contraction in exploration for new wells as the profit margin forfracking for oil has been diminished. The oil is still there and those jobs will come back ( albeit perhaps not for the same workers ) when once again demand picks up and supply from lower cost conventional wells is constrained. There is still quite a bit of Oil left to exploit in EOR and jobs there might very well be fulfilled by workers laid off in the fracking industry.
  • JM on April 16 2015 said:
    "Jobs gains of 1 to 3 million (green energy) offset by job losses of at least 5 million (fossil fuels) are unlikely to result in a ground swell of popular support."

    The article states that an equal amount of BTU produced by fossil fuels can be replaced by green energy at substantial less human input. In other words green energy all other inputs equal is substantially more efficient and as a result less costly.
  • Lee James on April 16 2015 said:
    I think we can relax, Mr. McDonald. The transition away from fossil fuel will be gradual. Only the usual and customary business cycles of the fossil fuel industry pack the kind of drama you are alluding to.

    I'm looking forward to the jobs of the future. And there will still be lots of fossil fuel pollution remediation jobs available.
  • Kip on April 17 2015 said:
    It does not take a an advanced degree to criticize "Green" energy. It does take blinders or an incentive to do so. The growth in solar and wind energy will not end the jobs in fossil fuels for a very long time. During the period while fossil fuels can still be profitably extracted our addiction to the stuff pretty much guarantees lots of jobs in fossil carbon energy. To continue to use the label "environmentalists" so ambiguously also shows old school industrial rhetoric. Industries that seek to find ways to use their waste and also find way to reduce their consumption and in both ways become more competitive and more environmentally sustainable.

    I really like the quote, "The Stone Age didn't end because man ran out of stones".
    The fossil energy industry is perhaps getting nervous and they probably should be.
    Even Mr MacDonald with have PVs on his roof one day fairly soon. Until then stop looking for mud it only clouds your vision.
  • Ondrej Curilla on April 17 2015 said:
    This is absolute nonsense. Turning to renewables is not an option, it is utterly crucial step we have to take if we want to keep this planet inhabitable for humans. Creating jobs is just added value and loosing jobs in fossil fuels industry is natural part of this change - and for sure it will not happen suddenly from one day to another but it will take years, probably decades, so please don't use this emotional propaganda.
    You speak about possible revolts and revolutions - what do you think is going to happen if droughts in California or Brazil are going to worsen and spread to other parts of world? BTW climate change is widely considered to be one of the main triggers of Arabian Spring revolution that led to bloodbaths in Syria and rising of ISIS...
    Change always happens and it always has consequences. Maybe hundreds of millions people lost jobs in agriculture because of oil fueled machines - and what? Who cares? They had to move to cities, live in slums, no job, no future...
    Renewables and fundamental change in agriculture is the only hope for humankind to survive.
    There is still some hope :-)
    http://www.bloomberg.com/news/articles/2015-04-14/fossil-fuels-just-lost-the-race-against-renewables
  • John Scior on April 17 2015 said:
    Not to offend you Mr. Ondrej Curilla, but I believe a big contriuting factor in the Araian Spring was a large sike in food costs. In my opinion, this was largely due to the RFS and vast amounts of feed corn that would otherwise have been exported to fed chickens or cattle overseas being converted into ethanol to fuel American cars. A spike in demand for corn caused the price to rise along with a resultant increase in the value of farmland. I don't know if this was intended by Bush but it paid off handsomely for his rural constituency who normally might vote conservatively anyway. The resultant chaos in the middleeast causes a greater demand for US intervention and /or foreign military sales as well. Another bonus for Texas defense contractors. OH, and hey thats Bush W's home state, what a co-incidence.
  • Ondrej Curilla on April 17 2015 said:
    not taken :-)
    sure there are more reasons, everything is connected and food price is also directly linked with climate: http://www.americansecurityproject.org/climate-change-the-arab-spring-and-food-prices/
  • Mensa Graham on April 20 2015 said:
    Has any of our brainiacs considered pursuing improved efficiencies of our electronics instead of trying to go head to head in a duel to the death with the other side? One, you woosy green people will lose. Two, you have no idea how to put up a fight.

    We have come some way in improving efficiencies for cooling (A/C) and refrigerators/freezers. How about some innovation there? Would that lowered the need for any fuel? Wow, such a brilliant thought. And no head banging required.

    LED lightbulbs. Get them subsidized!! Jesus boys, get to work doing something useful!!

    Hybrid cars or something even more fuel efficient and not any costlier for transportation. Can you do it? Hydrogen? Hybrids? How?

    In these ways you can set up the situation where we can do without so called fossil fuels and be able to actually rely on renewables. Until then please shut up with wishful thinking.
  • Keith Henson on April 26 2015 said:
    Over the last few months a new proposal, Reaction Engine's Skylon and an old proposal by microwave power pioneer William Brown have brought the cost of transport to GEO down far enough that power satellites could undercut coal for base load power. The power is cheap enough (under 3 cents per kWh and less for off peak power) that we can make synthetic transport fuels out of water and CO2 from the air. The scale of the project to get started isn't that large, around $60 B if you don't count Skylon development and $80 B if you do.

    Recent news story:

    http://investor.northropgrumman.com/phoenix.zhtml?c=112386&p=irol-newsArticle&ID=2037749

    Technical details on getting the transport cost down.

    http://ieeexplore.ieee.org/xpl/articleDetails.jsp?tp=&arnumber=7046244&queryText;=Solving+economics,+energy,+carbon+and+climate+in+a+single+project

    There is a lot more if someone wants to see it.

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