TODAY’S STUDY: SWING STATES, GREEN JOBS

Red, White & Green; The True Colors of America’s Clean Tech Jobs

Nancy Pfund and Michael Lazar, September 2012 (Double Bottom Line Venture Capital)

Executive summary; Clean tech may mean a debate in Washington, but it means jobs everywhere else.

Washington D.C. may be the national capitol of the United States, but the political discussions there often have little in common with those taking place in the country as a whole. One of the many issues for which this is true is the relationship between the environment and the economy. Within the Beltway today, nearly everything associated with “clean tech” and “green jobs” is highly politicized—much like everything else. In general, Democrats support them. Republicans oppose them. End of story.

One might assume we’d find the same trend outside of Capitol Hill, with blue Democratic states rushing to embrace clean tech and green jobs, but with red Republican states resolutely declining to join in the action.

In fact, what we find is entirely different. The following maps tell the story. Map one shows that in the ten states where clean tech jobs are growing the most quickly, only two can be considered traditionally Democratic. Many of the remaining states are decisively Republican. The story is the same in map two when you look at the states where green jobs make up the biggest percentage of the labor force; only three of those and the District of Columbia are Democratic.

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What’s more, many of the governors working the hardest to bring clean tech jobs to their home states are not only Republican, but are usually regarded as leaders of their party.

This demonstrates that clean tech and green jobs are only contentious inside Washington. Outside of the capital, where governors (and mayors) are more concerned with creating jobs than scoring debate points, there is no controversy about the impact of clean tech. It is almost universally appreciated as the important engine for job development and economic growth that it is. Disregarding the partisan bickering in Washington, these local officials are using clean tech to bring high-quality jobs to their states, in the process reviving communities and winning the support of local voters in both parties.

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The on-the-ground reality of the economic importance of clean tech should serve as a reminder to journalists, pundits, policymakers and even politicians campaigning for office. Map three shown below underscores the political importance of green jobs by highlighting that in this election cycle seven of the top 17 fastest growing clean tech states are swing states.

While it may be that on a D.C.-based cable news show, or inside a congressional committee hearing room, mentioning clean tech tends to immediately conjure up the capital’s gridlocked, right-left divide. Meanwhile, the rest of the country is often too busy working to attract and keep their green jobs to even notice the debate.

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The data; Green jobs are growing the most quickly in some of the smallest and “reddest” states

A preliminary procedural note: Counting the number of green jobs in the United States means first coming up with a definition of whether a given job is in fact “green.” The Bureau of Labor Statistics has one definition: Jobs that either “produce goods or provide services that benefit the environment or conserve natural resources” or those that involve making a company’s production processes “more environmentally friendly” by using fewer natural resources.

Some have criticized this definition as being overly-broad, suggesting it might include such disparate activities as tending an antique shop or lobbying for an oil company. Aware of this controversy, in 2011 the Brookings Institution came up with its own more restrictive definition. We use that narrower definition in this paper.

The data from the Brookings Institution, combined with information from other sources about economics, population and voting habits, points to a number of surprising, even counter-intuitive, observations.

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1. Clean tech is already a significant source of employment everywhere in the country.

As expected, the states with the most green jobs are usually those with the biggest populations. Here are the top ten states in clean tech jobs; they are also among the top ten states in populations with two exceptions (Michigan and North Carolina). The major “outlier” is Washington, which ranks 13th in population.

To put these numbers in some perspective, it is worth noting that according to the National Mining Association, coal employs 136,000 people in the entire country. But three states all by themselves each have more clean tech workers than all the coal mining workers in the USA. The total number of Americans working in clean tech is many times the size of those in coal. This rarely-acknowledged statistic suggests that we broaden the national discussion of the economic effects of environmental policies. That discussion often emphasizes their impact on the coal industry, with the much-larger clean tech portion of the energy economy receiving proportionally much less attention.

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2. The most rapid growth in clean tech is taking place in smaller, red states.

The number of green jobs, on a percentage basis, tends to be growing the most rapidly in small, red states. The following table shows the top ten states ranked by percentage of green job growth; the final column shows the average GOP vote in each state in the presidential races of 2004 and 2008. (Recall the country as a whole was split roughly down the middle, especially in 2004.) Note that four of the states are solidly Republican, and a further four are close enough to be considered swing states. Note, too, that many of the states are among the least populous in the country.

Also worth considering in the table below is the generally rapid rate of growth for green jobs everywhere in the country. In fact, the average growth rate for solar, which represents one big chunk of the clean tech sector, was 28 percent between 2006 and 2009, when both direct and indirect jobs are counted. Moreover, the entire solar industry employment growth between August 2010 and August 2011 was nearly ten times that of the overall economy at 6.8 percent v. 0.7 percent.

3. It is much the same story with states with the biggest percentage of non-farm jobs connected with clean tech: small, red states are over-represented.

As Exhibit C demonstrates, the numbers around the share of green jobs as a percentage of total jobs in 2010 are somewhat surprising: some of the least populated red states are the most dependent on green jobs. Many of the states with the biggest share of green jobs as a percentage of total non-farm jobs are less populated red states like Alaska and Montana.

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Real life outside out of the Beltway; Republican governors go green

Clean tech may be seen as a Democratic issue on Capitol Hill but out in the states, it has no political party. A number of Republican governors, as part of their overall economic development efforts, have embraced clean tech initiatives as a source of well-paying jobs, often in manufacturing. The pragmatism of governors—their willingness to do the right thing for their states regardless of current political fashions—may be one reason that pollsters generally find that governors, on the whole, have favorability ratings that are double those of prominent national politicians, and five times the approval afforded to the Congress.

We highlight here the clean tech efforts of five Republican governors. Of course, many Democratic governors have been equally aggressive in this regard. But we are not chronicling their efforts because they are, in some ways, less surprising. We also do not consider here the significant work done on behalf of Arnold Schwarzenegger during the eight years he spent as Republican governor of California. Also not included are Republicans Rick Scott of Florida, Mitch Daniels of Indiana and Jan Brewer of Arizona, all of whom have championed clean tech efforts in their states.

Readers with long memories should not be surprised by the active role being played by Republicans in environmentally-friendly economic development. For many years, the environment was a bipartisan issue. Indeed, some of the strongest pieces of environmental legislation were enacted during the presidency of Republican Richard Nixon. The polarized discussion of the environment is a relatively recent phenomenon, and, perhaps sadly, echoes the sharp divisions occurring throughout American political discourse…

Mississippi Former Governor Haley Barbour… Kansas Governor Sam Brownback… New Jersey Governor Chris Christie… Louisiana Governor Bobby Jindal… Texas Governor Rick Perry…

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Maintaining the momentum; Key policy issues affecting the future of green jobs

For the clean tech economy to continue its growth, policies supporting long-term investment must be implemented at both the federal and state levels. Three of the most important of these are described here.

1. Keep the Solar Investment Tax Credit

The Solar Investment Tax Credit (ITC) provides a 30 percent tax credit for solar systems on both commercial and residential properties. It is probably the single most important solar-related energy policy now in place. According to the Solar Energy Industries Association, the Solar Tax Credit has been crucial in lowering the price of solar and creating jobs, and has helped give solar energy a 76 percent growth rate since its enactment in 2006.

The credit is scheduled to decline to 10 percent by the end of 2016, in connection with other changes in tax law. Many argue that such a steep drop may disrupt the steadily improving economics of solar relative to other energy sources—energy sources that, contrary to popular belief, are themselves the benefit of very significant subsidies via corporate tax breaks and other mechanisms. As unsubsidized energy sources are a legitimate policy objective, several groups have suggested a much more gradual phase-out of the solar credit. One proposal calls for it to be phased out slowly, though the year 2025, at which time all energy sources are expected to be able to exist without any form of government help.

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2. Redraft tax legislation affecting clean tech-related Master Limited Partnerships and allow for solar REITs

Seemingly obscure portions of the tax code can have a dramatic effect on what is, or is not, invested in a field like clean tech. For example, experts say that laws like the ITC that are favorable to solar leasing arrangements, along with contracts known as “Power Purchase Agreements,” account for much of the recent growth in solar energy power sources. Two other changes have been proposed and should be considered. The first would allow a Master Limited Partnership, which is a publicly traded partnership corporate ownership structure, to own and finance renewable energy and biofuel projects—something that can already be done with oil, gas and coal. As it would lower the financing cost for these projects, the idea has bipartisan support in Washington; earlier this year, a group of senators from both sides of the aisle introduced S.3275, known as the “MLP Parity Act,” which would enact the change into law.

Similarly, many financial and solar industry advocates are calling for an expansion of the definition of Real Estate Investment Trusts (REITs) to include solar installations as a form of real property. Solar REITs would greatly expand the pool of capital available for solar projects, allowing for more solar projects to move from the planning to the actual construction stage.

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3. Extend the Production Tax Credit

This may be the most immediately pressing issue of all. The Production Tax Credit has played a crucial role in the development of wind energy in the U.S. since its inception in 1992. However, the credit is set to expire at the end of this year. On account of the inevitable uncertainty about the credit’s future, new wind project development has slowed significantly this year, so much so that the CEO of Vestas, a wind energy company, predicts the wind turbine market to fall by up to 80% next year.29 In connection with that decline, Navigant Consulting estimated a net loss of 31,000 wind jobs from 2011 through 2014, of which about 7,000 are direct jobs in manufacturing, construction and operations.30 With wind as one of the most important of the renewable energy sources, not to mention the source of a considerable number of jobs, Congress would be wise to renew the credit before the year is out.

Conclusion: Green jobs and the political discussion; We need to hear less from Capitol Hill and more from Main Street

Many people believe that supporting green jobs makes sensible policy, one that addresses our nation’s economic development, climate, and energy security needs. With the growing number of green jobs, it is also good politics. Seven of the top 17 states with the most rapid growth in the clean tech sector are considered swing states for the 2012 presidential election, as shown by the exhibit below. Numbers like these suggest we are entering an era in which politicians who unfairly criticize or otherwise ignore clean tech run the risk of alienating a bedrock constituency: job holders, most of whom vote. We all need to understand that green jobs and clean tech are not merely the idle dreaming of a small group of partisan activists and insiders, but a source of livelihood for millions of Americans, literally in all parts of the country. What’s more, their numbers are growing every day.

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