06.13.2012 1

Spain’s ‘green’ failure

Wind EnergyBy Robert Romano — With Spain on the verge of bankruptcy, having just secured a €100 billion loan from the European Financial Stability Facility (EFSF) to recapitalize its banks just so it can refinance its €734.9 billion debt, the government there has been looking for things to cut.

One thing the new government under Mariano Rajoy saw that could be cut were taxpayer subsidies to “green” forms of energy. Debts related to those subsidies had reached some €24 billion last year, or 3.2 percent of its total debt, before the programs were discontinued.

Those debts were racked up over about a decade while the programs were built, to little effect. Billed as the jobs of the future, a 2009 study by Dr. Gabriel Calzada Alvarez found that although the subsidies had netted about 51,000 jobs in Spain, it had cost over 110,000 jobs in lost opportunity costs because of the excessive expense involved.

From 2000 to 2009, Alvarez reported it cost an astronomical €571,138 per “green” job created.

Making matters worse, as Alvarez testified to Congress in 2009, “Only 1 out of 10 green job contracts were in maintenance and operation of already installed plants, and most of the rest of the working positions are only sustainable in an expansive environment related to high subsidies.”

In other words, that €24 billion spent on the programs could have been invested privately more productively. And into something that might have been sustainable economically, instead of a program that depends on taxpayer subsidies for its very viability.

By Alvarez’s estimates, that likely means over 40,000 jobs will be lost as the subsidies dry up. Hardly the “green” miracle that was promised. Weren’t the subsidies supposed to be temporary to help the industry get going?

Now, ten years later, the industry cannot support itself. The European Commission’s Marlene Holzner described Spain’s decision to cut the subsidies, “The suspension of all new renewable energy projects will have a disturbing impact on investment in this sector.”

What a waste. Here’s a thought. So long as solar, wind, and other so-called renewables cannot sustain themselves in a market environment, they should not be propped up by precious tax dollars. And certainly not to perpetuate a myth that humans are destroying the Earth.

With over 5.6 million Spaniards unemployed, an astronomical 24.3 percent, and budget cuts coming swiftly, many may wish to have some stable work, let alone “saving” the planet.

And now, the jobs simply are not there in the government.

In 2011 Spain had to slash government spending €11.1 billion, but still had a €91.4 billion deficit. To reach its goal of reducing the deficit to about 5 percent of its Gross Domestic Product (GDP) this year, the government will likely need to cut another €38 billion or so.

To get to the 3 percent of deficit to GDP required under the Lisbon Treaty, it will need to cut another €32 billion off of that. That is, if it even gets that far before the country defaults on its debts.

So, any expansion of the public sector is going to have to wait.

But restoring growth to the private sector likely will not be easy. The ongoing financial crisis has hit Spain and other European nations hard. In Spain, the unemployment rate more than doubled since 2007.

The only way out is to create a competitive environment for business to flourish. That will not be accomplished with higher taxes and a debt so large it cannot be serviced, let alone repaid. Nor will “green” jobs lead Spain out of this mess.

Robert Romano is the Senior Editor of Americans for Limited Government.

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