Wednesday, December 29, 2010

McGuinty has led us all down the green energy garden path

By Ross McKitrick
http://www.stratfordbeaconherald.com/ArticleDisplay.aspx?e=2907400

Anyone remember the Sprung Greenhouse fiasco? In 1987, Newfoundland Premier Brian Peckford attempted to boost local employment by subsidizing the building of a massive hydroponic greenhouse operation that its inventor, Philip Sprung, said would turn the province into a world leader in green produce. His plan had failed in Alberta, but in Peckford he found a gullible partner willing to abandon common sense and start signing over other people's money.

During the construction phase the premier pointed with pride to the hundreds of jobs apparently created. Meanwhile the province kept signing cheques and promising that cucumbers and economic renewal were on the way in equal measure.

Cucumbers did start appearing. The problem was each one cost $1.10 to grow, and the wholesale market price was just over 50 cents. The greenhouse went bankrupt and ceased operations by 1990. The jobs vanished, and the tiny province was left with $14 million in debts to pay.

Never forget: jobs are created by profitable businesses, period. Industries reliant on subsidies do not generate jobs, they destroy them. Subsidies create short-term jobs that have to be financed by new taxes on profitable activity, which drives away long-term investment and ends up costing jobs.

People in Ontario ridiculed the Sprung fiasco at the time. But I guess we didn't really learn anything, for now we are madly building our own versions of the Sprung greenhouses. This time they are called wind turbines.

Their salesmen have found in Dalton McGuinty their own Brian Peckford. They convinced him we can become a world leader, not in green produce, but green energy. Common sense has been jettisoned and the cheques are flowing.

We already have green energy. Most of our electricity comes from non-emitting hydro and nuclear generation, at a fraction of the cost of wind-and solar-generated power. By the government's own data, Ontario air pollution has fallen dramatically since the 1970s through the use of scrubbers and automobile technology (check it out at airqualityontario.com).Most of our remaining smog precursors originate in the U.S. An expert report to the government in 2005 -- which was promptly marked "Classified," but a copy of which I obtained -- showed that closing our two coal-fired power plants would make no measurable difference to summertime smog levels, especially since they would require gas-fired replacements.

Wind turbines, like solar panels, can generate electricity but they require backup gas generators to compensate for the fluctuating yield.

And, like Sprung's cucumbers, those green electrons don't create jobs, they annihilate them. Wind turbines don't run on wind, they run on subsidies and rigged prices, or "feed-in-tariffs." Green energy will only be a source of jobs the day the industry can produce electricity at competitive market rates and still pay its own bills.

Ontario was not the first region to fall for the scam. Spain did years ago. Recently an independent analysis showed the plan destroyed 2.2 jobs for every one created. Over the past month Spain has slashed subsidies for green power producers and capped the size of the sector. France has also begun eliminating subsidies in the wake of a report showing that, after the temporary, subsidy-driven construction jobs end, the price hikes and tax increases will lead to long-term declines in jobs and growth. And Germany -- producer of half the world's solar electricity -- just announced accelerated cuts in solar subsidies in response to the same economic realities, with hints the subsidies may not survive a scheduled review in 2012.

Everywhere it's the same story. Green energy salesmen bamboozle gullible governments into signing cheques in return for empty promises of jobs and growth. As the bills mount, prices rise and the economy sags, the inevitable unravelling begins. It will happen here too. The only question is how many jobs will disappear and how much economic hardship we will put up with before having the common sense to shut the scam down once and for all.

Ross McKitrick is a professor of environmental economics at the University of Guelph; senior fellow of the Fraser Institute; member, Academic Advisory Board, John Deutsch Institute, Queen's University, Kingston, and member, Academic Advisory Board, Global Warming Policy Foundation, London, U.K.

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