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ENERGY GUEST BLOG -- WILLIAM M. BOWEN OF CLEVELAND STATE UNIVERSITY

Over the long term, renewable energy portfolio standards lead to growth in green businesses

Blog Entry:
William M. Bowen is professor of public administration and urban studies at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University. He's also associate editor of the International Journal of Energy Technology and Policy.
My colleagues Sunjoo Park and Joel Elvery and I are completing a two-year study of the impacts of renewable energy portfolio standards (RPS) on the growth of green businesses and jobs in states.

Such standards legislatively mandate the adoption of renewable energy technologies in state electricity markets. In Ohio, ours is found in Senate Bill 221, passed in 2008. The study examines the effects of RPS on green business and job growth in all 50 states. Currently 29 states, including Ohio, have an RPS.

The standards have advocates and detractors.

Advocates argue that the presence of an RPS in a state causes growth in its green industry. Detractors variously argue that RPS policies have selectively provided support for some renewable energy technologies while providing for inadequate support for others; that other types of policies might bring equal or greater benefits to states at lower cost; and that RPS decrease overall jobs numbers.

Our study was designed to find out which side is the most coherent in light of available data and economic growth theory.

To get our answer, we gathered economic panel data on all 50 states from 2001 to 2009. We defined “green businesses and jobs” using the definition given by the Bureau of Labor Statistics. We wanted to statistically control for any plausible rival explanations for any growth we might find. We took guidance on this from other published research reports on state economic growth, including an excellent study by some economists from the Federal Reserve Bank of Cleveland.

There is no doubt the overall numbers of green businesses and jobs throughout the country have increased over this period; their mean annual growth rates were 17% and 35%, respectively. But much of the causal structure of growth in green businesses and jobs evidently has to do with increases in overall state economic productivity that occur independently of whether a state has RPS.

For instance, we found that states whose markets produce more economic goods and services overall experience much higher rates of growth in green businesses and jobs. Similarly, states that invest more in public infrastructure, such as highways, have more growth in green businesses and jobs. States with a greater stock of knowledge experience higher green job growth rates.

Furthermore, we found that neither the presence nor the stringency of a state's RPS has any statistical relationship with growth in green jobs, once suitable statistical controls are put in place. Green business growth is a little different than this. Although the presence of RPS in a state doesn't initially cause growth in green businesses, it leads to such growth after RPS has remained in force for a number of years.

The major implications for businesses and policy makers in Ohio are threefold.

First, the most important factor in causing state green business and job growth is the health and vibrancy of overall state economic markets. Nothing causes growth in green businesses and jobs more effectively and efficiently than increased levels of production of goods and services people value and the exchange of such goods and services in free and competitive markets.

Secondly, the state of Ohio can help to create green businesses and jobs by making public investments in the state's infrastructure and educational systems.

Third, SB 221 will neither help nor hurt Ohio green job growth in any discernable overall fashion, but it will help create green businesses in Ohio if it is allowed to remain in force for a number of years.
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