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Will tax breaks for green investment bring green jobs?

Last week, Gov. Tim Pawlenty introduced his proposed package to encourage green job creation in Minnesota. His “Green Jobs Investment Initiative,” extending a variety of tax credits to businesses and investors, has been called “Green JOBZ.”

That nickname is unfortunate.

It’s true, part of what he’s offering is just JOBZ warmed over — not a concept that will excite JOBZ’s many critics. But he’s also suggested some other positive steps to encourage private capital investment, expand infrastructure for alternative energy, raise awareness of energy conservation and discourage greenhouse gas emissions.

It’s good he’s getting out front on the issues of jobs and clean technology development, but he also got out ahead of a Legislature-sponsored Green Jobs Task Force that has been laying out how to tackle the green-jobs issue. The bipartisan group, which includes legislators, executive branch agencies, business and environmental representatives, had scheduled to bring out a legislative action plan in December and a report in January.

This political maneuvering aside, our question is whether longer-term tax credits will actually have much impact on creating jobs today.

Extent of JOBZ’s success is debatable
JOBZ’s tax breaks were aimed at increasing employment in communities where economic growth was stagnating. It’s debatable how many new jobs overall were created. As much as two-thirds were part of planned expansions or simply moved from one place to another.

Green JOBZ faces another hurdle. It’s trying to stimulate job creation in a relatively young sector that has already received a lot of venture-capital scrutiny. Although investment in green industry has been growing, there have also been signs that venture funds have not found enough compelling opportunities to invest in green industry.

A 2007 study by New Energy Finance found that venture capitalists had spent only 73 percent of the funds that had been raised for green technology, and several green tech funds closed their doors that year. More recently, the research group calculated that global investment in clean-energy projects fell by almost 25 percent in the third quarter 2008, and it will likely fall further by year end.

Persuading those investors to put more money into clean technology is a laudable policy goal, but it’s a very different challenge from getting a machine shop to locate its new facility in Long Prairie instead of Bloomington.

Tax breaks for regional investment funds
Gov. Pawlenty’s plan offers tax incentives for regional investment funds to invest in Minnesota (only 50 percent of the credits will be targeted for green industry, however). Using tax breaks to boost expected investor returns seems like a good move, but it’s also a move any state can duplicate.

Of the more than $13 billion in public and private investment in U.S. clean energy in 2007, nearly $9 billion was made in wind energy, a sector where Minnesota has some advantages. Venture-capital funds favored solar energy development, though, with $1 billion of the $2.7 billion they invested in renewable energy technologies. By virtue of geography and technology base, Minnesota will be less competitive for these funds.

Green industry by any name will be good for Minnesota, and it seems churlish to question any well-intentioned effort to grow jobs and lessen our dependence on fossil fuels. But we also should look for the most effective role government can play in encouraging future industry — while addressing jobs today.

For the thousands of Minnesotans who are out of work or underemployed, “offer tax incentives and the jobs will come” won’t offer much encouragement. Let’s hope the Green Jobs Task Force has more about ideas about creating jobs than Green JOBZ.

Charlie Quimby is a communications fellow with Growth & Justice, a nonpartisan think tank based in St. Paul.

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Comments (1)

  1. Submitted by Tom Poe on 11/17/2008 - 10:53 am.

    If a meaningful tax credit is available to homeowners (rapidly declining species) to install solar panels, wind power, green transportation, jobs will be created by all those who will contract to have the work done. Suppliers will hire to meet increased demand. Accessories cottage industries will bloom, and the world will be richer for it.

    I think a more critical decision, though, is breaking through the concept that our utilities must remain centralized. If we can get over that notion, and think in terms of decentralized power and telecommunications, the jobs will follow quickly. Pawlenty and those dwindling advocates of corporate welfare need to face the fact that our free market experiment has us headed into the Great Depression. It’s time for action, not time for salvaging a dead horse, free market.

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