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GREEN JOBS AND RED TAPE: 

ASSESSING FEDERAL EFFORTS TO 

ENCOURAGE EMPLOYMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INVESTIGATIONS AND 

OVERSIGHT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

WEDNESDAY, APRIL 13, 2011 

Serial No. 112–14 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

DAVID WU, Oregon 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

GABRIELLE GIFFORDS, Arizona 

DONNA F. EDWARDS, Maryland 

MARCIA L. FUDGE, Ohio 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

JOHN P. SARBANES, Maryland 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT

HON. PAUL C. BROUN, Georgia, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

SANDY ADAMS, Florida 

RANDY HULTGREN, Illinois 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

RALPH M. HALL, Texas 

DONNA F. EDWARDS, Maryland 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

JERRY MCNERNEY, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Wednesday, April 13, 2011 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Paul C. Broun, Chairman, Subcommittee on 

Investigations and Oversight, Committee on Science, Space, and Technology, U.S. House of Representatives ............................................................... 7 

Written Statement ............................................................................................ 8 

Statement by Representative Donna F. Edwards, Ranking Minority Member, 

Subcommittee on Investigations and Oversight, Committee on Science, 

Space, and Technology, U.S. House of Representatives .................................... 9 

Written Statement ............................................................................................ 10 

Witnesses: 

Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute 

Oral Statement ................................................................................................. 12 

Written Statement ............................................................................................ 15 

Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate 

Change, The Heritage Foundation 

Oral Statement ................................................................................................. 29 

Written Statement ............................................................................................ 31 

Dr. Josh Bivens, Economist, Economic Policy Institute 

Oral Statement ................................................................................................. 38 

Written Statement ............................................................................................ 40 

Dr. David W. Montgomery, Vice President, NERA Economic Consulting 

Oral Statement ................................................................................................. 54 

Written Statement ............................................................................................ 55 

Mr. William Kovacs, Senior Vice President, Environment, Technology, & Regulatory Affairs, U.S. Chamber of Commerce 

Oral Statement ................................................................................................. 62 

Written Statement ............................................................................................ 65 

Appendix: Answers to Post-Hearing Questions 

Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute .... 158 

Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate 

Change, The Heritage Foundation ..................................................................... 162 

Dr. David W. Montgomery, Vice President, NERA Economic Consulting .......... 164 

Mr. William Kovacs, Senior Vice President, Environment, Technology, & Regulatory Affairs, U.S. Chamber of Commerce ..................................................... 167 

(1) 

GREEN JOBS AND RED TAPE: 

ASSESSING FEDERAL EFFORTS TO 

ENCOURAGE EMPLOYMENT 

WEDNESDAY, APRIL 13, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT, COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, Washington, DC. 

The Subcommittee met, pursuant to call, at 2:05 p.m., in Room 

2318 of the Rayburn House Office Building, Hon. Paul Broun 

[Chairman of the Subcommittee] presiding. 
2 
3 

HEARING CHARTER

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

SUBCOMMITTEE ON INVESTIGATIONS AND OVERSIGHT 

U.S. HOUSE OF REPRESENTATIVES 

Green Jobs and Red Tape: 

Assessing Federal Efforts to 

Encourage Employment 

WEDNESDAY, APRIL 13, 2011

2:00 P.M.—4:00 P.M. 2318 RAYBURN HOUSE OFFICE BUILDING

Purpose 

The Subcommittee on Investigations and Oversight meets on April 13, 2011 to examine the issue of green jobs and efforts to create them. The term ‘‘green jobs’’ generally refers to employment in the alternative energy and energy efficiency industries. One of the primary goals of the recent growth in federal incentives and funding for alternative energy sources and energy efficiency industries has been the creation of green jobs. 

The hearing will examine international efforts to create green jobs, as well as historical efforts domestically, including the American Recovery and Reinvestment Act. 

In light of the Administration’s recently announced ‘‘Winning the Future’’ initiative, 

the Subcommittee will explore the effectiveness of loan guarantees, subsidies, tax 

incentives, regulations, mandates, research, and other federal efforts to create green 

jobs. Under House Rules, the Committee has jurisdiction over all energy research, 

development, and demonstration projects; all environmental research and development; as well as the commercial development of energy technologies. 

Background 

Pre-2009 Incentives 

Prior to enactment of the American Recovery and Reinvestment Act of 2009 

(ARRA), the federal government provided a series of tax incentives for users and 

producers of green energy. These incentives were continued, and in many cases, expanded with the enactment of ARRA. These pre-existing incentives included tax 

credits for: 

• Biofuel production 

• Solar and fuel cell investments 

• Energy efficient appliances 

• Energy efficient commercial buildings 

• Energy efficient new homes 

• Renewable energy production 

• Residential solar and fuel cell installation 

• A range of tax credits for alternative fuel automobile technologies 

In addition to tax incentives, renewable energy portfolio mandates are also a 

means by which the public sector attempts to create green jobs. Currently, there is 

no federal renewable energy portfolio mandate, but 43 states have renewable energy 

portfolio mandates set by their State Public Utility Commissions that require a percentage of each state’s energy usage to be generated by renewable energy sources 

such as solar, wind, biomass and hydroelectric. For example, the state with the biggest long-term commitment, Maine, will require 40 percent of its energy to be generated by renewable sources by 2017 while the state with the lowest long-term commitment, Pennsylvania, will require only eight percent by 2020. Seven states have 

either non-binding targets or non-percentage goals. 

Similar to mandates, regulations are often used as a method of encouraging green 

jobs development. By placing restrictions and limitations on certain energy sectors, 

governments can artificially influence the market by creating a disincentive for cer-
4 

tain energy sources and technologies, therefore making others more financially viable. This increased demand creates jobs in a new sector, but as some argue, this 

comes at the detriment of employment in the regulated sector. Proponents of regulation as an incentive for job growth argue that the market is already unbalanced 

when it fails to adequately take into account externalities such as environmental 

impacts, and regulations simply force the market to account for those externalities. 

Loan guarantees are yet another way the federal government attempts to bring 

about green jobs. Created as part of the Energy Policy Act of 2005, the program 

leverages federal dollars by allowing the Department of Energy to guarantee the 

debt of privately owned clean energy developers and manufacturing companies instead of investing directly into these companies through grants or tax subsidies. 

Additional federal efforts aimed at increasing green job growth include subsidies, 

direct expenditures, and research and development. Subsidies and direct expenditures seek to directly affect the energy industry by providing funds to producers or 

consumers of energy. Federal research and development spending focuses on a variety of goals, such as increasing U.S. energy supplies, or improving the efficiency of 

various energy production, transformation, and end-use technologies. Research and 

development expenditures do not directly affect current energy production and 

prices, but, if successful, they could affect future production and prices. 

ARRA Funding 

ARRA contained over $60 billion in tax credits and grants to fund various federal, 

state, local, and private sector efforts related to alternative energy and energy efficiency including $21.6 billion in tax credits for renewable energy and $45.2 billion 

for direct appropriations. These funds were in addition to pre-existing tax incentives 

and federally funded research and development efforts in the same areas. ARRA 

funding and incentives for alternative energy and energy efficiency had several purposes: 

• Research and development by public and private scientists to develop new 

sources of energy and to lower the cost of existing technologies 

• Reductions in overall energy usage through tax incentives and grants to reward particular actions and investments 

• Commercialization of alternative energy technologies 

• Job creation in these sectors of the economy 

ARRA tax credits expanded pre-existing incentives for renewable energy and created several new ones, resulting in more projects becoming financially feasible. 

ARRA direct appropriations were used for significantly more research and development, increased block grants to states for weatherization of residential properties 

and consumer purchases of energy efficient appliances, federal grants for advanced 

battery manufacturing, alternative fueled vehicles, increases in federal building energy efficiency, smart grid development, and loan guarantee programs. The vast majority of the jobs created by ARRA are believed to be in weatherization projects of 

residential homes. 

To address concerns that new funding benefit Americans, Section 1605 of ARRA 

contained a ‘‘Buy American’’ provision that required stimulus funds to be spent only 

on American steel, iron, and manufactured items, subject to three exceptions for 

non-availability, unreasonable cost, and inconsistent with the public interest. The 

Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) 

is responsible for issuing these waivers. To date, EERE has issued 44 non-availability categorical waivers and three public interest waivers, two of which are no 

longer in effect. The categorical waiver items cover a range of items, from specific 

products such as LED lamps for television studio lights to broad categories such as 

all Energy Star rated in-wall air conditioners. It appears that no statistics have 

been collected to determine how many jobs have been created overseas as a result 

of these categorical waivers, some of which cover broad areas of manufacturing. In 

addition, large scale wind projects have turned to wind turbines in Europe and 

China to build American wind farms. These projects have received project waivers 

to allow the importation of foreign manufactured wind turbines. 

FY12 Budget Proposal 

This February the Administration released its ‘‘Winning the Future’’ initiative, as 

well as the ‘‘Strategy for American Innovation,’’ and the ‘‘Startup American’’ campaigns. The goal of these proposals is to ‘‘bring greater income, higher quality jobs, 

and improved health and quality of life to all citizens.’’ Some of the main goals outlined in these agendas include: 
5 

• The development of a Clean Energy Standard which would call for 80 percent 

of the nation’s electricity from ‘‘clean’’ sources by 2035 

• Increased funding for the Advanced Research Projects Agency—Energy 

(ARPA–E) 

• The creation of three Energy Innovation Hubs 

• The Reauthorization of the Clean Energy Manufacturing Tax Credit 

• Funding to reach the goal of one million advanced technology vehicles on the 

road by 2015 

• Two $1 billion initiatives for investing in early-stage seed financing and other 

incentives to invest in high-growth startups 

• Permanent extension of the Research and Experimentation Tax Credit 

Issues 

Defining and Calculating Green Jobs 

Jobs are typically considered ‘‘green’’ when they involve alternative energy or increased energy efficiency. More uncertain is how to count jobs that are somewhat 

related such as the truck drivers who deliver solar panels across America, the state 

employees who process the tax credits for energy efficient appliances, and the consultants that advise cities and states on how to improve energy efficiency. At its 

broadest scope, green jobs could include: 

• Factory workers that manufacture solar panels, wind turbines, etc. 

• Architects and engineers who design these manufactured goods 

• Construction workers who increase the energy efficiency of existing homes 

and buildings by installing insulation, caulking doors, and installing new 

more efficient windows 

• Factory workers who manufacture the same insulation, caulk, and windows 

• Truck drivers who deliver energy efficient appliances to job sites 

• Construction workers that install solar panels, wind turbines, etc. 

However, many of these jobs would still exist even if they were not ‘‘green’’ in nature. Architects and factory workers would still be needed to design and build components for coal mines and natural gas plants. Less efficient windows still need to 

be manufactured by the same workers, delivered by the same truck drivers, and installed by the same construction workers. Coal miners would be as in demand as 

they were before, if not more so, should alternative energy projects not be subsidized 

to the extent they are today. 

Energy Savings 

A great deal of uncertainty surrounds the energy savings resulting from the 

ARRA funding. Initially, ARRA grant applicants were required to estimate the energy savings that would result from their proposed projects. However, the Department of Energy’s Office of Inspector General found that original estimates for the 

energy savings due to ARRA projects were wildly overestimated: 

For example, the sum of the state’s estimates for anticipated energy savings was 

88 billion MBtus based on their initial proposed SEP projects. However, our review 

of this estimate found that it contained a number of errors and inconsistencies. 

Management agreed, pointing out that the estimate was not realistic or achievable 

since the United States’ total energy consumption is estimated at 100 billion MBtus. 

The Department is no longer collecting energy savings estimates. 

Regulatory Impediments and Underutilized Authority 

The creation of jobs that also benefit the environment is a goal shared by many. 

Unfortunately, the ability to create green jobs can be stymied by regulatory and 

legal challenges. For example, a wind energy project proposed to be located off Cape 

Cod called Cape Wind originally filed for its permits in 2001 and has repeatedly 

faced legal challenges from those opposed to the location of wind turbines offshore. 

Finally in January 2011, the Army Corps of Engineers issued one of the last permits 

required for construction to proceed. 

Other projects related to green energy such as the construction of Midwestern 

transmission lines to deliver wind power to large cities have also faced strong opposition. The U.S. Chamber issued a report in March 2011 entitled, Project No Project, 

highlighting permitting problems and legal challenges faced by energy projects nationwide. 
6 

In addition to regulatory hurdles, a number of existing authorities relating to 

green jobs are underutilized. U.S. government agencies have the authority to enter 

into energy savings performance contracts (ESPCs) under which private sector entities pay to improve the energy efficiency of federal buildings in return for keeping 

the savings to pay for their investments with some profit. ESPCs require minimal 

federal funding and shift the costs of upgrading energy efficiency in federal buildings to the private sector. 

Additional Issues 

Additional questions relative to green jobs include the following. 

• Do incentives actually produce a net increase in jobs? 

• Are they an efficient way to increase jobs? 

• Are jobs the correct economic output the country should be measuring? 

• On a job-for-job basis, should green jobs be subsidized more than non-green 

jobs? 

• Could the same amount of money spent on creating green jobs be more effective in creating jobs in other ‘‘non-green’’ industries? 

• Could federal funds spent on renewable projects have a greater employment 

and environmental impact if the same funds were spent on other energy 

projects? 

• Will these newly created jobs be permanent or will they remain in existence 

only until subsidies for them expire? 

• Are these jobs created domestically, or overseas? 

• Can these international jobs statistics be accurately tracked? 

• Are we borrowing money to create these investments and create these jobs? 

• Where are we borrowing this money from? 

• Are we funding foreign companies? 

• Are domestic companies doing this work overseas? 

• Have U.S. subsidies and incentives helped foreign countries expand their own 

industries to the detriment of the U.S.? 

• How does the growth of foreign green industries impact the U.S.? 

• What metrics should decide whether federal funding related to green jobs is 

successful and a wise use of scarce federal funds? 

• Should federal funding be shifted more towards basic research and development? 

Witnesses 

• Dr. Kenneth P. Green, Resident Scholar, The American Enterprise Institute 

• Dr. David Kreutzer, Research Fellow in Energy Economics and Climate 

Change, The Heritage Foundation 

• Dr. Josh Bivens, Economist, Economic Policy Institute 

• Dr. David W. Montgomery, Vice President, NERA Economic Consulting 

• Mr. William Kovacs, Director of Environment, Technology & Regulatory Affairs Division, U.S. Chamber of Commerce 
7 

Chairman BROUN. The Subcommittee on Investigations and 

Oversight will come to order. Good afternoon. Welcome to today’s 

hearing entitled, ‘‘Green Jobs and Red Tape: Assessing Federal Efforts to Encourage Employment.’’ You will find in front of you packets containing our witnesses’ panel written testimony, biographies, 

and truth in testimony disclosures. 

I recognize myself now for five minutes for an opening statement. 

The economic crisis of 2008, provided a new Administration with 

the opportunity to expand government’s role in a number of different areas. One of the most prominent was the energy sector. 

This expansion was meant to be, ‘‘timely targeted and temporary,’’ yet spending is still ongoing today. One of the highlights 

of the Stimulus Bill’s energy agenda was the goal of creating green 

jobs that would spur employment, aid the environment, make us 

most secure, and keep us competitive. 

With the President’s 2012, budget, the President is asking Congress to double down on that strategy. The Start-up America Campaign, the Clean Energy Initiative, and the Strategy for American 

Innovation extends and expands many of the same initiatives put 

forth in the Stimulus Bill. 

In the course of reviewing the President’s FY ’12, budget, the 

Science, Space, and Technology Committee heard from a number of 

agency officials about the importance of maintaining and expanding these green economy investments. This hearing is the first opportunity to hear perspectives from outside entities. 

It is important to realize the context that we are assessing these 

proposals. When the President took office, the average price of gasoline was $1.84 a gallon. Today the average price is around $3.79 

a gallon. This should come as no surprise. In 2008, before he became the Secretary of Energy, Dr. Stephen Chu, stated, ‘‘Somehow 

we have to figure out how to boost the price of gasoline to the levels in Europe.’’ Gasoline in Europe is roughly $8 a gallon. 

In a 2008, interview with the San Francisco Chronicle, President 

Obama, then candidate Obama, stated that, ‘‘Under my plan of a 

cap and trade system, electricity rates would necessarily skyrocket.’’ Necessarily skyrocket. That is what he wants to do. 

It seems as though this Administration’s energy and green jobs 

agenda are both built less upon stimulating our economy and creating domestic jobs and more on picking winners and losers and financing foreign investment and production. 

On one hand, the Administration is limiting development of oil 

production in the outer continental shelf. On the other hand it is 

promoting the development of oil off the coast of Brazil. On a recent trip to Brazil President Obama stated Americans, ‘‘want to 

help with technology and support to develop these oil reserves safely, and when you are ready to start selling, we want to be one of 

your best customers.’’ 

On one hand the President advocates for federal investments and 

green technologies as an economic stimulus and jobs creator. On 

the other hand U.S. taxpayer dollars are purchasing renewable energy equipment manufactured in Europe and in Asia. 

A 2010 report by the Investigative Reporting Workshop found 

that more than $1.6 billion in Stimulus funds were used to buy foreign-manufactured products. If the goal is to create jobs here in 
8 

America, I am not sure that this is the right method. It seems to 

me that the left hand does not know what the far left hand is 

doing. 

There are a number of important policies that will ensure economic prosperity here in the United States. A competitive tax policy that maintains and entices corporate activity, a legal system 

that respects contracts and patents, thereby rewarding innovation, 

a stable regulatory environment that both protects public health 

and safety and encourages economic activity, and a highly-educated 

and trained workforce capable of meeting 21st century challenges 

are all imperative to prosperity. 

Unfortunately, we find ourselves with the highest corporate tax 

rate in the developed world, an Administration that stated it seeks 

to, ‘‘share all intellectual property as much as possible,’’ and an 

ever-expanding regulatory system strangling small businesses and 

killing jobs. 

Today we will hear from outside experts on what role government incentives such as loan guarantees, subsidies, tax incentives, 

mandates, R&D, and regulations can or should play in augmenting 

these principles. 

[The prepared statement of Mr. Broun follows:] 

PREPARED STATEMENT OF CHAIRMAN PAUL BROUN

The economic crisis of 2008 provided a new Administration with the opportunity 

to expand government’s role in a number of different areas—one of the most prominent was the energy sector. This expansion was meant to be ‘‘timely, targeted, and 

temporary,’’ yet spending is still ongoing today. One of the highlights of the stimulus 

bill’s energy agenda was the goal of creating green jobs that would spur employment, aid the environment, make us more secure, and keep us competitive. 

With the President’s FY12 budget, the President is asking Congress to double 

down on that strategy. The Startup America Campaign, the Clean Energy Initiative, 

and the Strategy for American Innovation extends and expands many of the same 

initiatives put forth in the stimulus bill. In the course of reviewing the President’s 

FY 12 budget, the Science, Space, and Technology Committee heard from a number 

of agency officials about the importance of maintaining and expanding these green 

economy investments. This hearing is the first opportunity to hear perspectives from 

outside entities. 

It is important to realize the context that we are assessing these proposals. When 

the President took office the average price of gas was around $1.84 a gallon. Today 

the average price is around $3.79 a gallon. This should come as no surprise. In 

2008, before he became the Secretary of Energy, Stephen Chu stated ‘‘Somehow we 

have to figure out how to boost the price of gasoline to the levels in Europe.’’ Gasoline in Europe is roughly $8 a gallon. In a 2008 interview with the San Francisco 

Chronicle, President Obama (then Candidate Obama) stated that ‘‘under my plan 

of a cap and trade system electricity rates would necessarily skyrocket.’’ It seems 

as though this Administration’s energy and green jobs agendas are built less upon 

stimulating our economy and creating domestic jobs, and more on picking winners 

and losers and financing foreign investment and production. 

On one hand, the Administration is limiting development of oil production in the 

Outer Continental Shelf. On the other hand, it is promoting the development of oil 

off the coast of Brazil. On a recent trip to Brazil, President Obama stated Americans 

‘‘want to help with technology and support to develop these oil reserves safely, and 

when you are ready to start selling, we want to be one of your best customers.’’ 

On one hand, the President advocates for federal investments in green technologies as an economic stimulus and jobs creator. On the other hand, U.S. taxpayer 

dollars are purchasing renewable energy equipment manufactured in Europe and 

Asia. A 2010 report by the Investigative Reporting Workshop found that more than 

$1.6 billion in stimulus funds were used to buy foreign manufactured products. If 

the goal is to create jobs here in America, I’m not sure that this is the right method. 

There are a number of important policies that will ensure economic prosperity 

here in the U.S.A competitive tax policy that maintains and entices corporate activity, a legal system that respects contracts and patents thereby rewarding innova-
9 

tion, a stable regulatory environment that both protects public health and safety 

and encourages economic activity, and a highly educated and trained workforce capable of meeting 21st century challenges are all imperative to prosperity. Unfortunately, we fmd ourselves with the highest corporate tax rate in the developed world, 

an Administration that stated it seeks to ‘‘share all intellectual property as much 

as possible,’’ and an ever expanding regulatory system strangling small business 

and killing jobs. 

Today we will hear from outside experts on what role government incentives such 

as loan guarantees, subsidies, tax incentives, mandates, R&D, and regulations can 

or should play in augmenting these principles. 

Chairman BROUN. Now the chair recognizes my Ranking Member, Ms. Edwards, for an opening statement. Ms. Edwards, you are 

recognized for five minutes. 

Ms. EDWARDS. Thank you, Mr. Chairman, and thank you to our 

witnesses today. 

Interesting hearing that we have. The idea that government cannot make public investment choices that benefit the country actually flies in the face of our Nation’s actual history. Canals, railways, roads, ports, highways, airports, the electrical grid, and the 

Internet are all products of government activities. The government 

has used different tools at different times to encourage these investments, but all of it was accomplished through government initiative. 

Building our current infrastructure created jobs and established 

the base for a national economy that has been among the most creative and productive in the world. As we see new competitors rise 

around the world and as we face new environmental challenges 

and energy supply issues, we need to make sure we step up and 

prove that we are just as innovative and dynamic as the Americans 

who came before us. 

The collapse of the housing market bubble in 2008, brought the 

country to the edge of an economic disaster with high unemployment and drying up of capital for businesses to meet their day-today expenses, much less look for opportunities to expand. And 

while we like to think that the normal, that normal economic times 

find consumer demand the bedrock of our economic prosperity, in 

the months after September, 2008, the times were hardly normal. 

Consumers reeled from collapsing value in their homes and investments, high unemployment left even those with a job feeling deeply 

insecure about their financial future, and when faced with these 

real conditions, it would be foolish to think that consumer demand 

alone was going to pull the economy out of a nosedive of what could 

have been a full-blown depression. 

The American Recovery and Reinvestment Act or Recovery Act 

was adopted by Congress and signed into law by President Obama 

with the twin goals of getting America back to work and funding 

projects that would create a more modern, robust infrastructure, 

21st century infrastructure, to support economic growth for future 

generations. 

The fact that the infrastructure could also reduce our dependence 

on imported oil and help reduce our carbon emissions, producing a 

cleaner environment and fighting global climate change was actually an added social benefit, and despite the investments of the Recovery Act, much still remains to be done. We are no longer officially out of the—we are officially out of the recession, but we need 
10 

to create almost 14 million jobs in order to get Americans back to 

work. 

I believe that we have to make sustained commitment to public 

investment in our infrastructure and our research enterprise, and 

in supporting innovation. I don’t believe that government is incapable of choosing wisely about public investments, and I do not believe that the government has no effective role in the face of high 

unemployment. Congress can’t just sit on its hands while people 

are losing their jobs, their security, their homes, and their future. 

The government has many tools at its disposal to help. 

I am particularly interested in seeing the research and development tax credit made permanent and to increasing the domestic 

production activities deduction for property manufactured in the 

United States, which was the result of research and development 

done here. In fact, I have introduced along with my colleague from 

Maryland and colleague on the full committee, Roscoe Bartlett, 

H.R. 689, the 21st Century Reinvestment Act, that would do just 

that. 

The Information, Technology, and Innovation Foundation issued 

a report in 2006, that found that the U.S. had gone from offering 

the most generous research and development tax credit, that we 

had dropped to number 17 by 2004. An effective way to get people 

back to productive work and to reward innovation is to reward 

companies that innovate and create jobs here in America domestically. 

I look forward to the testimony of our witnesses as we explore 

these issues today, less investigation and oversight and much more 

in exploration. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Edwards follows:] 

PREPARED STATEMENT OF RANKING MEMBER DONNA EDWARDS

The idea that the government cannot make public investment choices that benefit 

the country flies in the face of our nation’s actual history. Canals, railways, roads, 

ports, highways, airports, the electrical grid and the internet are all the product of 

government activities. 

The government has used different tools at different times to encourage these investments, but all of it was accomplished through government initiative. 

Building our current infrastructure created jobs and established the base for a national economy that has been among the most creative and productive in the world. 

As we see new competitors rising around the world, and as we face new environmental challenges and energy supply issues, we need to make sure we step up and 

prove that we are just as innovative and as dynamic as the Americans that came 

before us. 

The collapse of the housing market bubble in 2008 brought the country to the 

edge of economic disaster with high unemployment and a drying up of capital for 

businesses to meet their day-to-day expenses, much less look for opportunities to expand. 

While we like to think that normal economic times find consumer demand the 

bedrock of our economic prosperity, in the months after September, 2008, the times 

were hardly normal. Consumers reeled from collapsing value in their homes and investments. High unemployment left even those with a job insecure about their financial future. 

Faced with these real conditions, it would be foolish to think that consumer demand was going to pull the economy out of the nose dive of what could have become 

a full-blown depression. 

The American Recovery and Reinvestment Act (ARRA) was adopted by Congress 

and signed into law by the President with the twin goals of getting American’s back 

to work and funding projects that would create a more modern, robust infrastructure to support economic growth for future generations. 
11 

The fact that the infrastructure could also reduce our dependence on imported oil 

and help reduce our carbon emissions producing a cleaner environment and fighting 

global climate change was an added social benefit. 

Despite the investments of ARRA, much remains to be done. While we are no 

longer officially in a recession, we need to create almost 14 million jobs to get all 

Americans back to work. 

I believe that we need to make a sustained commitment to public investment in 

our infrastructure, in our research enterprise and in supporting innovation. I do not 

believe that the government is incapable of choosing wisely about public investments. I do not believe that the government has no effective role in the face of high 

unemployment. Congress cannot just sit on its hands while people are losing their 

jobs, their security, their homes and their future. 

The government has many tools at its disposal to help. I am particularly interested in seeing the R&D tax credit made permanent and increase the domestic production activities deduction for property manufactured in the U.S. which was the 

result of R&D done here. With bipartisan support, I have introduced a bill, H.R. 

689, that would accomplish all this. 

The Information Technology and Innovation Foundation issued a report in 2006 

that found the U.S. had gone from offering the most generous R&D tax credit, we 

had dropped to number 17 by 2004. An effective way to get people back to productive work, and to reward innovation, is to reward companies that innovate and create jobs in America. 

I look forward to the testimony of our witnesses. 

Chairman BROUN. Thank you, Ms. Edwards. If there are members who wish to submit additional opening statements, your statements will be added to the record at this point. 

At this time I would like to introduce our panel of witnesses. Dr. 

Kenneth Green is a Resident Scholar at the American Enterprise 

Institute. Dr. David Kreutzer, is that correct? Kreutzer. Okay. I 

can’t spell, and I can’t pronounce my name. It is Broun spelled 

with a U, but anyway, Doctor, I apologize. Dr. Kreutzer is the Research Fellow in Energy, Economics, and Climate Change at the 

Heritage Foundation. Dr. Josh Bivens is an Economist with the 

Economic Policy Institute. Dr. David Montgomery is a Senior Vice 

President at NERA Economic Consulting, and Mr. William Kovacs 

is a Senior Vice President for Environment, Technology, and Regulatory Affairs at the U.S. Chamber of Commerce. 

I welcome all of you all here today and appreciate you all coming 

and participating. As our witnesses should know, spoken testimony 

is limited to five minutes each, so, please, we are facing some votes 

here shortly, so if—we want to try to get through this and not be 

here all afternoon. If you all would try to limit your spoken testimony to five minutes or less. Your full written testimony will be 

put in the record. And then each committee member will have five 

minutes to ask questions. 

It is the practice of the Subcommittee on Investigations and 

Oversight to receive testimony under oath. Do any of you have any 

objections to taking an oath? 

[No audible response.] 

Chairman BROUN. Dr. Montgomery, I don’t see—okay. Let the 

record reflect that all witnesses are willing to take an oath by 

shaking their head that they had no objections to doing so. 

You also may be represented by counsel. Do you, any of you have 

counsel with you here today? 

[No audible response.] 

Chairman BROUN. Okay. Let the record reflect that all witnesses 

indicated they have no counsel. Now, if all of you would please 

stand and raise your right hand. 
12 

[Witnesses sworn.] 

Chairman BROUN. Thank you very much, gentlemen. Let the 

record reflect that all the witnesses participating have taken the 

oath. 

Now I recognize our first witness, Dr. Kenneth Green, of the 

American Enterprise Institute. You are recognized for five minutes. 

Dr. Green. 

STATEMENT OF DR. KENNETH GREEN, RESIDENT SCHOLAR AT 

THE AMERICAN ENTERPRISE INSTITUTE 

Mr. GREEN. Thank you, Chairman Broun, Ranking Member Edwards, members of the subcommittee, for having me here today. At 

the end of my testimony I have appended a pertinent study that 

I recently completed for AEI titled, ‘‘The Myth of Green Energy 

Jobs: The European Experience.’’ Much of my testimony is derived 

from that paper. 

My testimony represents my personal views only, and should not 

be construed as the official position of AEI or any other person or 

organization. 

The question of green job creation is simply a variant on the general question of whether or not government creates jobs by intervening in the marketplace. The question has been debated since at 

least the 1850s, when Frederic Bastiat, a French journalist and 

politician, wrote, ‘‘What is Seen and What is Not Seen,’’ an essay 

that should be mandatory reading for anyone interested in public 

policy. 

Bastiat framed the idea of government creation in the broken 

windows fallacy. As he explained, imagine some shopkeepers have 

their windows broken by a boy throwing rocks. At first, everyone 

is horrified, and they blame the boy. But then someone points out 

that, well, it is not really all that bad because now jobs have been 

created for the window makers, the glass blowers, glaziers. And so 

really there was no loss because you have new jobs in making windows. 

But, of course, did the child do a public good by breaking the 

window, the baker’s window, and making a job for the glaziers? 

And the answer is, no, because beforehand the baker would have 

used his money perhaps to expand his bakery, put on a coffee shop, 

hire a new baker, and instead he used the money to replace a perfectly good window. So the village as a whole has lost the value of 

the window and has not gained any new jobs as a result. 

So let’s look at—the analogy holds just as well when the government breaks jobs in one sector, breaks windows in one sector of the 

economy and uses the money it takes from there to create jobs elsewhere. 

When they pick product A over product B, what is seen is the 

new sales of product A. What is not seen are the loss of sales of 

product B and the associated job losses. 

So to look at our possible green future, let’s look at what happened in Europe recently where they have been very aggressive in 

pushing for green energy on the premise that it will create green 

jobs, green technologies, and green economy. 

I will start with Spain. 
13 

In March of 2009, researchers at the Universidad Rey Juan Carlos released a study examining what happened in Spain as a result 

of their push into green energy. The study calculates that from 

2000 to 2009, it cost them $815,000 each to create a green job, rising to $1.5 million to create a green job in the wind industry. 

And they calculate that for every job created in the green energy 

industry, 2.2 jobs were destroyed elsewhere in the general economy. 

Now to Italy, where a study performed by the Bruno Leoni Institute, found an even worse experience. They found that because 

green jobs were so expensive to create in Italy, that for every green 

job created in the green energy sector, five to seven jobs could have 

been created in the general economy for the same amount of 

money. 

They also found that the majority of these green jobs were temporary, following through on existing plans they calculated for 

2020, would create, indeed, create quite a few jobs, up to 112,000, 

but 60 percent of them would be temporary. 

Now, the United Kingdom. A recent report by the consultancy 

Verso Economics found that for every job created in the United 

Kingdom in renewable energy, 3.7 jobs were lost in the general 

economy. What is interesting about that particular study is it uses 

a methodology that the Scottish government itself uses to calculate 

job losses as a result of taxes, of taxation. It uses a model that the 

other studies I mentioned were criticized for not using and yet it 

comes up with the same result as the other two studies. 

Before I conclude, I was asked to comment a bit about the American Recovery and Reinvestment Act of 2009, and its effectiveness 

in creating green jobs. A news article in 2010, September, pointed 

out that only 20 billion of the 92 billion allocated for renewable energy projects had been spent, and according to the Department of 

Energy, as was mentioned earlier, much of that was spent abroad, 

creating green jobs in China, Spain, and South Korea. 

For example, a report by the American University found that 11 

U.S. wind farms used their Stimulus grants to buy wind turbines 

made abroad, 695 out of about 1,000 wind turbines purchased with 

Stimulus grants were made elsewhere. The Department of Energy 

reports that for some green stimulus projects, 80 percent of the 

spending was abroad. 

So given that most of the green stimulus is unspent and much 

of what has been spent has been spent elsewhere, it is hard to see 

how it had a significant impact on creating green jobs here in the 

United States. And don’t take only my word for it, April 11, 2011, 

the EPA put out an at-a-glance form, and this report says that they 

are unable to determine what the results were of their Stimulus 

spending, whether it created any jobs at all because while they can 

track having spent the money, they could not figure out what was 

done with it. So it is unlikely that we have seen an explosion of 

green jobs. 

In conclusion, the idea that government can create jobs on net 

in the economy is a myth, and painting the myth green doesn’t 

make it any less of a myth. The experience of Europe, which has 

preceded us in the quest for a new economy, is uniformly negative 
14 

and is proving unsustainable, with subsidies being cut back and 

feed-in tariffs reduced. 

And, not to discount American exceptionalism and ingenuity, 

there is absolutely no reason to believe that things would happen 

differently here. Green energy requires significant subsidization. 

By definition, that means that jobs in the wind and solar industry 

will be more expensive to create than those in the general economy 

and that means less jobs on net. 

I thank you for the opportunity to testify, and I look forward to 

your questions. 

[The prepared statement of Mr. Green follows:] 
15 

PREPARED STATEMENT OF DR. KENNETH GREEN, RESIDENT SCHOLAR, THE AMERICAN

ENTERPRISE INSTITUTE
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Chairman BROUN. Thank you, Dr. Green. 

I now recognize our next witness, Dr. David Kreutzer. 

Mr. KREUTZER. I will read my statement here. It says, my name 

is David Kreutzer. 

Chairman BROUN. Kreutzer. 

Mr. KREUTZER. And I have to confess that I had to call your receptionist to figure out how to pronounce your name. I hope I get 

it right. 

Chairman BROUN. You are recognized for five minutes, Doctor. 

Mr. KREUTZER. Okay. Thank you. 

STATEMENT OF DR. DAVID KREUTZER, RESEARCH FELLOW IN 

ENERGY, ECONOMICS, AND CLIMATE CHANGE, THE HERITAGE FOUNDATION 

Mr. KREUTZER. I am Research Fellow in Energy Economics and 

Climate Change at The Heritage Foundation. The views I express 

in this testimony are my own and should not be construed as representing any official position of The Heritage Foundation. 

Chairman Broun, Ranking Member Edwards, and distinguished 

members of the committee, thank you for giving me this opportunity to discuss the employment impacts of federal energy and climate policies. 

I would like to make two fundamental points today. The first is 

that government regulation is costly. The second is that government spending is costly. Both of these statements are true whether 

the economy is at full employment or in a recession. 

Now, let me also say that government spending and regulation 

can have benefits, but we need to compare those benefits to the 

costs instead of pretending that there are no costs. 

Too often proponents of spending and regulation focus on the jobs 

and income going to those who receive the government money or 

who provide the necessary goods and services for compliance with 

the regulations. They ignore the losses to the other parts of the 

economy that are needed to finance these jobs. 

A report by the Blue Green Alliance and the Economic Policy Institute sets out an analogy to try to explain why an apparently ineffective Stimulus program was actually effective but undersized. 

Though probably not the intent of the authors, and I believe in a 

few minutes we will hear about that, the analogy captures the 

flawed logic of virtually every green jobs study I have seen. 

Here is the quote from that report. ‘‘A good metaphor for this 

controversy is the temperature in a log cabin on a cold winter’s 

night. Say the weather is forecast for the temperature to reach 30 

degrees. To stay warm you decide to burn three logs in a fireplace. 

You do the math and chemistry and calculate that burning these 

three logs will generate enough heat to bring the inside of the 

cabin to 50 degrees or 20 degrees warmer than the ambient temperature. But the forecast is wrong, and instead of—and instead 

temperatures plummet to 10 degrees, and burning the logs only results in a cabin temperature of 30 degrees. Has log burning failed 

as a strategy to generate heat?’’ 

The flaw in this analogy is that there isn’t any woodshed. The 

only available logs come from the walls of the cabin. It would be 

no surprise that burning more of the wall does not make the cabin 
30 

warmer. Likewise, there is no money shed from which the government can finance all the green subsidies and programs. These resources are extracted from other parts of the economy. They do not 

and cannot come from outside of the economy. 

Yes, when firms receive government subsidies, there may be additional jobs with those firms, just as it may get warmer right by 

the fireplace when more logs are torn from the wall and burned. 

But just as the overall cabin temperature will plummet, the overall 

economy suffers as resources are taken from better uses and put 

to less valued ones. 

There is no money shed to finance the cost of complying with a 

cap-and-trade regime such as Waxman-Markey. Indeed, Heritage 

analysis estimated that such legislation would reduce national income as measured by gross domestic product by nearly $9 trillion 

over the first 25 years of the program can cause employment losses 

of nearly 2.5 million jobs. 

There is no money shed to pay compliance costs of EPA regulations. There is no money shed to subsidize loan guarantees. Let me 

just use one example of the examples from my written testimony. 

The case of Solyndra. In the fall of 2009, Solyndra, a solar panel 

manufacturer, received a loan guarantee of $535 million. That is in 

the fall of 2009. In the spring of 2010, half a year later or less, 

Solyndra failed to successfully complete its initial public offering 

because an independent audit questioned the viability of the company as people weren’t going to buy the stocks. In the fall of 2010, 

Solyndra actually closed one of its manufacturing facilities that had 

been in operation when they got the loan. 

There is no money shed to finance green Stimulus programs. 

Even in a time of recession with under-utilized resources there are 

costs to government expenditure whether it is purchasing military 

jets, building highways, or subsidizing green energy projects. 

But even if government spending can stimulate the economy, and 

that doesn’t mean there are no costs, but if the government can 

stimulate the economy, the spending needs to be correctly timed, 

and the targets should be those with the best return for the money. 

Spending that raises electricity rates does not fit this bill. 

Figure six from the Blue Green Alliance Economic Policy Institute report, reproduced in my written testimony, purports to show 

that GDP, consumption, and employment all improved after the enactment of the ARRA Stimulus Bill. 

However, using the measures offered in the chart, okay, rates of 

change at an annualized rate, it clearly shows that all three measures of economic activity were turning the corner months before 

any Stimulus spending started. 

Thank you. 

[The prepared statement of Mr. Kreutzer follows:] 
31 

PREPARED STATEMENT OF DR. DAVID KREUTZER, RESEARCH FELLOW IN ENERGY, 

ECONOMICS, AND CLIMATE CHANGE, THE HERITAGE FOUNDATION
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Chairman BROUN. Thank you, Dr. Kreutzer. Is that better? 

Thank you, Dr. Kreutzer. 

Our next witness is Dr. Josh Bivens with Economic Policy Institute. You are recognized for five minutes, Doctor. 

STATEMENT OF DR. JOSH BIVENS, ECONOMIST, ECONOMIC 

POLICY INSTITUTE 

Mr. BIVENS. I would like to thank the chairman and members of 

the committee for the opportunity to testify today. I am Josh 

Bivens. I am an economist at the Economic Policy Institute. Today’s testimonies reflect only my own views. 

I would make a couple relatively quick points about the efficacy 

of what we are going to call green investments. I mean, essentially 

they have two benefits. One is in the short run we have a pressing 

problem of very high unemployment rates, and the reason why we 

have those high unemployment rates is because there is a shortfall 

in demand for goods and services in the economy. Green investments will help plug that shortfall, bring down the unemployment 

rate in the short run. 

In the longer run the reasons why you undertake green investments is because it is recognized that we need to transition to a 

cleaner energy economy for many reasons, one just for the health 

of citizens of the United States, coal-fired power plants are very 

bad for that health, and also to deal with the effects of climate 

change. 

Let me take these in order. Obviously the most pressing problem 

facing the U.S. economy over the short-time horizon is high rates 

of unemployment, and we know why unemployment is high today. 

There is a shortfall of demand in the economy because an $8 trillion bubble in home prices destroyed household balance sheets, 

made households cut back on spending, destroyed the residential 

construction industry, cascaded throughout the economy, had businesses cutting back their capital spending because customers 

stopped coming through the door. Essentially, it is clear why unemployment is high today. There is a shortfall of demand in the U.S. 

economy. 

The shock to private sector demand stemming from the bursting 

housing bubble is actually larger than the shock that led to the 

Great Depression. A key reason why we didn’t have a second depression is that we allowed fiscal support, debt finance, increases 

in spending, and decreases in taxes to act as a shock absorber. 

Until the economy reaches pre-recession unemployment rates, further fiscal support would provide similarly welcome downward 

pressure on the unemployment rate. 

For the simple purpose of propping up demand in our economy 

hit by a negative spending shock, you know, most kinds of spending and transfer payments are going to be as good as the others, 

but the architects of the American Recovery and Reinvestment Act, 

since we decided to make sure that many of these investments are 

long-term gains as well, and so they essentially were dedicated to 

providing a down payment on making a needed transition to a 

clean energy economy. 

The effects of ARRA have become controversial among policymakers, and that is really odd because these effects are not con-
39 

troversial at all among professional economic forecasters. People in 

the private sector and the public sector whose salary depends on 

knowing what is going to happen in the economy over the next couple of years are unanimous that the Recovery Act boosted GDP, 

jobs, and reduced the unemployment rate. 

The argument against the effectiveness of RA is kind of through 

a simple feat. It didn’t work because we know it cannot work. It 

essentially says that any money borrowed by the government to finance Stimulus takes money out of the hands of households and 

businesses who will spend less. 

You know, this is just wrong. The recession happened because 

households and businesses were saving too much to generate 

enough demand to keep unemployment low. If the government 

didn’t do anything, that would be the end of the story. We would 

be stuck at a high unemployment economy for quite some time. 

If the government instead decided to accommodate the savings 

that households and businesses were already doing, the savings 

was already there, if they just accommodated the savings by swapping money for treasury bonds and then spending the money on 

public sector investments to generate demand, then you would put 

more people to work, and that is exactly what has happened. 

Essentially, opponents of Stimulus want to argue that public 

spending chases away private spending by competing with it for 

scarce resources, but scarce resources are not the problem in the 

U.S. economy right now. Labor, not scarce. There is four and a half 

unemployed workers for every job in the economy. Corporations are 

sitting on record amounts of cash ready to finance investment. The 

problem is not scarce resources. The problem is demand, and green 

investments help solve that problem. 

In the longer term, say longer than five years, assuming once, 

again, we get to some tolerable unemployment rate, the primary 

benefit of green investments isn’t in boosting the net number of 

jobs in the U.S. economy, rather the benefits are in making the 

U.S. economy more productive and better poised to meet the demand of transitioning to a cleaner energy economy in the future. 

In my written testimony I go over the evidence that says a larger 

stock of public capital, public investments would do much to boost 

U.S. productivity. I won’t rehash that here. 

Last, I just want to sort of address the argument that green investment is just picking winners that the private sector is somehow 

by definition better at doing. Yeah. I don’t think that is right. I 

mean, one, policy failures have so far not given the private sector 

the right price signals to incentivize green investment. You know, 

greenhouse gas emissions are free for individual emitters, but they 

are very costly for other stakeholders in the economy until this externality is priced, you know, the best way to price it would be 

through market-based programs like cap-and-trade. I know that is 

not going to happen soon. There is going to be stunning incentive 

for the private sector to undertake the optimal amount of green investment so the government has to step in and do some of it. 

And further, many of these green investments are for public 

goods, goods that are less viable, less excludable than private 

goods, and or have features of natural monopolies. This is the textbook example of goods that should be provided by the government, 
40 

not the private sector, so the idea that we are chasing away the 

private sector from providing these goods and services I think is 

pretty clearly wrong. 

So I would like to just thank you again for the opportunity to testify, and I am happy to answer any questions you might have. 

[The prepared statement of Dr. Bivens follows:] 

PREPARED STATEMENT OF DR. JOSH BIVENS, ECONOMIST, ECONOMIC POLICY

INSTITUTE
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Chairman BROUN. Thank you, Dr. Bivens. 

Our next witness is Dr. David Montgomery with NERA Economic 

Consulting. I recognize you for five minutes, sir. 

STATEMENT OF DR. DAVID W. MONTGOMERY, VICE 

PRESIDENT, NERA ECONOMIC CONSULTING 

Mr. MONTGOMERY. Thank you, Chairman Broun and Ranking 

Member Edwards. I am honored, again, by your invitation to appear before the subcommittee. 

I have recently joined NERA Economic Consulting as a Senior 

Vice President, but today I am testifying entirely on my own behalf. These are my own independent opinions and conclusions, do 

not necessarily represent the positions of my employer or any of its 

clients. 

I have two primary recommendations. First, stop using green 

technology as an engine of macro-economic policy. That approach 

takes resources away from R&D that could lead to fundamental 

technology advances, it increases the cost of meeting environmental 

goals, and it is inferior macro-economic policy as well. 

Second, take some of the resources now being spent unnecessarily on demonstration and deployment and put them to work 

cushioning real research and the onset of the inevitable and necessary era of fiscal austerity. 

It would also be helpful to create new institutional arrangement 

to assure continuity of energy R&D funding and prevent that funding from being starved in the future by the huge budgetary demands of large-scale demonstrations of unready or excessively costly technologies. 

As you consider reductions in spending it is critically important 

to preserve the current levels of funding for basic and applied energy research. All the rest of the direct funding, subsidies, loan 

guarantees, and standards to promote large-scale technology, demonstration, and deployment need to be examined critically because 

most can go without sacrificing either environmental goals or—and 

at a great saving to the taxpayer. 

Why are reductions in basic research so harmful? It is not possible to get the best science and technological advances with stop, 

go, stop funding. Good researchers will not tolerate being torqued 

around. They will go back to fields of research where that does not 

happen, and the flow of discovery that is required for breakthrough 

applications will stop. 

And why can reducing direct support for green energy be so beneficial? That support is a solution in search of a problem. Cost-effective environmental programs apply directly to the emissions that 

cause harm. That is what we environmental economists have been 

trying to teach our students at least for the 30 years I have been 

in the game. Tilting the playing field to favor specific technologies 

only forces American industry to adopt more costly ways of meeting 

the requirements of environmental laws and regulations. 

There is already every incentive for industry to choose the most 

cost-effective means to meet those requirements, and I cannot understand how we now think that energy is a public good since it 

has been provided cost effectively by the private sector for centuries. 
55 

The only virtue green technologies can claim is superior performance and identifiable environmental dimensions. So environmental 

programs, not technology subsidies and mandates, should guide 

their adoption. In some specific cases particular kinds of support 

for technology demonstration might be justified. 

But history and economics make it clear that these are the exceptions, and allowing the exceptions also opens the door to a flood 

of rent-seeking pleas for support and earmarks. 

Government funding for basic and applied research is still needed to provide the flow of discoveries on which cleaner and cheaper 

technologies will be based. Every prior—unfortunately, every prior 

Congress that has been faced with the choice has sacrificed the unquestioned long-term benefits of R&D to maintain jobs through 

fundamentally-unnecessary and wasteful subsidies for existing 

technologies. 

I urge you to change that dismal record. 

I haven’t used up much of my time. I would be happy in the future to debate some points of macro-economic policy, but I wanted 

to focus on R&D. 

Thank you. 

[The prepared statement of Mr. Montgomery follows:] 

PREPARED STATEMENT OF DR. DAVID W. MONTGOMERY, VICE PRESIDENT, NERA 

ECONOMIC CONSULTING

Mr. Chairman and Members of the Subcommittee: 

I am honored by your invitation to testify today. I am an economist and have recently joined NERA Economic Consulting as Senior Vice President. I will start with 

a brief word about my qualifications. 

I have studied energy R&D and energy technology programs since the late 1 970s, 

when as a member of the faculty at Caltech I participated in a major study of the 

economics of R&D supported by the National Science Foundation. More recently I 

was coauthor of a statement of principles for energy R&D policy with some of the 

most distinguished academic experts in the field. At the Congressional Budget Office 

I was deeply involved in all the issues of this hearing, as my Natural Resource and 

Commerce Division was continuously active in analyzing Federal R&D programs 

and industrial policy. I have published many papers in peer-reviewed journals on 

related subjects, and I was honored by the Association of Environmental and Resource 

Economists with their 2004 award for a ‘‘publication of enduring quality’’ for my 

pioneering work on emission trading. I taught environmental economics at the California Institute of Technology and economic theory at Caltech and Stanford University. I was Assistant Director for Natural Resources and Commerce at CBO and 

until recently I led the group at Charles River 

Associates that developed a pioneering set of economic models and used them in 

studies of virtually every major proposal for climate and energy policies over the 

past decade. 

My testimony today will take a broad view of the subject. I will address the common-sense economics of federal efforts to create green jobs through federal R&D 

funding and through the use of loan guarantees, standards, subsidies, regulations, 

and tax incentives to promote ‘‘green’’ technologies. My statements in this testimony 

represent my own opinions and conclusions and do not necessarily represent positions of my employer or any of its clients . . . 

Summary 

It is a fundamental error in policymaking and economics to design or justify federal support for new energy technologies as a jobs program. It subverts the entire 

purpose of government involvement in R&D, and is the greatest single cause of the 

continued failure of energy technology programs. 
56 

1 Jason Walsh, Josh Bivens and Ethan Pollack Rebuilding Green The American Recovery and 

Reinvestment Act and the Green Economy, Blue-Green Alliance and Economic Policy Institute, 

February 2011. 2 In support of this point, see Richard Newell, A U.S. Innovation Strategy for Climate Change 

Mitigation. The Brookings Institution Discussion Paper 2008–15 December 2008 p. 20 ff. 

Some advocates claim that Federal spending on green technologies is a 

‘‘triple winner;’’ instead, it is at best a ‘‘triple also-ran.’’ 1 No single policy tool 

can at the same time and in a cost effective way develop new energy sources, protect 

the environment, and reduce cyclical employment. A closer look shows that current 

efforts to do these three things at once must, lead to doing none of them well or 

even adequately. 

1. Promoting new energy technology: The federal government has a limited but 

vital role in the quest for new energy technology. But the right division of labor between public sector and private sector is absolutely crucial to success. Government 

should focus on basic and applied research. There, its intervention is essential; yet 

it is in these activities that the U.S. government traditionally allocates the smallest 

part of the Energy R&D budget. The policies promoting use of current green technology starve needed research in favor of demonstration and deployment of high 

cost current technology. The stimulus package tilted the balance still farther in the 

wrong direction. 

2. Cost-effective environmental protection: Current programs to promote a Green 

economy actually raise the costs of reaching environmental goals. Well-designed environmental policies would provide incentives to choose least-cost means of compliance. In contrast, current green jobs policies mandate use of specific technologies; 

yet these may often not be the most cost-effective means to the desired end. Some 

current policies even use subsidies to tilt the playing field. If such schemes work 

at all, they do so by encouraging the choice of needlessly costly means while shifting 

the added costs onto the taxpayers. 

3. Stimulus: To be efficient, energy R&D and investment incentives must be predictable, consistent, and sustained over a long period of time. But in a recession, 

fiscal policy experts all agree that the most effective jobs program spends its funds 

as quickly as possible and phases out the funding as the economy improves. Thus, 

energy research and investment are strikingly ill-suited to the task of leading the 

economy out of a down turn. The attempt to force these activities into so inapt a 

role is bound to frustrate the goals of both energy policy and economic stimulus. 

Purposes of government intervention: 

Efforts to use government spending to create ‘‘Green’’ jobs lose sight of the real 

objectives of government intervention in energy technology and R&D. Economists 

call these reasons ‘‘externalities,’’ but they can be viewed simply as the problems 

that government intervention is designed to solve. There are two areas in which 

markets cannot be expected to bring about the most socially desirable outcomes 

without some fonn of government intervention, and these are R&D and environmental protection. There is less complete agreement among economists about the 

appropriate role of government in dealing with the business cycle, but for my testimony today I will assume that a third policy goal, more rapid recovery from the recession, is also relevant. The current mix of subsidies for technology deployment 

through the use of loan guarantees, standards, subsidies, regulations, and tax incentives has only a haphazard relationship to these three externalities, and cannot do 

a good job of dealing with any of them. 

R&D 

Government must play a role in R&D because it is impossible for researchers and 

innovators to capture for themselves the full value of the information that their activities provide to society.This spillover effect is a positive externality, but it also 

implies that without active government intervention there will be less R&D than 

is socially optimal. The market failures associated withR&D are greatest in the 

early stages of basic and applied research: as activity moves into demonstration of 

technologies and their commercial deployment there are increasingly effective ways 

to protect intellectual property—including patents, trade secrets, and in-house development— for innovators and investors to appropriate an adequate share of the 

gains their innovations provide to society. Thus government’s role should be greatest 

in funding of basic and applied research and fade away as projects move toward 

large scale demonstration. 2

In all sectors of the economy except energy, U.S. government funding is concentrated in basic and applied research as theory and experience demonstrates that 
57 

3 ‘‘A Statement on the Appropriate Role for Research and Development in Climate Policy’’ 

Kenneth J. Arrow, Linda Cohen, Paul A. David, Robert W. Hahn, Charles D. Kolstad, Lee Lane, 

W. David Montgomery, Richard R. Nelson, Roger G. Noll and Anne E. Smith. Economists Voice, 

February 2009, Vol 6, No. i. 4D. Bohi and W. D. Montgomery. Oil Prices, Energy Security, and Import Policy. With Washington, DC: Resources forthe Future, 1982. 

it should be. Energy R&D programs tend to take too few risks, because they concentrate funding on pre-selected potential ‘‘winners’’ that are carried forward long 

after they have ceased to warrant continued government support. In large part, 

these failings can be directly attributed to the widespread perception of energy technology funding as a ‘‘jobs’’ program. 

A statement written by a number of the most distinguished experts in the economics of R&D described the kinds of policies that would be effective in promoting 

technological advances in energy: 3

Government R&D policy should encourage more risk-taking and tolerate failures 

that could provide valuable information. This can be accomplished by adopting parallel project funding and management strategies and by shifting the mix of R&D 

investment towards more ‘‘exploratory’’ R&D that is characterized by greater uncertainty in the distribution of project payoffs. The single greatest impediment to an 

R&D program that is directed at achieving a commercial objective is that it will be 

distorted to deliver subsidies to favored firms, industries, and other organized interests. The best institutional protections for minimizing these distortions are 

multiyear appropriations, agency independence in making grants, use of peer review 

with clear criteria for project selection, and payments based on progress and outputs 

rather than cost recovery. 

The idea of parallel approaches is very important, and as I will discuss later it 

is rarely seen in Federal energy R&D. Studies of successful R&D show that a parallel approach, in which many early-stage, high-risk projects are funded with the 

expectation that most will fail, would be provide far more information than the current approach, and would increase the likelihood of breakthrough discoveries. 

The statement also emphasized that commitments must be long-term and stable: 

Policy commitments must be stable over long periods of time. Climate change is 

a longrun problem and will not be solved by transitory programs aiming at harvesting available short-run improvements in energy efficiency or low-carbon energy. 

A much more stable commitment to funding and incentives for R&D is required to 

do better than the limited results of energy R&D efforts in the 1970s and 80s. 

What should be equally clear is that a series of temporary, politically unstable, 

targeted subsidies, financial incentives, or even mandates for deploying specific 

green technologies will not provide adequate incentives for the R&D that would 

bring about large-scale technological change. 

Environmental and other externalities of energy production and use 

Another rationale for energy R&D comes from externalities associated with energy 

production and use. Effective programs to address these externalities—such as the 

Clean Air Act Title IV program that through a cap and trade program put a price 

on sulfur emissions from utilities—created clear incentives for the private sector to 

develop and deploy new control technologies. One of the few things that most economists agree on is that a clear, credible, consistent and stable policy that puts a price 

on C02 emissions will lead to cost-effective technology deployment and provide a demand-driven inducement to innovation. Federal support for energy R&D motivated 

by these externalities also needs to be concentrated on basic and applied research, 

as existing environmental regulations and new policies focused on the direct causes 

of environmental concern—such as greenhouse gas problems—provide the incentives 

for innovators to take these research findings into commercial demonstration and 

deployment. 

Even energy security is dealt with most efficiently by programs that directly increase domestic production of crude oil and reduce consumption oil consumption in 

a balanced way. The ideal in terms of cost-effectiveness is an import fee, not a set 

of targeted subsidies and mandates for costly or technologically unavailable substitutes for oi1. 4 Production of more fossil fuels is a direct and—on an appropriate 

scale—more cost-effective way to reduce oil imports than promotion of non-petroleum fuels through regulation (Renewable Fuels Standards) or subsidies (ethanol). 

Many of the environmental consequences of energy production and use are already extensively regulated. Greenhouse gas emissions have not been regulated 

until now, but are the subject of proposed EPA regulations and much legislation. 

Development of new—and indeed radically new—energy technologies is critical to 
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our ability to reduce greenhouse gas emissions sufficiently to stabilize temperatures 

at some level without unacceptable economic harm. For other externalities, this is 

less clear. Development of new technologies for production and use of fossil fuels or 

other forms of energy is already motivated by a perceived need for more cost-effective options for compliance with policies that address other externalities. 

Recovery 

Recovery from the recession is a policy problem distinct from either R&D or energy externalities, and requires its own distinct toolkit. Economists differ seriously 

about the best strategy to pursue to address an economic downturn like the one we 

have faced. All agree that monetary policy in some form is necessary, but many are 

critical of using government spending to stimulate the economy because of the longterm consequences of increased debt and the difficulty of making the spending be 

effective and timely. Too often fiscal measures are so slow to get money into the 

economy that they only ramp up funding after the economy is well on its way to 

recovery, so that rather than reducing unemployment deficit spending ends up increasing inflationary pressures. Moreover, temporary stimulus programs create constituencies that lobby to keep the spending going long after stimulus is no longer 

needed. 

The basic principles of public finance for reducing cyclical unemployment are to 

choose methods of spending that get money into the economy as quickly as possible. 

Public works projects that have already been chosen as desirable investments by 

passing through the authorization process are good candidates. But the projects 

must be ones that can be ramped up quickly and also ramped down without waste 

or diminishing their value or effectiveness. Technology development that requires 

this kind of long term and stable funding does not satisfy these criteria. 

Another basic principle is that the stimulus comes from spending, and many different programs offer the same opportunity for job creation if they receive the 

money. Thus job creation does not serve to justify one form of spending over another. Choosing which among many competing uses of funds should be the recipient 

of stimulus funding is not different from normal authorization and appropriations, 

except for the need for speed to avoid missing the window when stimulus is needed. 

A program that cannot pass a normal cost-benefit test has no business being chosen 

as a recipient of stimulus funding. 

Why Energy R&D and Green Economy programs achieve none of the policy 

goals well 

There is no such thing as a ‘‘triple winner’’ in economic policy. Economists have 

long observed that as many different instruments are required as there are distinct 

externalities. Using one policy instrument to address three different market failures 

assures that none will be addressed well or cost-effectively. 

Energy R&D failures are largely attributable to an inability to resist treating technology investment as a jobs program 

R&D is carried out by governments, for-profit and not-for-profit entities, and national and multinational institutions. These institutions perform a wide variety of 

R&D as illustrated in Table 1. This suggests that the problem of appropriability is 

greatest in basic research, important in applied research, and smaller in development and later stages of demonstration, commercialization and deployment. 

Perhaps the most striking feature of the government’s energy spending is the relatively low priority that it accords to R&D in general and basic and applied research 

in particular. In fact, in terms of total spending, deployment subsidies dominate. 

The following figure shows the relative resource commitments and the relatively 

modest role of basic and applied research in the Federal program. Thus even before 

the stimulus package, Federal funding was highly biased toward development where 

the private sector is capable of handling a much larger role if the technologies being 

advanced to that state promise to be commercially successful. Federal funding for 

this stage has been needed largely because too many unpromising technologies are 

advanced beyond basic and applied research. 
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60 

5 Linda R. Cohen, and Roger G. Noll (With Jeffrey S. Banks, Susan A. Edelman, and William 

M. Pegram). The Technology Pork Barrel. Washington, D.C.: The Brookings Institution, 1991. 6 Newell, ibid. 

These funding patterns can be attributed to three serious failings in the total energy technology program: 

Large scale demonstration projects that provide ‘‘jobs’’ in politically influential regions drain funds from basic and applied research, 

Deployment subsidies that benefit specific constituencies are rationalized as creating ‘‘jobs’’ even if the technologies are not cost-effective, and 

Failing projects are not cancelled because of the ‘‘jobs’’ involved. 

And each of these failings arises because of favoring jobs’’ over the most effective 

way of promoting technological advance. 

It is not surprising, therefore, that energy R&D had a long history of waste and 

failure. Cohen and Noll describe a dynamic based on incentives of executive agency 

staff and Congressional incumbents that leads to the conclusion that R&D programs 

will investigate too few risky alternatives in the early stages of research, commit 

prematurely to large scale demonstration, and continue to fund large scale projects 

long after their failure has become evident. 5 This is exactly the opposite of the stable, long-term research program required to stimulate breakthrough research and 

introduce game-changing technologies. 

Newell, in the study cited earlier, expands on this point: 

A number of specific market problems have been suggested as rationales for technology deployment policies. These market problems include information problems 

related to energy-efficiency investment decisions, knowledge spillovers from learning 

during deployment, asymmetric information between project developers and lenders, 

network effects in large integrated systems, and incomplete insurance markets for 

liability associated with specific technologies (Newell 2007b). Although such problems are often cited in justifying deployment policies, these policies in practice often 

go much farther in promoting particular technologies than a response to a legitimate market problem would require. Therefore, while conceptually sound rationales 

may exist for implementing these policies in specific circumstances, economists and 

others tend to be skeptical that many of them, as actually proposed and implemented, would provide a cost-effective addition to market-based emissions policies. 

Critics also point out deployment policies intended to last only during the early 

stages of commercialization and deployment often create vested interests that make 

the policies difficult to end . 

. . . the most notable failures in government energy R&D funding (e.g., the Synthetic Fuels Corporation, Clinch River Breeder Reactor) tend to be associated with 

large-scale demonstration projects-using up large portions of limited R&D budgets 

in the process (Cohen and Noll 1991). The recent experience with the FutureGen 

Initiative for clean-coal power tends to reinforce this perspective. 6

The nature of the electoral process biases authorization and appropriation processes against basic and applied energy research. Supporting R&D projects that yield 

large, but diffuse, net benefits and those only after a long time, is a poor re-election 

strategy. However, when an R&D project reaches a large enough scale, it begins to 

have distributive significance. At that stage, the project may become politically relevant to legislators interested in re-election (Cohen et al 1991). 

Energy R&D managers also exhibit an unwillingness to propose a sufficiently 

wide range of risky alternative approaches to achieve real breakthroughs. High-risk 

approaches with high potential may not come to their attention, since in the early 

stage of R&D there are significant agency problems in communicating the nature 

and potential of an approach (Cohen et al 1991). 

Career advancement is also more likely to come from successful projects rather 

than accumulation of useful information about approaches that do not work. This 

limits the set of alternatives considered for funding and leads to far too little risktaking in government R&D and too narrow a view of possible avenues of approach. 

This dynamic introduces a series of perverse incentives. 

First, it encourages officials to move technologies too swiftly to the phase of largescale demonstration. As a result, these projects often run into technical problems 

that could have been resolved much more cost-effectively at a smaller scale, and to 

end up having chosen the wrong route overall. 

Second, congressional involvement has often led to poor projects surviving long 

after they should have been terminated. Representatives gain electoral credit for 

continued funding of local facilities and lose almost no electoral credit because the 

funding is accomplishing nothing. 
61 

Third, the excess resources that demonstration projects consume, either because 

they are launched prematurely or because they linger too long on political life support, are likely to crowd out more valuable earlier phase research. In effect, projects 

at the early stage of development are not politically appealing because further work 

on them is not expensive enough to have distributive significance. 

Fourth, the rush to demonstration may distort the selection of technologies toward 

those that are more mature rather than toward those that are more promising. 

Where there is path dependency in technology selection such distortions may have 

long-term consequences. 

In addition to the effects of the high political discount rate on a premature rush 

to demonstration at high cost, choosing the location and design of projects by earmarking to benefit influential constituents is unlikely to lead to the choice of the 

best qualified and most cost-effective organization to carry out an R&D project. 

All of these characteristics are found in the expanded set of programs that were 

introduced in the stimulus package and are rationalized as a program to create a 

‘‘Green Economy.’’ The history of energy R&D suggests that they will not promote 

technological advance effectively and that they will lead to waste of taxpayer’s resources. 

Green energy subsidies raise the cost of environmental policy 

Cost-effective environmental policies lead to a choice of technologies that achieve 

the goals of the policies at minimum cost. A price on pollution -like the price of sulfur or NOx allowances—motivates every emitter to choose methods of reducing 

emissions that cost less per ton removed than the price of allowances. With a fixed 

cap on emissions, the allowance market causes the price of allowances to adjust 

until sufficient investments are made in pollution control that the cap is achieved. 

Introducing mandates for specific ‘‘Green’’ solutions, such as a Renewable 

Portfolio Standard or credits for manufacturing renewable energy equipment, only 

forces utilities to choose more costly renewable energy technologies over less costly 

solutions, because the cap will be met in either case. 

A performance-based emission standard does not achieve the broad cost-minimization that an emission trading system would do, but it does provide an incentive for 

regulated entities to choose the method of compliance with the standard that minimizes cost. A good example is the reformulated gasoline standard, which allows 

flexible choice of fuel components as long as the required emission performance is 

achieved. Adding a set of renewable fuel standards on top of the reformulated gasoline emission standards only increases the cost of meeting the emission standards, 

because the renewable fuel standards require that gasoline already compliant with 

emission standards be replaced with a much more costly alternative fuel that in 

some cases actually makes compliance with the emission standard more difficult. 

This is a general phenomenon. Regulations or incentives that deal directly with 

the emissions, or more generally the externality, in question are always more costeffective than incentives or subsidies that tilt the playing field in favor of one set 

of technologies that would not have been chosen as an environmental solution without the subsidies. And the cost is absorbed by the taxpayer. 

Energy R&D and technology investment have none of the characteristics of 

the optimal policy to create jobs in a recession 

First, they ignore the timing of proposed policies relative to the business cycle. 

One of the first principles of fiscal policy to counter recessions is to make sure that 

funds are expended quickly, and the most common political mistake is to authorize 

spending that will only hit its peak after the economy is well on the way to recovery. 

That mistake in timing means that the opportunity to help the economy out of the 

recession is missed, and that when spending does occur it fuels inflation and drives 

out other, more productive investments. Current regulatory programs and subsidies 

and loan guarantees for green technology fail this test. Even if some spending in 

these programs did ramp up quickly, most of the expenditures would still largely 

be made after even pessimists think the economy will be well on the way to recovery. In that case, workers supported by green technology subsidies will have to be 

drawn away from other jobs, just as the mandated investment will be drawn away 

from other areas where it would contribute to economic growth. The total result is 

no net job gain and an overall drag on the economy. 

Even if the expenditures for green technology were timely, they cannot take credit 

for the benefits of economic stimulus. As even Green Jobs advocates admit, about 

the same job benefits can be expected to come from any additional stimulus spending, so that job benefits do not differentiate between different kinds of spending. 

This kind of job analysis is a sheer waste of time and resources, because every pro-
62 

posal for more expenditure can make identical claims. In a slack economy, any increase in spending will create some jobs. The way to get the most out of fiscal stimulus is by putting additional spending into the areas in which a temporary funding 

increase provides the greatest return to the economy overall, and that does not include R&D or investment that requires stable and permanent incentives. 

Conclusion: What About the Green Economy 

There are serious reasons of public policy for federal support of basic and applied 

research that could lead to breakthroughs in energy technology and for policies that 

deal with environmental protection and global climate change. Very specific kinds 

of measures are appropriate for each. 

Federal R&D funding deals with the market failure in R&D that leads to less 

than optimal R&D effort across the board in the economy. Programs like Title IV 

sulfur trading deal cost-effectively with SOx emissions, and a carbon tax could address greenhouse gas emissions at lower cost than any set of subsidies and standards. But even the best-designed regulatory , programs have costs, as I have discussed in four previous appearances before House and Senate Committees in the 

past two months. They do not create additional jobs for the economy as a whole, 

but they do raise energy costs and lower worker compensation and the standard of 

living of the average household. Ideally, environmental and climate policies will be 

designed so that the benefits of addressing various forms of pollution and global climate change will exceed their costs. 

Energy R&D has the potential of leading to future technologies that can lower the 

cost of energy, but R&D has a cost as well. R&D requires both money and, more 

importantly, an adequate supply of qualified scientific researchers. Shifting the direction of research toward energy diverts dollars and researchers away from other 

fields, unless there is both a net increase in total R&D funding and additional investment in education and training. 

What, then, is the purpose of programs to promote a ‘‘Green Economy?’’ The vast 

majority of ‘‘Green Economy’’ funding is not going to basic and applied research, it 

is going to loan guarantees, standards, subsidies, regulations, and tax incentives for 

demonstration and, mostly, deployment of current technology. Environmental regulations and climate policy already address the externalities that provide a reason 

for government intervention. They provide incentives for private businesses to adopt 

clean energy or ‘‘green’’ technologies and practices when they are cost-effective 

ways of complying with environmental regulations and policies, and leave them free 

to do otherwise when green is not cost-effective. Therefore, federal funding and 

standards to promote adoption of green technology are unnecessary to achieve the 

environmental goals that have been accepted in public policy. For the economy as 

a whole, these large expenditures and requirements only serve to increase the cost 

of achieving the goals of environmental policy by predetermining which technologies 

will be favored. They do, of course, increase investment in favored technologies, but 

they do so at the expense of investment in more cost-effective alternatives and the 

consumer who always pays the bill. 

Chairman BROUN. Thank you, Dr. Montgomery. 

Just for the information of members of the committee, we have 

a vote on, and for the witnesses, we have a vote on now. We will 

be able to hear Mr. Kovacs’ testimony. After Mr. Kovacs’ testimony 

we will recess and reconvene 10 minutes after the last of four votes 

begins. 

So, if you would, please, come right back after you vote, and we 

will get back as quickly as we can. We apologize for the interruption, but, unfortunately, we have got the votes. 

So, now I want to recognize our final witness, Mr. William 

Kovacs, U.S. Chamber. Mr. Kovacs, you have got five minutes. 

STATEMENT OF MR. WILLIAM KOVACS, SENIOR VICE PRESIDENT, ENVIRONMENT, TECHNOLOGY, & REGULATORY AFFAIRS, U.S. CHAMBER OF COMMERCE 

Mr. KOVACS. Thank you, Chairman Broun, Ranking Member Edwards, and the members of the committee. You have asked me to 

address two issues; one, the impediments to the development of 
63 

private sector energy projects, including the creation of green energy jobs and to identify under-utilized federal programs that could 

spur job growth without new statutory authority. 

There are actions Congress could take, and they could take them 

now with any—without any appropriated funds that would create 

tens of thousands of clean energy and energy-efficiency jobs, generate billions of dollars in additional GDP, expand the development 

of clean energy technology, and substantially reduce the energy use 

of the world’s largest energy user, the Federal Government. 

You can do this by doing two simple things without any federal 

funding. One is you need to streamline the permitting process for 

private sector energy projects, and two, we need to maximize the 

implementation of the Energy Savings Performance Contracts that 

Congress passed in 2007. 

Let me expand on both of these. If you look at page four on— 

in my testimony, it is a map of what we call our Project No Project, 

and that is an identification of projects in March of 2010, that were 

stopped by permitting challenges across the United States, and 

what is so fascinating about this is that the only common thread 

is that they were stopped by sequential challenges. They would 

start with one law, move to another law, move to another law, and 

because the statute of limitations is generally six years, you can be 

the last person in your law school class and hold it up for ten 

years. It doesn’t—it is not a trick. 

But what is so important is that in this process, when we did the 

economic study, if these projects had all moved forward during the 

seven-year period of time which would have been the construction 

period, they would have generated about $1.1 trillion in new GDP, 

and it would have created about 1.9 million jobs a year. And then 

for the 20 or 30 years that they were in existence they would have 

produced more jobs. 

We recognize within the study that you couldn’t build them all 

at once. There wasn’t the people, there weren’t the materials. So 

we did a sensitivity analysis, and even if you took whatever was 

happening and let’s say we did the largest project in any state, you 

still had a $.5 trillion in GDP and hundreds of thousands of jobs, 

and we did that for nuclear or all renewables, pick your choice. But 

some of the projects, if a large group would have gone forward, you 

still would have created the jobs. 

The solution there is permanent streamlining. Congress has handled this issue many times. You handled it in the Highway Bill in 

2005. You literally created the time to get through the process for 

NEPA in half from about 72 months to 38 months. You did it in 

the Stimulus Project with requiring the use of NEPA in as expeditiously a manner as possible. That allowed 180,000 out of 250,000 

projects to get into the marketplace quickly. 

The second point that I want to talk about is energy-savings performance contracts. In a climate of fiscal restraint you literally 

have an $80 billion pool of contracts that you can move immediately. An Energy Savings Performance Contract is a statutorilyestablished, private sector partnership in which the private sector 

energy service company installs in federal buildings all the energy 

efficient equipment at its own expense and is paid from the energy 

savings over a 20 to 25-year period of time. 
64 

You are probably all familiar with it. This building is subject to 

one of the Energy Savings Performance Contracts as well as the 

other House buildings. The energy service company guarantees the 

proposed energy savings and takes full responsibility for any of the 

shortfalls. So there is absolutely no risk to the Federal Government. It is an $80 billion authorization that can be triggered literally by the Federal Government wanting to do this. 

One of the things that we have—that has been very clear is that 

there have been two problems with this issue. One is because it is 

outside of what we would call just using appropriations, the federal 

contractors in the Department of Energy that manage these programs really are not familiar with it, and they could use more 

training, and that is based on basically GAO reports. 

And the second is I think the Stimulus from what we can tell 

from both the GAO reports and the obligated funds under the 

Stimulus, because appropriated funds were available, it was easier 

for the Department of Energy to move and use the appropriated 

funds first rather than the Energy Savings Performance Contract. 

So what happens is you ended up in the last year with only six 

projects totally $104 million when you have an $80 billion authorization. 

Oak Ridge National Labs indicated that this would create 40 bil- lion jobs, $21 billion in saved energy, and take ten million cars off 

the road. 

In my last 10 seconds I recommend that solutions and executive 

order get the President behind us. This is an excellent law, and if 

he makes it—if he requires this to be used first before appropriated 

funds, that would move it along. We need training and then finally 

Congressional oversight. 

Thank you very much. 

[The prepared statement of Mr. Kovacs follows:] 

PREPARED STATEMENT OF MR. WILLIAM KOVACS, SENIOR VICE PRESIDENT, 

ENVIRONMENT, TECHNOLOGY, & REGULATORY AFFAIRS, U.S. CHAMBER OF COMMERCE
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Chairman BROUN. Thank you, Mr. Kovacs. I appreciate all the 

witnesses staying pretty much within your five minutes and Dr. 

Montgomery, for you being even under time. If I remember last 

time you were here, you were under time also, and I appreciate 

that very much. 

Unfortunately, we have got about six minutes or 6–1/2 minutes 

on this vote. You all can stand, the witnesses can stand at ease. 

The committee will recess until 10 minutes after the last vote begins. 

[Whereupon, at 2:42 p.m. the subcommittee recessed, to reconvene at 3:28 p.m., the same day.] 

Chairman BROUN. I call to order the continuation of this hearing, 

and I thank our witnesses for your forbearance in our going to vote, 

and we tried to rush back here to minimize you all’s time. So I 

thank you all for your testimony, and I want to remind members 

that the committee rules limit questions to five minutes, and the 

chair at this point will open the round of questions. I recognize myself for five minutes. 

Federal efforts to create green jobs costs money. Our Nation is 

currently very heavily in debt and running a huge deficit that is 

unsustainable. 

Where are we getting the money to fund these projects, and what 

impact does that have on the overall economy? 

I would like anyone who—Dr. Green is nodding his head, so I 

will give you first go at that. 

Mr. GREEN. Other than printing up money the government 

doesn’t have any money, and therefore, when it gives money to subsidize an industry or to create jobs in a certain sector or to subsidize battery production and so forth, it takes that money from another part of the productive economy. 

Unless you subscribe to the mattress theory of capital, which is 

that people actually stick their capital under a mattress and don’t 

have it working somewhere in the economy, either in their bank or 

in their savings account or in investments, it is simply the truth 

that the government scoops money out of the economy here, and 

they hand it over here. They take their cut along the way, and the 

jobs they create are more expensive than would be created in the 

market, and you have less jobs. 

Chairman BROUN. Dr. Kreutzer. 

Mr. KREUTZER. I would say even if people did put their money 

in their mattress, you have to follow the real resources, all right, 

and if you are somehow going to build a new high-tech economy entirely with people from the unemployment line, you know, then 

that is where the cost would be low. But that isn’t what happens. 

I mean, we use resources that have an opportunity cost. 

Chairman BROUN. I think Mr. Kovacs, I saw that you were nodding. Did you want to—— 

Mr. KOVACS. I am happy to take a crack at it. 

Chairman BROUN. Dr. Bivens. 

Mr. BIVENS. I mean, the short answer is they are borrowing it, 

and now is a perfect time to borrow it because U.S. households and 

businesses are saving at historic rates because they are terrified 

because of the recession, they have lost a lot of wealth, and they 

are taking that savings that otherwise would not go to productive 
85 

use, and they are making sure that there is enough demand in the 

economy to fill the hole caused by the bursting of the housing bubble. 

Chairman BROUN. Mr. Kovacs. Or Dr. Montgomery. We will just 

go right down the line. Dr. Montgomery. 

Mr. MONTGOMERY. Thank you. I think that the notion of real resources really is the important one, that that is what most of the 

green jobs studies miss, that you have to ask where the money is, 

where the funding is coming from, and that means what the real 

resources are, what is the capital and labor that is building green 

technology, what would it be doing otherwise. 

And if the government has to provide subsidies to get that capital labor into green technologies, that means it costs more than 

what the alternative would have been. 

So, yes, that is the sense in which there is a cost, but I think 

in terms of fiscal stimulus, there really is an error in thinking that 

we can justify spending on green jobs as a short-term stimulus, because it is probably the worst way to spend short-term money. 

What we need to do for—every fiscal economist agrees, I think, 

that in the recession what you want to do is you want to get money 

into people’s hands as fast as possible, you want to ramp that 

spending up rapidly, and then you want to ramp it down just as 

rapidly when you are coming out of the recession. 

What you want to do for R&D and technology development is 

provide a long-term, stable set of incentives as I was describing before. That is exactly the opposite of the program. That is the last 

program you would want to try to ramp up and ramp down to do 

something about the recession, even if you believe that fiscal policy 

is going to work. 

Chairman BROUN. Mr. Kovacs. 

Mr. KOVACS. Well, I certainly don’t want to sound like a broken 

record, but I do want to push the Energy Savings Performance 

Contracts. In some way, shape, or form they have been around 

since 1985. They are a bipartisan effort. All the money is put forth 

through the private sector. You are—the government is guaranteed 

that they will not pay any more than their energy costs. They theoretically will save about $21 billion depending on how the contract, 

depending on how long the equipment lasts beyond the contract period. They take, you know, what is the equivalent of ten million 

cars off the road, but more than anything the government is guaranteed that it will not pay more, and it creates jobs. 

Chairman BROUN. Thank you, Mr. Kovacs. I have three-quarters 

of a minute left, so I will ask Dr. Kreutzer, I think you brought up 

Evergreen Solar. They received $20 million in funds to build a 

plant in Devens, Massachusetts. Shortly after receiving those funds 

Evergreen Solar shuttered the plant, fired 800 workers, is now 

moving its operations to China. 

What presents—wasn’t it you, Dr. Kreutzer that—oh, Dr. Green. 

Okay. Dr. Green then, what prevents other companies from doing 

the same? 

Mr. GREEN. Absolutely nothing, and in fact, all the incentives 

point in the opposite direction. China has temporarily at least cornered the market on the rare earth elements which are used to 

make advanced technologies, including cell phones, wind turbines, 
86 

solar panels, and the like, and they are instituting cuts in exports 

of those materials. 

And so if you want to produce and have access to these materials 

and lower labor rates and lower environmental standards for production, and it is—these are quite damaging technologies to 

produce, you want to go build them in China. 

So the incentive is to actually take the Stimulus—take government money here, do your R&D here, and then take what you have 

learned to the low-cost production in China. 

Chairman BROUN. Thank you, Dr. Green. My time is up, and I 

recognize Ms. Edwards for five minutes. 

Ms. EDWARDS. Thank you, Mr. Chairman, and thank you to our 

witnesses. I just have one quick question, and you can just answer 

yes or no, and then we will get to the meat of it. 

I am curious as to whether you or your organization, the organizations that you represent supported the American Recovery and 

Reinvestment Act, the Stimulus Package? 

Mr. GREEN. AEI as an institution does not take official positions. 

Some of our scholars did, and some of the scholars didn’t, I believe. 

Ms. EDWARDS. Did you? 

Mr. GREEN. No, I did not. 

Ms. EDWARDS. Thank you. 

Mr. KREUTZER. Yeah. That is not my area of energy, and I am 

not speaking for Heritage, but I don’t believe they supported it. 

Ms. EDWARDS. Thank you. Dr. Bivens. 

Mr. BIVENS. Our institute did support it. 

Ms. EDWARDS. Thank you. Dr. Montgomery. 

Mr. MONTGOMERY. No. Consulting firms clearly don’t support legislation one way or the other. 

Ms. EDWARDS. Did you? 

Mr. MONTGOMERY. I feel that my job is to try to explain when 

I am asked what the likely consequences of decisions are and—— 

Ms. EDWARDS. So you don’t have a position on the American Recovery and Reinvestment Act? 

Mr. MONTGOMERY. I would be happy to, as I am today, discussing 

what I think its effects were. I don’t know whether you mean that 

is a position or not, but these are certainly my professional opinions about what the effects of the act—— 

Ms. EDWARDS. But you didn’t have a position at the time whether you supported or opposed the Recovery Act? 

Mr. MONTGOMERY. What do you mean by a position? 

Ms. EDWARDS. Did you support or oppose the Recovery Act? Did 

you—— 

Mr. MONTGOMERY. In what context? 

Ms. EDWARDS. —support—— 

Mr. MONTGOMERY. Party conversation or—— 

Ms. EDWARDS. Let me finish my question, please. Did you support the President’s signing into law and the passage out of this 

Congress of the American Recovery and Reinvestment Act? 

Mr. MONTGOMERY. Well, I am not a member of Congress, so I 

didn’t get to vote on it one way or the other. 

Ms. EDWARDS. Thank you. Mr. Kovacs. 

Mr. KOVACS. The Chamber supported it. 
87 

Ms. EDWARDS. Thank you. I am just curious when it was passed, 

it was, you know, I think it was because of a collapse in consumer 

demand and a financial system that really was on the brink of disaster and job losses, and so I am curious as to each of you, if there 

is a situation that doesn’t justify the government stepping in to create jobs and restore confidence in the economy such as the time 

that we experienced from 2008, and beyond, what would it be? 

Dr. Green. 

Mr. GREEN. Since I am not an economist, macro, micro, or otherwise, this is a personal opinion, and there are—there were different 

ways—was it legitimate for the government to step in? Probably so. 

I am actually not anti-government. I think government is widely 

important. It is like fire. It is a necessary thing. It is great in the 

fireplace, it is wonderful on the stove, it is not so good on the carpets and on the drapes. 

But there are different ways that I think it could have been implemented that I would have preferred, which is why I didn’t support it. 

Ms. EDWARDS. Thank you. Dr. Bivens, is there an appropriate 

time when the government should intervene in cases of high unemployment and collapse of confidence in the market? 

Mr. BIVENS. Absolutely. I mean, in specific over the past couple 

of years why it was so appropriate for the American Recovery Act 

to be passed is because our primary tool for fighting recession is 

Federal Reserve Policy, had already pretty much maxed out its conventional ammunition. There was very much little extra the fed 

could do, something else had to come in and try to support the 

economy. That is what made it so appropriate in this context. 

Ms. EDWARDS. And so you come to a conclusion in your testimony 

that jobs were created, the economy was stabilized. How do you 

know that? From an economic perspective and from an evaluation 

perspective. How do you know that? 

Mr. BIVENS. I reference the sort of consensus among forecasters, 

and that is not evidence in and of itself, but what it reflects is that 

there is a lot of strong evidence underlying it. 

One is just the timing of the act. It works very well when the 

downward spiral was arrested. Two, you do economic simulations 

where you try to construct, and this is what the Council for Economic Advisors did when they did their quarterly reports on the 

Recovery Act, and you can get a baseline path of how the economy 

would have done given the trajectory of economic variables as the 

crisis hit and then see how it actually did do relative to that 

counter-factual baseline. And then, three, you know, you use the 

multipliers that have gotten such a bad name in this debate, you 

know, given the amount of spending on food stamps or public sector investment. People act like these multipliers come from thin 

air. They don’t come from thin air. They come from lots and lots 

of empirical research of the affect of government spending in environments like we saw in 2008, that is when the interest rate is at 

or zero-lower bound, when you have got the threat of deflation in 

those environments, past government spending has provided very 

large multipliers. That is where those come from. So that is where 

I got those. 
88 

Ms. EDWARDS. Thank you, and then lastly, Mr. Kovacs, can you 

imagine an environment today in which we wouldn’t have done 

the—passed the Recovery Act and what that would mean to the 

businesses that you represent? 

Mr. KOVACS. Well, actually, I think we, as the Chamber put it, 

an enormous amount of constructive thought into trying to work 

with Congress. One of the provisions that we had been lobbying for 

was what Senators Barrasso and Boxer put in, which was the way 

that you have to treat NEPA. In other words, it has to be handled 

in the most expeditious way possible, and we had no idea how 

many projects were really going to be impacted, but we knew there 

weren’t that many shovel-ready projects. 

In the end according to the Administration that provision was 

used over 180,000 times, so we think that we added to really making the act work. 

Ms. EDWARDS. Thank you, Mr. Chairman. 

Chairman BROUN. Okay. The—I guess, Mr. Miller, you are recognized for five minutes. I was just looking around to see who was 

here, so you are recognized for five minutes. Congressman Miller, 

you are recognized for five minutes. 

Mr. MILLER. All right. Thank you. Dr. Green, you just a moment 

ago said that you are not an economist macro and micro. Actually 

my information is that your Ph.D. is in environmental science and 

engineering. You have a B.S. in biology and a Master’s in molecular genetics. 

Did you take macro and micro in college? 

Mr. GREEN. Yes, sir. Yes, Congressman. As part of my doctorate 

at UCLA, the program I was in was an inter-disciplinary and policy-oriented doctoral program in which we had a core course on decision-making theory that included economics. 

Furthermore, I have worked at and with economists now for 16 

years, including for three years editing a journal on the think tank 

that was primarily economic studies. So I am not an economist, but 

that does not mean I am not versed in economics. 

Mr. MILLER. Okay, but you don’t have an academic credential 

that would—you would not be qualified to peer review for a peerreviewed economics journal, would you? 

Mr. GREEN. I believe I have, but I will leave that to your judgment. 

Mr. MILLER. Okay, but all of your testimony today is on economics. Correct? 

Mr. GREEN. Essentially. Yes. 

Mr. MILLER. Okay. In the three studies that you refer to are all 

economic studies. Isn’t that correct? 

Mr. GREEN. Yes. 

Mr. MILLER. Okay. Do you know if those studies were peer reviewed? 

Mr. GREEN. I am not aware of whether they were peer reviewed 

or not, but then, again, I don’t hold a peer review as a particular 

guarantor of accuracy, and that has been clearly documented in the 

university. 

Mr. MILLER. Okay. Do you know if those studies have been criticized by other economists as methodologically unsound? 
89 

Mr. GREEN. Well, yes, naturally. I mean, all studies in this area 

are criticized, including—— 

Mr. MILLER. Isn’t that one of the reason for peer reviews is to 

have a discussion back and forth between those who are familiar 

with methodology about whether the studies are methodologically 

sound? 

Mr. GREEN. Sure, and my guess is, yes, they actually did consult 

with their peers to have their research findings checked. 

Mr. MILLER. Okay. 

Mr. GREEN. However, even peer-reviewed studies are a source of 

debate. Look at the IPCC, look at all the studies—— 

Mr. MILLER. Do you know the extent to which—do you know if 

they got any funding from the fossil fuel industries? 

Mr. GREEN. I have no idea what their sources of funding are. 

Mr. MILLER. You don’t know that they did? 

Mr. GREEN. I don’t know what their sources of funding are at all. 

Mr. MILLER. Okay. You are a fellow at the American Enterprise 

Institute. You say that you are here expressing your own opinion. 

I assume you are not on unpaid leave today, and in fact, if we look 

at the website for AEI in a few days they will probably tout your 

testimony today as a credential for you. 

Tell us what support AEI gets from the fossil fuel industry. 

Mr. GREEN. Well, first to correct the record, I am a resident 

scholar at AEI. 

Mr. MILLER. Okay. 

Mr. GREEN. It is an arbitrary distinction or distinction that only 

matters inside, but for the record that is the case. 

I have no idea to tell you the truth what the fossil fuel industry 

donates to AEI. The scholars are walled off from the fundraising 

process entirely, and I couldn’t begin to tell you. 

Mr. MILLER. Okay. 

Mr. GREEN. Or any other donor to AEI. 

Mr. MILLER. All right. Dr. Bivens, are you familiar with the 

three studies that Dr. Green wrote about? 

Mr. BIVENS. I am familiar with two of the three, the Spanish and 

Italian, but I have not read the Scottish one. 

Mr. MILLER. Okay. What—you presumably are qualified to peer 

review them as an economist. What is your peer review? 

Mr. BIVENS. I think they are pretty bad. I mean, essentially they 

compare the labor intensity of jobs supported by green investments 

versus some economy-wide average, and because the labor intensity 

is lower, they decide that money could be more profitably spent 

somewhere else in the economy. 

I mean, that is ridiculous. If you just look at jobs in the utility 

sector in the United States today, they are not labor intensive at 

all. It is not a real shock, you know. These are very capital-intensive industries, so the idea that you could somehow just stop 

spending on utilities in the U.S. economy today and devote the 

money to other activities and create more jobs that the utility sector is killing jobs, that is an insane way to think of the issue. 

So basically they have come up with the blockbuster finding that 

utilities are not very labor intensive, which was not a surprise to 

anyone. 
90 

Mr. MILLER. Okay. A lot of the testimony today has been that 

government support distorts the market, and I see some heads nodding yes, that is correct. That is what your testimony is, that presumably if government is supporting something in one way, presumably alternative energy is in competition with coal, with oil and 

gas, with nuclear, and by supporting alternative energies, it distorts what the market would otherwise do. 

Since 1948, there has been $91 billion in funding for nuclear energy. Excuse me. There has been a total of—that is correct. Ninetyone billion for nuclear energy, 46 billion for fossil energy, and 11 

percent or 21 billion for alternative energy. That is wind and solar 

and everything else together. 

Has that distorted the marketplace at all? Mr. Green. Dr. Green. 

Mr. GREEN. I would like to say, first of all, one has to keep these 

things in perspective. When you look at subsidies per megawatt 

hour, you do not see a dominance in the oil and petrochemical sector. 

I testified before I believe all subsidies distort markets and all 

subsidies in the energy field, in the markets should be removed to 

everyone, fossil fuels, nuclear power, wind, solar, alternative, battery technology. It doesn’t really matter. 

Mr. MILLER. Mr. Kovacs, do you have an opinion on this? 

Mr. KOVACS. I mean, look. We have, you know, we have generally supported the advancement of technology at various stages. 

We for years have supported the advancement and the funding of 

all the technologies in the Energy Policy Act of 2005, 2007. We believe that one of the ways to begin addressing some of the issues 

that we have in this country is through technology, and obviously 

funding is a part of it. 

You know, to that extent we have supported it, and I think in 

the end one of the things we are here today to talk about is to say, 

okay, it seems as though the climate has changed, we have borrowed a lot of money as a Nation, and we are here to try to give 

ideas as to how we might cooperate and do both energy efficiency, 

promote technology, and have it done through the private sector. 

So, but, yes, we have always supported the technology efforts. 

Mr. MILLER. My time has expired, Mr. Chairman. 

Chairman BROUN. Yes, it has, but if you would like to ask an 

economist, Dr. Montgomery, those economic questions you asked of 

the other witnesses, I will be glad to give you a few more minutes 

for Dr. Montgomery to answer. 

Mr. MILLER. Which ones particularly do you want to—— 

Chairman BROUN. Well, you asked an economist whether they 

were—Dr. Montgomery is an economist if you want to ask him the 

question about investment. 

Mr. MILLER. Well, certainly. 

Chairman BROUN. I would be glad to give you extra—— 

Mr. MILLER. Dr. Montgomery, well, do you agree that government support, subsidies, whatever, distorts the marketplace, the 

decisions that we made in the marketplace or otherwise? 

Mr. MONTGOMERY. Yes, I do, and in particular I think that the— 

yes, and that there is a difference between distorting the marketplace and intervening in order to deal with true externalities like 

environmental protection. And I was trying to make that distinc-
91 

tion in my testimony and rapidly in my five minutes, that it is a 

perfectly legitimate role and something which we have done quite 

successfully in many areas to establish cost-effective regulations 

that deal directly with emissions. 

Like the Title IV Sulfur Program under the Clean Air Act. That 

is the right way to direct technology into cleaner energy because 

it deals with the emissions. Where the distortions come in is when 

the government picks the technologies by funding the technologies 

directly rather than concentrating on what the consequences of the 

technologies are and letting nuclear renewable energy, natural gas, 

and others fight it out on a level playing field to see which one has 

the best way of meeting the environmental goals. 

Mr. MILLER. Okay. How about the ultra deep water and unconventional natural gas and other Petroleum Research Fund? Does 

that fall within that—that doesn’t seem to have anything to do 

with the environment. It seems to be simply with doing the research to—how to drill down to two miles. 

Mr. MONTGOMERY. I think the other part of my testimony was 

that there is a general market failure in R&D which leads to a lack 

of adequate investment across the board in the economy, including 

in the energy sector in the basic and applied research that provides 

new ideas on which innovations are built. 

Now, I don’t know whether that particular fund is doing that 

kind of basic and applied research or is doing something that the 

oil industry could have done perfectly well all by itself without having that money put into it. 

But I would call that spending on technology development that 

may or may not be justified, depending on whether it is at the 

basic research end of the scale where government has an appropriate role. 

Chairman BROUN. The gentleman’s time has expired. Just in 

fairness. 

The gentlelady, Ms. Lofgren, you are recognized for five minutes. 

Ms. LOFGREN. Thanks very much. You know, I come from Silicon 

Valley where the tech sector is very excited about clean energy. I 

mean, it is not just the government programs that has given a tiny 

leg up to the industry but also the venture capital world. That is 

the biggest area of new growth, and people believe in business and 

also in the academic world that this has a tremendous future, not 

only in energy production but clearly in terms of job creation, and 

it is the next big thing that we don’t want to miss out on. 

And as I review the testimony today, I do have a concern. There 

seems to be a questioning of government investment in clean energy and green jobs. Now, Mr. Miller mentioned the disparity in 

terms of research dollars which the Congressional Research Service 

has advised us of with most of the money going into nuclear and 

the most of the rest going into fossil and really just a small percentage going into clean energy, but I think that is part of the 

story. 

We have, and I have heard no willingness on the other side of 

the aisle to take a look at the tax breaks that we are giving in the 

fossil fuel arena, especially to oil companies. 

Dr. Bivens, it seems to me if you add in the disparity in research 

funding with the tax breaks given to oil companies that nobody ap-
92 

parently is talking about repealing, you know, what does this do 

to the kind of a level playing field for the clean energy industry? 

Doesn’t it make sense when we are subsidizing the oil industry and 

when we are disproportionately funding nuclear and fossil fuels to 

at least provide some assistance to this fledgling part of the energy 

economy, the high-tech sector? 

Mr. BIVENS. Yeah. I mean, I would say I am not an expert on 

exactly how much in the way of benefits the fossil fuel industry 

gets, but I think your point is a good one, and I would add, you 

know, that besides the direct benefits, subsidies, tax breaks going 

to the fossil fuel sector, I think the single biggest subsidy is our 

failure to price emissions that are harmful to other economic stakeholders. That is a huge subsidy, and so I think until we correct 

that one, we are just not giving the private sector near enough incentive to do the green investment on its own, so I think public sector incentives to give that, give those incentives are a very good 

way to go. 

Ms. LOFGREN. I was interested in Dr. Montgomery’s comment in 

the exchange with Mr. Miller about the value of regulation to set 

standards that then people or industries will work to. I am wondering the Governor of California just upped the renewable energy 

portfolio requirement to a third today, and what I hear from industry is that if they know what it is they are supposed to do, they 

can do it. But what they need is some standards and what are the 

rules, and would you support, would you think that that would 

help? What California is doing? 

You know, our energy consumption has remained flat while the 

population has grown about 25, 30 percent. 

Mr. MONTGOMERY. I have done a lot of work on California’s AB– 

32 implementation, so I will resist the temptation to talk about all 

of it. 

Ms. LOFGREN. Thank you. 

Mr. MONTGOMERY. I think the clean energy standard is a good 

example of a program which actually increases the cost of achieving the actual environmental objectives, and this is something we 

discussed at great length with the Air Resources Board and with 

the Economic and Allocation Advisory Committee. Larry Gould who 

chairs it from Stanford. That a cap-and-trade program in California 

would have been sufficient to achieve the goals of AB–32. 

Adding the Clean Energy Standard to it serves only to limit the 

choices that utilities have for what kind of energy they are going 

to use to meet that standard, and it forces utilities to bear more 

of the burden. 

Ms. LOFGREN. It is interesting, if I can, I have limited time, I 

don’t want to be abrupt or rude, but the utilities certainly don’t feel 

that way. In fact, PG&E which is the major utility and is the utility in my part of the State, pulled out of the Chamber of Commerce 

when they didn’t support the cap-and-trade bill that the Congress 

had. 

Dr. Bivens, do you share that point of view? I mean, not that 

California is so perfect, we have our challenges, but from an energy 

point of view we are making tremendous progress. 

Mr. BIVENS. That general point of view that California has been 

a real leader in keeping energy consumption down relative to the 
93 

rest of the country, absolutely, and I will say, you know, I bet I 

could construct an absolutely platonic, perfect energy policy that 

follows textbook economics and gets us to exactly where we need 

to go. That is not the world we live in. I mean, right now we have 

just got the market failing every day to put a price on emissions 

that harm other economic stakeholders, and so we should find a 

second best way to do the job until we get the platonic ideal. 

Ms. LOFGREN. Well, I think that is correct, and certainly the 

State of California has set the standard in many ways by setting 

fuel efficiency standards when the Nation would not, and because 

it is such a large market, it actually did move fuel efficiency in the 

Nation, and we are doing the same thing with air quality, energy 

consumption, renewable uses, and the like. 

I want to just switch briefly because I am almost out of time to 

the role of basic science research, which there is no way industry 

has the funds to do that kind of pre-competitive pre-commercial research, and I have a very deep concern that if we don’t do adequate 

investments in basic research, university-based, or in the national 

labs, that we are going to have a big problem in the future and specifically some of the reductions that are being proposed, for example, the Stanford Linear Accelerator, which is doing X-ray photography in a way where they will actually be able to see at a molecular level photosynthesis, which has tremendous potential in terms 

of energy. 

What is your take on the budgets, budget discussions on basic research, Dr. Bivens? What would those cuts do for our future competitively from a jobs point of view and from an energy point of 

view? 

Mr. BIVENS. Yeah. I pretty much totally agree with you. I think 

cutting investments in basic research and a rush to budget austerity is kind of the definition of penny wise, pound foolish. I just 

don’t think we should do it. 

Ms. LOFGREN. Dr. Montgomery, do you have a point of view on 

that? 

Mr. MONTGOMERY. Yes, I absolutely agree. In fact, that was what 

I put into my opening statement to try to emphasize it more than 

my written testimony did. Absolutely that the highest—that as you 

look at cutting the budget, it is very important that you protect the 

level of funding that we are now putting into basic energy research, 

not let it get cut. 

The problem is that it has generally been starved by Congress 

in order to continue funding the subsidies and deployment of existing technologies, and that is because of the jobs that that creates. 

I think we have to—— 

Ms. LOFGREN. Well, there are jobs in basic science research, too. 

Mr. MONTGOMERY. There are, and that is just fine, but don’t lose 

sight—but don’t concentrate so much on jobs that you put money 

into things instead of basic. 

Ms. LOFGREN. I think we are the richest country in the world. 

We can do both, and I yield back. 

Chairman BROUN. The gentlelady yields back. 

Now, the chairman recognizes Mr. Hultgren for five minutes. 

Mr. HULTGREN. Thank you, Mr. Chairman. Just a couple of questions, and I am sorry, there is a couple different committees meet-
94 

ing the same time, and I wish I could have been here for the whole 

time, but we will spend more time going over your testimony and 

things, but I did want just some clarification if I could. 

And I guess I will, Dr. Montgomery, if I can address this to you 

at first, the Administration has made a high profile effort to invest 

a significant amount of taxpayer money on green jobs. How should 

Congress evaluate various job creation proposals? Any suggestions 

that you would have for us? 

Mr. MONTGOMERY. Yeah. I would say ignore everything anybody 

says about jobs. You should be evaluating programs on their merits 

in terms of what do they cost, how do they address a specific externality or public policy problem, are they going to be increasing or 

reducing the cost of energy. The jobs calculation I think is—the 

jobs argument is pure smokescreen. Everybody can argue that they 

are going to be creating jobs if you give them money or losing jobs 

if you don’t give them money. You have to actually look at the merits of what the money is doing. 

Mr. HULTGREN. Mr. Kovacs, would you agree with that, and I 

guess just kind of a follow-up question. What is the appropriate 

cost that we should expect to pay? You know, is it $100,000 per job 

or $1 million per job or $10 million per job? Where do we start 

making a decision that this is too much, it is not being effective? 

Mr. KOVACS. Well, our research doesn’t confirm or deny any of 

that, but what it does state factually was that at least in March 

of 2010, there were 351 developers around the United States who 

were willing to put in $570 billion in direct investment that would 

have created roughly about $1.1 trillion as you have the multiplier 

effects with about 1.9 million jobs. 

And what we are trying to say is the thing that held up that investment was the fact that departments were challenged and challenged and challenged, and if you—the goal isn’t necessarily an environmental goal because every kind of facility was challenged, and 

40 percent of the facilities that were challenged were all renewables. And there are 24 nuclear and I forget how many transmission, which would actually take the renewable power from the 

plains into Minnesota or Chicago. 

So you have a pot of money, and you have developers who are 

willing to risk their money to build these facilities. So the easier 

way to do it is to let the private sector do it, and the market will 

begin to sort itself out. Some will get permits, some won’t, but even 

if you took just one facility per state, you still get to about $400 

billion in direct investment. That is needed at this time. 

Mr. HULTGREN. Thanks, Mr. Kovacs, and I agree. It frustrates 

me when I see sometimes we are picking winners and losers or 

pushing an agenda that the market just doesn’t want, and you 

know, there are some issues there I think that—so I appreciate 

your input there. 

Dr. Green, if I could ask you, would you—are there other federal 

efforts that could be more efficient—that could just work more efficiently to help unemployed American and also stimulate the 

growth of the green economy? Are there things that you see that 

we could be focusing on that you would recommend? 

Mr. GREEN. I lack the hubris to make suggestions like that. That 

would be better asked of someone who was more focused on sort 
95 

of how economic stimulus works. I can recommend any of our 

economists at AEI for that. 

Mr. HULTGREN. Great. I will move right next door if I could with 

that question, Dr. Kreutzer. If you have any suggestions, are there 

things, you know, federal efforts that could be more efficiently used 

to help people who are unemployed other than some of these green 

jobs initiatives? 

Mr. KREUTZER. Yeah. Well, let’s look at some of the things. First 

of all, we could have a separate discussion about the general benefit of federal funding of research, but the Stimulus Package 

doesn’t fit that. We are trying to promote the economy. In the Stimulus Package they had a carve out of $140 million for climate data 

modeling. I checked with climatologists. They didn’t know any unemployed climate data modelers. We had a $5 billion program for weatherization. The state auditor in New Jersey, Stephen Eells, looked at the money that was 

being spent in New Jersey. Five percent of the funding was spent 

documented on nothing, close to ten percent they couldn’t even tell 

where it had been spent, eight percent was overspent. They spent, 

you know, $22 on a light bulb that cost $1.50. 

In short, out of 5 billion if you use that ratio, 1 billion is wasted. 

So you could do a lot better stimulus with the economy by not 

wasting billions of dollars by not ramping up money for people that 

are already employed. 

When it comes to the impact, there was a debate earlier on 

whether we had the studies that Dr. Green cited were peer reviewed, as though they didn’t matter if they weren’t, but here is 

a statement from the Congressional Budget Office, okay, last year 

on the impact of policies to reduce greenhouse gas emissions on 

employment. This is a quote. ‘‘In particular, job losses in the industries that shrink would lower unemployment, excuse me, would 

lower employment more than job gains in other industries would 

increase employment, thereby raising the overall unemployment 

rate.’’ 

So it is not fossil fuel funded researchers that are coming up 

with this. This is very general, consistent from economists. We had 

a panel at the Heritage Foundation in September of 2009. We had 

economists from the EIA, we had economists from the EPA, we had 

economists from the Congressional Budget Office, we had economists from the Brookings Institution. All of them analyzing the employment and the simulative impact of Waxman-Markey. None of 

them found that it stimulated the economy. 

The debate was entirely over how much did it cost. Nobody found 

economic growth from that. The question is is it worth that? That 

is a reasonable debate to have, but you can’t pretend that it is free. 

Mr. HULTGREN. I am out of time. Thank you very much. I yield 

back. 

Chairman BROUN. The gentleman’s time has expired. 

I want to thank the witnesses for you all’s valuable testimony 

here today. It has been very enlightening, and I thank the members for your questions. 

Members of the subcommittee have additional questions for the 

witnesses, and I will ask all of you all to respond to those questions 

in writing. The record will remain open for two weeks for addi-
96 

tional comments from members, and if you would, please get those 

answers in writing back to us within that two-week period. 

The witnesses are excused and—— 

Ms. EDWARDS. Mr. Chairman, I just have a question. I would ask 

unanimous consent that we be allowed to include materials for the 

record that were shared with the majority staff prior to the hearing. 

Chairman BROUN. Okay. I think that has been agreed to. So ordered. 

Ms. EDWARDS. Thank you. 

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Chairman BROUN. Anything else? Okay. Witnesses excused. The 

hearing is now adjourned, and thank you all very much. 

[Whereupon, at 4:05 p.m., the Subcommittee was adjourned.] 
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Appendix 

ANSWERS TO POST-HEARING QUESTIONS
158 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Kenneth Green, Resident Scholar at the American Enterprise Institute 
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Responses by Dr. David Kreutzer, Research Fellow in Energy, Economics, and Climate Change, The Heritage Foundation 
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Responses by Dr. David W. Montgomery, Vice President, NERA Economic Consulting 
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Responses by Mr. William Kovacs, Senior Vice President, Environment, Technology, 

& Regulatory Affairs, U.S. Chamber of Commerce 
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