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Thursday, September 16th, 2010

There’s No Such Thing As Green Industry

I have always been skeptical of the idea of green industry. The bifurcation between green and non-green industry seems destined to be a temporary transitional state. In the future, probably less than a decade, there will only be industry, it will all be green, with only a few legacy exceptions winding down into the sunset.

This immediately begs the question, if America isn’t doing so well in non-green industrial development in an ever more competitive globalized world, why would we think that it will be any better for green industry? Why isn’t that going to move to China too?

Turns out, it is, as a recent story in the Washington Post illustrates.

The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s.

The remaining 200 workers at the plant here will lose their jobs. “Now what’re we going to do?” said Toby Savolainen, 49, who like many others worked for decades at the factory, making bulbs now deemed wasteful….Jobs at the plant have been prized locally for years: They pay about $30 an hour.

Congress slipped a provision into bill that will shortly ban incandescent light bulbs in the US. The result is that all those factories are going to go out of business. But what about replacements like compact fluorescents? Those, as it turns out, are made in China:

“For those who make incandescent bulbs the law was bad for business,” [Ellis] Yan said. “For people like us, it was very good.”

Yan’s Chinese factories, which will employ around 5,000 at years end, make half of all CFL light bulbs sold in the US. He talks about opening a US plant, to produce bulbs at 40-50 cents higher than his Chinese ones. But if there’s one thing we know, it is that America is a price-dominant culture. Those bulbs aren’t going to sell even if he does make an investment here, which I very much doubt.

In a very real way here, the shift to green technology has actually accelerated the move of industry offshore. So many people like to talk about “green jobs” saving the economy. But the reverse is likely to be the case. The faster we force a shift to new green tech, the faster our manufacturing base will get shipped offshore. It can be difficult to make the case to shutter a fully depreciated factory with skills labor and fully understood operational and quality metrics in favor of a new offshore plant. But if you are starting from scratch in any case, China starts to look even more attractive. In this case, not only could a legacy plant not compete with China, it is legally not possible for them to do so after 2014 even if they wanted to because incandescent light bulbs will be banned.

This is not necessarily to disparage the shift to green tech. But sustainability advocates have to face up to the fact that there are real costs and tradeoffs to be made. Sometimes you can have it all, but much of the time you don’t get to have stricter environmental policies, lower costs and more jobs. There’s a real cost, financial, industrial, and human involved.

The real challenge of leadership is to figure out the right balance of competing needs, sell it to the public, and then make it happen. I wish our leaders luck in making that happen. But in the meantime, I’d suggest cooling the rhetoric that green industry is somehow going to save our economy from the mess we’re in, because in the short term at least it’s probably only going to dig the hole deeper.

40 Comments
Topics: Economic Development, Public Policy, Sustainability, Technology

40 Responses to “There’s No Such Thing As Green Industry”

  1. KS says:

    @Aaron — What do you mean by “…it is legally not possible for them to do so after 2014 even if they wanted to.”?

  2. After 2014, incandescent light bulbs are banned in the United States.

  3. KS says:

    Disregard…you were referring to the ban on incandescent bulbs after 2014.

  4. The reference may not have been clear so I added a bit more text.

  5. Curt says:

    Additionally, those “green” bulbs may not be so green when one looks deeper into the manufacturing processes employed in China. It is my understanding that China is not nearly as progressive as us when it comes to environmental standards. correct me if I am wrong.

  6. samizdat says:

    “…China is not nearly as progressive as us…” the understatement of the year award goes to Curt. Why do you think all of those companies went to China to manufacture? No environmental controls. No workplace health and safety laws. Virtual slavery in some cases. I’m surprised no one snarked about the 30/hourUSD wages of these workers. How do think people are supposed to survive on 8-10, even 15USD/hr. in our country today? Do you want to be payed $12 an hr? No. And yet most of the posters here disdain those who work so-called non-skilled jobs. Non-skilled. Bullshit. There are dozens of little things that workers do as innovators and operators that never made it to the eyes and ears of the general public. Those are called s-k-i-l-l-s. Millions of small and large innovations on the shop floor through the span of Industrial activity, and we get “non-skilled” hung around our necks. And now, through automation and offshoring, our jobs are going, going, gone. The economy is shrinking because, outside of going into hock up to our necks, we can’t even buy the crap shoved in our faces. The ignorance of industrial work and workers evident here is breathtaking and disheartening. Educated professionals, my ass. And don’t sell me that BS about “economic reality”. I’m no fool.

  7. DC Hoosier says:

    What about the consideration for your VAT carbon tax? Might that offset some of the incentive to move manufacturing overseas? High tax on the coal based energy production in china and tax on the shipping transportation it takes to get it here. Is there anyway that could offset the $.40-$.50 increase to manufacture the bulbs here?

    I might be an optimist… but I just won’t count out all American manufacturing to be dead in 10-20 years.

  8. Danny says:

    After working for a VC that specializes in green technology, I couldn’t agree more. The transition to green technology will not be accomplished by using the heavy hand of the law to destroy non-green technology.

  9. JackLovett says:

    @samizdat

    Where do you work? And what do you do? I’m interested in what you had to say.

  10. Pete from Baltimore says:

    I had already read the article .And there is another similiar article in today’s [9/16/10] Washington Post.Both were very well written

    Another example of what MR Renn is talking about is the [former] solar energy panel factory in Frederick county MD. it was touted as the future of American ” green jobs”. Lets hope not.It shut down and opened up a factory in China instead.

    I am no expert.but my understanding is that ,among other things, its hard to get loans to start factories in america. I read an article about a chinese immigrant to america that wanted to start a factory in america[i seem to recall it being about “Green jobs”. His financial backers veteod the idea of an american factory and made him produce his product in china instead

  11. Pete from Baltimore says:

    I would slightly ,and respectfully, disagree with MR Renns assertion that price trumps everything. I work in construction.And there is a reason that Milwaukee recipercating saws[Sawzalls] are so poular.

    A lot of guys like the fact that they are made in America. Partly its a patriotic thing.But mainly, “Made in America” says “quality” to them .

    And its generally agreed that Milwaukee makes the best Sawzalls [but not in Milwaukee.i think its Tennessee]

    A lot of the best [ and most popular] tools are still made in America.Because guys in construction not only want,but need, quality products.

    This of course is not true of all products. But5 i think its true of many. I dont think it was price that made people turn away from American automobiles.

  12. Kallie says:

    I agree with DC Hoosier; if the government is going to step in and ban some forms of non-green tech, then they should also require the actual cost of shipping legal, “green” technology be attached to those goods. Fluorescent bulbs that need to be shipped around the globe cannot be much more environmentally friendly that regionally produced incandescent bulbs, right? (If I’m way off base, please let me know) I would rather the government not get involved, but if it feels the need to punish one company for non-green practices, it should punish every company for non-green practices.

  13. Patrick says:

    Aaron, love your blog, but I must declare shenanigans. We may have a short-lived advantage in innovation in green technology, and that may or may not translate into advances in manufacturing that position us ahead of other countries when development is done here and production can take place elsewhere, but that doesn’t mean we shouldn’t promote that advantage.

    For people who have been displaced by globalization, and have lost their manual/craft-skill oriented job, it’s not enough to say we shouldn’t pursue “green industry” as it is normally envisioned in the socio-political context as a way to get these folks back to work. What’s going to take the place of green tech as a new job engine? Any suggestions?

    The forces that have driven productivity per worker through the roof in US manufacturing and reduced the number of manufacturing sector workers will not abate because of green tech gaining ground.

    You want to save manufacturing in the US to save those jobs? Then you have to be willing to slap tariffs on products from places with lower environmental regulations, worker protection, and human rights protections. Is our Congress ready to do this? Is our Congress ready to do most anything other than rename post offices? Of course not.

    If you’re not onboard with green tech, tell us what other industrial activities we should be promoting to maintain the US manufacturing base. I’m at a loss to think of what those might be.

  14. Ed says:

    What is called “offshoring” (or sometimes “trade”!) is really nothing more than companies evading U.S. federal and state regulations, apparently with the connivance of the U.S. federal government.

    Suppose the federal government exempted a particular state from all federal labor and environmental regulations, among other things. And that state had the same exact regulatory culture as China. Businesses located in that state could still produce products for sale in the other 49 states without penalty.

    We would almost certainly see relocation of businesses to that state, including a considerable number who have relocated their operations to China. The state would have impressive economic figures but the people living there would probably be worse off -all the benefits from the regulatory abritrage would accrue to the companies and that state’s government. Plus over time, the exemption would erode the regulatory regime in the other 49 states.

    Once you frame the issue as regulatory evasion, instead of trade, alot of muddled thinking vanishes.

  15. Pete from Baltimore says:

    Regarding comment 13 by Patrick
    MR Patrick
    I cant speak for MR Renn.But i think that his point was that while “green technology” can be good .Its not nececarrily the silver bullet to solve unemployment that someof its supporters think it is.

  16. Wad says:

    Ed, your scenario is not hypothetical. That’s how the Sunbelt, particularly the South, plays.

    The results are just as you stated.

    The consequence for race-to-the-bottom states is that they tend to get transplants. The transplanted work produces jobs, which is what the local population craves, but the transplanted businesses produce closed-loop economic transactions that might not benefit the local economy.

    The factory owners also have the leverage in the business deal. This means the local cities have to eat the costs of negative externalities in order to keep their factory jobs. The community mortgages its possibility for wealth creation because it is part of a commodity labor pool and must keep its costs low to industrialists.

  17. Alon Levy says:

    Aaron, the nostalgia for Edison’s invention of incandescent light bulbs is misplaced. Incandescent bulbs are an obsolete technology. I’m sure that when GE’s last phonograph factory closed, some workers complained about the layoffs, too.

    The story about how green regulations are shifting jobs to China is just anecdote. Globally, the leader in green industry is not China, but Germany. It’s Germany that sets standards for green buildings, that still has the top solar and wind power use, and that manufactures many components used in green tech. Spain is number two. The US is far behind, because it’s never bothered to phase out coal energy and promote conservation. Labor regulations have nothing to do with it.

    Now, it’s true that low-skilled labor will move to China. This is a good thing: it means that people get paid based on their skill level and not based on which country they were born in. But this in itself does not doom the first world’s workers; they’d just need retraining. In Singapore, Hong Kong, and the EU-15, people manage to live even with competition from lower-wage countries.

  18. Wad says:

    Pete from Baltimore, Aaron’s point of the price-dominant culture has to do with commodity products. Those are goods that can be made and substituted with such abundance that price becomes the paramount factor.

    Light bulbs are such a good. As consumers, you or I wouldn’t mind paying 40 or 50 cents more for a domestic-made light bulb if our consideration was to support the American economy.

    The problem is, the Chinese industrialist isn’t selling to us directly. He or she is producing it for the retail market: the mass-merchandisers like Walmart and Target, the groceries like Kroger and Safeway, general merchandise drugstores like Walgreens and Rite-Aid, and even middlemen who sell to stores without their own supply organs.

    These retailers cannot justify paying 40 or 50 cents more per bulb, because they are dealing in extraordinarily large lots. The retail buyers place quantities of several million bulbs per month. An order of 10 million bulbs from the American factory will cost $5 million more — just for the price of the bulbs.

    That’s $5 million on top of the storage costs of the bulbs at the distribution center, on the trucks, and the store of sale. Plus, merchandisers may buy those large lots on credit, so there’s interest on top of the $5 million.

    Yet this differs from the power tool market you gave in your example. Why? It has to do with consumers vs. buyers.

    Consumers are a general (mass) market and are more sensitive to price points.

    Buyers, such as power tool users, are a specialized market and are more sensitive to cost horizons.

    A construction laborer may prefer a Milwaukee Co. tool and pay handsomely for it, because buyers have more information about a product than a consumer. The laborer knows they can pay multiple times more for Milwaukee than a Black & Decker, but the Milwaukee tool is expected to outlast the price of the tool versus the cheaper model.

    If Milwaukee builds a $180 saw, while Black & Decker produces an identical say for $60, the construction worker may know from reputation that the latter may only work for 6 months. If Milwaukee’s saw can last for longer than 18 months, then it is the better value.

    Buyers of specialized products generally know the life cycles and replacement costs of their products and factor that in their purchasing decisions.

  19. BrianTH says:

    CFLs are kinda an extreme example, given they are something easy to manufacture and ship. If we were instead talking about something like retrofitting buildings to make them more energy-efficient, I think it would be less obvious that offshoring was likely.

  20. Thanks for all the great comments.

    There are two factors driving declines in US industrial employment: productivity and offshoring. The former is probably more important.

    I don’t think green tech per se changes these underlying dynamics. However, by forcing a market switch now – through various mandates and subsidies – will pull forward offshoring that was going to happen anyway. That factory probably would have closed at some point, but the timing is clearly affected by the ban on the products it produces.

    I’m actually not convinced we have a good, affordable substitute for traditional incandescent bulbs yet, as anyone who as a CFL in their closet can attest. I’m sure we’ll get there soon, but CFL is a not ready for prime time product in many household applications if you ask me.

  21. Curt says:

    Most people get annoyed that they have to wait on it to “come on” LOL

  22. @Urbanophile

    The last paragraph of your last comment quite frankly boggles my mind. Astounded really.

  23. Tell me what product I should be buying and I’ll be happy to check it out.

  24. Danny says:

    Incandescent light bulbs have something no other energy efficient lighting has: A natural looking light spectrum. If you don’t believe me, pull out your camera and take some pictures under CFLs, LEDs, and incandescents. The incandescent will be the only light that doesn’t make you look like a zombie or a freak.

    On top of this, some people have issues with 60hz light pulses. They can literally see them. Normally we can see fluorescent light pulses when the lights are older and they pulse less reliably, but some people can see them when they are brand new. To them, a fluorescent light is nothing more than a headache factory.

    The real solution to energy efficiency is, and always has been, a carbon tax or cap-and-trade system. By increasing the cost of energy, people naturally look for the ways to conserve that fit their situation the best. For some people, CFLs might be the trick. For others, better insulation or better windows or a hybrid car.

    When we make heavy handed decisions like banning light bulbs, we inadvertently and disproportionately reduce the quality of life of some people in the quest to increase it slightly for other people. It’s a terrible solution.

  25. Wow. I mean wow. The quality of life for some people vs. other people? Look, I agree with the bulk of the post Mr. Renn is getting at here. The idea of a green economy magically appearing or replacing lost manufacturing jobs is pie in the sky, and there needs to be realistic solutions to that reality. However, it should be noted that the dramatic energy reduction involved in replacing all incandescents with CFLs indeed helps improve the quality of life of everyone. All over the planet. I like breathing and keeping the ice caps where they are thanks very much.

    Also, Cap and Trade is absolutely a solution I support. But you can’t discount the fact that it is equally, if not more radical, than banning incandescent bulbs. The trade-offs will be some people losing jobs in order to keep the planet from turning into a fireball. How much is that worth? I have no idea. How do you mediate that problem. I’m sure people have been thinking about it. Just not me.

    To answer The Urbanophile’s other question there is the n:vision soft white bulb, which comes on instantly and has a genuinely pleasant light. I believe popular mechanics did a study on this and there were at least 6 CFLs that outperformed incandescents in terms of a “natural” light spectrum. A Google search should get you there.

    Their cost of course can be three to five times a normal bulb, but they have a life span 10 times longer, though I would question that one a little, but certainly long enough to pay for the difference and plenty more.

    And true photographers will use tungsten balanced halogen bulbs. Which really are great. But they also get hot enough that you might burn your house down.

    Note: I hate waiting for light as much as the next guy.

    Much love!

  26. Danny says:

    You are completely ignoring the point that a ban is making a decision for you, which is not always the best decision to make.

    Take the situation of a cash-tight person who lives in an old brick house with poorly fit windows and a leaky basement. Under a carbon taxation system, their incentive is to make the changes that will provide the biggest reductions in energy use for the lowest amount of money. In this case, they would probably spend money on sealing draft leaks.

    But in a command and control system, you have already spent their money for them. They have to buy the lightbulbs because they have no other choice, and they no longer have the money available that could provide a better net reduction in energy use. So they spend the money on lightbulbs and crank up the heat in the winter to heat air surrounding the house.

    This isn’t just an anecdote. If you asked 50 different people in 50 different states what would be the most cost effective ways to reduce their energy use, you would get 50 different answers. And replacing incandescents would probably be on a lot of lists. Banning things like incandescent light bulbs takes away their ability to spend on the things that make the biggest impact for their situation. All that they need is an incentive to save energy.

  27. COAST says:

    You guys didn’t really think you were going to shove a bunch of draconian laws down peoples’ throats, outlaw their jobs, tax away their wealth, and have them sit still for it, did you?

    The reply to these comments is the same as the reply to the problem. The equal and opposite reaction to all this progressive B.S. is “Speaker Boehner.” And if the damage continues, it will be “President Palin.” Thanks for that.

  28. Larry Willliams says:

    Samizdat, Our political elites have transferred our technology and our jobs overseas to maximize wealth for their corporate allies and themselves, of course. And they have managed to convince most of us for decades that, despite the loss of “real” earning power over the last several decades, we are better off with our manufacturing jobs shipped overseas.

    Of course, ridiculous laws like the banning of incandescent bulbs for the mercury laden hazardous waste CFL bulbs were designed to limit our choices and enrich their thieving partners. And the environmentalists fall for the scam despite the inherent contradictions – what is green about importing all of our stuff from China? It is the exact opposite of sustainability yet the B.S. continues unabated.

    Eventually, if the globalists win out, a large portion of the U.S. citizenry will be unable to afford anything from anywhere as shelter and energy costs consume nearly all of their meager service job wages. Our leaders want to pretend that we can survive as a economic power without producing anything. Unfortunately, when they realize it can’t work (assuming they haven’t already), it will be to late to restore our economic status and we will be relegated to being a second world country if we are lucky, with perennial 20% unemployment.

  29. Jason Mann says:

    OMG. Is this true? Incandescent will be illegal? So I have to use CFLs? With their mercury waste? You have to be kidding me. This craziness is occurring because global warming has come to completely dominant the conversation about the environment. Climate change is a problem–to be sure–but does it have to completely blind us to reasonable solutions? First, Al Gore and Obama want to push nukes on us–nowe mercury light bulbs—all to “save” (?) the planet.

  30. David says:

    I agree with the overall point. By the 2020s, “Green” jobs will be a rounding error compared to retail, health care, and other sectors that are too boring for many bloggers and pundits to ever discuss.

    But I believe it’s a huge mistake to paint this big broad brush of “green”. Solar manufacturing is all going to Asia, because it’s extremely labor-intensive and you get a big per unit cost reduction when you move your plant from Santa Clara to Malaysia. Wind turbines, on the other hand, are being outsourced from Europe to the U.S., because shipping and assembly costs are so high. So just as the U.S. still leads the design for logic chips, but not memory chips, you have to make deeper distinctions to determine the industries that are likely to keep a domestic focus.

  31. Alon Levy says:

    Danny, incandescent bulbs are not very natural. They’re much redder than sunlight, and you can definitely see it in photos. Halogen light partly mitigates this. Unlike both incandescent and halogen bulbs, CFLs look like they give off white light. They used to look artificial, but the modern ones are not very distinguishable from sunlight. If you’re in a room with bright indoor lighting and poor outside sunlight, to the point that sunlight does not overwhelm indoor lighting, then the light can cast two shadows. If the indoor light is incandescent, then it will cast a blue shadow whereas sunlight will cast a red shadow. If the indoor light is fluorescent, they’ll cast shadows of the same grayish color.

    Larry, importing things from overseas is greener than you think. Environmentalists routinely overestimate the amount of energy consumed in shipping. The fuel economy in freight transportation is so great that even at $20/gallon diesel, you’d barely notice the price difference. A ton of light bulbs retails for about $100,000. At $20/gallon, the cost of fuel for shipping this ton 20,000 miles by sea and rail is about $1,000.

  32. The mother of all false equivalencies! Just because we no longer manufacture incandescent light bulbs here in America green industry is a fantasy? Tell that to the thousands of Tennesseans manufacturing solar panels at three different plants across the state.

    Here’s a news flash for you: short of bombs, bullets and fighter jets there’s very little America manufactures anymore, and it has nothing to do with an act of Congress and everything to do with corporate greed and an addiction to cheap labor. We in Tennessee thank God for every scrap of Congressional incentives to the green industry you disparage because people thrown out of work when other manufacturing got outsourced to Mexico and China can at least have a job making Nissan’s Leaf or Sharp’s solar panels.

  33. Bad Man says:

    News flash for Mr. “Know It All” Levy! I always love how some green eco-nazi “claims” to know all about lighting and light spectrum. Incandescent bulbs not only produce a warmer, more natural light – but the energy saved is miniscule in the scheme of things.
    It’s idiots like you that would like everyone to go back to living in some underheated hovel, wearing hemp clothing and no longer owning an automobile.

  34. Terabyte says:

    I’m open to this line of argument, but the Urbanophile fails to make a convincing case. Yeah, lightbulb production may well move overseas – so what? That’s a capital-intensive product. There are many other green industries (both design and manufacture – ex. solar panels, new energy infrastructure, etc etc) in which the U.S. has a competitive advantage either because of superior human capital or transportation advantages. As with all global trade, there will be winners and losers but the U.S. stands to gain far more than it will lose with the move to green products.

    If you want to make a case for this, then you’re going to have to do a whole lot better than one hypothetical.

  35. Alon Levy says:

    Hooray for anonymous flames!

  36. rewinn says:

    The conclusion “… in the short term at least it’s probably only going to dig the hole deeper” is not supported by any facts, except ONE anecdote about ONE product.

    While in the nature of humanity, there is generally a normal distribution of knowledge on any subject, as a whole sustainability advocates have “…face[d] up to the fact that there are real costs and tradeoffs to be made…” in a far more realistic fashion than have their critics, for example, in customarily factoring in the health and economic damages of non-green technology. If the blogger wishes to educate himself before writing again, one rather objective place to start may be http://www.scientificamerican.com/topic.cfm?id=green-technology

  37. DBR96A says:

    Those fluorescent bulbs are so “green” that you need to call in a HAZMAT team to clean up the mess if one of them breaks.

  38. timh99 says:

    Lost in all this is the sad reality that GE actually invented the compact fluorescent in the 1970′s and decided not to develop it. I’m sure they thought it was too expensive, maybe it was. But Mr. Yan comes along 15 years later, picks up the idea and runs with it. These jobs aren’t being lost because of legislation, they’re being lost because the market for them is shrinking, that’s why there is only one factory remaining. They’re being lost because of corporate shortsightedness. GE could have owned the market had they had some vision.

  39. Here’s some facts about CFLs…

    “Natural Light” varieties are in your stores now. And you’ll take better photos in your home with them than anything you’ve ever used (unless you’re a professional photographer with lighting setup skills).

    They don’t burn hot like incandescents, and therefore they’re more comfortable to work under during the summer and don’t work against your air conditioning.

    Cleaning up a broken CFL doesn’t require “HAZMAT” – http://www.epa.gov/cfl/cflcleanup.html – but it’s certainly not as easy as dealing with a broken incandescent.

  40. Nathanael says:

    I specifically switched to LEDs to get *rid* of the UV light (pure waste, and some people are photosensitive) in the spectrum!

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