Can the creation of green jobs in cleantech industries be the answer to the US's economic woes?
Eco-money: Green light at the end of US's dark tunnel
As the United States comes to terms with its recent credit downgrade by the ratings agency Standard & Poor's, green job creation is now being seen as one way for the nation to try and pull itself out of the continuing recession.
If governments can assist green jobs growth by helping find crucial funding for green technologies at key stages of their development, it is believed that sustainable, clean technologies could grow at an even faster rate.
This would be good news for the US economy, as well as green investors across the world, in a week that has seen ratings agency Standard & Poor's downgrade the US government's sovereign credit rating to AA+ from the AAA rating and more than US$4 trillion (Dh14.69tr) wiped off world markets.
The downgrade will not only add billions to the US government's interest bill but also further damage to the US economy's already tarnished image. It puts the US credit rating below those of about a dozen countries including the United Kingdom and Australia.
With many traditional manufacturing industries now drastically weakened by foreign competition and no clear end of the current recession in sight, the US is desperate to stimulate employment.
According to research carried out by the Brookings Institution, a non-profit public policy organisation based in Washington DC, and independent research and development organisation Battelle's Technology Partnership Practice, green jobs now exceed the growth of oil-and-gas industry jobs. Although green-sector growth has been relatively slow overall, newer green technologies, referred to as "cleantech", which use technology that has been developed since 1996 in areas such as renewable-energy and new power-grid technologies, has seen rapid growth.
According to Johnathan Rothwell, a senior research analyst with Brookings Institution: "Jobs growth in new cleantech industries is double that of general growth in the US."
But he added that the new green industries often suffer from a lack of funding, which is limiting green jobs growth at a time when new industries need desperately to grow. Although it is acknowledged that new industries need to stand squarely on their own two feet and rely primarily on private sector support, they also require a certain level of government support in order to grow.
"The US is a great environment for attracting venture capital early on," says Mr Rothwell. "But there is little appetite on the part of the banks to help new companies scale up their technologies."
Individual cleantech companies can require cash injections of $100 million in order to develop their products to a fully commercial and competitive level. In the current financial climate, the banks are reluctant to lend money to companies without sufficient track records or proof of long-term stability. The Brookings Institution believes that one cost-effective route to job creation on a larger scale would be for the government to help fund warranty insurance on cleantech products to help inspire confidence on the part of the banks.
"Banks need to evaluate risk before turning over large sums of money," adds Mr Rothwell.
The report concludes that: "Vigorous private sector-led growth needs to be co-promoted through complementary engagements by all levels of the nation's federal system to ensure the existence of well-structured markets, a favourable investment climate, and a rich stock of cutting-edge technology."
It also recommends that the US Congress should create an emerging technology deployment finance entity and also work to rationalise and reform the complex tax provisions and incentives that currently encourage capital investments in clean economy projects.
The Brookings Institution also believes that Congress and the federal government could help by putting a price on carbon, passing a national clean energy standard (CES) and moving to ensure more rational cost recovery for the delivery of renewable energy to towns and cities. It also recommends that individual states adopt or strengthen their own clean energy standards, reduce the initial costs of energy efficiency and renewable energy adoption and pursue electricity market reform to facilitate the use of clean and efficient solutions.
The main hurdle is that although cleantech jobs growth has been dramatic, the rapid growth starts from a relatively small base, estimated at roughly 200,000 and could stall without support. While the US added half a million cleantech jobs between 2003 and 2010, expanding at an annual rate of 3.4 per cent, this lagged behind the growth in the national economy, which grew by 4.2 per cent in the same period.
It is essential, therefore, not only for the US, but for the entire global economy, that the right funding combination for cleantech industries be found soon. If green industries can realise their potential in this way, the new industries will provide jobs growth, not only in developed western economies, but eventually across the whole world.
If this can be achieved, the rewards for private investors in cleantech industries could be considerable, offering high returns on green companies with the added potential of long-term financial and ecological sustainability.