How Clean is your Clean Energy?

In the summer of 2022, the Inflation Reduction Act was pushed through Congress. Its goal was to promote a transition to clean energy with subsidies for electric cars and solar and wind energy. It also was supposed to raise revenue through a small tax on share buybacks and increased tax enforcement by the Internal Revenue Service. How far has the bill been succesful in achieving in clean energy goals?

The White House IRA Fact Sheet claims that “Inflation Reduction Act’s clean energy and climate provisions have created more than 170,000 clean energy jobs”. Climate Power Report makes a similar claim. If read closely, the first paragraph reads, “In just under a year, companies have announced or moved forward with projects accounting for more than 170,600 new clean energy jobs”.

Figure 1: Nonfarm payroll (in thousands) Note: Source: U.S. Bureau of Labor Statistics, Release: Employment Situation

The area between the two vertical lines shows the period between the passage of the IRA and one year after that. In a recessional period, businesses and companies often lay off employees or limit hiring due to a decrease in demand for goods and services which results in a negative spike in employment. After a recession, as the economy begins to recover, firms start to increase production and services due to rising demand. This requires more workforce, so firms start to hire more employees leading to a significant increase in employment rates. These jobs are commonly known as the “bounce back jobs”. This upsurge often goes above normal as companies not only have to make up for their workforce shortage caused by layoffs during the recession, but they also have to account for increased demand. However, this surge tends to stabilize eventually. That’s because once companies have sufficiently increased their workforce to meet the demand at hand, the need for additional hiring decreases. Hence, the employment rate returns to normal levels. This surge was seen during the 2008 financial crisis and also post COVID-19. So, it is clear if there is a surge in non-farm payroll jobs, it is because it is a post-recession recovery period, not necessarily because IRA added clean energy jobs.

Figure 2: Job openings (in thousands) Note: Source: U.S. Bureau of Labor Statistics, Release: Job Openings and Labor Turnover Survey

Figure 2 shows the number of job openings. There has been an aggregate decrease in the number of job openings in the one year after passing of the IRA which raises further questions since when the overall job opening has declined, it is unlikely that just the clean energy jobs were newly added or there was a growth in the clean energy jobs.

Furthermore, according to the U.S. Department of Energy’s (DOE) U.S. Energy and Employment Report (USEER), clean energy added 114,000 jobs nationally in 2019, increasing to over 40% of total energy jobs. Thus, there was already a growth trend in clean energy jobs even prior to the passage of the IRA. This pre-existing growth trend indicates that the recovery and addition of energy jobs are more likely a continuation of the sector’s bounce back from the pandemic losses rather than a direct consequence of the IRA. Therefore, the assertion that the IRA is the primary driver of new job creation in the clean energy sector is not strongly supported by the available data.

Fallacy of Clean Energy

There is no convincing evidence that the energy being generated is actually clean. There is a big boost for electric vehicles. However, while promoting electric vehicles, a common fallacy is to not look at the source of electricity generation. If electricity generation itself is not through renewable resources, electric vehicles themselves are of no consequence. Another greater concern is humanitarian and pertains to the cobalt used in lithium-ion batteries needed in electric vehicles as revealed in the NPR report on Siddharth Kara’s book “Cobalt Red: How the Blood of the Congo Powers Our Lives”(Read here).

Accounting for the greenhouse gases generated while producing the electricity used in electric vehicles as well as the humanitarian concerns in the cost-benefit analysis of electric vehicles vis-à-vis vehicles using fossil fuels, electric vehicles don’t seem to offer a clear-cut competitive advantage as far as clean energy is concerned.

As far as solar energy is concerned, some of the crucial things are overlooked such as the potential negative impacts the solar panels could have such as high upfront and storage costs, changes in land use patterns, intensive water use, disposal of harmful chemicals such as silicon tetrachloride used in the manufacturing process, potential land/soil pollution owing to improper disposal of toxic chemicals and the prospects of recycling the defunct panels or the waste generated.

That leads to another contested term i.e. chemical recycling. It is constantly being touted as “clean energy” technology. However, the Greenpeace report as well as the Beyond Plastics report point out the fallacies in considering the so-called “clean energy technology” as clean. Many environmentalists contend that chemical recylcing is just a misnomer for incineration.

Heat Pumps vs. Gas Boilers

There is another area where boost is given i.e. the heat pumps. To compare the greenhouse gas emissions of heat pumps and gas boilers, we calculate the CO₂ emissions per gigajoule (GJ) of heat delivered for each system, including transmission and distribution losses for electricity. For a gas boiler with 90% efficiency burning natural gas (emission factor: 56.1 kg CO₂/GJ), the heat delivered from 1 GJ of gas is 1 GJ × 0.9 = 0.9 GJ, with 56.1 kg CO₂ emitted, resulting in emissions of 56.1 / 0.9 ≈ 62.33 kg CO₂/GJ. For a heat pump with a coefficient of performance (COP) of 3, delivering 1 GJ of heat requires 1 / 3 ≈ 0.333 GJ of electricity, or 0.333 × 277.78 ≈ 92.59 kWh (since 1 GJ = 277.78 kWh). Accounting for 5.1% transmission losses, the electricity generated is 92.59 / (1 - 0.051) ≈ 97.57 kWh. Using the U.S. average marginal emission rate of 1,405.3 lbs CO₂/MWh (0.637 kg CO₂/kWh), the CO₂ emissions are 97.57 × 0.637 ≈ 62.16 kg CO₂/GJ. Under current U.S. grid conditions, both systems emit nearly identical CO₂—62.16 kg/GJ for heat pumps and 62.33 kg/GJ for gas boilers—showing no clear emissions advantage for either. This parity highlights that gas boilers are not worse than heat pumps in terms of clean energy, particularly given the grid’s reliance on fossil fuels in many areas.

Wind Energy Concerns

While wind energy has been touted as a green, renewable alternative to fossil fuels, it is not without a set of associated drawbacks. Firstly, one major concern with wind energy is its inconsistent and unreliable nature. Wind farms are only able to generate power when the wind is blowing at an adequate speed, which makes them less reliable than more traditional sources of energy. It necessitates the need for alternative backup systems for when wind power generation is not possible. Secondly, the infrastructure required for wind power, including wind turbines, can cause significant noise and visual disturbances. These turbines are a source of concern for many communities because of their impact on the local scenery and the potential for noise pollution. Thirdly, they require substantial land space for installation. This often leads to the destruction of natural habitats during the construction of the wind farms which negatively impacts biodiversity. Moreover, wind turbines can pose an existential threat to flying wildlife, particularly birds and bats. Many of these creatures are killed every year by colliding with the spinning turbine blades. Lastly, from an economic perspective, the high initial costs for installation and maintenance pose a significant challenge. The capital costs of wind turbines are quite high, and the long-term maintenance costs can make them unattractive investments without robust long-term government subsidies. While mitigation strategies exist for each of these drawbacks, integration of wind energy into the power grid should be done thoughtfully to minimize these negative impacts.

The Subsidy Dilemma

There exists a significant amount of monetary resources, derived from taxpayer contributions, funneled into propelling the so-called “clean energy” technologies. This strategy ostensibly serves the dual purpose of job creation, including the promotion of clean jobs in particular instances. Notably, the magnitude of the subsidies and tax credits or rebates received by corporations can be observed vis-à-vis Subsidy Tracker. However, it is imperative to highlight that the premise of clean energy and technology is often not substantiated, and the job creation promises remain unfulfilled. Furthermore, there is an apparent disregard for the Environmental Protection Agency’s guidelines. A comprehensive cost-benefit analysis would reveal a rather bleak picture. The enormous subsidy and tax credit influx, including the ones given by IRA, appears untenable when placed against the background of the initial objectives purportedly set out to be achieved by this strategy. It’s clear there is a discernible disconnection between the envisioned expectations and the actual outcomes.

This brings us to the second major purported objective i.e. tax on share buyback and increased enforcement. Firstly, the huge amount of subsidies and tax credits on the so-called clean energy, defeats the two purported objectives mentioned above, without even achieving the desired objective of implementing clean energy. According to tax foundation’s report here (Tax Foundation Report), these provisions of IRA have extraordinary implementation challenges and taxpayer confusion and has worsened deficits. Thus, the bill suffered from its improperly defined goals, despite the purported good intentions. More data based evidence is needed just to define the correct goals. That is the first step before comprehensive solutions are suggested.