The green economy: what does green mean?

• Author: Slaper, Timothy F.

Everyone is talking green these days. President Obama has made the green economy a pillar of his administration. In early August, the President announced that several Indiana companies were awarded federal grants to advance the development of green transportation. Several reports on the green economy and green jobs have surfaced in the last year. The studies all agreed--the green economy and green jobs will be integral to continued U.S. prosperity.

It's Not Easy Being Green

The trouble is that researchers, data collectors, and policy makers have yet to settle on a method for identifying what is green. Such a method would need to accurately gauge the green economy's size and rate of growth, and to identify the jobs associated with it. What is green and how do we measure it?

This definitional issue is not trivial. The industries that qualify as green serve as a benchmark for the size of the green economy today and a gauge to measure the rate by which the economy becomes greener. Getting the definition right helps to guide government policy, research funding, business investment, and hiring decisions.

Here are two definitions from reports that came out this year:

* From The Clean Energy Economy (The Pew Charitable Trusts): A clean energy economy generates jobs, businesses and investments while expanding clean energy production, increasing energy efficiency, reducing greenhouse gas emissions, waste and pollution, and conserving water and other natural resources.

* From the Michigan Green Jobs Report (Michigan Department of Energy, Labor & Economic Growth): Industries that provide products or services related to renewable energy, increased energy efficiency, clean transportation and fuels, agriculture and natural resource conservation, and pollution prevention or environmental cleanup.

The reader may have noticed a subtle shift from the first definition to the second. One moves from what the green economy is toward how the green economy is measured. Here is the first sticking point: Some business activities are unquestionably green, say low-input, organic farming. Others are obviously not green, say extracting oil from tar sands. But most green business activities are bundled with those that are not. So then, what is a green business? Who decides? The manner in which economic statisticians collect and categorize data isn't much help either. Organic food processors are no different from other food processors according to the economic accountants that collect and report production and employment data.

There is no green accounting standard when it comes to what to include as a green product or industry and what to exclude. A producer of citrus-based solvents may readily be classified as green. But what about the house painting company that uses the citrus-based solvents instead of mineral spirits? Is that company green? Some researchers and green economy watchers would say yes. Others might wonder whether that citrus-based solvent isn't somehow being double counted as green, once for the firm selling it and the second time for the painting company reselling it to the home owner.

Measuring green on the production side then, has at least two major weaknesses.

1. Most industries produce both green and non-green goods and services, so making distinctions is difficult.

2. It may be spurious to include industries that produce non-green products or services but use green inputs and processes in their production. For example, are a tailor's suits and shirts green if he makes them from organic cotton cloth? His production process is exactly the same irrespective of the type of cloth he uses to make...