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On Green Energy: Italy and the Eco-Mafia

Thursday, May 26, 2011

The Mafia like ‘green jobs,’ but Italians shouldn’t.

Part of a series on “green jobs” in Europe, this article focuses on Italy. Italy has been another early European leader in wind and solar power deployment. But a study performed by Luciano Lavecchia and Carlo Stagnaro of Italy’s Bruno Leoni Institute found serious problems with the Italian experience; in particular, that capital spent on green energy was vastly less efficient at creating jobs.

Finally, we have compared the average stock of capital per worker in the RES [Renewable Energy Sector] with the average stock of capital per worker in the industry and the entire economy, finding an average ratio of 6.9 and 4.8, respectively. To put it otherwise, the same amount of capital that creates one job in the green sector, would create 6.9 or 4.8 if invested in the industry or the economy in general, respectively—although differences exist between RES themselves, with wind power more likely to create jobs than PV power. This fact is particularly relevant because we didn’t even consider the non-trivial value of the renewable energy produced, but we focused on pure subsidies. If we had considered the energy value, the average stock of capital per worker would result even higher. Since subsidies are forcibly taken away from the economic cycle and allocated for political purposes, it is especially important to have a clear vision of what consequences they beg. 

The researchers also found that the vast majority of the green jobs created were temporary:

Using what we see as inflated estimates, from various sources, of already existing green jobs, we take between 9,000 and 26,000 jobs in wind power, and between 5,500 and 14,500 in photovoltaic energy, as our starting point. From there, we have calculated that thanks to the subsidies Rome has promised, the number of people working in the green economy will rise to an aggregate total of between 50,000 to 112,000 by 2020. However, most of those jobs—at least 60 percent—will be for installers or other temporary work that will disappear once a photovoltaic panel, or a wind tower, is operative.

As with Spain, corruption has run rampant through the renewable sector. In Italy, however, rather than having numerous individuals defrauding the government, the mafia is involved. As Nick Squires reported in The Telegraph, “Attracted by the prospect of generous grants designed to boost the use of alternative energies, the so-called ‘eco Mafia’ has begun fraudulently creaming off millions of euros from both the Italian government and the European Union.” Squires goes on to report that:

Eight people were arrested in Operation "Eolo," named after Aeolus, the ancient Greek god of winds, on charges of bribing officials in the coastal town of Mazara del Vallo with gifts of luxury cars and individual bribes of €30,000-70,000.

Police wiretaps showed the extent of the Mafia's infiltration of the wind energy sector when they intercepted an alleged Mafioso telling his wife: "Not one turbine blade will be built in Mazara unless I agree to it.”

In another operation last November, codenamed "Gone With the Wind," 15 people were arrested on suspicion of trying to embezzle up to €30 million in EU funds. Among those arrested on fraud charges was the president of Italy's National Wind Energy Association, Oreste Vigorito.

As my series on the European experience shows, the push for renewable energy has been hasty and unsustainable. The results, which were utterly predictable, included job losses, economic loses, abuse of government subsidies, more costly energy for consumers, corruption, and waste. The causes for Europe’s failure stem from nearly unavoidable dynamics of economics, public choice theory, and rent-seeking. Europe’s experience should be viewed as a cautionary tale for those who would have the United States embark on similar efforts. Those who think the United States would fare better because we are somehow immune to such dynamics have not been paying attention to recent events in the U.S. economy.

Kenneth P. Green is a resident scholar at the American Enterprise Institute.

FURTHER READING: Previous entries in this series are “Plainly Not Helping Spain,” “Don’t Envy Germany,” “Renewable Energy Fails to Green the U.K. Economy,” and “A Dutch (Re)Treat.” Green discusses “President Obama's Flawed Energy Blueprint,” “The Green Jobs Myth,” and “Empowering the Free Energy Markets.”

Image by RobGreen/Bergman Group.

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