Can Obama's Stimulus Plan Spur Green Jobs in the U.S.?

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A Texas wind farm; some 3 million Americans already work in green businesses Robert Nickelsberg/Getty Images

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Spanish wind company Gamesa is bringing 1,000 jobs to several factories in Pennsylvania and its North American headquarters in Philadelphia. In Memphis, Sharp opened its first plant outside of Japan for making solar panels.

Some green industries are homegrown by nature. Biofuel refineries need to be built near the crops that provide the feedstock. Even more jobs would be created by making U.S. houses and buildings more energy efficient, argues economist Robert Pollin of the University of Massachusetts, Amherst. "There is about $26 billion in retrofitting on public buildings that could be done the day after legislation is signed," Pollin says. "The job impacts are very high. Each $1 million in spending would bring about 18 jobs."

What could Washington do to grow the green economy? Limit emissions of greenhouse gases, thus raising the price of using fossil fuel and steering the industry toward more environmentally friendly alternatives. Continue or boost tax credits for biofuels, wind, and solar. Make infrastructure investments, such as building transmission lines needed to bring power from large solar power plants in the desert or from North Dakota's windswept prairies. And increase federal dollars for energy research and development, aiding programs that have withered during years of declining funding. All of this, proponents say, would foster enough innovation to help American companies leapfrog their overseas rivals. "America's future depends on our ability to spark an energy revolution," argues Massachusetts Institute of Technology President Susan Hockfield.

Skeptics wonder, however, if such a sweeping transformation is possible. "The optimist in me wants to believe it," says Matthew E. Kahn, an economist at the University of California, Los Angeles. "The cynic in me asks, is this like FDR jobs creation in the guise of green jobs?" Kahn believes that rather than spending federal dollars, the best approach is simply increasing the price of carbon—which is politically difficult.

Passing Obama's green stimulus package will be an uphill battle, and its success if implemented is far from certain. But the nation's financial mess is so bad that the President-elect has a freer hand. He also needs to show action on climate change to help restore America's reputation around the world—and to bring China and India on board. The surge earlier this year in oil prices (expected to rise again after the recession ends) even has brought traditional opponents of renewable energy and climate action to the bipartisan table, as long as they get expanded drilling rights. Says Thomas J. Donohue, president of the U.S. Chamber of Commerce: "Energy policy can create jobs, give an economic lift, and get us out of this ditch."

with Adam Aston

Carey is a senior correspondent for BusinessWeek in Washington.