The Michigan Public Service Commission’s report on the implementation of Public Act 295 of 2008 states that:
“[T]he [MPSC] is aware of several undertakings which suggest a positive influence on employment and economic growth in the state. … Indeed, there has been economic development in Michigan that can be attributed to the Act.”
The commission commits what economists call the “broken windows fallacy.” On the surface, there may appear to be an underlying benefit to smashing a window because it would mean profits for local glassmakers and window installers. But is it really beneficial to destroy the window and redirect money meant for other things to replacing it?
By requiring utilities to forgo lower-cost sources of conventional energy in favor of higher-cost “green energy,” supporters of the act might be able to point to individual investment projects and jobs. However, the important economic consideration for the commission and the people of Michigan should be the net economic effects of the mandate, not just some of the isolated financial benefits.
The jobs that are lost due to higher energy costs are not as easy to identify as the jobs created by new energy construction projects, but they are just as important. While Public Act 295 might generate visible new jobs and construction projects, our projections clearly indicate that Michigan electricity ratepayers will pay higher rates, face fewer employment opportunities, and see investment redirected to other states.
Business firms, particularly those with high electricity usage, may begin to move their production (and emissions) out of Michigan to locations with lower electricity prices. Start-up firms or relocating firms may refuse to locate in Michigan at all. In both cases, the emissions — as well as the jobs and other economic benefits — will simply occur elsewhere. Therefore, the Michigan policy is unlikely to reduce global emissions, but will likely send jobs and capital investment outside the state.