In this column in today’s Toronto Star, James Biggar of Leadnow.ca calls on Ontario to, “embrace the green future,” and to avoid becoming the, “Commodore 64 of the world economy, sitting on the trash heap of history.” I agree, but perhaps not for the reasons you expect.
This statement has irony written all over it. For you see, the Commodore 64 could have been a great Canadian success story. If you take a look at this history of Commodore, you will see that the original Commodore International Limited was founded by Jack Tramiel in Toronto! It was then a manufacturer of typewriters and adding machines. After enduring some business hardship, the company was on the verge of something big and then…they relocated to Palo Alto in 1976. In 1977, they launched the PET, in 1981 the Vic20, and in 1982 they introduced the best-selling computer of all time, the Commodore 64.
Ontario’s Green Energy Act is, “part of Ontario’s plan to become a leading green economy in North America.” To succeed, they must learn the lessons of the Commodore 64. At the time, Palo Alto offered locational advantages to Toronto, and so the company relocated. Right now, the Green Energy Act creates a lot of artificial fiscal and regulatory comparative advantage for Ontario in the race to develop better green energy technology. The trick is making sure that the big breakthrough in renewable energy doesn’t happen a few years after the industry packs up and leaves Ontario for a better deal somewhere else, as Ovonic Solar did when they got a better deal from Ontario than they had in Greenville, SC. To do so, Ontario needs to focus on building real comparative advantage through skills development, superior supply chains, etc. Unlike a fossil fuel industry, renewable energy industries are mobile and so maintaining locational comparative advantage is crucial.
The history of Commodore tells me that Tramiel is, “basically retired and now lives in a house house atop a foothill in Monte Sereno, Calif.” He was able to capture a lot of the benefit from his success, but the place where his business got its start was not. We absolutely should not let Ontario’s Green Energy Economy go the way of the Commodore 64.
Let me see if I am understanding you correctly. So you are essentially saying that the problem with domestic content rules and relocation subsidies (e.g. the Samsung deal) are that the other jurisdictions may use the same policies, so whatever artificial comparative advantage these policies were meant to create are easily negated. Therefore a comparative advantage via other means, that are not as easily replicated elsewhere, is needed (e.g. skilled labour force, transportation infrastructure (the 401), favourable exchange rate (1990s), etc.).
cheers,
Joel
That’s it exactly. I don’t know enough about Commodore (or computers in general) to say why they moved to silicon valley, but it seems pretty obvious. The question is whether the same agglomeration economies exist in renewable energy, and whether Ontario will be able to take advantage of them.
Andrew
Silly Economist. Don’t you know that green energy firms, such as a certain amphibian, are purely motivated by altruism and have a higher moral standing than those who work at dirty energy jobs?
All kidding aside, what definition do you use for a “green job”? Is it self-identified or is it like a Hall of Famer, you know one when you see one?
Thanks Phil. Far too few comments on this blog begin with, “Silly economist…”
I don’t really have a preferred definition of “green job”. There are a couple of reasons for this. First, I think of jobs as costs, not benefits, in terms of an environmental program. The more people you have to hire to achieve a given outcome, the more expensive it is likely to be. I would much rather see us investing in environmental policies which deliver the most environmental bang-for-the-buck, not those which lead to the hiring of the most people per unit of environmental improvement. Second, I don’t think you can draw a line around “green jobs” even if you wanted to for some reason. Is a fork-lift driver in a solar panel plant any different from a fork-lift driver in a car factory? It could just as easily be either one of them who now has a job because of the solar panel plant opening, so it’s hard to say. Same goes for electricians; if distributed generation creates more demand for electricians, all electricians benefit (and all consumers of electrician services pay), not just those who end up working on solar installations.
Does that answer your question?
Andrew
I am not an economist but a computer engineer and like most computer engineers we have studied the history of silicon valley. Silicon valley is the epicentre for the IT world because it was the first place to supply the entire supply chain and related services that IT companies need. If I were to start up a IT company I would go to Silicon valley because that is where all the venture capitalist are. Silicon valley became the epicentre because of two reasons, Stanford University produced a lot of engineers, and the Navy and NASA had facilities in the San Francisco area. The Navy and NASA created an artificial demand for integrated circuits 40 years before they were profitable. The FIT program creates this artificial demand, once the industry gets large enough and supply chains are established business will come to Ontario because it offers an ecosystem for solar development that no other jurisdiction offers. For example look at facebook, even though the company started in Massachusetts it is now located in Silicon Valley.
Hi Jimmy,
Thanks for commenting. Yes, you are correct that there are many success stories that come about because of policy creating an early incubator for success. There are also success stories which occur in the absence of those policies, and situations in which a policy-driven push to create a sector does not end up succeeding. The question is which storyline Ontario will follow. Ontario is not the only jurisdiction trying to create a cluster in renewable energy – in fact, almost every jurisdiction with a feed-in tariff or renewable portfolio standard seems to fancy itself a future exporter of renewable technologies. They will not all be successful, and that was part of my point. Ontario can’t only look at the successes, and try to emulate those…they also have to be willing to look at the failures, and learn which pitfalls to avoid. So far, there have been to few instances where discussion about the GEA begins with, “this will not work unless…”
Andrew