Horizon, Host: Ted Simons

November 23, 2010


Host: Ted Simons

Arizona’s “Green” Economy


  • What is the “green economy” and can it deliver much needed economic growth to Arizona? George Basile, of ASU’s School of Sustainability and Jim Rounds, VP and Senior Economist for Elliott Pollack & Company, discuss the issue.
Guests:
  • George Basile - ASU School of Sustainability
  • Jim Rounds - VP and Senior Economist for Elliott Pollack & Company
Category: Sustainability

View Transcript
Ted Simons:
Good evening, and welcome to "Horizon," I'm Ted Simons. Former Paradise Valley mayor and congressional candidate Vernon Parker says he's going to run for chairman of the state Republican Party. The "Arizona Guardian" says Parker announced his candidacy today. If elected, he would be the first African-American to chair the state GOP. Arizona's economy has been hit extra hard by the recession, mainly because of the state's dependence on taxes. Many are calling for Arizona to diversify its economy with the development of green jobs as part of the answer. I recently discussed the promise of a green economy with George Basile, executive director of the decision theater for ASU's Global Institute of Sustainability. And Jim Rounds, senior vice president and senior economist for Elliott D. Pollack & Company.

Ted Simons:
And thank you both for joining us tonight. George, we'll start with you. What constitutes a green economy?

George Basile:
Well, I think the major thing a green economy does is it actually works with the environment, doesn't work against the environment. So we know these things in terms of clean and renewable energy, smarter use of water. Businesses that are more efficient and use more of their resources in a way that delivers better products and gives us less of the problems we've had with pollution and climate change.

Ted Simons:
Conservation is a part of it, I would imagine?

George Basile:
Conservation is a very big factor, and in terms of efficiency, which goes right to the bottom line.

Ted Simns:
How do you incorporate, Jim, environmental issues into an economic system? How do you balance that?

Jim Rounds:
I think in some cases it comes down to cost. Is it going to be cost-effective for a business to maybe go green. And it doesn't necessarily have to be cost-effective right away, it could be having returns over time. There's also the publicity factor where I think some major businesses get some benefit from indicating they are going green. There's really this groundswell of support. We don't know the extent this is going to play out across the nation when the federal government runs out of money. At some point they can't keep supporting these programs. But for the last decade or so post 9/11, when people started to talk about getting off the fossil fuels and oil prices went up due to investor speculation, I think there was a change in people's perceptions.

Ted Simons:
Take a specific industry, construction, which has always been so important to Arizona. Put the green component into that industry. What do we see?

Jim Rounds:
It's probably the simple stuff, the solar panels you might install, the insulation. Probably more in government buildings than in the private sector, but that's not uncommon that you see the movement a little bit more on the government side, and then the private sector picks it back up. We did it a couple of years ago for the Department of Commerce and tried to gauge the willingness of building owners, and it came down to price.

Ted Simons:
Is that is how you see it, as well, retrofitting not being the best idea if you're too far ahead?

George Basile:
I think there are a lot of things you can do as far as retrofitting. 50% of our energy is used on incandescent lighting and we're shifting that over with policy. Another interesting thing in the marketplace are companies like IBM, making a multibillion-dollar business by making a better data center. Folks like Intel helping folks use green thinking to make higher efficiency computers. In this case, green building gives you a whole new market opportunity you didn't have before.

Ted Simons:
But How much do costs still play into this? If there's a way to do X and doing it green adds costs to it, are we in a situation where folks are saying, I can see the benefits down the road, let's do green, or is still cost a major factor?

George Basile:
Well, cost is always a major factor, especially with businesses, and more and more with all of us these days. I think you're right, we've seen a ground shift where businesses no longer ask, do I have to do this; they know they have to; it's a question of how fast. Cost comes in as more a driver of speed, than whether you're going to do it or not.

Ted Simons:
Interesting. As far as Arizona is concerned, a green economy, sustainability, these sorts of things, how much impact on Arizona's economy as we go forward? What are you seeing?

Jim Rounds:
There's a lot of support from the business sector to support G-pac and the solar package passed a couple of sessions ago. That was one of those cases where the subsidy was needed to reduce costs to the point where we could start to generate jobs here. A lot of people don't recognize, yes, Arizona can be a leader in solar technology and energy, but we're really the natural leader in planting stuff in the ground and having somebody clean off the panels. You can do the R&D and the manufacturing in the shade. You're not doing that out in the desert. It made us more competitive in the high value added and higher wage industries. There's a difference in being competitive in cleaning off the panels and paying somebody $10 an hour for it versus actually making the product. You have the production of the energy and exporting it.

Ted Simons:
Are we doing a good enough job in Arizona to make sure the jobs either come here or stay here?


George Basile:
I don't know if we're doing a good enough job. We can certainly always do a lot more. We are putting a lot of pieces in place. The university system here has leadership in energy, leadership in water, leadership in technology. We've seen the aerospace industry here jump into some of these projects, which is different for them, new for them. We've seen the computer technology industry here become leaders in the production capabilities of these pieces. So we have, to your point, in terms of building the right kind of context for the future jobs that are high-paying jobs, leadership jobs, we're doing a lot there. We can certainly do more.

Ted Simons:
Are we doing enough in terms of making sure -- and you mentioned some private sector industries there -- is the private sector jumping in? Obviously the public sector seems to be very interested in a lot with the stimulus, but it's not going to last forever. What's going to happen to that dynamic?

George Basile:
Right now we're seeing a number of solar industries come here and put new plants here. We have places like Dial-Henckle, a manufacturer of soaps and whatnot. They are leading the way in some of these industries. We're also seeing a manufacturing base in things like Frito-Lay which has transitioned that to a near net zero plant. They have solar power and clean water. The jobs there, the things people do there are going to be the things that then go out and make them leaders in the rest of the industry. I don't see business going backwards on this at all.

Ted Simons:
You referred to it earlier, again, stimulus is not going to last forever. What happens when public funding eases? Is private ready to take over?

Jim Rounds:
I don't think so right now, to the extent that it's already participating. What's tough is that the stimulus program, in some cases it had good elements, but it had a lot of bad elements, as well. Some of the stimulus went toward consumer items. Weatherproofing a garage door, to me that's not really a long-term investment. It's putting Styrofoam on a piece of metal. It's creating jobs, but not relevant to the technology. Some of it went into R&D research. Public policy theory would suggest that it's appropriate for the government to be involved in certain areas. I'm not 100% sure the stimulus moneys were going to the right places. If we get rid of that, there's going to be that much of a void. A significant portion, billions of dollars, went to development in the appropriate places if you buy into it. That's going to have to be made up somewhere. I still think the number one factor is going to be costs. Our taxpayer dollars being used later. The second can be marketing benefits, the advertising benefits. We're going to go green. I would say that's going make up a little bit of difference, but not all of it.

Ted Simons:
Nonrenewable energy sources, subsidies are everywhere and everybody seems to get them. A lot of critics of renewable say too much in the way of subsidies and too much in the way of government interference.

Jim Rounds:
There is government interference in all parts of our lives. Let's go to the airport and see what they are invasive in now. We have limited resources. If you provide a subsidy in one area, you're not providing a subsidy or reducing a tax rate in a particular area. As long as we have limited resources -- and hopefully we always will, I don't want the government to grow at that rate -- people have to make wise decisions. Looking at renewables, make decisions where it's going to be efficient for the economy going forward. Where the taxpayer isn't going to be just losing their money and not getting a benefit from it down the road.

Ted Simons:
For the critics that say renewable sustainable projects, the green economy is too reliant on subsidies, how do you respond to that?







George Basile:
It's a matter of picking the places where you get the biggest bang for your buck. If some subsidies slide off the table, we will see increases in folks looking at efficiencies. Another question is where do you want to spend your money? We're going to spend money on things. Do you invest in the future you want to have? Or do you continue to invest in a path you don't want to bring forward? I think that's where we have to have these discussions around what's the right balance. Whether we have the subsidies or not, there are just smart things to do here, in terms of efficiencies, and there are new technologies to be developed and that are being developed on a worldwide scale. The other question is, where do we want to put ourselves as the Arizona economy, the U.S. economy, in that context.

Ted Simons:
How do we know we have expanded to the point where we are legitimately a leader and we're making headlines all over the world? What do we look for, as far as triggers for that expansion and that kind of success down the road?

George Basile:
I think locally we look for the kind of job growth we want to see. We are already seeing a more rapid increase in jobs. We want to see the businesses doing this have increased sales in these areas. We are typically seeing the most rapid parts of the market growing in these green areas. I think we also want to see it where we aren't so reliant on subsidies that the markets are catching on. We'd like to see also that the leadership is coming to Arizona, that we're being asked to present at places, we're being asked to go out and show what we can do. I think our base economy, the base pieces that we have from construction to health care to aerospace, those are all benefiting in real ways from this -- these sorts of green strategies. Then we'll know we're in the right direction.

Jim Rounds:
Arizona actually did a really good job of setting up a solar program where we're not giving away more than we're getting in return. That was a situation where we became more competitive and it wasn't a matter of limited resources. We are giving back a piece of what they were bringing in. There are some things we can even do now with limited state resources. The federal government has a different definition of what limited resource means, but at the state level there are things we can do, and we've 11 already started it. We somewhat have a model for subsidizing not just green energy, but all sorts of green energy by not giving away more than we get in return. As long as you stick with that, you have a fairly safe program.

Ted Simons:
Quickly, what would you tell a business considering going green?

Jim Rounds:
I would say do your math and see how much it's going to cost, put a dollar value on it and see if A is greater than B.

Ted Simons:
For your students, what advice would you give them?

George Basil:
I'd tell them to go into this with their eyes open. I do think it's a growth sector. I would also say dot your I’s and cross your Ts and cover your bases on this one.


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