David McNew/Getty Images

No way. Vowing to pump $150 billion into green technology over the next decade, U.S. President Barack Obama has made big promises about his environmental agenda. “It will also help us transform our industries and steer our country out of this economic crisis by generating 5 million new green jobs that pay well and can’t be outsourced,” he said in November.

British Prime Minister Gordon Brown has similarly called for an international “Green New Deal” to create a “low-carbon recovery.” The United Nations wants a full 1 percent of global GDP to go to environmental initiatives. Rich countries such as Canada, Japan, and South Korea are obliging, spending billions to promote ecofriendly projects and green businesses.

Even the U.S. Congress is considering a range of measures to reduce greenhouse gases—from regulatory mandates, such as raising vehicle fuel economy or requiring electric utilities to produce more of their power from renewable sources, to carbon taxes and a cap-and-trade system for electric utilities.

Many of these ideas are very much worth pursuing for environmental reasons. But it’s doubtful they offer a double dividend of helping to jump-start the economy. For one thing, the global financial crisis is fundamentally about different issues: the popping of housing and credit bubbles from St. Petersburg to San Francisco, the associated implosion of a highly leveraged international banking sector, and the resulting fallout on real economies. These pressing problems won’t be solved by switching to hydrogen-powered cars or installing solar panels on every roof.

Second, let’s be honest: Anti-carbon regulations will simultaneously create and destroy jobs. Take the United States: Given the country’s current reliance on cheap, coal-fired power plants, carbon caps will translate into higher electricity prices. (How much higher remains an open question.) Older manufacturing firms—especially in energy-intensive industries such as petroleum and coal products, paper, cement, and primary metals—will face higher costs of doing business, and this may lead them to shut down or seek international locations where electricity prices are lower and carbon regulation is less stringent.

In the long run, a little creative destruction will likely be a good thing. The same regulations that might kill jobs in smokestack industries will act to stimulate a host of new manufacturing opportunities, ranging from energy-efficient household appliances to solar panels to energy-efficient vehicles. Even former U.S. Vice President Dick Cheney might consider buying a fuel-efficient vehicle if gas prices rose enough.

But don’t count on clean technology to pull us out of the doldrums. The green revolution won’t happen overnight.

It depends how. Governments have a dreadful record when it comes to picking winners. Consider the U.S. Energy Policy Act of 2005, which required that gasoline sold in the United States be mixed with increasing amounts of renewable fuel. As intended, this regulatory mandate created large demand for ethanol made from corn (which was already heavily subsidized). Corn Belt senators were thrilled, but it made environmentalists and economists queasy—because corn-based ethanol may actually create more carbon over its life cycle than conventional gasoline. Now that oil prices have collapsed, subsidizing this fuel source makes little economic sense. With newly built ethanol plants already rusting across the Midwest, U.S. taxpayers are left propping up an industry that could never survive on its own.

Ethanol is hardly a special case. Take the historical track record of Japan’s powerful Ministry of Economy, Trade, and Industry, which was set up to aid particular economic sectors. Economists Richard Beason and David Weinstein found that this supposed engine of Japanese success had actually been financing losers and that government aid did nothing to increase productivity between 1955 and 1990.

Why are governments so bad at this game? Because the future is hard to predict. Better to avoid top-down mandates (i.e., Soviet five-year plans) and instead encourage individual experimentation. A decentralized approach would let firms and households identify the most efficient ways to reduce their carbon footprints. Instead of handing out subsidies for technologies that may or may not succeed, governments should level the playing field by forcing polluters to pay the true social costs of their consumption of dirty fuels. When my local power plant fires up its boilers, it should pay for the greenhouse gases it emits as well as the cost of the coal. A carbon tax or a cap-and-trade program would do the trick.

Not on your life. Some pundits, such as New York Times columnist Nicholas Kristof, have suggested that China, with its foray into hydrogen fuel cells and tough new fuel-economy standards, threatens to leapfrog the United States in going green.

We should be so lucky. The unfortunate reality is that China has extremely high air and water pollution levels. Yes, the average Chinese person’s greenhouse gas emissions are much lower than the average American’s, but this gap is closing fast, as private vehicle ownership and electricity consumption are rising sharply in China. In 2001, there were 1.5 million vehicles in Beijing. By August 2008, the city’s vehicle count had grown to 3.3 million. If the Chinese began consuming like Americans, resource pressures would go up dramatically. Geographer and historian Jared Diamond of the University of California, Los Angeles, warns: “Oil consumption would increase by 106 percent, for instance, and world metal consumption by 94 percent. If India as well as China were to catch up, world consumption rates would triple.”