Are Green Energy Projections Useful?

by Ginosar  

Many scientists like to project what would be the best way to replace our current fossil-based energy sources with green energy. See for example the November issue of Scientific American: Plan for A Sustainable Future. MIT also has projections and so have other institutions. These projections are interesting but I wonder how influential are they?

 

No matter how good these proposals may be the reality is that the market place, investors, will decide what technology to invest in and how fast it would be available. Their selection, obviously, will be based on potential profits to the investors. Capital investment gravitates actively to the areas with the maximum potential for sustainable profit, return on investment. Energy related laws passed by Congress, and local laws, will influence the potential economic benefits to the investors, and could make or break the potential for large penetration of specific technologies.

 

It does not matter if we like this reality of the market place or not, since only private investors can raise the immense capital required for this global-wide effort. In addition, government subsidies can distort the market and in the end could even destroy it too, at least for a period, as it did to solar water heating in California in the 1980's.

 

The eagerness of government to support one green technology over another is not useful on the long term since legislators are neither economists nor scientists. In addition, they do not make laws to benefit the majority of the society, but often to satisfy the strongest advocates and those with more influence. The Cash for Clunkers program was a clear example of governmental waste. The $3 billion had insignificant impact on the American auto industry and inconsequential impact on GHG emission. If invested in attic insulation it could have reduced noticeably energy use in 4 million homes for decades to come, provides many local jobs, and the total money would have remained in the US.

 

Also note that the market can not function effectively, and could even be paralyzed for a time if there is too much legal uncertainty, that is, if the related laws are not established. The market rather lives with imperfect laws than no laws, or waits for a more desirable set of laws. The free market can not function well with legal uncertainties.

 

In the US Congressional laws will make significant impact on the selection of technologies by private investors since it will impact the profitability of the investments. But in China, the largest emitter of GHG, the central government, not hindered by need to satisfy the public perception or give political favors, has the ability to push through laws and regulations much faster than we can. This ability to act rapidly, and presumably more scientifically correct, is a very significant, and important difference that could impact the global effort to curtail GW. But we do not know how the Chinese government will use it and we do not know how much the semi independent local leadership will support it. We in the US are unable to respond fast enough and proper enough to this new and not well grasped issue.

 

If we were sensible, logical people, and not constrained by the need for Congressional favors we would increase markedly (in steps) the cost of fossil fuels and thus make it more attractive to replace them. Many in power believe that Cap &Trade will do that. The Congressional need to attract marginal legislatures, and giving favors for raising money for the next election, dictates Cap & Trade. However, the public does not trust it since it is distorted with so many favors to special interests that it is too complex to grasp, and thus difficult to trust. It reduces further the low trust the public has for Congress.

 

Economists generally support Cap &Trade since they may understand its complexity, but not the public. However, the public does not have any voice in this political game. As I said, special interest groups that can raise money for the next election carry a major influence on elected officials. I do not believe most in Congress grasps the seriousness and the time-criticality of global warming, and thus continue to use old methods that worked for them in the past. Those methods worked somewhat for less critical issues, the outcomes were not endangering the future of the country. They were not on the scale of GW!

The only other issue on a similar scale was WWII.

 

We are still using old methods- congressional extreme self interest -which led us partially to our current global warming problem, (remember Congressman Dingle's ability to stop raising the fuel millage standard for many years) to solve this grave new problem. I am greatly concerned that it would not work in time.

 

Dr. Steven Chu, among other scientists, did not believe in Cap & Trade and recommended fossil fuel tax before he was selected to join the administration. Now he reluctantly, I noticed, has to go along with this politically dictated direction. Most scientists are probably against Cap & Trade too since it is so convoluted, it is hard to know what long term impacts it could induce, and how fast it could reduce GHG emissions.

 

And time is not on our side on GW.

 

 

 

 

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