“Green” innovations: fashion or necessity?


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Why alternative “green” energy is crucial today?
Public awareness of the global energy challenge is at a very high level, at least in the U.S., where I live, even though we do not have an energy crisis of the type that we saw in the 1970’s. Energy prices, e.g. for gasoline and electricity, are reasonably stable, and there are no supply shortages like the ones that led to long lines at gasoline stations in the 1970’s. Nevertheless, there are two issues driving a need to develop alternative energy sources.

First, climate change arouses concern among many people who wish to see a good environment for themselves and for subsequent generations. This is a very complex phenomenon, but it is clear that growing carbon dioxide concentration in the atmosphere contributes to it. To reduce carbon emissions, we need to find alternatives to burning stuff, whether it be fossil fuels, wood, or other biofuels.

Second, the U.S. imports a very large fraction of its energy, generating a significant trade balance challenge, overall, and resulting in reliance upon a few foreign countries, particularly for oil. Developing alternatives, especially domestic ones, diversifies the market and is a powerful hedge against price increases in any particular area.

What role national governments play in developing new energy sources? What is the ratio of public/private investments?
Governments take many different approaches to this challenge, but there is certainly worldwide attention to it. In France, where electricity is provided essentially by a government-owned corporation, there has been great success in developing nuclear power. Other countries foster a much more diverse approach with a broader range of solutions, including combustion. In countries where decisions are nominally based upon free-market considerations, there still remain government interventions that tilt decision making in one direction or another. In Europe, motor fuel is taxed much more highly than in the U.S., resulting in a more highly-developed public transportation sector, and less reliance upon automobiles. In the U.S., investment incentives provided to corporations help to drive the development of wind, solar and other renewable energy sources, where they would not otherwise be able to compete with the low cost of coal, oil and natural gas.

Because of the complex interplay between private investments and government programs that take a wide variety of different forms, it takes some very sophisticated econometrics to make any reasonable comparison between different countries on the basis of the ratio of public to private investment. In all cases, however, the government plays some role, either direct or indirect, in determining what kinds of energy sources are developed.

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