Why Green Energy? It’s The Economy, Stupid

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The cost of energy? Tell me about it! You, me, and the man on the Clapham omnibus all know all too well just how volatile and relentlessly more expensive energy has become these past years. But more interesting is to ask what effect this has on the global economy.

As you might have guessed, the answer is “quite a lot actually”, since energy quite literally powers the modern world. Have you ever been in a supermarket for example during a sudden power cut? Sure they manage to cope…but badly.

With only emergency lighting and no heating (or air conditioning, depending on the season) it get’s to be a less than thrilling experience pretty quickly. When you finally make it to the checkout, you discover for yourself that none of the products have anything so quaint as a price sticker, that human’s can’t read bar-codes, and neither as it happens can bar-code scanners in the absence of computers, which of course are all powered off.

Imagine then what would become of our transport systems, factories, hospitals, communication infrastructure and so on. If energy gets switched off then our modern world basically grinds to a juddering stop.

Mind you, having the price of energy bounce around on an ever upward trajectory is not even close to going without energy at all, but it can still exert a profound effect on economic activity (which is not in fact some abstract concept but simply ordinary folk going to work, buying groceries, raising their kids, planning for the future and generally interacting with one another).

Rising energy prices leads, of course, to inflation – making it more costly to manufacture and distribute goods and deliver services. This in turn results in fewer goods and services – or to use the jargon, economic output decreases (less is made and done).

This drag on growth and productivity inevitably gives rise to gloomy projections for the future, derails existing business plans and puts investment on hold. A downward spiral could develop as negative sentiments become self-fulfilling prophecies and it’s hardly surprising that the technical terms for what could await are “great recession” or worse “depression”.

But in today’s massively interconnected world, it doesn’t stop with just those countries that are most obviously in trouble due to increasingly unaffordable energy. Every nation is some other nation’s trading partner and disruption to the import and export patterns of one will significantly impact each of its partners (and their partners and so on). As the song goes, we truly are “all in this together”.

Photo Credit:  Some rights reserved by The Environmental Blog via Flickr.

At this point, enter stage left…“green energy” – an umbrella term for energy sources other than those based on extracting and burning (in some fashion) mineral resources. So basically NOT fossil fuels – oil, gas and coal.

Some folk would also argue that “green energy” doesn’t encompass nuclear power either since, despite its creditable CO2 credentials, it still comes down to mining and effectively “burning” a finite mineral resource, namely uranium ore.

There are three broad criteria that most green energy sources have in common. They are not finite in supply; they don’t pollute and specifically don’t increase atmospheric CO2 levels; most places on Earth are able to access some form of green energy (unlike oil which is unevenly distributed).

Now you would think, given that we depend on a few (not always friendly) foreign states for energy supplies and that fossil fuels are expected to be finally exhausted some fifty to one hundred years from now, that the promise of endless energy for all would be a powerful driving force for green energy.

As it happens, the most practical motivator so far has been the desire to reduce CO2 emissions and hopefully combat global warming. The fledgling green power industry was struggling to get started at all until many governments chose to bootstrap it with a variety of attractive incentive schemes (whose underlying purpose was to ensure government compliance with binding international CO2 limits).

The result, whether intentional or not, was a heavy dose of classical Keynesian intervention. And regardless of whether or not you approve of Keynes’ economic ideas, there is no getting away from the fact that if you want to get things moving in a big way (especially where large scale infrastructure is concerned) then it certainly does that job.

The most obvious immediate effect is wealth creation, with new businesses and jobs springing up. But if you consider that this could be not only a global initiative, but also a fundamental structural shift on a par with the Industrial Revolution or the advent of the digital era, then you can begin to appreciate the scale of the opportunity that “green energy” represents for the world economy.

By Kat from www.kulekat.com who writes about eco-technology and related matters.

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