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Although more and more people seem to understand what enormous potential green energy technologies will have in the future, there is still a considerable opposition to government regulations, incentives and mandates imposed to move the market in the right direction.

It is reasonable to question any attempts by the government to interfere in the market. Usually, governments rather screw things up than help to meet a challenge, but regarding the transition to a new energy age, things are different.

Dave Lister - a small-business owner from Portland, OR - presents his view on the issue in his post on oregonlive.com “Markets not mandates are what makes jobs“.

Mr. Lister describes how employment opportunities in Oregon changed throughout the decades. He writes about the 1970s with endless economic opportunities for everybody and booming businesses. This period ended with the second oil crisis and the 1982 economic crisis. Many small enterprises went out of business, but the the onset of the IT revolution alleviated the effects on employment. Many jobs lost were made up for by new ones created in the New Economy.

He continues by comparing the situation in 1982 with today’s situation. Again we’ve just come out of a sharp recession, unemployment hit 10.2 % in the U.S. last month and the I.T. revolution has long ebbed.

The next big thing will be what New York Times columnist and best-selling author Thomas L. Friedman refers to as “ET revolution”. It’s likely that global demand for smart energy technologies will be the foundation of a new, long-lasting economic boom.

As Dave Lister points out, the problem with the ET revolution is that this time - unlike in the 1980s - government is leading the way which is always problematic.

It is justified to doubt a government’s ability to create new markets and jobs effectively by incentivize and regulating. As Lister puts it, “mandates alone won’t make it happen”. The market for IT - the engine for two decades of prosperity - was not created with the help of government incentives or regulations.

Nevertheless, government does play a vital role in the transition to a new energy age.

The increasing use of alternative, domestic sources of energy is not only beneficial to the economy as jobs are being created (and money spent locally instead of being shipped abroad to authoritarian petro-regimes), but also vital to national security and the environment.

In July this year, I was at the United Nations Headquarters in New York City and asked Jean Gazarian - who joined the UN Secretariat in 1946 - whether it will be more difficult for the international community to deal with the effects of climate change than it was to deal with the Cold War. And he replied that it is indeed possible, even likely that climate change will be more challenging to the UN as the cold war was.  [check my slide show: http://www.youtube.com/watch?v=Hp1Rt98OXvs]

Even in pure economic terms, incentives and mandates are beneficial and even necessary to make the U.S. more sustainable and prosperous.  By pushing the market to reach specific goals earlier, American companies gain an advantage over competitors who will still be lacking behind when demand for smart energy technologies (everything from efficient and sustainable ways of generating power to bringing it to consumers to consuming energy more efficiently) starts to take off when oil prices hit new record levels. China, India, Brazil and many other developing nations will create an enormous market for ET in addition to American domestic demand. Another reason why reasonable government intervention is appropriate is that current energy prices - especially the price of oil - don’t reflect the true cost of the resources. The adverse effects on the environment, the economy and our security are not included. However, we feel these costs as our prosperity and freedom declines.

The bottom line is that the energy markets have their shortcomings and so do government initiatives. Yet, a wise regulatory framework will help to create a market faster and therefore give American companies a competitive advantage, resulting in job creation, higher exports, lower fossil fuel imports and a reduction in greenhouse gas emissions.

In August, I spoke to hedge fund managers in New York City who think that even China - yes, the world’s biggest CO2 emitter - is ahead of the U.S. in terms of alternative energies. In fact, China is to build the world’s biggest solar power plant. (http://www.dailyfinance.com/2009/09/09/china-to-build-the-worlds-biggest-solar-power-plant/)

America has to get active now not to fall behind a developing country in this key future industry.

This entry was posted on Saturday, November 7th, 2009 at 6:42 PM and is filed under Economy, Energy, Environment, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.