Can Clean Energy Drive The Economic Recovery?

The NPR program Intelligence Squared US held one of their Oxford-style debates raising the question  Can Clean Energy Drive The Economic Recovery?  Incredibly, the notion in the affirmative lost.  Feeling compelled to give it a shot hopefully I will succeed.

This notion is so matter of fact,  so self evident  in our daily lives and confirmed by the laws of economics we take its truth for granted.  In order to come to a solution we must clarify the argument with a few simple questions. Well, remember the typewriter?  Or the personal computer? Life before Microsoft Office or the Internet?   Hard to imagine right.  How do we define these things generally?  What sector of the economy do they represent?  Technology.  What we know about technology is that it improves our lives as resources that save time and money and improve our quality of life.  In business jargon, technology works by increasing productivity and returns on labor leading to bigger profits and return on capital.  All things that we and our economy like to grow and provide for a better quality of life.  I don't want to waste my time pecking away at a typewriter.

Economists have given this process a name.  They call it technological progress, it just so happens that among the increasingly few things most economists will agree upon it is that for a developed economy, such as our own, the  major long term factor affecting economic growth its varying level.   Empirically we know this too.  Think of a few names of companies or individuals of relatively recent wealth and prominence with products or services that garner huge levels of investments and support new industries and employment.

How does technology relate to the notion? What is "clean energy"?  Any agreed upon definition that I know is based on examples involving technology harnessing energy from renewable or passive sources provided to us by nature: the sun, wind, hydro, tidal, geothermal.  Since we have already established that technological progress is a necessary prerequisite for growth and recovery and clean energy is based on technological progress it is incumbent upon us to rephrase the notion to properly determine its efficacy.  Can technological progress in the energy sector drive economic recovery?  My response to that, outside of any concern for climate change, is a resounding YES, it is about time it did! 

With respect to additional specific elements or inputs of recovery related to clean energy technology it is important look at employment.  It is the nature of something that does not exist to necessitate an influx of manpower and investment to become manifest.  A house does not get built without the labor and inputs necessary for its construction.  This fact provides for employment recovery across a broad spectrum including the design, manufacture, installation, sales and delivery of the product.  Furthermore, these jobs created to provide a product that will increase the efficient consumption of energy and productivity of capital are exactly the type of sustainable investment that our economy needs.  When a drill is dug its done.  When a mountain of coal is mined its gone.  The very nature of this effort is the antithesis of sustainability and recovery and will only kick the stone of scarce resource consumption and depletion down the road for another generation to deal with at which point the costs will be greater and impact on the economy even more harder felt.

The basis of the opposition argument is that on the production side it is too costly given the current state of the economy and comparative, current cost to substitute.  However, we can all attest to the nature of the fluctuating, commodity based costs of the existing energy base.  They are more likely to drive us back into recession then to lead to a sustainable recovery.  Once again we all know this intuitively, the moment signs of recovery begin to appear demand for these scarce resources will rise and curb disposable income that would otherwise add additional fuel to the recovery.  This commodity or resource consumption tax on income is a major cause of uncertainty for business investment while the only benefactors are banks, speculators and extractors that bid up the price for increasing gains at the expense of the broader public and economy.

While it is easy to argue that the generally infant clean energy industry is costly now, just as a Mac or PC was in the 70's and early 80's, the revolutionary impact technology has and will continue to have on our economy is without question.  Competent long term managers are making the switch not because it makes them warm and fussy but because it provides the necessary certainty they need to make good long term budgetary and profit projections.  This process has only begun and the current economic environment is limiting the broader level of investment.  However, across every sector of the economy the ability of technology to deliver by decreasing energy consumption and costs with efficient replacements will continue.  Until the day when we take it for granted and view the internal combustion engine or 55 gallon water heater or monthly energy bill as the backward, outmoded novelty they should be already.