Tuesday, April 6, 2010

Green Energy

By and large, I am enthusiastic about the possibilities for safe and clean energy. I look forward to a world with more wind turbines, solar panels, recycling, and who knows what has not yet been invented.

But, and there's always a but, we need to be careful when considering policies that promote these energies. The fact that green energy costs more than fossil fuels means that in some very relevant sense: they cost more in resources.

To simplify the intuition: if Joe Coalminer needs to mine more coal in order to buy his Toyota Prius to replace his F-150 truck, it's not clear that the environment wins out. Of course, if Roger Recycler has to recycle more so he can purchase his Prius, everyone wins.

The point is that prices signify a cost in resources and in a relatively "dirty" economy it looks like higher prices for clean energy mean an extra expenditure of dirty resources to buy clean ones.

Yes, you have to start somewhere, and yes you have to make sure prices signal relative scarcity but let's not immediately sanctify everyone who buys into the green economy. (Much the same could be said of high priced Organic farming, I think)