Bigger, Stronger, Greener, Faster? - Obstacles to a Green Economy

We have entered a wondrous and magical time. Somehow, the 1960s have met the 1990s and there is a new global hippie capitalist movement for sustainability. We are shouting "Show me the Kumbaya!" Most governments and companies see climate change as a threat, but only a minority are getting proactive, a la Jessica Simpson (http://www.enn.com/business/article/38242). As with any great goal in history, there are obstacles (e.g. the Atlantic ocean for the Pilgrims’' religious freedom, the ingrained prejudice with the civil rights movement, my lack of facial hair in growing a sweet mustache, etc.). I thought I might discuss some of the new green economy's obstacles in the hope that my writings inspire solutions, debate, and an immediate search for something else to read.

1. The Bush Administration - Say what you will about the Bush Administration (seriously, you say it, I don't want to offend anyone on my initial blog given the fact that if I lose one reader, I probably lose half my audience), but they have been a block to the U.S. participating in mandatory carbon reductions. While they have extended the renewable energy tax credits (never mind that it was pork on the bailout bill), their approach has been more reactive than proactive. The theory is that the next administration will be more conducive to a green economy, however, there are other pressing economic needs and in the short-term, green may be sacrificed for green (money).


2. U.S. Infrastructure - I'm all for green energy, but I'm not sure the electricity grid feels the same way (http://www.nytimes.com/2008/08/27/business/27grid.html?_r=1&hp&oref=slogin). Further, our infrastructure was built around oil and turning around a ship that big takes a lot of time (just ask the Exxon Valdez). Whether we're talking about hydrogen, biodiesel, or electricity, the distribution network will take some time to construct. Local, regional, and state governments will play a significant part in establishing this infrastructure, but as with the federal government, incentives will be needed for proactivity to take place.


3. Price of Oil - I love a good Catch 22. We hate high energy prices, but we need high energy prices (at least in the short term) so that we can eventually have lower energy prices through new technologies. Further complicating matters is the global economic slowdown. But because oil is scarce, it's price can rise, or in the current case, fall, according to the accompanying demand (as Lavar Burton once said, don't take my word for it, http://www.nytimes.com/2008/10/19/magazine/19oil-t.html). With a falling oil price, the incentive to develop new technologies also falls. Hopefully, OPEC will get its act together and cut production so prices to rise like everyone wants, right?


4. Credit Crisis - I'm not sure if everyone has heard, but there seems to be some sort of credit crisis going on. The effect this may have on green investing is still being sorted out. My guess is that larger projects will be minimally affected. Venture capital and general investment funds need to still put money somewhere that there is strong potential for growth, and large always equals less risky (right AIG? Lehman, Bear? anyone?). Smaller and more risky projects will more likely have a difficult time obtaining funding, in the short term. But once liquidity is reestablished, money should flow into even these smaller projects once again and everyone will live happily ever after, just like the internet tech boom.


5. Trendy Business Practices - Who doesn't love a good trend (e.g. bell bottoms, SUVs, mortgage backed securities)? They always look great looking back on them, don't they? Actually, sported in moderation, trends work, they stay cool and relevant. But when we get hooked on one particular item, things can get a little dicey (e.g. Disco Duck). It is encouraging that calls for various alternative energies, reduced waste, etc. have become common place. But American industry has to be careful as not to hook onto one particular solution (e.g. the coming carbon market) so other parts of the solution are ignored. Sustainability is a great goal, as long as it is kept as a goal, and not a business trend.

The above are just a few examples of the obstacles that the new and greener economy will face. I could talk about America's love of consumption, the possibility of a "green tech bubble", confusion through "over" innovation, the scarcity of water, and our everlasting gobstopper of a deficit. But the point is that the road is going to be rocky, difficult, and have many forks. It's going to be a little like one of those choose your own adventure books (do you fill your car with biodiesel or go electric, you go with electric, turn to page 46, oooh, you are eaten by the dreaded grid monster, dun, dun, dun, but I digress). Only through government and corporate leadership and technological and financial innovation can we hope to sell green tech stocks high around the year 2016, but at least be a little bit closer to actually having a green and sustainable economy.