Adam Newman | Tuesday, February 19, 2013
The role of the federal government’s involvement with green technology has faced intense scrutiny in recent years due to the bankruptcy of Solyndra, a manufacturer of solar panels that received a federal loan for $500 million.
In his book “Hot, Flat and Crowded,” New York Times columnist Thomas Friedman explains the three trends that will make green technology a thriving industry in the future. “Hot” refers to unusually high global increase in temperature that most scientists believe is due to the mass usage of fossil fuels. “Flat” refers to the increased globalization and technological advancement that has lifted hundreds of millions into the global middle class, increasing the demand for energy. “Crowded” refers to the major increase in the global population, from roughly seven billion today to 9 billion in 2050, with most growth coming from developing countries.
The new combination of hot, flat and crowded in the world will lead to more people requiring more energy, leading to a major strain on natural resources and a massive increase in the outputs that lead to global warming. To prevent this, America needs a “green revolution,” where it invests in, produces and buys energy efficient products that utilize clean sources of power. Working toward setting the conditions for a “green revolution” makes business sense and is a moral imperative.
Similar to the expansion of the railroad industry or computer industry, government investment in green technology is critical, which is why conservatives are wrong about Solyndra. The government should not cease its investment in green technology because one business failed. Not all government investments will lead to profitable companies, but government investment can help lead to scientific breakthroughs that allow the private sector to bring products to scale (the internet is the best example).
Liberals are mistaken that government investment alone can deliver the green revolution. Government investment can help lower the costs of research and development and help drive early stage innovation, but it does not have the capability to create green products or bring them to scale. Only the private sector can accomplish this. However, the private sector currently does not invest much in energy efficiency because of the high costs of energy efficient products relative to non-efficient products.
If the price of dirty fuels could somehow be raised, then the private sector would have an incentive to invest more into green products because consumers would demand them in higher numbers. This pressure would increase innovation and help drive down the cost of green products, making them easier for consumers to purchase.
A carbon tax can help deliver this scenario. By raising the price of dirty fuels, companies and individuals will have an incentive to save energy and purchase energy efficient products. Innovators and businsess will then have an incentive to invest and spend time devising ways to increase energy efficiency using clean sources of energy. Venture capitalists and investment bankers with no concerns about the planet, climate change, clean air or future prosperity, only caring about money, will invest in green technology. This creates the best case scenario: The government setting the conditions of the marketplace and the private sector responding with increased investment and innovation. But this can only happen if green energy becomes more profitable, which can only happen if the price of dirty fuels is raised.
The most important green innovations probably will not come from Wall Street, a factory in Detroit, or a government office in Washington, but garages (where the personal computer was created) and universities (where Facebook was created). However, without the right economic conditions these life changing innovations may never have happened, depriving the world of perhaps two of the most important technological advancements ever. Imagining that the “green
Facebook” and “green Apple” (as Friedman calls them) don’t exist today because of the current market conditions is horrifying.
There is both a business case and a moral imperative for a green revolution led by America in a world that is hot, flat and crowded. If America can’t embrace it, then, as Friedman said, we will find ourselves buying less oil from Saudi Arabia and more hybrids and solar panels from China. So as both Democrats and
Republicans scuttle over the bankruptcy of Solyndra, both miss lessons that could help make America the leader of the most important industry of the 21st century.
Adam Newman is a senior political science major. He can be reached at [email protected]
The views expressed in this column are those of the author and not necessarily those of The Observer.