Renewable resources

Resources come in two varieties, renewable and non-renewable. Non-renewable resources have a limit, i.e. amount of oil that actually exists. Renewable resources on the other hand can continue to support us for an indefinite period if not destroyed in some way.

If you accept that basic premise, then you should also accept that moving from non-renewable resources to renewable resources is ultimately inevitable. So, power generated via oil, gas and coal will have to be replaced at some time in the future by solar, wind and hydro. The only real question is the time frame.

As long as non-renewable sources of energy are cheap it does not make economic sense to convert. Of course as the cost of non-renewable energy increases and the cost of renewable energy decreases, there will come a point when it does make economic sense.

The Government can, as a matter of social policy, influence that outcome. By increasing taxes on non-renewable resources and providing tax credits for renewable ones, the economic balance can be changed. This could potentially be revenue neutral if the credits were financed by the taxes on non-renewable energy, but the current infrastructure is heavily reliant on non-renewable energy and it would drive that cost up.

So, lets say the Government increased taxes on gasoline to a level such as $4 a gallon and utilized that revenue to provide tax credits for electric car usage. Would this be effective? I think it would be, but a bigger question may be what would be the impact on the economy?

The increased cost would be experienced almost immediately and the conversion process would take time. So using another example, if the price of home heating oil was increased but tax credits were made available for solar alternatives, it would increase cost to the average consumer. Of course the money generated would create jobs and as the renewable energy industry became more efficient costs should come down, and as an added bonus, the trade deficit could very well be reduced.

So the real question is, would the increased economic activity based on conversion from non-renewable to renewable outweigh the decrease in economic activity based on increased cost for energy in the short term?

I think it can be demonstrated that at some point the increased economic activity would more than offset the cost impact, especially as the cost of renewable energy decreased and the use of non-renewable energy decreased. How long would it take?

When you consider the slack in our current economy, in almost all sectors, the increased employment in something as simple as installing solar panels on houses would likely have a fairly immediate impact. Manufacture and installation would be a growth industry for a long time. Similarly, if the car manufacturers can retool quickly, the demand for electric and/or hybrid cars will boost the auto industry. Other areas may very well take a longer time. Many solar and wind projects get delayed by local issues. It may very well take a significant public affairs campaign to overcome some of this, but I do believe that most Americans will get on board if there is a consistent public message about how this reduces dependency on foreign oil and is good for the environment.

Generally, I believe the downward impact would be quickly offset by the increase economic activity.

Just something to think about.