When the green bubble pops, it’s going to cost a lot of people a lot of money – both taxpayers (in the form of subsidies and other forms of failed industrial policy) and venture capitalists who succumbed to the religious urge. Last April I predicted:
It’s a conspiracy of physics that will keep “green energy” a de minimis part of our energy consumption for the next generation or more, and a conspiracy of grant-seeking “scientists” that should keep us all skeptical of climate policies that promise a utopia of no trade-offs.
Because alternative energy generation is expensive and inefficient, it requires some combination of subsidies, high energy prices and forced purchases to make these investments pay off.
The political assumptions underlying the green investment boomlet turned out to be false. There will be no global carbon regime for the foreseeable future; there will be no cap and trade and no aggressive federal programs to raise energy prices during the deepest recession since World War Two.
Perhaps even worse from the green point of view, a cascade of discoveries and technological advances has dramatically increased the supplies of oil and gas in the western hemisphere — including huge new domestic energy supplies in places like Pennsylvania, Ohio and upstate New York. These discoveries are devastating to the politics of the environmental movement.
Increasingly, the climate change argument will be the only argument left to support subsidies for alternative energy generation. That argument has not been enough to make far reaching legal changes in the past when national security and peak oil worries supported it; there is not much to suggest that the climate change forces can win the political battle standing alone.
The collapse of the green political structure (cap and trade plus global carbon treaty) and the transformation of the American fossil fuel supply have dramatically weakened the case for alternative energy. Investors take heed.