Alternative Energies and Other Fairy Tales

The quest for alternative, non-fossil fuel, energy sources is driven by two misconceptions: (1) The mistaken belief in "peak oil" (that we are nearing the complete depletion and exhaustion of economically extractable oil reserves) and (2) That market mechanisms cannot be trusted to provide adequate and timely responses to energy needs (in other words that markets are prone to failure).

At the end of the 19th century, books and pamphlets were written about "peak coal". People and governments panicked: what would satisfy the swelling demand for energy? Apocalyptic thinking was rampant. Then, of course, came oil. At first, no one knew what to do with the sticky, noxious, and occasionally flammable substance. Gradually, petroleum became our energetic mainstay and gave rise to entire industries (petrochemicals and automotive, to mention but two).

History will repeat itself: the next major source of energy is very unlikely to be hatched up in a laboratory. It will be found fortuitously and serendipitously. It will shock and surprise pundits and laymen alike. And it will amply cater to all our foreseeable needs. It is also likely to be greener than carbon-based fuels.

More generally, the market can take care of itself: energy does not have the characteristics of a public good and therefore is rarely subject to market breakdowns and unalleviated scarcity. Energy prices have proven themselves to be a sagacious regulator and a perspicacious invisible hand.

Until this holy grail ("the next major source of energy") reveals itself, we are likely to increase the shares of nuclear and wind sources in our energy consumption pie. Our industries and cars will grow even more energy-efficient. But there is no escaping the fact that the main drivers of global warming and climate change are population growth and the emergence of an energy-guzzling middle class in developing and formerly poor countries. These are irreversible economic processes and only at their inception.

Global warming will, therefore, continue apace no matter which sources of energy we deploy. It is inevitable. Rather than trying to limit it in vain, we would do better to adapt ourselves: avoid the risks and cope with them while also reaping the rewards (and, yes, climate change has many positive and beneficial aspects to it).

Climate change is not about the demise of the human species as numerous self-interested (and well-paid) alarmists would have it. Climate change is about the global redistribution and reallocation of economic resources. No wonder the losers are sore and hysterical. It is time to consider the winners, too and hear their hitherto muted voices. Alternative energy is nice and all but it is rather besides the point and it misses both the big picture and the trends that will make a difference in this century and the next.

A Comment on Energy Security

The pursuit of "energy security" has brought us to the brink. It is directly responsible for numerous wars, big and small; for unprecedented environmental degradation; for global financial imbalances and meltdowns; for growing income disparities; and for ubiquitous unsustainable development.   It is energy insecurity that we should seek.    The uncertainty incumbent in phenomena such "peak oil", or in the preponderance of hydrocarbon fuels in failed states fosters innovation. The more insecure we get, the more we invest in the recycling of energy-rich products; the more substitutes we find for energy-intensive foods; the more we conserve energy; the more we switch to alternatives energy; the more we encourage international collaboration; and the more we optimize energy outputs per unit of fuel input.   A world in which energy (of whatever source) will be abundant and predictably available would suffer from entropy, both physical and mental. The vast majority of human efforts revolve around the need to deploy our meager resources wisely. Energy also serves as a geopolitical "organizing principle" and disciplinary rod. Countries which waste energy (and the money it takes to buy it), pollute, and conflict with energy suppliers end up facing diverse crises, both domestic and foreign. Profligacy is punished precisely because energy in insecure. Energy scarcity and precariousness thus serves a global regulatory mechanism.   But the obsession with "energy security" is only one example of the almost religious belief in "scarcity".