Market incentives necessary for supporting green fuels


No matter how many industry and climate experts conclude that climate change is a real danger and that we must take steps to mitigate it, there will be some people who don’t accept it.  Interestingly, the logic of some global warming critics leads directly to an understanding of how important alternative energy is to a successful economic future for America. Our way of life and economy are dependent on affordable sources of energy, and therefore we must develop green technologies if we are to minimize the economic consequences of ever increasing fossil fuel prices. Regardless of belief in global warming, carbon cap and trade is an important piece of legislation that is critical to the future success and stability of America’s economy. 

While researching this article I listened to a prominent critic of global warming discuss what he calls the environmentalists’ mistake of demonizing the use of traditional energy sources. Fossil fuels are the foundation of our economy, and we critically depend on them in ways that are hard to fully grasp. Without our sources of energy we would have no heat for our houses, no food in our grocery stores, no industries, no transportation and no work for our citizens. Life would be brutal and short.  It is no exaggeration to say without energy sources, civilization as we know it would crumble and our way of life would vanish overnight. 

Although this critic is correct in saying that energy sources are fundamental to our economy and should not be demonized, somehow he has failed to realize the importance of energy is not a reason to oppose green legislation, but in fact a further reason to support it. While American ingenuity is impressive and market forces are indeed the best way to create new products, it is still very important we use market incentives to encourage reductions of fuel usage and the development of alternative energy sources. 

Currently, alternative energies are more expensive than fossil fuels, and accordingly there is no economic drive for companies to utilize and develop them.  By artificially increasing the cost of traditional fuels, we provide opportunities for green fuels to enter the marketplace and develop their technologies, ultimately leading to lower prices for these green fuels in the future.  Eventually, these fuels can and must become cheap enough to support our entire society.

As the industries of China, India and other undeveloped countries steadily grow, demand for oil will only increase, and accordingly the price of oil will continue to climb until new sources of energy are developed to replace it.  Further, although the world’s demand for oil is growing, its production of oil will soon begin to decline. 

Various economic and geological groups have made predictions concerning when the world’s oil production will peak and begin decreasing. Such predictions involve a lot of assumptions, and there is no way of telling when the peak will actually arrive. Additionally, there are always new oil discoveries being made, such as deep ocean reserves and Canadian shale oil. However, these new discoveries are invariably more difficult to extract and thus more expensive. Exxon Mobil company spokesman William J. Cummings noted in 2005 that, “All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.”

Other experts agree with this assessment.  According to an e-mail sent out in 2008 by Royal Dutch Shell chief executive Jeroen van der Veer, “Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand … Taking the path of least resistance, policymakers pay little attention to curbing energy consumption – until supplies run short.”

Ultimately, we will never run out of oil. What we will run out of is cheap oil.  When that happens, it will be absolutely critical for the survival of our economy and our way of life that we have developed adequate sources of alternative energy. The best way for us to ensure such development is through legislation that uses market incentives to reduce fossil fuel consumption and support companies researching and developing green energy production.  The most important foundation of that legislation is carbon cap and trade, as outlined by international petroleum companies through the organization called the U.S. Climate Action Partnership.