While climate change represents the most significant environmental concern, the BP oil spill has provided a glimpse into the true cost of carbon based energy dependence and the urgent need to put in place the mechanisms necessary to support a technological shift in our nation’s energy sector.
While the past 40 years have shown great ebb and flow in government efforts to redirect our energy markets (recall the Arab oil embargo of 1973 and cries for energy independence), at no time has the stage been so “set” to transform the energy sector. As articulated by Tom Friedman in his latest NY Times Op-Ed, the BP oil spill disaster provides a great moment of opportunity for the administration to set in place the policy measures necessary to fully engage on the New Energy for America plan.
Unfortunately, while the S&P 500 is up 20% the NEX is down 20% for the same 12 month period…not exactly the sort of returns that will incentivize capital markets to invest in new energy businesses focused on achieving what the administration has said is “the moral, economic and environmental challenge of global climate change, and building a clean energy future that benefits all Americans”.
While subsidies along with ARRA stimulus funding have helped some companies with the economic learning curve inherent in creating novel, Renewable Energy and CleanTech solutions, a much stronger signal needs to be sent if we are truly committed to energy independence and climate change mitigation. A Carbon Tax or a Cap-and-Trade program that puts a cost on carbon is such signal.
Such a signal, coupled with increased R&D investments and enhanced deployment incentives, can go a long way to providing the economic incentives investors demand when putting money in harm’s way. In fact, large scale participation by the capital markets will not only accelerate clean technology innovation, but it will also help in getting large emitting nations to finally get on-board; irrespective of Copenhagen’s politics, as the economic incentive for participation in a new green economy will simply be too large to ignore.
So while the past 40 years have been a demonstration of the disconnect between what is needed versus what is politically feasible, the BP disaster in the Gulf of Mexico provides a rare window of opportunity for the administration to connect these pieces and make its New Energy for America vision a reality.
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