The Recession is Good for the Environment

By | Dec 17, 2008

It turns out that the recession is good for the environment, as long as Obama has his way. Under a new ten year plan, the president-elect plans to pour $150 billion into projects aimed at improving the energy-efficiency and weatherizing government buildings in order to save big on electricity. By extension, the plan will cut back on emissions by electrical utilities who would also be asked to poney up for those emissions.

It’s an interesting plan that combines the ideas of job creation, frugality and economics of scale, but can it be successful? Is now really¬†the time to encourage people to spend money on green technologies when the average American is struggling to put gas in his car and food on his family’s table? Yes – according to a growing chorus of maverick investors who believe that investing in green is not only the ethical way to conduct business, but is also the key to future survival. As the recession goes on we will see trends toward globalization start to reverse and the rennasaince of the local producer.

Although investing in green companies feels good¬†right now it is seen as less profitable than “normal” business, which makes the prospect unpopular for investors hoping to make a turnaround in a short amount of time. It stands to reason these companies will become profitable once they their technology has aheived a level of sophistication and saturation that makes switching to alternative energy cheaper or as cheap as the current stand-bys – coal, oil, nuclear. Solar, for example, has a lot of promise but hasn’t yet been able to deliver constant reliable energy to be able to compete on scale.

We’ve seen promises like this before. The government takes the simple formula – research capital + marketing capital + time = sales + return on investment – and pours money into the market hoping to see results. While the money is useful, the market itself needs to mature and reach a larger audience before it will become viable.

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