Not an “either/or” world ahead

Posted on 01 September 2009

Many people are wondering whether the future will be “green” or “business-as-usual.” The answer in our view is “No.” It will be neither. It will be BOTH.

Opinions about the future tend to fall into one of two camps. The “Green” camp advocates “cap-and-trade,” wind power, solar power, electric vehicles, a simpler lifestyle with less transport, and backyard gardens. The business-as-usual crowd thinks that global warming is a hoax, plenty of oil, gas, and coal exists and can be economically recovered with only modestly higher prices or even with lower prices, technology can solve resource constraints, nuclear power is always available if fossil fuels get scarce, and the needs of the economy take precedence over environmental considerations.

In the news today are two stories about what is actually happening that should give members of either “camp” reason to pause and think a bit harder.

China is investing US$1.7 billion in two Alberta oil sands projects.

The Financial Times reports that the investment needs oil at US$50 to $60 per barrel to be successful. The Chinese investment was made after ten years of watching and waiting for the price to be right. The Canadian oil sands are notorious with environmentalists as major sources of carbon emissions, downstream pollution of rivers, and marginal “energy return on energy invested”.

Another bit of news from China: BYD, the Chinese electric car producer owned 10% by Warren Buffett, has moved up by one year its plans to introduce an all-electric vehicle into the US market, in 2010.

So whose side are the Chinese on? Or is this a case of two opposing factions making these investments?

Again, the answer is neither. As oil becomes more costly to find, its price will rise. This will make cars running on gasoline more expensive to operate, and electric vehicles will be increasingly competitive. It is impossible to convert the world’s fleet of vehicles from gasoline to electric in less than a generation, and so gasoline will continue to be needed for many years. And as the price of oil rises, more sources will become economic, such as the Canadian oil sands and the deepwater resources off the coast of Brazil. Electricity will become more expensive too, in part because the world will recognize the need to place a price on carbon emissions, and the share of electricity generated from economically-viable renewables will grow.

Yet another insight into the need for the two “camps” to break out of their ideological strait jackets comes from a book published earlier this year written by veteran journalist William Tucker titled “Terrestrial Energy.” He takes climate change and “peak oil” concerns seriously, which means conservatives won’t listen to him. He also makes a compelling case that nuclear energy (based on uranium and thorium from the earth–hence terrestrial) is the alternative to fossil fuels with the greatest potential to solve both the problems of environment and energy. That means the “green” camp won’t listen to him.

In our view, both “camps” should be listening to him, and to each other.