Battlepanda: Temporary pain, long-term gain?


Always trying to figure things out with the minimum of bullshit and the maximum of belligerence.

Wednesday, November 23, 2005

Temporary pain, long-term gain?

Today's high oil prices are giving green companies a big boost when it comes to developing environmentally friendly products and petrochemical substitutes. Here's a good article from the NY Times documenting the recent progress in this field:
A few years ago, scientists at Cargill Inc. learned how to make rigid, transparent plastics from corn sugars. There was just one problem: they cost a lot more than the oil-based plastics they would replace.

But that was before the price of oil shot up and companies came under pressure from consumers and investors to find economically sound ways to adopt "green" packaging and other environmentally friendly products and processes. This year, Wal-Mart, Wild Oats Market and many other retailers, as well as food suppliers like Del Monte and Newman's Own Organics, all embraced corn-based packaging for fresh produce.

Sales at NatureWorks, the Cargill subsidiary that makes the plastic, grew 200 percent in the first half of this year over the period last year. "The early adopters were more influenced by environmental concerns than costs," said Kathleen M. Bader, chairwoman of NatureWorks. "But now we're competitive with petrochemicals, too."

I guess both rabid environmentalists and complacent market types are half right. The market types are right in that the free-market economy is a powerful engine for progress, and that when the economic incentives are there, innovative solutions and technological progress happens startlingly fast. But the environmentalists are also right in saying that the market is hopelessly myopic -- everybody could see the oil crisis coming, but the market did not respond until recent geopolitical events and price shocks bring home the fact we're right on top of it. And it was the uphill struggles of the green-crowd who laid the groundwork for the technology that brings us affordable corn-based plastic and solar panels etc. etc.

To rope in a shaggy-dog metaphor, it's like we're all sitting in a stage-coach drawn by powerful horses (the economy, see) complacently browsing in the green. The environmentalists and peak-oil believers are screaming "the Indians are coming" while trying to get the horses moving. But the horses don't see the Indians yet. They won't start to run until they feel the first arrows graze their rump. It should be up to the government to crack the whip and get things moving so that we stay ahead of the crisis, but they're too distracted by the horses' lobbyists.

O.K., bad metaphor. My point is, the recent surge in oil prices has good unintended consequences. It would be even better if our government is prepared to put in the regulations (milage requirements for cars, things like the Kyoto agreement) that will further spur development in green technologies directly. The worst thing to do is to act in such a way as to desperately keep oil prices low in the short term (such as ANWR), because there is only so much oil in the world, and eventually, unless the one iron law of economics is repealed, price is either going to shoot up more precipitously or that shit is going to completely run out. Better to feel some pain now and start kicking the habit.