It's Cheapest to Push Clean Energy in a Downturn

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Wednesday, 16 June 2010 04:29

In his speech on the BP oil spill President Obama discussed his clean energy agenda. At one point he said: "There are costs associated with this transition, and some believe we can't afford those costs right now."

It would have been worth pointing out that the opposite is true. Measures to shift to alternative forms of energy require increased resources. At present, with the economy operating well below full employment it has a vast amount of unemployed labor and idle capacity. In principle, some of these idle resources can be used to promote the switch to alternative energy or for measures that promote conservation.

We would have less money for this transition if the economy were near full employment and there was little idle capacity. In that situation, the only way to get resources for the transition would be by pulling them away from their current uses. This would mean effectively some types of tax on current consumption patterns. At the moment, any taxes on can be fully rebated to consumers with little cost to the economy.

Reporters who cover this issue should be aware of these facts. It would have been appropriate to correct President Obama on this statement.