Going Green--The Role of Environment in the Economy

Last week, Adam Alston from Businessweek came to the The Stephen M. Ross School of Business to talk about the role that the environment will play in our economic future. His presentation focused on the dwindling supply of current available energy, projected growth of alternative energy sectors and the role China will play in promoting the use of new energy technology.

With the growth of India and China, experts claim that the available supply of energy is being consumed at an alarmingly accelerated pace. Alston stated that there is approximately 13 years of indium and other rare Earth metals left because of our rapidly increasing population and our over consumption of these resources.

With the scarcity of current available energy, Alston claim that alternative methods of harnessing energy with be given more attention and will therefore be profitable in the near future. Some of the sectors he claims will experience rapid growth in the next 10-20 years include natural gas, wind energy and solar power, as well as new energy gathering methods such as the use of vertical pipes, 3-dimensional imaging and hydraulic fracturing.

The biggest point of Alstons presentation, however, was the fact that China, not the United States, would be the biggest exporter of green technology. He cites a term coined by Jonathan Rauch in a National Journal article published Sept. 5, 1992 called "demosclerosis." Demosclerosis is defined as the loss of ability to adapt to change by a democratic society, usually due to state gridlock. In the United States' case, Alston claims that the United States will "never have a meaningful climate bill" because there are too many conflicting interests in Congress based on congressmen trying to please their respective constituents.

Alston cites the coal industry as an example of this. If Congress were to pass a bill limiting coal production and replace it with natural gas, states such as West Virginia, which depend largely on its coal industry, would lose many jobs as a result of the bill. Therefore, West Virginian congressmen would be disinclined to accept such a bill without countless addendums being added to it.

Because China does not have this problem, Alston claims that it will overtake the U.S. as the largest exporter of green technology. It has already begun to do so, with the introduction of electric motorcycles and small cars. What Alston refers to as "bottom-up electrification" will eventually introduce a large world market for electric cars of all sizes.

Alston cites four reasons for the inevitable development of a major green market. In the next 15 years, 350 million people will be added to China's urban population, 170 mass transit systems will be built, 50,000 skyscrapers will be built, and the Gross Domestic Product (GDP) will grow five times larger. The sheer numbers make it clear that a Chinese initiative to invest in green technology will drive the world market for such products and make going green a significant part of our future economy.