Will the financial crisis be the end of green, or could green be the way to end the economic crisis?
Many people have asked me what effect the economic turmoil will have on all the green initiatives I call for in Hot, Flat, and Crowded. My friend David Rothkopf, the energy expert at the Carnegie Endowment, put it this way: “Is the economic crisis going to be the end of green? Or, could green be the way to end the economic crisis?”
The economic crisis could be the end of green, because without investment capital for research and development, it will be impossible for us to develop a new Clean Energy System or bring alternative energy solutions to market and get them to scale.
But green may be how we end this financial crisis, because in lean economic times everyone wants to be more cost-efficient in how they live and do business. Demand for the most cost-saving energy efficient buildings, cars and heating and air conditioning systems will increase, and all that demand will enable us to build a Clean Energy System that strengthens America and helps the planet.
What do you think?
(This is part of "The Chapter 18 Project." Chapter 18 will be a completely new chapter that I'll add to the next edition of the book: Version 2.0. In it I hope to include the best ideas and proposals sent in from readers.)
By submitting a comment, you are agreeing that your comment (and/or any abbreviated or summarized version) may be incorporated into the text of any future editions of Hot, Flat, and Crowded: Why We Need a Green Revolution - And How It Can Renew America, by Thomas L. Friedman (the "Author"), in any and all media, and irrevocably grant the Author, his publisher (Farrar, Straus and Giroux), and their licensees all necessary rights in connection therewith.
Answers (648)
Do you remember how after bullying the world to start smoking cigarrettes we decided to stop smoking ourselves? And litterally banned it from various places? We did not stop manufacturing it. But forced the people who were addicted to hide and smoke.
The story of environmental degradation may take a similar route. In times of plenty, we will indulge a bit until regulation and social stigma weighs in. In times of hardships, we will be forced to cut back on everything and investments may not go the route of "new morality" for returns are not inviting enough just yet.
In analyzing the impact of oil prices, not enough attention has been paid to the influence of security considerations, security as in defence I mean.. Oil prices have played a role in taming Soviet Union before and Russia now. The power of the US in managing such shifts is something that is not openly discussed but can hardly be discounted.
I see little reason for investments to shift towards green in the times of recession, even less so now that the oil prices have been brought to a level that the cry for green will not bring tears to most eyes.
This financial crisis has been in the making since Bush came to power. If you accumulate a couple trillion dollars in the hands of a few by means of a war here and an oil price hike there, that money has to find some ways to influence the market. That money will spread the reach of seemingly cheaper options and encourage a new set of behaviours from those who are least equipped to deal with its consequences. Uncapped ways of deploying these sums profitably will create new products, vehicles etc and will bring about financial meltdown as we know. How is it fundamentally different from teh meltdown that LTCM went through? Save in size and implications?
China, on teh other hand, will move steadily towards greener investments that will impact the future. india is not as ready as its not so centralised. However, it will continue to make some efforts towards greening of the country. Europe has been way ahead in the game to the extent that every citizen is conscious of environmental imperatives. The US did not have to be the last. But Bush administration did do its best to put us on the path to shrubs.
Stephen L
Enterprise / SOA Architect - Semantic Solutions Integrator
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The answer to that question will be entirely driven by us. If we give voice to the type of proactive planning that needs to occur, then the economic crisis could be resolved through pragmatic action - action that combines goals and resources to achieve more with the same resources.
One thing to keep in mind, many of our current economic liabilities have arisen through the ad hoc and short-sided decisions on energy related issues over the years. Those decisions led to suburban sprawl, increased pollution, excessive use of energy w/o regard to supply and a general move away from responsible sustainable communities. This is our chance to bring all of our resources to bear to begin correcting this situation - and it can't happen quickly enough, as we will soon begin to face the direct impacts of Global Warming.
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Gene R
President and CEO
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A bit of both will occur. A short but very accurate answer.
Regards,
Gene Russell
I think that Sustainability inititives can be the engine to revitalize the entire US economy. It gives us a great opportunity to critically evaluate everything we do. This inititive can create a new version of all products and help us make sure our operationg processes are efficient. I think if done properly it can help us drive sales and profits in the right direction.
I think that Sustainability inititives can be the engine to revitalize the entire US economy. It gives us a great opportunity to critically evaluate everything we do. This inititive can create a new version of all products and help us make sure our operationg processes are efficient. I think if done properly it can help us drive sales and profits in the right direction.
I am voting for green. We all know that US infrastructure is in a sad state. How many job would we create by have the federal, state and local government either retro-fit building with green technology and/or apply eT to new and badly needed construction? Benefits include job, new taxes revenues from workers and saving in energy costs.
I think the answer is simple. Companies could care less about green unless green means more cash for them.
So it becomes this win-win situation for the company. If an employee has a new green proposal, the company reviews it, if its neutral or net negative it gets rejected "temporarily" because of budget concerns. If the proposal is net positive for the company they take it and run with it. Not only does it make the company more money (the goal of capitalism) but they then get to reap the benefits of positive publicity for going green.
I think its a bit of a joke to be honest because virtually everything is dictated by money anyway. I almost think that if we were presented with a choice between being poor, but we'd be able to save the planet, or we were told that we could keep our money but that the earth would be unliveable in 20 years, that most people would choose the 20 years. The era of sacrifice for the greater good is dead in my mind.
Amongst all the pages of answers listed here, I am sure that all my thoughts have already been said, but I will put them forth all the same. "Those who forget history are doomed to repeat it" is one of my favorite quotes. Looking back, in my lifetime, we have experienced a severe recession with a lack of energy, loss of jobs and homes, and drops in economic output. Much time and energy was spent in bringing major corporations out of the muck-much like is being proposed for automakers today. In the background loomed an energy crisis, brought on by a lack of energy. Fast forward 25 or so years, and history seems to be repeating itself. The lack of sufficient energy has been replaced with global warming, but the hysteria is much the same.
So what do we choose to do to go forward? Just as solar panels sprung up all across the nation (including the white house) and energy efficient geodesic homes were built to cut energy spending, we push forward with hybrids and other energy saving measures to combat our current situation. Will it sustain us?
The answer to the question posed is not an either /or, but could be some of both. True, current growth forward on green technologies could be slowed by global recession. However, it is just as true that re-tooling and investment in green technologies could provide the new jobs and new growth that we need to turn things around both here and abroad. Furthermore, these investments could make bringing underdeveloped countries forward both cheaper and easier-spurring global growth. (For example, why are we not putting acres of solar panels in the Iraqi desert to produce cheap electricity? Providing the entire country with cheap reliable energy will go farther to squelch opposition than bullets.)
The question truly at hand is whether or not we will take advantage of the current situation and MAKE green the answer. If green technology isn't a major factor in our economic recovery, then I fear that much like the solar panels on the white house, we sill see new ideas pulled down and thrown away.
I think it is very possible that we will see an expansion of green technology under an Obama adminstration. It will depend on his ability to create incentives for green technology; a majority Dem Senate and Congress makes that more likely. However, I have no illusions about the power of oil and old technology lobbying money and influence. We can only hope that citizens and others create the public momentum to keep this issue on the table and visible. As we've seen we can't depend on the politicians or media (in general) to keep this going. Citizens need to be involved.
I think going Green is one of the major industries that will help our economy grow. Just imagine the impact of everyone in the world buying just one product to support this need in our global environment.
It's a naively framed question, but has marketing memory so it should help you sell books. How green is that!
A crisis by definition has to be handled immediately. Changing the course of energy usage for a country is a long term project, much like laying the track for the transcontinental railroad or planning our escape from planet Earth's physical boundaries throughout the sixities.
Mr. Friedman and I both grew up in the same metropolitan area. My wife and Mr. Friedman went to the same high school. I am thrilled and envious of Mr. Friedman's success. He is clearly more successful than I will ever be. But this question is framed poorly.
This is not 1980. The country is changing and changing dramatically. The country is growing up.
Perhaps none. We are merely in the midst of two crises where temporary relief in one will put the other on the back burner temporarily. Unfortunately, ET and green technologies are nowhere near where IT was in early 90's. The IT revolution was enabled by a much earlier revolution in Electronics dating back to the invention of transistor and integrated circuits (as articulated by Moore's law). Perhaps a comparative disruption in BT (biotech) will someday enable the ET revolution of tomorrow. For example it will be cool to cultivate micro-organisms one day that can produce biofuels on an industrial scale cost effectively without starving half of the planet. Until then ET and green technologies would (and should) be viewed as "investment decision" questions: invest in them wherever and whenever it makes sense. For example cap and trade is a neat way to inject liquidity to energy efficiency markets. On the other hand, drawing the analogy to IT too far would result in investment in lots of useless ideas that will burden an already troubled economy.
Yes. I think just as World War II took us out of the Great Depression, environmental initiatives will take us out of this economic downward spiral.
I think the green movement and green industry could be the best thing to happen to our economy since the beginning of the industrial age in this country.
With so many defunct and closed down manufacturing sites in this country (most notably in the Midwest), we have a great opportunity to open them up, start the machinery humming, and get busy building all sorts of green, clean products.
We can bring bustling industry back to America and stop outsourcing our manufacturing to other countries, but we have to be willing to pay for it - this means to pay a living, no, a THRIVING wage to our plant workers, and that doesn't come cheaply.
But we can once again be one of the countries to build quality, progressive, and environmentally friendly products. And we will be a top producer in the world again. I feel very positive about this.
This will not only provide a positive impact (and great example) to the industry producers in this world, but will also be a positive force for the health of the planet. It's all win!
Tom, I agree that green is the way out of our financial crisis. Green collar jobs are an immediate opportunity to match available resource (workers) with a national need (jobs) and help us to reduce our dependence on foreign oil. I also endorse the Pickens Plan as another immediate opportunity to take action that will have lasting impact on the future of our country and our planet.
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I think green is a good investment in the future but I also believe the current financial crisis will slow down investment efforts in that direction. Ford and GE were slow in recognizing that customers want more energy efficient cars and I believe that is reflected in their latest financial results. Still with the financial crisis you see more cost cutting rather then investments in something "new" at least in the short run.
Everyone has a FIXED non-disposable income budget
so any Green (Low Energy) Solution means
1)Less consumption of dwindling resource (petroleum)
2)Less emphasis on redirecting foreign policy to acquire dwindling resource
3)More money in the consumer's pocket to spend on food, appliances and housing and (items which will get this economy moving again)
I think most would recognize that the question oversimplifies matters as there are many other factors (healthcare, financial regulation, consumer behavior, etc.) which will influence economic recovery.
Having said that, I believe the relationship between the economic crisis and green may depend largely on steps taken at the federal government level.
Cap-and-trade is a mistake. A well-structured carbon tax program (taxing such activities as burning hydrocarbons and developing forests) would directly disincentivize the burning of hydrocarbons.
It would make alternative energy more competitive.
It could provide direct revenues for tax credits for renewables, basic research and energy conservation.
It could incent investment from the private sector into clean technologies.
It can be structured in such a way to reduce some of the volatility of fossil fuel costs.
Part of the revenues can be used to offset the regressive impact of cost increases by providing tax relief to lower-income Americans (through such measures as a payroll tax credit)..
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Jon M
Legislative and Public Affairs Office at CA Victim Compensation and Government Claims Board
Mr. Friedman - First, enjoy the books and the insight and I wish more would listen. While I see first hand the amount of government funds being used, some wisely, some not, on executing climate change initiatives the pondering question of whether this environmental issue was created or can be solved by man comes to mind. With that question being raised, it would seem that it opens the door to debate whether funds should continue to be poured into a claimed crisis where no proven solutions have been made.
However, there are many green initiative and actions that can be accomplished that have proven to benefit the bottom line of both bussiness and local governments. Think about how much time and effort we put into our waste disposal when in fact, a large majority if not all of it, can be reduced, reused or recycled.
The cost of supplying plastic or paper bags at stores woudl be cut by using simple reusable bags, or the disposal costs to businesses can be cut if they implemented recycling tactics. Businesses cutting down on packaging.......a green tactic but one that is great for the bottom line. Cities, counties and state transportation departments can use recycled materials in their roadways that reduce the amount of tires going to landfills and saves them money in the long run. The cost saving ideas are endless to both business and governments and it will take consumers and tax payers to demand that we examine these ideas, these approaches and hold ourselves accountable to make things better for our environment and for our economy.
Sustainability - Green - is evolving. It has moved from the being a fringe movement to part of our culture and maintstream. The next step in the evolution is it becoming a major element in business decisions. This will happen in three phases.
The first phase is where organizations understand the business case and rapidly adopt sustainable practices that reduce waste and eliminate costs. These early adopters are already out there and seeing the successes - Starbucks, Wal-Mart, etc.
The second phase is where companies evaluate the actions of their leading competitors and strive to adopt and emulate successes to maintain the status quo and their competitive position. Green for green sake is not a solid business position and the winners will unlock the Return on Investment equation and adopt those areas that drive savings and efficiency.
The third and final phase is through legislation and regulation driving sustainability further into the mainstream. This is an area that can also be a disincentive for companies by mandating solutions instead of allowing creativity and ingenuity to developing innovative environmental and business solutions.
The sustainability movement will lead to a entirely new group of businesses that succeed and prosper along with those that wither and disappear. Just as with any evolution and massive change - the changing economic and environmental concerns will result in new winners and losers.
The reality will fall in the middle. Much of the R & D has been for the money and not necessarily the empowerment of the sensible and closer to use technologies. Tighter money will spark the sensible solutions to market for profit. Technologies such as Ethanol are not viable motor fuels they are inspired to fundng by oil insiders just for that reason. The best thing their can do is get us all chasing our tails over a source of fuel that cannot sustain any real completion to them ever.
There is no doubt that the fuel solution is hydrogen which can eliminate the oil industry very quickly. However, the big oil lobby will try to keep us blind to it until such time as they can get the legislation that allows only their chosen few to control its production. Truth is hydrogen can be easily be produced by almost anyone anywhere.
Carbon trading and solutions are here to stay because the technology is developed to the point where it is cost effective and subsidies exist to help the opportunists of such ventures profit. Therefore solar, wind and water solutions are profitable and can sustain themselves as competitive alternatives to carbon consuming solutions.
Tom. great question to put out there.
Being from Detroit, at this moment in the domestic auto industry's history, green could be the next evolution and a possibility to regain our status as the leader in automotive innovation.
We had it, we lost it, we can regain it, and create a new green industry within an industrial industry. We have a critical mass of engineering brains, now we need to direct the intellectual energy and retooling to reimagine, reinvigorate and repurpose a lagging industry into a future-focused industry. Like the computer industry we could create a whole new job category in automotive.
Detroit has to change or die. The green direction can be it's way forward.
The answer to both your questions is YES. The economic crisis will kill green and green could be the way to end the economic crisis.
Tom, you and I have been following the green movement in parallel for the last four years. As you know, capital hill has been clueless for at least the first three of those four years. I believe you and I both have been telling them for all four of those years that green solves three problems: national security, energy and employment. When all three reached crisis proportions, the message finally sunk in and they picked up the rallying cry in 2008.
Unfortunately, one of the big lessons over the last four years of visiting capital hill and discussing this issue is that there are no leaders, no visionaries and no policy makers on capital hill … they are power brokers that respond to the whining of their most influential constituents.
So to the point of your question.
The economic crisis will kill green … at least as you and I have been thinking about it. The investment in green necessary to make a difference requires political momentum and the willingness to invest great amounts of capital. Momentum has been lost on both fronts. With oil at $60 and the possibility of moving lower, one crisis has been relieved, even if only temporarily. The credit crisis is worse than most realize … the financial system is bankrupt and it will take a lot of money from the government and a lot of time to recapitalize the system. Meanwhile the economy slows. There will be no private sector willingness to take the risk on that type of capital investment while the economy and oil slows. Not to mention, those types of capital investment requires heavy borrowing which is not available today. Further, the government is bankrupt and falling deeper into financial insolvency as it recapitalizes the banks. The government does not have the money to jump start this type of investment either.
Green will be the way out of our economic crisis (if one understands that this crisis was long in the making and will be long in the resolving). Notwithstanding the above, green is the long term solution. It will create national security, it will solve the energy crisis and it will create new technology jobs to lead the country into the next several generations.
Keep in mind the following … The nation’s infrastructure was built following world war two by our fathers and grandfathers. That infrastructure was built when the oil price was low and energy was therefore not a constraint on economic growth. They did not need to build an energy efficient infrastructure. In an era of higher energy prices, the energy price is an economic constraint. The infrastructure needs to be made more efficient.
My point is that much of the energy conversation has remained on the supply side regarding renewables and nuclear and so on. Those are all capital heavy investments which will be more difficult to pursue in this environment. The demand side, however, has the potential to create the greatest impact short and long term and much of the technology already exists today. And to implement demand side efficiency investments will require considerably less capital, shorter paybacks and less risk than the supply side solutions that are discussed so often today. The governments therefore needs to incent and encourage less sexy but more palatable energy efficiency upgrades at home and in our industrial base in order to create a new demand cycle for some of our existing industrial, technology and services businesses.
I think this is enough to make my point. If you ever wish to discuss this in more detail, please feel free to contact me at peter.mcgratty@comcast.net or 973-898-9461.
Take care.
Pete
Prem R
Director, IT - System Validation, Testing & Quality COE
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I am a big fan of your column in NYT and your books - thrilled to be responding to your question.
The "greening" of America is surely one of the ways we can move towards a sustainable solution for our current economic crisis. There is significant potential for job creation as I envision more private sector investments in this space operating within a government sponsored framework that provides both guidance and incentives. This overarching framework for "green" initiatives has to drive the key messages of sustainability, efficiency and thrift. The planning & execution of these initiatives should be driven by risk and benefits realized, and not based on the media attention they get or the political capital they can help build. After the dot-com bubble and financial bubble in quick succession, we certainly don't need a "green bubble".
After reading your book, I believe as you do, that with regard to a sustainable future in many aspects the solution is taking a leadership role in this 'Energy-Climate' Era. You book has assisted me in crystalizing my thinking and motivated me to action. I can only hope and am encouraged that with this new administration, Obama can move this country forward with this agenda.
Evert J
Manager of Research, Analytic Services and Communications at McKinsey & Company
Hi,
It all depends on how you define green. If people can create "green" (dollars) out of green they will do this investment. It might actually the time to invest in this area. In general the companies that are succesful after a recession are the companies that had the courage to invest. So why not, I don't think you will see an end to it, It might prove to be a huge opportunity.
The other 'green', I mean the currency is doing rather well at the moment. The creators of the recesssion in the first place, the USA, are now getting more and more better exchange rates then they had before. The dollar grows stronger while the country is at the edge of a recession. That is a paradox. But I am sure that is not the green your were focusing on. :-)
Regards
Evert
Short answer: "Green" costs money and when coupled with the short-sightedness of compliance standards (that will classify one as "green" while being furthest from it), you will see that the "green" movement will cost more than it should in the long term. Especially after the novelty wears off and people become aware of what has happened in trying to get the designation.
Old money, old politics and old energy will not allow a forward movement in "clean" and "green" until every last penny is squeezed from current supplies, thereby fueling our economic crisis. You will see slow forward motion, carefully paced to end at the same time alternative resources are geared to go live.
To end the economic crisis, the world must change its' perceived institutions, mainly the cash based economy. Research "fractional banking" to see why are in a crisis to begin with. Project Venus has great ideas on solving the issue by thinking outside the box with resource based economy over cash based. This allows for much more freedom with much less possibility of secret corruptions that we have with cash.
I do not see green as the end of this financial crisis. In the short term we will work our way out of the current crisis using our traditional methods. However I see us leaving the current crisis with a much enlightened green strategy to help us limit some financial crisis in the future. Unfortunately I don't believe being greener could have prevented this economic crisis or any future crisis unless we are better able to control the human behavior causing the issues.
Rob C
President Curedale Inc.
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Thomas,
Thomas,
For as long as our species has existed and as long as we will exist, our natural environment is the final arbitrator of our success or failure as a species. Archaeologists study vanished civilizations that overfarmed, overpopulated and overexploited water resources in areas that today are barren deserts but once were frtile environments. The financial crisis won't be the end of green because green is more real than our economic system.Our economic system may eventually be the end of a global environment that can support billions of people.It is no longer providing what we need as a species because it operates independently and in conflict with the environment but we do not.
In short term the financial crisis could hamper the growth in Green sector because of at least two reasons:
1. Shortage of capital to continue the research
2. Burden on companies to follow the regulations and upgrade the infrastructure. Manufacturing companies might have found a persuasive argument against spending on 'going green'.
I don't think 'Green' has enough momentum to end the financial crisis. In short term it does not have enough financial benefits. However, I think there is a unique opportunity for government to accelerate Green by giving a portion of stimulus/relief fund to companies which follow certain guidelines and to companies which are near a product to boost the sector.
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