Eco-Living Magazine

Investing in Renewable Energy Makes Economic Sense

Posted on the 15 February 2013 by Greentech

Sceptics who claim that there is no need to invest in renewable energy sources because the link between human activity and Global Warming is disputed weren’t paying attention in Economics 101. Whether or not you believe that CO2 emissions have a part to play in the warming of the Earth there is sound economic rationale for making the investment. (For the record we think that there is a link between greenhouse gases and Global Warming but that is another post…)

Not even the most ardent supporter of fossil fuels can dispute the fact that oil, coal and gas are all subject to a finite supply. It is true that improvements in engine efficiency can extend the length of time that our reserves will last. New oil and gas fields continue to be discovered and new extraction techniques are being developed that can tap previously uneconomic supplies. However there is no getting away from the fact that the supply of fossil fuels is limited and one day they are going to run out. At the same time the demand side of the equation continues to increase due to population growth and industrialisation in developing countries. Any high school economics student can tell you that increasing demand coupled with a restricted supply will lead to higher prices.

Renewable energy sources are as the name suggests unlimited in their supply. Sunlight, wind and tidal energy will be a feature of life on Earth for longer than humans are likely to be. Technological advances continue to improve the amount of energy that can be derived from solar, wind and hydropower. Improved efficiency and an unlimited supply will result in lower prices.

With the price of carbon based fuel climbing ever higher at the same time that the cost of producing energy from renewable sources is falling there will inevitably come a time that energy from fossil fuels is more expensive to produce than that from renewable sources. That day may not be too far away. Already in Australia the cost of producing electricity from solar power has fallen bellow new oil and gas based production. It is only a matter of time before this trend is replicated on a global scale.

We have a choice. We can battle rising prices and continue to invest old fossil fuel based technology or we can make the leap and reap the potential benefits offered by renewable energy. It is a similar choice to that faced by the automotive industry. Those carmakers that invested in new production techniques saw costs fall and productivity increase and they became leaders in their field. Those manufactures that remained wedded to old outdated production methods found that they could not compete and they failed.

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