Tuesday, August 10, 2010

What Portugal's Clean Energy Drive Tells U.S.

I really enjoyed today's NY Times article on the success of Portugal's clean energy drive.  Ever sceptical of journalists I may have to see if I can get harder data on it in the future but for now a few things jump out at me. 

First, it seems that citizens ARE willing to pay higher energy prices to fund clean energy.  While public opinion may differ between here and Portugal, from Portugal's experience it doesn't seem true we should simply accept the notion that we have to hide the end costs from consumers through clever legislative mechanisms; presented correctly consumers, in Portugal at least, will accept a 15% rise in energy costs to pay for the transition.

Second, there is more hope than the doomsayers claim.  Portugal's transition has been quite rapid, from 17% of electricity from renewable sources 5 years ago to 45% today.  Of course, Portugal is in a position that makes the transition unusually appealing, it has little in the way of domestic supply of fossil fuels so it has to import leading to a high vulnerability to price swings.  For them, domestic investment in renewable energy poses relatively little cost to existing domestic firms and there was likely less policy inertia since they would have been unlikely to have the vast system of subsidies and entrenched interests that we do.  Still, this transition is technically possible, it's a question of interests not physical barriers.

The third part I'll take up in a separate post since it touches a subject I think is very important and underdiscussed, how private rights can be as much, or more, an impediment to the operating of the market as government intervention.

[Edit: A brief follow up post is up on the Green blog.]

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