In Feb 2008 edition of Harpers, Eric Janszen wrote an article titled "The Next Bubble" where he descibed the wave of investment in altnerative energy as the next bubble. http://www.harpers.org/archive/2008/02/0081908
While I aggree, there is good probability of bubble investment in alternative energy, this will hopefully drive down costs of alternative energy solutions. But there is more to think about with this article.
I could see his point. Yet, there are two economic bubbles happening. One raising the value of the other. Higher energy cost is the first bubble. How big will this bubble be? I’m not sure. However, not one energy analyst has forecasted a downward trend in energy costs in the next 5 years. We’ve seen this model before with past bubble activity; Confident analysts predicting never ending higher speculative values.
Because of the global nature of energy needs and political instability, the energy bubble might have a longer time cycle than most U.S. focused bubbles. And this leads us to the second bubble: alternative energy.
It is true, that a possible alternative energy bubble is being uplifted by conspicuous consumption and public environmental reaction from higher profile climate change awareness campaigns. However, the real muscle motivating many consumers and businesses into alternative energy planning is a short term hyperinflation of the energy cost asset (or bubble : to use a term below).
When gasoline prices soared after 1979, President Carter made moves to encourage alternative energy development and encouraged consumers to use less gasoline and electricity. The popularity of alternative energy consumption became popular (from high MPG compact automobiles to outcries from the World Watch Institute to use bicycles) and many alternative energy businesses were formed as a result.
But as the price of energy decreased significantly (the energy bubble), the 3 year alternative energy bubble quickly deteriorated. SUVs and large homes became the symbols of conspicuous consumption. Subscriptions to environmental magazines diminished. Environmental groups were labeled extremists (although very few were) and their memberships dropped.
Now, as a new energy bubble emerges, environmental groups are regaining members, the amount of environmental literature is increasing, and governments are pressing for more oversight, regulations and laws to manage energy consumption and encourage alternative energy use.
However, while the risk of this alternative energy bubble dropping might be high when the ensuring energy bubble drops, there is a difference between now and 1979. The alternative energy bubble could be establishing long term regulatory, social and market externalities in the area of environmental accountability. An example is disclosing carbon footprint and pollution impact of multi-national corporations.
I predict that long after the price of energy drops and even an alternative energy bubble bursts, organizations will be still under an environmental regulatory microscope for the foreseeable future.