Worlds of Differences

I’ve always known that Americans hold a pretty different view about the state of the energy sector than elsewhere in the world, but never really knew how to characterize those variances.

Today, I write in gratitude, thanking the efforts of Sonal Patel, senior writer at Power magazine.  Patel developed this helpful visual framework summarizing the recent issuance of the World Energy Issues Monitor, a a global survey undertaken annually by the World Energy Council posing the question “what keeps energy leaders awake at night?”

For each of three regions — North America, Europe and Asia — Patel has drawn circles for each major issue area of potential concern to the energy sector and placed them on a two-dimensional chart, where higher indicates more impact and right represents more certainty.   The size of the circles is proportional to the urgency of an issue.

Perusing Patel’s graphic is an illuminating exercise.  Of note:

Only in North America is the topic of “unconventionals” — meaning producing oil and gas from unconventional sources such as shale and oil sands — viewed as a particularly big deal.  In Europe, unconventionals are somewhat lower on the radar screen, and in Asia barely on the screen at all.

Conversely, energy prices are a critical topic in Europe and Asia, but deemed only of modest importance in North America.

Similarly, energy efficiency is high on the agenda in Europe and Asia, not so much in North America.  Even more starkly, renewables are seen as only a low-impact issue in North America, and a more significant issue elsewhere.

Perhaps because of the high penetration of renewables there, energy storage is of most interest in Europe, but of less interest in North America, and of hardly any interest in Asia.

Nuclear energy is viewed as a high-impact issue in North America, moderate impact in Europe, and (perhaps surprisingly) low-impact in Asia.  So, for that matter, are electric vehicles.

The so-called “hydrogen economy” — involving the use of fuel cells for power generation and transportation — retains a bit of interest in North America (though with low urgency), but has fallen off the map elsewhere.  Carbon capture and storage (CCS) follows somewhat of the same pattern, although Europe does hold it in higher esteem than hydrogen.

True, there are some commonalities to acknowledge:  the smart grid and policies to deal with climate change and energy subsidies are seen in approximately the same light globally.

However,  more than anything else, Patel’s framework shows that leaders in the energy industry live in very different worlds, depending upon which part of the world they live and work in.

Failing The Course: Energy Economics and Subsidies

When I was a young lad in college, at the Massachusetts Institute of Technology (MIT) in the early 1980s, I took a course in energy economics taught by Prof. Morris Adelman.  I was an anomaly:  there were probably no more than a handful of courses then being taught in energy economics in the colleges and universities around the world, and Adelman was one of the very few people around who could have plausibly been called an “energy economist”.

Thirty years on, and the relative dearth of economic understanding in the energy sector persists.

Certainly, there is much more attention now being paid to the intersection of energy and economics at centers of higher education, but these professors are teaching students who will be leaders 20-40 years from now.

Most of today’s leaders involved in energy policy, who went to school decades ago (as I did), do not seem to have been exposed to (or if so, to have grasped) the importance of economic principles when setting energy policies.

Perhaps this economic ignorance in the energy policy realm is most apparent by the prevalence of energy subsidies.

As I’ve posted before, energy subsidies are powerful and dangerous things:  powerful because they are effective, dangerous because their effects can be bad.

And how prevalent are they?  The International Monetary Fund just issued a new study, entitled “Energy Policy Reform: Lessons and Implications”, that brings a fresh analysis of this difficult-to-measure topic.

By IMF’s estimates, on a worldwide basis, energy subsidies of all types summed to nearly $2.5 trillion in 2011, equating to over 3% of global economic output (GDP).

Certainly, some of the less-developed kleptocratic oil producing countries of the world are among the worst performers.  For instance, under the despotic rule of Hugo Chavez, Venezuela directed nearly 17% of its economic output into energy subsidies.

However, the U.S. performed no better than the world average, with fully 2.4% of its GDP subsidizing American petroleum markets.

This is not a good thing at all.  As the IMF notes right at the top of the executive summary of the report:

“Energy subsidies have wide-ranging economic consequences.  While aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector.  Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources.  Most subsidy benefits are captured by higher-income households, reinforcing inequality.”

In all, it’s a long litany of ails that are amplified by energy subsidies.  And yet, they persist.  Why?

Do I really need to answer that question?

Whether future leaders have the strength to prevail over political forces that aim to preserve and enhance energy subsidies remains to be seen.  However, it is cause for some hope that a greater number of future leaders are being better taught about energy economics and better informed by estimates such as those produced by the IMF.

Let’s hope these future leaders pass their energy economics courses — not only when they attend school, but more importantly, when they’re out in the real world and make decisions and recommendations and actions that have consequence to us all.

Rethinking the Role of Government in Cleantech

Another year, another wringing of the hands over tax credits and incentives for clean technology.

Lobbyists and vendors in the U.S. are once again singing the blues, calling for continued and expanding government investments in clean technology. At the same time, political challengers continue their Solyndra hootenanny, raking the current administration for how it spent hundreds of millions of taxpayer dollars.

One can’t help but wonder whether it’s time for a different tune when it comes to government involvement in cleantech.

Perhaps conversations about policy support should be less about giving more taxpayer money to prop up the space, and more about elected officials setting long term market stability and enabling the private sector to deploy capital to assume risk in cleantech.

Why? First, some background…

Down with incentives
Every time U.S. tax credits for renewable energy development come up for renewal, the cleantech sector cringes at having to once again “play chicken” with whichever administration is incumbent at the time.

The U.S. Production Tax Credit (PTC), which provides a 2.2-cent per kilowatt-hour benefit for the first ten years of a renewable energy facility’s operation, was born in 1992. But it’s had a hardscrabble life, clinging to life support after seven one and two-year extensions bestowed alternately by Republican and Democratic Congresses. Neither major American party has been willing to show long term incentive support for renewable energy.

The PTC for incremental hydro, wave and tidal energy, geothermal, MSW, and bioenergy was extended until the end of 2013. But the production tax credit for wind expires at the end of 2012. And that’s got wind lobby groups girding up. In a recent statement, American Wind Energy Association (AWEA) CEO Denise Bode cited a study suggesting Congressional inaction on the PTC “will kill 37,000 American jobs, shutter plants and cancel billions of dollars in private investment.” The same study suggested extending the wind PTC could allow the industry to grow to 100,000 jobs in just four years. Expect this battle to simmer all summer.

The unpredictability around cleantech incentives is taking its toll. “The U.S. is hitting a brick wall with the cessation of benefits,” remarked John Carson, CEO of Alterra Power, on the subject at a recent cleantech investment conference I co-chaired in Toronto. He wasn’t happy, and do you blame him? Nobody likes living hand to mouth. But that’s what happens when you rely on credits and incentives like the PTC or its loved and loathed counterpart in the U.S., the Investment Tax Credit (ITC).

And then there are the cleantech subsidies provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which are now winding down.

If it feels that clean technology vendors and lobbyists are spending an undue amount of energy and resources chasing such subsidies worldwide, they likely are.

Up with mandates and standards
Rather than funding and administering subsidies to help the clean and green tech sectors find their footing, a case could be made that governments should focus on passing aggressive policy mandates, standards and codes.

Instead of using taxpayer money to make technology bets, regional and national governments could focus on passing laws, including broad brush stroke ones like the renewable portfolio standards in the U.S. that mandate a certain percentage of power from renewable sources by certain dates, and then step back and let the private sector figure out how to deliver. Or mandate change more granularly—for example, that coal power plants need to meet certain efficiency or emissions standards by certain dates, and, again, let the private sector figure out how. (Ironically, if there were more public support to actually clean up coal power instead of simply disingenuously parroting, beginning in 2008, that “there’s no such thing as clean coal” and throwing up our hands because environmental ads told us “clean coal doesn’t exist today”—and if that translated into political will and a mandate—cleaner coal power could exist today. Yes, there’d be a penalty on the nameplate capacity of plants’ output, but there’d also be billions saved in health care costs. But we digress.)

Taxpayers should take their politicians to task for trying to play venture capitalist, i.e. by investing their money in trying to pick winners (a la Solyndra) in complicated markets. Professional venture capitalists themselves, who focus on their game full-time, barely pick one winner in 10 investments.

Drawbacks of incentives
How could government grants, loans, tax credits and other subsidies possibly be bad in cleantech? Free money is good, right? Here’s a list of drawbacks to these incentives, some of them not as obvious as others:

  • They can go away and cause market disruption – to wit, the points earlier in this article.
  • The existence of loans and grants silences critics – Few speak out against pots of free money, because they might want or need to dip into them in the future.
  • Incentives favor only those willing to apply for them – and therefore are often missed by companies working on disruptive, fast-moving tech, or who are focused on taking care of customers’ needs.
  • Criteria are often too narrowly defined – Criteria for incentives often favor certain technology (solar photovoltaic over other solar, or ethanol over other biofuels), and as a result, lock out other legitimate but different approaches.
  • Picking winners means designating losers – Recipients of government grants or loan guarantees get capital and an associated halo of being an anointed company. Those that don’t are comparatively disadvantaged.
  • Not the best track record – Incentives go to companies best staffed to apply for and lobby for them. And those aren’t necessarily the companies that could use the capital the most effectively, e.g. to compete in world markets, or create the most jobs.

What governments could and should be doing
In the cleantech research and consulting we do worldwide at Kachan & Co., we’ve come to believe that governments are best focused on activities to create large and sustained markets for clean technology products and services.

Doing so gives assurance to private investors that there will be continued demand for their investments—one of the most important prerequisites to get venture capital, limited partners and other institutional investors to write large checks.

Given that objective, governments should, in our opinion, pursue:

  • Setting mandates and standards – e.g. the amount of power generated from renewable sources, new targets for fuel efficiency, green building or other dimensions.
  • Improving codes and other regulations – making building codes more stringent could drive energy efficiency, green building and smart grid investment.
  • Building the talent pool
  • Stabilizing the economy
  • Fostering political stability
  • Commitment to infrastructure projects – including water, transportation and grid.
  • Building showcase projects – regions wanting to foster local cleantech can do as Abu Dhabi has done with itsMasdar initiativeas Saudi Arabia is now doing with solar, or as China has done with hundreds of green development zones; in doing so, all three of these countries have sent strong signals to large corporations and investors that they view clean technology as strategic.
  • Rolling back so-called perverse government subsidy support today of the fossil fuel industry, including direct and indirect subsidies.

Cities as test beds of policy innovation
Interestingly, cities are emerging as petri dishes of progressive cleantech policy, and are increasingly where such innovation is taking place.

For instance, Barcelona has established that large companies need to create as much as 30% of their power from solar thermal technologies. The city of Berkeley, California pioneered what is now known as Property Assessed Clean Energy (PACE) financing, wherein property owners are able to pay for energy efficiency and renewable energy improvements on their property taxes. This month, Phoenix, Arizona introduced what it calls the largest city-sponsored residential solar financing program in the U.S. And New York City is taking the lead in residential demand response by trialing a program to curtail the consumption of 10,000 room air conditioners at times of high demand.

Given the world’s current financial malaise, and especially in light the Occupy momentum globally, I’m surprised more folks aren’t questioning how their governments spend their money in cleantech. Because, as described above, there are other arguably more effective ways elected officials can help usher in a cleaner, greener future than throwing around billions in incentives.

After all, how much fun would a pristine planet be if we’re all destitute because governments have crumbled under crushing debt?

This article was originally published here. Reposted by permission.


A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. The company publishes research on clean technology companies and future trends, offers consulting services to large corporations, governments and cleantech vendors, and connects cleantech companies with investors through its Hello Cleantech™ programs. Kachan staff have been covering, publishing about and helping propel clean technology since 2006. Details at Dallas is also executive director of the Clean Mining Alliance.

2011 In The Rear-View Mirror: Objects May Be Closer Than They Appear

It’s that time again:  sifting through the detritus of a calendar year to sum up what’s happened over the past 12 months. 

Everybody’s doing it — for news, sports, movies, books, notable deaths…and now even for cleantech:  here’s the scoop from MIT’s Technology Review, and here’s a post on GigaOM.

So, my turn [drum roll, please], here’s my top 10 take-aways from 2011:

  1. Solyndra.  The utter failure of Solyndra, and the messy loan guarantee debacle, has been a huge black-eye to the cleantech sector.  It’s a political football that will be kicked around extensively during the 2012 election cycle, further widening the schism of support levels by the two major U.S. political parties for cleantech.  In other words, cleantech is becoming an ever-more polarizing issue — with Solyndra serving as the most visible tar-baby.
  2. Shale gas and fracking.   A chorus of ardent proponents of natural gas development, most vocally Aubrey McClendon, the CEO of Chesapeake Energy (NYSE: CHK) — the largest player in the shale gas game — is repeatedly chanting the mantra that shale gas is so plentiful that it can very cheaply serve as the major U.S. energy source for the next several decades.  And, recovery of this resource will create a bazillion jobs for hard-working Americans in rural areas.  In this view, who needs renewables?  Interestingly, this view also poses increasing threats to coal interests as well.  On the flip side, of course, the concerns about the use of fracking techniques, and the implications on water supplies and quality, are constant fodder for headlines.  Clearly, shale and fracking will continue to be hot topics for 2012.
  3. Keystone XL.  The proposed pipeline to increase capacity for transporting oil from the Athabasca sands of Alberta to the U.S. is the current lightning rod for the American environmental community.  Never mind that denying the pipeline’s construction will do very little to inhibit the development of the oil sands resources — Canadian producers will assuredly build a planned pipeline across British Columbia to ship the stuff to Asia.  Never mind that blocking the pipeline will do nothing to reduce U.S. oil consumption — which is, after all, the source of the greenhouse gas emissions that opponents are so concerned about.  This has become an issue of principle for NRDC and other environmental advocates:  “we must start taking concrete steps to wean ourselves from fossil fuels.”  Nice idea in theory, but this action won’t actually do anything to accomplish the goal, and will only further paint the environmental community in a damaging manner as being anti-business and anti-economics.  In my view, we have to work on reducing demand, not on curtailing supply; if we reduce demand, less development of fossil fuels will follow; the other way around doesn’t work.  The Obama Administration has punted approval for the pipeline past the 2012 election, but Keystone XL — like Solyndra — will be a major framing element in the political debates.
  4. Fukushima.  The terrible earthquake/tsunami in Japan in March killed over 20,000 people — and sent the Fukushima powerplant into meltdown mode in the worst nuclear accident since Chernobyl in 1986.  As costly and devastating as Fukushima was to the local region, it pales compared to the damages caused by the natural disasters themselves.  Even so, the revival of the perceived possibility that radioactive clouds could spew from nuclear powerplants put a severe brake on the “nuclear renaissance” that many observers had been predicting.
  5. Chevy Volt.  Released after much anticipation in 2011, sales of the plug-in electric hybrid Volt have been well below expectations.  Furthermore, as I recently discussed here, a few well-publicized incidents of fires stemming from damaged batteries have been a huge PR blow to gaining widespread consumer acceptance of electric vehicles.  Clearly, Chevy and others in the EV space have their work cut out for them in the months and years ahead.
  6. Challenges for coal.  As I recently wrote about on this page, the EPA has been working on promulgating a whole host of tightened regulations about emissions from coal powerplants.  These continue to move back and forth through the agencies and the courts, and coal interests continue to wage their battles.  But, between this set of pressures and low natural gas prices (see #2 above), these are tough days for old King Coal.  Not that they couldn’t have seen these challenges coming for decades, mind you, and not that some of their advocacy organizations don’t continue to tell their pro-coal messages with some of the most heavy-handed and dubiously factual propaganda outside of the recently-deceased “Dear Leader” Kim Jong Il
  7. Light bulbs.  One of the most absurd and petty dramas of 2011 unfolded over the planned U.S. phase-out of incandescent light bulbs, as provided for in one of the provisions of the Energy Independence and Security Act of 2007Representative Joe Barton (R-TX) led a backlash against this ban, arguing that it was an example of too much government intrusion into consumer choice — and succeeded in having the ban lifted at least for a little while, tucked into one of the meager compromises achieved as part of the ongoing budgetary fights.  This was accomplished against the objections not of consumers, but the objections of light bulb manufacturers themselves, who had already committed themselves to transitioning to manufacturing capacity for the next-generation of light bulbs:  CFLs, LEDs and halogens.  Now, the proactive companies who invested in the future will be subject to being undercut by a possible influx of cheap imported incandescent bulbs.  Way to go, Congress!  No wonder your approval ratings are near 10%.  Is it possible for you guys to focus on the big important stuff rather than on small bad ideas? 
  8. PV market dynamics.  Solyndra (#1 above) failed in large part because the phovoltaics market has become much more intensely competitive over the past year.  Module prices have fallen dramatically — no doubt, in large part because the market is now saturated by supply from Chinese manufacturers, who are sometimes accused of “dumping” (i.e., subsidizing exports of) PV modules into the U.S. marketplace.  This is stressing the financials of many PV manufacturers, including some Chinese firms and other established players.  For instance, BP (NYSE: BP) announced a few weeks ago its exit from the solar business after 40 years.  However, the stresses are falling mainly on companies that employ PV technology that cannot be cost-competitive in a lower pricing regime, whereas some of the new PV entrants — not just Chinese players, but some U.S. venture-backed players like Stion (who just raised $130 million of new investment) — are aiming to be profitable at low price levels.  And, after all, the low prices are what is needed for solar energy to achieve grid-parity, which is what everyone is seeking for PV to be ubiquitous without subsidies. 
  9. Subsidies.  Ah, subsidies.  In an era of increasing fiscal tightness (see #10 below), pro-cleantech policies are under greater scrutiny.  In particular, renewable portfolio standards are being threatened by state legislators of a particular philosophy who are opposed to subsidies in all forms.  The philosophy is understandable, but the lack of understanding or hypocracy is less easy to defend:  the status quo is almost always subsidized too, especially during its early days of development and deployment — and often remains subsidized well after maturity and commercial profitability.  Fortunately, there’s an increasing body of high-quality work that assesses the energy subsidy landscape in a generally objective manner, such as this analysis released by DBL Investors in September.
  10. Europe.  Although not a cleantech issue per se, the vulnerability of the European economy, the European Union, and the Euro in the wake of the various debt crises unfolding across the Continent is a major negative factor for the cleantech sector.  Europe is the biggest cleantech market, and many of the leading cleantech investors and corporate acquirers are European, so a recession (or worse, depression)  in Europe will be a very big and very bad deal for cleantech companies.

In all, 2011 was not a great year for the cleantech sector, and I don’t see 2012 being much better.  But, that’s not to say that good things can’t happen, or won’t happen.  Indeed, there will always be rays of sunshine among the clouds…or, to use another metaphor, you’ll always be able to find a pony in there somewhere.

Happy New Year everyone!

What If…?

…someone invents an economically-competitive energy storage technology that could be deployed at any electricity substation at megawatt-hour scale?

…the power grid were brought up to 21st Century standards to match the true power quality needs of our increasingly digital society?

…high-speed rail was not the exclusive province of Europe and Asia?

…customers had real choice about electricity supplies, via ubiquitously cost-effective on-site generation options?

…cities and industries pursued viable cogeneration options with real vigor, and companies like Echogen revolutionize the capture of waste heat?

…the use of fracking was reliably paired with other technologies and solid oversight to assure that local water quality is not harmed when shale gas is produced?

…recovering coal and tar sands was undertaken only via mining approaches that don’t leave huge gouges in the earth’s crust?

…all companies involved in the mining and burning of coal would honestly acknowledge and deal responsibly with the environmental challenges associated with coal?

carbon sequestration technologies are more than just a pipe dream and can be widely applied with confidence that no leakage will occur?

…environmentally-responsible technologies were commercialized to produce oil from shale in the Piceance Basin, making the U.S. self-sufficient for years to come?

Joule is really onto something and can produce liquid fuels for transportation directly from the sun?

…fuel cells expand beyond niche markets via continuing improvements in technology and economics to penetrate mass-market applications?

nuclear fusion could ever become viable as a technology for generating electricity?

…new technologies for the production and use of energy in a more environmentally-sustainable matter were responsible for a major share of new jobs and economic growth in the U.S.?

…we stopped sending hundreds of billions of dollars overseas every year to fight both sides of the war on terrorism?

…we stopped subsidizing mature and profitable forms of energy?

…we determined that climate change was simply too big of a risk to keep ignoring and decided to tackle the issue out of concern for the future?

…Americans were willing to pay at least a little bit more for energy to help defray the costs of pursuing much — and achieving at least some — of the above?

…we later found out that we didn’t spend that much more money and also found ourselves living on a healthier planet and in a more fiscally-solvent country with a viable industrial future?

…certain fossil fuel and other corporate interests would cease misinforming the public on many economic and environmental issues related to energy consumption?

…Democrats and Republicans could come together and do what’s best for the country rather than what’s best to strengthen or preserve their party’s political power?

…more Americans cared about the above than who wins American Idol, Survivor or Dancing With the Stars?

Why Corn-Based Ethanol Sucks

by Richard T. Stuebi

While it is increasingly recognized that subsidies for corn-based ethanol are bad policy, a nod must be given to C. Ford Runge, a professor at the University of Minnesota, for his pithy and merciless analysis in his note “Biofuel Backlash” published in the May/June issue of Technology Review.

In the space of just a few short paragraphs, Prof. Runge cites the work of Earth Track (a firm dedicated to exposing subsidies detrimental to the environment) projecting $400 billion of U.S. subsidies to ethanol between 2008-2022, notes a recent estimate by the Earth Policy Institute that the 2008 U.S. corn crop diverted for ethanol production would have been sufficient to feed 330 million people for a year, and provides a reference to modelling that indicates a near-doubling of greenhouse gas emissions due to changes in land-use patterns associated with corn-for-ethanol production.

It’s amazing that such awful policies, which are so adverse on so many dimensions, can survive. But, in the gameboard that is U.S. energy, environmental, and agricultural policy, only grand compromises supported by the big boys can get enacted — which are then extremely difficult to overturn when they are seen to be nothing more than gifts to their well-positioned and deep-pocketed sponsors and supporters.

Reiterating a point I’ve made before: I have nothing against ethanol per se. Cellulosic ethanol, if it can be accomplished cost-effectively, is a promising prospect for reducing greenhouse gases and reliance on Middle Eastern petroleum without chewing up valuable foodstuffs. But corn-based ethanol plainly sucks. And, the notion of using corn-based ethanol as a bridge to cellulosic ethanol is dubious at best.

The old adage says that a camel is a horse designed by committee. Would it were that U.S. biofuels policies were as lovely as a camel.

Richard T. Stuebi is a founding principal of NorTech Energy Enterprise, the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.

The Role of Government in Advancing the Green Economy

by Richard T. Stuebi

as posted to Huffington Post

Last week, I wrote a sizable check to the IRS. I wasn’t exactly happy about it, but I was happy for the fact that it stemmed from a nice payday in 2008 from one of my investments. Ah, the joys of capitalism, and the obligations of responsible citizenship.

This particular investment is advancing the cause of clean energy, as it involved the sale of interests in a pre-development windfarm to another firm that will (hopefully) take the project to fruition.

Clearly, the public sector played some factor in the fundamentals of my investment. States have imposed renewable portfolio standards driving the market for new windfarms to be developed, and the Federal production tax credit represents a significant portion of the financial value of an operating windfarm to its owner.

But, by and large, it was the forces of the marketplace – entrepreneurs, suppliers, landowners, financiers, customers – that drove the underlying business opportunity, the transaction, and its associated value-creation.

I hope that those days aren’t long gone.

Over the past year, there has unquestionably been a shift towards more government intervention in virtually all markets. It’s far beyond the scope of one blog post to delve into all of the causes and effects and all of the pros and cons of this shift.

In the cleantech realm, the tendency for increased intervention has been especially aggressive. The chatter in political circles is the notion of pushing forcefully towards the new energy economy – to achieve the admirable environmental benefits, but more for the prospect of creating some arbitrarily-large number of so-called “green jobs”.

Though I admire visionaries like Van Jones who newly brought the green job notion to the forefront of the public discourse just a few years ago, I’ve decried the excessive hype and the weak analytics behind the claimed magnitudes of green jobs that may or will emerge. I don’t doubt that many new green jobs will emerge, and I think they will be great for this country. It’s just that I don’t put any validity on any of the estimates of job creation, and I also acknowledge that there will be some job losses in other sectors that also need to be considered (but often aren’t).

I also lament the way in which many public sector leaders talk about “creating” green jobs, as if the job positions can somehow be invented by the government itself through the stroke of a pen or the wave of a wand.

Unless we want to move to a command-and-control economy where the government dictates the majority of all economic activity (remember the Soviet Union?), large-scale job creation is a private-sector phenomenon. In turn, the private sector (i.e., investors) must spot an opportunity to earn favorable returns, to generate attractive profits, in order for them to incur the costs of hiring people to perform work. In other words, value-creation (or at least the promise thereof) must precede job creation.

If a government throws money at inventing jobs that the market won’t somehow sustain after they’re created, this can’t be legitimately called job creation; it’s “make-work”. (And, never forget: the government doesn’t have any money of its own; it’s actually your money that the government is spending.)

In my humble opinion, the role of government is not to try to create jobs. Rather, governments should establish the playing field in such a way that the private sector will operate in its ruthlessly efficient manner to exploit – and, in so doing, hire a lot of people.

Governments can never match the intensity and the innovation of millions of properly-motivated private sector actors. Instead, governments should focus on aligning and harnessing these interests in ways that drive the system towards outcomes that are good for the public.

To be sure, the government has a key role – indeed, a responsibility – for setting policies that serve, advance and protect the public’s interests in transitioning towards an energy system that is more sustainable from both a supply and environmental standpoint. But, in the name of green jobs, the case is sometimes being stretched too far. An article in the April 4 edition of The Economist is particularly illuminating.

Spain is often touted as a model for how the public sector can exert leadership in setting a whole host of progressive policies (mainly generous subsidies) for rapidly pushing a move to green energy and creating many jobs while doing so. Yet, according to a recent study by a professor at King Juan Carlos University in Madrid, this way of building an industry is more than twice as costly on a per-job basis than if the private sector were to act on its own. Put another way, the study finds that, for every green job created by public sector prodding in Spain, more than two run-of-the-mill jobs were destroyed in the private sector. Ouch.

There’s a lot of talk in Washington about industrial policy these days. I’m a skeptic. I see Japan, and while it’s true that the Japanese industrial sector was the world’s envy in the 1980’s due to its strong government intervention, I also see nearly 20 years of uninterrupted economic stagnation now.

In sum, I just don’t think the public sector can actually build an industry better than the private sector can. In my ideal world, I would like to see the government intervene in the energy markets, for environmental and supply security, in one (and only one) simple way: high taxes on fossil fuel burn, to account for the social costs of climate change and dino-resource depletion.

High fuel taxes! The horror! The horror!

It’s lonely for me to write this, but the biggest problem facing the U.S. energy system is the enduring insistence of a “low price at any cost” energy policy, and the customer entitlement that bestows.

I see public service announcements (PSAs) about the little things that a viewer can do to become green, like changing from incandescent to fluorescent light bulbs, or using a reusable canvas shopping bag instead of use-and-chuck plastic bags. I understand that the average American needs to get engaged and feel like they can do something, even if it’s something simple and small, to contribute to the solution, but…. Please. Really. Enough feel-good talk about these piddling things.

I’d like to see some frank PSAs that confront the big issue head-on: higher energy prices, get used to it.

Obviously, a move to higher energy taxes will be unpopular, so we need some set of respected or well-liked voices in the public starting to lay the groundwork for its actual desirability, if not inevitability. In the grand scheme of things, shifting the U.S. mindset on the topic of energy taxes is much more important than urging people to put a recycling bin in the garage.

With energy prices that are predictably much higher, via a big jump in fossil fuel taxes, the private sector can go to work, busily eliminating wasteful energy consumption and developing new technologies that reduce fossil fuel requirements.

The twist is that the revenues collected from higher energy taxes can be offset by dramatic reductions in income and capital gains taxes. The way I figure it: we shouldn’t be heavily taxing things that are supposed to be good – such as income and savings – while undertaxing things that are supposed to be bad – like burning non-repletable fossil fuels that damage the atmosphere.

In the future, I want to get more good-sized checks from my cleantech investments, and I want all of you to get some checks from cleantech investments too. I also don’t want to send as big a chunk of those checks to the IRS. In return, I am willing to spend a lot more at the gas pump and in my utility bills.

Besides, I use my credit card when I buy those things, so higher energy prices means accumulating more points. In the move to the green economy, it’s important to always looking for the silver lining in every cloud encountered.

Richard T. Stuebi is the Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director of Early Stage Partners.