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April 02, 2010

When will we know?

When will we know it is time to convert from conventional energy sources to alternatives? Do we have to rely on the government to tell us?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"No, we don't. ... And this is kind of one of the big selling points to economists, or economic system. All we have to do is look at one thing: prices. Prices will tell us when we want to convert.

"When the price of conventional sources of energy go up and they get higher than the prices of alternatives, then people know it is time to transform our energy sector. And we have seen this many, many times.

"For example, when we were using whale oil, whales became scarce. Whale oil prices went up and people found other sources. In fact, they found crude oil.

"Now, what is the role for government here? Well government can do a couple of things: One, government can try to help develop alternatives, and we have research money from government that goes into that.

"But also government can play a role perhaps in adjusting these prices. If, for example, we think that there are some negatives to using conventional sources of energy -- environmental negatives, national security negatives -- then what the government can do is say, 'Well, those negatives aren't reflected in the price, and so we are going to up that price. We are going to put an extra tax on the price of conventional sources.'

"Likewise, if the government feels as if the value of alternatives is not adequately reflected in price, you can say the government will subsidize those prices.

"But ultimately what we look at is the price. And you and I make a decision when to switch when those prices ... tell us to do that."

Posted by deeshore at April 2, 2010 07:46 AM