TECHNOLOGY FOR THE NEW MILLENNIUM.

• Author: Smith, John F., Jr.
• Position: Alternative energy sources

CORPORATE EXECUTIVES are confronting critical technology decisions today that will affect the nation's ability to meet the environmental and economic needs of the new millennium. Conflicting signals from the market and the environment make these choices unusually difficult. Further compounding the situation is the fact that neither set of signals is complete. Market signals do not capture important "externalities," such as the risk of global warming created by rising concentrations of greenhouse gases in the atmosphere. Environmental signals exclude the "opportunity costs" of allocating limited resources to environmental goals, such as slower economic growth. Corporate decisionmakers know that they have to pursue strategies that will meet the demands of the market as well as the needs of the environment in order to succeed. It is not an either/or proposition.

The worldwide energy demand will double by 2030, driven largely by growth in developing countries. Fossil fuels, which account for 85% of today's energy supplies, will reach 87% in 2030, with some shifting from coal and oil to natural gas.

The abundance of fuel and the increasing demand for traditional energy supplies, despite recent soaring prices and production restrictions by OPEC, has critical implications for technology choices in the private sector. There is little consumer demand or market pull for alternative technologies that are more costly and less functional and reliable than traditional fossil fuels.

Energy efficiency often ranks low in the factors important to consumers when they purchase a new appliance, home, or motor vehicle. For example, automobiles that ranked in the top 10 in fuel economy accounted for just 1.6% of the 7,400,000 1998 model year cars sold in the U.S. Only 0.6% of the 6,700,000 sport utilities, pickup trucks, and minivans sold in the U.S. ranked in the top 10 in fuel economy.

There has been a decline in private and public expenditures for energy research in most Organization for Economic Cooperation and Development nations (Japan being the major exception), despite rising environmental concerns. This also attests to the lack of market pull for alternative energy technologies.

Consumer behavior, lifestyles, investments, and future expectations, especially in the U.S., have all been firmly rooted in traditional, low-cost energy. Any transition to alternative energy technologies would thus create substantial economic and social disruption, requiring a new infrastructure with a huge cost, convenience, and reliability disadvantage relative to fossil fuels.

While fossil fuels are the choice of the market, concerns about the risk of global warming from the accumulation of carbon dioxide in the atmosphere from their combustion send strong environmental signals for technologies that are more energy-efficient and less carbon-intensive. These include alternative fuels, hydrogen fuel cells, and renewable energy sources such as solar, wind, and hydropower.

The bottom line is that there is a...