Will the Economic Crash Take Down Our Hopes for Clean Energy?

A century ago French philosopher and writer Paul Valery observed, "The central problem with our times is that the future is not what it used to be." He could have been commenting on current events.

In August, Alternet invited me to write a series of articles on energy policy leading up to the election. At the time the invitation was extended, the price of oil was about $135 a barrel. Gasoline prices had eclipsed $4 a gallon. Natural gas prices hovered around $11 per million BTUs. SUVs sales were down, but car companies were having some trouble keeping up with the demand for smaller cars.

Renewable energy was expanding rapidly. The most important energy issue was whether the renewable electricity credits, bottled up by Senate Republicans for the previous 12 months, would be extended before they expired at the end of 2008. The renewable fuel everyone loves to hate, ethanol, was blamed not only for the rapid rise in food prices but also for food riots around the world.

In August, the economy was still expanding at a rate near its historical average. The stock market, down from the beginning of the year, was holding steady. By all accounts, the Iraq War was going to be the dominant issue in the presidential election.

What a difference 60 days make! The price of oil has now dropped by more than 50 percent to just over $60 a barrel. The price of natural gas has declined in similar fashion. Nationally, gasoline prices have plummeted by about $1.30 a gallon. In Pittsburg, Kan., one can buy gasoline for under $2 a gallon. The relationship between ethanol and food prices has proven tenuous because ethanol production continues to expand while the price of corn drops by more than 50 percent and food prices don't decline at all.

The economy is contracting at a terrifying pace. The stock market has plunged by more than 35 percent. The Iraq War has all but disappeared from the presidential campaigns. Sales of SUVs continue to dive, but now sales of all cars are declining as well.

The context for energy policy has changed dramatically. This happened once before, in 1981. I discuss those changes in a new foreword to my 1982 book Self-Reliant Cities, available at the Institute for Local Self-Reliance next month.

Self-Reliant Cities: Energy and the Transformation of Urban America was published just as the first wave of local, state and national energy activism peaked and crashed. Two factors caused the crash. One was political: the election of Ronald Reagan, a man who saw government as the problem, never the solution. He shut down as many alternative energy programs as he could and made his position crystal clear on the issue when he dismantled the White House solar collector array Jimmy Carter had had installed.

The second factor was the collapse of the economy. In 1981, world trade contracted for the first time since 1931. From 1981 to 1985, the price of oil plunged by 75 percent, falling from $36 a barrel ($93 in today's prices) to about $12.

Will energy history repeat itself in 2009? The economic conditions are eerily similar. We may now be witnessing the first worldwide economic contraction since 1981. We're already deep into the worst financial collapse since the early 1930s. The renewable energy tax credits have been extended, one of the few welcome outcomes of the financial meltdown since the energy bill was tacked onto the second bailout bill, but even with that long-sought passage, renewable energy expansion is stalling because of the credit crunch.

Federal energy incentives and mandates appear safe, although they may be reduced or their timelines may be pushed back. At the state and local level, painful budget crunches may result in significant cutbacks in energy programs. And in the marketplace, will consumers still be willing to pay a premium for green electricity or green fuels?