How Green is the Valley?

Interested in this NYT article on Kleiner Perkins (The Silicon Valley VC firm) doing well by doing good in the Green world. In essence, they believe that many promising technologies have been stifled because of the cheap fossil energy over the last few decades, and a bit of VC money now would get them ready for (profitable) launch into the straightened times looming. Cometh the higher energy prices, cometh the hour of the Green Startup.

There is no doubt some truth in this - I recall studying green and appropriate technologies in my undergrad and post grad years in the mid 80's, and most of the core Green technologies were around then. A lot of refinement - mainly in materials science and application of ICT and BioTech - has occurred since those days of course.

But there are also a few reasons to be sanguine about all this:

(i) "Green" always gets to the top of the agenda at the tail-end of an economic boom, and disappears as belts tighten again. Its a "luxury philosophy"for most people in the OECD world (or possibly a counter-philosophy when all around are losing their heads in their search for material goods).

(ii) If the past 3 decades are anything to go by, a lot of the economic benefit in Green Tech comes either from the arbitrage of artificial regulations (subsidies etc) which are more often driven by political expediency (a "green tax" on 4x4 cars for example) or fairly useless (from a Green impact point of view) plays on people's guilt. A Prius car, for example, uses less energy to go, but consumes far more energy and dangerous minerals in its manufacture to do so than it will ever save compared to a standard car. Net net, buying a gas guzzling second hand car has a far more +ve energy balance.

(iii) This regulatory largesse can wax and wane with political and economic priorities, so a smart tech today may be uneconomic in 5 years time because the rules have changed - as the NYT article note, Kleiner Perkins now have to keep a close eye on the developments of schemes like Carbon Trading.

The question therefore will be whether this is all a "top of boom" thing, or whether there is a lasting difference this time. As the NYT notes:

What intrigued me most about Kleiner’s plans, though, wasn’t whether its green-tech investments would (or would not) reap huge financial returns, but whether this country’s private sector, spurred primarily by venture capital, could start to change the way the U.S. and the world use energy.

And whether its actually solving the problem.

By and large, to actually solve the systemic "Global Warming / Energy usage" problem holistically requires energy reduction, as merely replacing energy sources but keeping consumption at current levels doesn't reduce the amount of energy pumped into the planetary ecosystem (especially when you take the aspirations of emerging peoples into account). Its also a closed system, so a give here requires a take someplace else. Biofuels are a case in point - replace fossil fuels with biofuels (economically profitable only because of artificial subsidies) also takes food growing land out of production, increasing food prices for the poorest to a level where they face real starvation - thus requiring more energy and chemical intensive farming of the remaining land to feed the new mouths. Also, starving peasants in poor countries then cut down more rainforest to feed themselves.

Thus "Real" Green solutions - ie ones with high long term value - require two very simple, but very unpalatable things - companies using less energy, and consumers using less energy. For companies that means making (and packaging) fewer we things don't want and far less distributing things over long distances, and for consumers it means less car journeys and less home heating / cooling. Since making and pimping a wide variety of largely un-needed stuff is the major economic driver of business growth, companies won't vote for that. And since we prefer cars to buses and comfort to discomfort, consumers are not going to vote for it either.

So, in summary - funding people to improve current Green technologies, and thus reducing the usage of fossil fuels and also increasing the efficiency of energy conversion is a Good Thing, but in and of itself its not enough, and the players in the game are by and large not motivated to fix it.

For this reason, to really make a difference involves actions far above the start-up layer, ie at Governmental and International level. However, given the shilly-shallying over Kyoto etc, there is an argument that says the best way to save the planet in the short term is simply to give rich Westerners less money to spend on un-needed goods and heating, so from that point of view the current credit crunch is the Greenest thing yet invented

Update - I later recalled this article of a few months ago, arguing that Kleiner was going Green more as part of a diversification strategy out of high tech than anything else (and Green gets you great PR too....bonus!) but this NYT article gives the impression of a much bigger shift.