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January 20, 2006



I think that this belief in the power of government is more a return to childhood when your parents could solve every problem if only you could get them to pay attention. Many adults take on a child-parent relationship with government when faced with a problem too large to solve on their own.

More optimistically, the marketplace is quietly making important changes. Energy use efficiency has improved steadily in the market driven commercial segment. Often this is hidden as part of general productivity improvement. Each 1% labor productivity improvement comes with an associated roughly 0.8% energy efficiency improvement. There is a regular ROI or IRR evaluation of energy efficiency improvement projects, and with oil holding above $50/bbl more projects cross the investment threshold. A lot of this is well hidden because it is just a footnote in the details of the business news.

The big problem areas remain transportation, where the capital equipment life is measured in decades; households, where there is rarely a careful cost accounting of energy costs or investment returns; and government, where PR and votes matter more than energy costs.

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