The case for going green is getting stronger—despite the anticipation that the global economic downturn would hurt investments in renewable energy.

Illlustration: Jayachandran / Mint

Halving of oil prices is clearly a disincentive for investing in alternative fuels. That concern was amply reflected by the end of October with Texas oil baron Boone Pickens putting off his plans to build the world’s biggest wind farm and to spend $58 million from his own pocket for promoting the cause of wind power, as oil prices crashed and the credit crunch hit hard.

The key to this, however, is the time frame for making that call. As Pickens added, oil prices would be back at $100 a barrel in a year, making his plans viable again.

The view that the era of cheap oil is over is well endorsed. The just released World Energy Outlook 2008 by the International Energy Agency has called for a global low carbon and renewable energy revolution in spite of the financial crisis.

Private capital is unlikely to stay away for long, even though it will be risk-averse in the short term. But the significant thing today is if governments see green spending as high priority or even viable in light of the economic crisis. US President-elect Barack Obama’s bailout plans have turned the debate around. After the United Nations’ call for a “new green deal" on a par in vision and scale with former president Franklin D. Roosevelt’s response to the Great Depression, Obama’s financial package included grand plans for creating five million green jobs by investing $150 billion over 10 years. Both events echo and amplify the view that the current situation offers an opportunity to transform the world into a sustainable green economy.

The question then is how, not whether, that can happen.

Obama’s plans have been criticized, including by The Economist, which said his approach of subsidizing renewables was wrong, as it meant promoting wrong technologies and wasting taxpayers’ money. It said penalizing polluters was the right way instead. To the extent that public policy must not direct choice of technology, it is correct. But, given the convergence on the need to go green, there’s little doubt that governments must have a strategic vision and appropriate policy tools if they are to take seriously the quest for a sustainable growth solution. India needs to think hard. Strong disincentives for inefficiency are a must. It can balance the political fallout of stopping fossil fuel subsidies by directing public spending to energy efficiency projects—construction, public transport, and so on—that create jobs.

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