Catastrophe Could Make World Change Its Energy Ways

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Banzai!: A traditional Japanese exclamation meaning "ten thousand years" (somewhat equivalent to our own "hooray!"). Often used in the context of a banzai attack, a last ditch desperate charge.

Centuries from now when historians examine our time, I imagine they will conclude it took an earthquake, a tsunami and a nuclear catastrophe for people to finally snap out of their Permagrowth lethargy - the one induced by rampant consumerism, excess debt and the unchecked use of poisonous "black" fossil and nuclear energy. Japan may be featured as villain or angel, depending on which path it chooses to take after the current emergency is over.

Will it go green and reach for Sustainability, or will it stay black and remain blinded by Permagrowth?

First, let's look at where the country stands right now:
  • Japan is one of the world's blackest nations energy-wise. In 2008 97% of all energy supplied came from coal, oil, gas and nuclear sources (see chart below - click all charts to expand).
Chart: IEA
Japan: A Black-Energy Nation

  • Japan is one of the world's most highly indebted economies. In mid-2009 total debt stood at 472% of GDP, up from 245% in 1980 (see chart below). The most rapid escalation came after 1990 as the government started borrowing heavily in an attempt to keep the Japanese Permagrowth model running. It failed, and the economy has been stagnant for years, no matter how many bridges to nowhere it built. Importantly, most of this debt is internal and serviced from local savings, preventing outright collapse. However, financing reconstruction after the earthquake-tsunami-nuclear disaster is another matter altogether.

Data: McKinsey Global Institute

Japan: A Country Awash In Debt
Right now, then, Japan is certainly a Permagrowth "villain". But catastrophic events can often lead to radical change and - who knows? - in the aftermath Japan may well become a Sustainability "angel". It already exhibits some sustainable-like elements: Japanese society is stable and technologically sophisticated, with zero population growth and high living standards.

When seen from the perspective of Permagrowth Japan is perceived as weak (e.g. no GDP growth); but from the Sustainability viewpoint a weakness may very well be an advantage (e.g. zero population growth).

I sincerely hope that the Japanese people, justly famous for their stoicism and perseverance in the face of serious trouble, cry "banzai!" and choose Sustainability for their reconstruction model. If they do and succeed (which they will), it will be the entire world's Banzai Moment.

Assuming this happens, then renewable energy will be a big winner. I recently bought some shares in (FAN,) an exchange traded fund that tracks the ISE Global Wind Energy Index. Given its recent bottom-scratching performance (see chart below) I think it's a decent candidate for fans (pun smile) of long-term buy-low, sell-high strategies.

First Trust Global Wind Energy ETF