If you haven’t figured it out, I’m talking about green investing. And as gas prices rocket higher and higher, green technology will become even more widespread.

In the past two weeks, I have written about the subject. I’ve discussed that for the most part, the economics of becoming green don’t make sense. But thanks to higher gas prices, green energy is becoming more and more commonplace.

For example, the Financial Times estimates that by 2030, plug-in cars will make up 50% of all cars sold. According to the World Watch Institute, starting in 2010, China will spend over $236 billion each year on green investments.

That’s huge. But that’s not all…

In a recent Harper’s Magazine article, it was pointed out that to have a bubble you need three things:

1. Government incentives or deregulation
2. An irrational belief that drives the masses to buy
3. A sector which can spawn new ways to make money nearly instantly

Now think about it. The Internet bubble saw all three things.

The government decided not to collect taxes from online purchases. They also helped speed up adoption of broadband and granted various tax credits to companies that would deal in technology (Silicon Valley anyone?). So obviously, the government helped.

Second, most people believed the Internet was the future. They thought that it would be so huge that life itself would depend on it (they weren’t wrong, just early). Remember the Y2K bug scare? That was part of America’s obsession with technology.

To make matters worse, everyone thought that buying an Internet stock was a sure bet. Companies were spawning every day and they all thought they had a great idea. But the problem was that they were only ideas. I saw my best friend’s father make over $140,000 – and then lose almost all of it as the bubble burst.

Now let’s look at the real estate bubble.

Under Greenspan, financial regulation was a joke. He believed in a free market and so thought that any government regulation would result in more harm than good. Add in the super-low interest rates we had and you’ll see that banks had the green light to grow undeterred.

Mix all of this in with the belief most people had that real estate never goes down, and you’ve got yet another bubble recipe brewing. Heck, people who had never bought real estate were buying and flipping houses and speculative vacant lots in a matter of months.

Finally, when mortgage demand started drying up, banks started issuing subprime, interest only, and no-doc loans. Then they would pull mortgages off their balance sheet, wrap them up in a nifty little investment vehicle, and sell them to hedge funds, banks, and investors looking for the supposedly safer mortgage backed returns. These banks were essentially creating these investment vehicles out of thin air.

As you can see, the real estate market also fits the profile of a bubble.

So how about the green market?

Well, the government recently incentivized production of ethanol, biofuel, and solar technology. If a Democrat gets into office, these incentives should grow. Congress even pushed up the Corporate Average Fuel Economy (CAFÉ) guidelines for the first time since 1975. And the idea of carbon credits is beginning to gain traction in Congress.

So the government is helping fuel the creation of cleaner energy. Step one is complete.

What about step two?

If I talk to any of my friends and tell them I love the things oil does to the earth, they’ll slap me (yes, I know oil is bad for the earth). If I told them that I didn’t recycle, they’d yell at me (yes, I recycle). My friends are already convinced that the green movement is the way to go.

If you type in the word ‘green’ in Google, you’ll see thousands of new websites that all talk about how great it is to be green.

Look at corporate trends, and you see more commercials with companies talking about going green. Wal-Mart, IBM, Intel, Google, and even ExxonMobil is getting into the act. The idea of going green is spreading like wildfire. And it will only increase as gas prices move higher.

For example, a CNN.com study found that the price premium you pay for a hybrid over a gas guzzler wouldn’t be made up by cheaper gas prices for up to five years. And that’s after including government incentives.

Some of you wrote in and pointed out that economics weren’t everything. That becoming green is more of a social responsibility. It’s something you do to make sure your kids have a nice, clean Earth to live on when they grow older.

And I couldn’t agree more. But the responsibility side isn’t what I’m trying to show everyone. What I’m trying to point out is that the economics of becoming green, for the most part, don’t yet make sense.

Sure, companies can plant a lot of trees on land they’ve purchased. Sure, they can pay just a little bit more to switch to more renewable packaging materials, etc… But the things that would make the greatest impact – fuel saving technologies, advanced water conversion techniques, and more renewable solutions – come at a cost to the company.

Nine times out of ten, the company won’t want to kill their margins for the sake of going green, unless of course they are trying to improve their image (Google, here’s looking at you, kid). And there’s nothing wrong with having a good public image. But that doesn’t mean that the economics of the solution make any more sense.

With that said, I believe that over time this will change dramatically. And once that change happens, there will be a lot more money to be made. Let me explain…

The Three-Wheeled Car I Need Right Now

The other day I was going through one of my favorite websites, www.autobloggreen.com. While on the site, I ran across a very interesting ride.

It’s by a company you’ve probably never heard of, Venture Vehicles. It’s a three wheeled vehicle, which is basically a roll cage on wheels (meanings it’s pretty safe).

When you go to make a turn, the vehicle actually tilts 45 degrees in the direction you’re turning. You can see a video of the venture one in action here.

That’s not the best part, though. This three-wheeled, electric-only vehicle, goes 0-60 in seven seconds, can reach top speeds of over 75 MPH (making it highway capable), and can travel up to 120 miles, all on battery. When you get home, just plug it in and it’ll be fully charged in six hours (on a 120v plug, if you use a 240v, it’ll be much faster).

And if you want to go further, you can get their hybrid version which goes over 350 miles on about four gallons of gas (That’s a phenomenal 90MPG!) and can reach top speeds of over 100MPH. Now, this vehicle won’t be in production until next year. Which is sad because I want one today. Why?

The economics are starting to make sense.

You see the car I drive right now is a six cylinder. It gets great fuel economy on the highway. But in the city, where I do most of my driving, the fuel economy is horrendous. At current gas prices, I’ll spend about $280 this month filling up.

That Venture Vehicle I showed you earlier will cost between $20,000 to $25,000. If I put ten percent down and get a decent interest rate on a five year loan, I’ll pay something like $320 – $350 every month.

This is only a little more expensive than it costs to buy gas – today. But next year, gas might be $5 a gallon. At that point, it’ll cost me $340 to fill up my tank. Instead of filling up my tank and polluting the air, I could own one of these cars and pay a little more on electricity every month to recharge it. Sounds like a pretty good deal.

Now, here’s the thing – cars like these are set to flood the market in the next year or two. For example, Tesla Motors (a Silicon Valley startup) will release their $98,000+ all-electric roadster sometime this year. That doesn’t include a host of other manufacturers like Aptera Motors and Fisker Automotive. As gas prices keep rising, these electric vehicles will become more and more popular.

And the big tipping point is affordability. If consumers can obviously save money buying one of these, they’ll do it.

This goes for the entire industry. Solar panels won’t be accepted en masse unless the economics of it makes sense. Sure, adoption is growing. But it won’t be mainstream until everyone can afford it. The same goes for wind power.

This brings me to ethanol – another alternative that doesn’t make economic sense. In this case, ethanol makes no real sense at all. The argument is that its carbon neutral. But most people end up paying more to fill up with E85 (85% ethanol). And to make matters worse, they get worse gas mileage. So what sense does it make to fill up with ethanol? I wouldn’t do it. And many people don’t.