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Life often presents us with paradoxes, but seldom so blatant or consequential as the following. Read this sentence slowly: Today it is especially difficult for most people to understand our perilous global energy situation, preciselybecause it has never been more important to do so. Got that? No? Okay, let me explain. I must begin by briefly retracing developments in a seemingly unrelated field—climate science.
Richard Heinberg is the author of eleven books including ‘The Party’s Over’, ‘The End of Growth’, and ‘Snake Oil’. He is Senior Fellow-in-Residence of Post Carbon Institute and is widely regarded as one of the …
The greenhouse gas emissions from oil flowing through TransCanada Pipelines’ proposed Energy East project would be equivalent to putting seven million new cars a year on Canadian roads, according to a report from an environmental think-tank released today.
The Pembina Institute’s study looked at the potential upstream carbon pollution — that is, from the well to the refinery gate — from oil flowing through the pipeline and found that it could add anywhere from 30 to 32 million tonnes of CO2 a year to the atmosphere.
“For a single piece of infrastructure, that’s huge. It’s more than the emissions of five provinces,” explained Clare Demerse, Pembina’s federal policy director and co-author of the report.
“The single most effective climate policy today [in Canada] is Ontario’s decision to phase out coal [for generating electricity]. The emissions associated with building Energy East could effectively wipe out the gains of our single most effective climate policy by far,” she told CBC News.
Tune in to The National on CBC-TV tonight to hear how pipeline companies and environmentalists are changing their tactics in Canada’s energy infrastructure debate.
Energy East is planned to take both conventional and oilsands oil from Alberta to the deep-water port in Saint John. The project would convert an existing natural gas pipeline that runs to the Ontario-Quebec border to carry oil, then build a new pipeline the rest of the way. When running at full capacity, Energy East would eventually carry 1.1-million barrels of crude a day.
TransCanada has yet to file an application with the National Energy Board, but it is expected to do so in the middle of this year.
Demerse admits that this is a preliminary report and that it is hard to comment accurately on Energy East because so little detail is known about the project. Still, she said, Pembina wanted to start the conversation about it as soon as possible.
TransCanada said it wants to take a closer look at the numbers before it comments on the report. The pipeline company has already held information sessions about the project in communities along the route.
Is time running out for powerdown?
Many climate policy professionals and climate activists are now reassessing whether there is anything more they can do to help prevent the global catastrophe that climate change appears to be. The passing of the symbolic 400ppm CO2 level certainly has seen some prominent activists getting close to a change of strategy. As the Transition Town movement founder and permaculture activist Rob Hopkins says, the shift in the mainstream policy circles from mitigation to adaptation and defence is underway (i.e. giving up).
While political deadlock remains the most obvious obstacle, I believe at least some of that deadlock stems from widespread doubt about whether greenhouse gas emissions can be radically reduced without economic contraction and/or substantial wealth redistribution. Substantial redistribution of wealth is not generally taken seriously perhaps because it could only come about through some sort of global revolution that would itself lead to global economic collapse. On the other hand, massive economic contraction seems like it might happen all by itself, without necessarily leading to greater equity.
The predominant focus in the “climate professional and activist community” on policies, plans and projects for transition to renewable energy and efficiency has yet to show evidence of absolute reductions in greenhouse gas emissions that do not depend on rising greenhouse gas emissions in other parts of the global economy. For example, the contribution of renewable technology installation to reduced GGE in some European countries appears to be balanced by increased GGE in China and India (where much of the renewable technologies are manufactured).
The Jevons’ paradox suggests than any gains in efficiency or tapping of new sources of energy will simply expand total consumption rather than reduce consumption of resources (and therefore GGE).
Richard Eckersley in his article ‘Deficit Deeper Than Economy’ identifies the improbability of ever decoupling economic growth from resource depletion and green house gas emissions. He states “Australia’s material footprint, the total amount of primary resources required to service domestic consumption (excludes exports and includes imports) was 35 tonnes per person in 2008, the highest among the 186 countries studied. Every 10 per cent increase in gross domestic product increases the average national material footprint by 6 per cent. By 2050, a global population of 9 billion people would require an estimated 270 billion tonnes of natural resources to fuel the level of consumption of OECD countries, compared with the 70 billion tonnes consumed in 2010.”
Time seems to be running out for any serious planned reductions in GGE adequate to prevent dangerous climate change without considering a powerdown of the growth economy. The ideas of degrowth are starting to get an airing, mostly in Europe, but the chances of these ideas being adopted and successfully implemented would require a long slow political evolution if not revolution. We don’t have time for the first, and the second almost certainly crashes the financial system, which in turn crashes the global economy.
Is time running out for bottom up alternatives?
Like many others, I have argued that the bottom up creation of household and community economies, already proliferating in the shadow of the global economy, can create and sustain different ways of well-being that can compensate, at least partly, for the inevitable contraction in centralised fossil fuelled economies (now well and truly failing to sustain the social contract in countries such as Greece and Egypt). When the official Soviet Union economy collapsed in the early ‘90s it was the informal economy that cushioned the social impact. Permaculture strategies focus on the provision of basic needs at the household and community level to increase resilience, reduce ecological footprint and allow much of the discretionary economy to shrink. In principle, a major contraction in energy consumption is possible because a large proportion of that consumption is for non-essential uses by more than a billion middle class people. That contraction has the potential to switch off greenhouse gas emissions but this has not been seriously discussed or debated by those currently working very hard to get global action for rapid transition by planned and co-ordinated processes. Of course it is more complicated because the provision of fundamental needs, such as water, food etc., are part of the same highly integrated system that meets discretionary wants.
However, the time available to create, refine and rapidly spread successful models of these bottom-up solutions is running out, in the same way that the time for government policy and corporate capitalism to work their magic in converting the energy base of growth from fossil to renewable sources. If the climate clock is really so close to midnight what else could be done?
Economic crash as hell or salvation
For many decades I have felt that a collapse of the global economic systems might save humanity and many of our fellow species great suffering by happening sooner rather than later because the stakes keep rising and scale of the impacts are always worse by being postponed. An important influence in my thinking on the chances of such a collapse was the public speech given by President Ronald Reagan following the 1987 stock market crash. He said “there won’t be an economic collapse, so long as people don’t believe there will be an economic collapse” or words to that effect. I remember at the time thinking; fancy the most powerful person on the planet admitting that faith (of the populace) is the only thing that holds the financial system together.
Two decades on I remember thinking that a second great depression might be the best outcome we could hope for. The pain and suffering that has happened since 2007 (from the more limited “great recession”) is more a result of the ability of the existing power structures to maintain control and enforce harsh circumstances by handing the empty bag to the public, than any fundamental lack of resources to provide all with basic needs. Is the commitment to perpetual growth in wealth for the richest the only way that everyone else can hope to get their needs met? The economy is simply not structured to provide all with their basic needs. That growth economy is certainly coming to an end; but will it slowly grind to a halt or collapse more rapidly?
The fact that the market price for carbon emissions has fallen so low in Europe is a direct result of stagnating growth. Past economic recessions and more serious economic collapses, such as faced by the Soviet Union after its oil production peaked in the late 1980’s, show how greenhouse gas emissions can and have been reduced, then stabilizing at lower levels once the economy stabilized without any planned intention to do so. The large number of oil exporters that have more recently peaked has provided many case studies to show the correlation with political upheaval, economic contraction and reductions in GGE. Similarly many of the countries that have suffered the greatest economic contraction are also those with the greatest dependence on imported energy, such as Ireland, Greece and Portugal. The so-called Arab Spring, especially in Egypt, followed high food and energy prices driven by collapsed oil revenues and inability to maintain subsidies. The radical changes of government in Egypt have not been able to arrest the further contraction of the economy.
The effects of peak oil and climate change have combined with geopolitical struggles over pipeline routes to all but destroy the Syrian economy and society.
Slow Contraction or Fast Collapse
The fragility of the global economy has many unprecedented aspects that make some sort of rapid collapse of the global economy more likely. The capacity of central banks to repeat the massive stimulus mechanism in response to the 2008 global financial crisis, has been greatly reduced, while the faith that underpins the global financial system has weakened, to say the least. Systems thinkers such as David Korowicz have argued that the inter-connected nature of the global economy, instantaneous communications and financial flows, “just in time” logistics, and extreme degrees of economic and technological specialisation, have increased the chances of a large scale systemic failure, at the same time that they have mitigated (or at least reduced) the impact of more limited localised crises.
Whether novel factors such as information technology, global peak oil and climate change have increased the likelihood of more extreme economic collapse, Foss and Keen have convinced me that the most powerful and fast-acting factor that could radically reduce greenhouse gas emissions is the scale of financial debt and the long-sustained growth of bubble economics stretching back at least to the beginnings of the “Thatcherite/Reaganite revolution” in the early 1980s. From an energetics perspective, the peak of US oil production in 1970, and the resulting global oil crises of 73 and 79, laid the foundations for the gigantic growth in debt that super accelerated the level of consumption, and therefore GGE.
Whatever the causes, all economic bubbles follow a trajectory that includes a rapid contraction, as credit evaporates, followed by a long-sustained contraction, where asset values decline to lower levels than those at the beginning of the bubble. After almost 25 years of asset price deflation in Japan, a house and land parcel of 1.5ha in a not too isolated rural location can be bought for $25,000. A contraction in the systems that supply wants are likely to see simultaneous problems in the provision of basic needs. As Foss explains, in a deflationary contraction, prices of luxuries generally collapse but essentials of food and fuel do not fall much. Most importantly, essentials become unaffordable for many, once credit freezes and job security declines. It goes without saying that deflation rather inflation is the economic devil that governments and central banks most fear and are prepared to do almost anything to avoid.
Giving credence to the evidence for fast global economic collapse may suggest I am moving away from my belief in the more gradual Energy Descent future that I helped articulate. John Michael Greer has been very critical of apocalyptic views of the future in which a collapse sweeps away the current world leaving the chosen few who survive to build the new world. In large measure I agree with his critique but recognise that some might interpret my work as suggesting a permaculture paradise growing from the ashes of this civilisation. To some extent this is a reasonable interpretation, but I see that collapse, as a long drawn-out process rather than resulting from a single event.
I still believe that energy descent will go on for many decades or even centuries. In Future Scenarios I suggested energy descent driven by climate change and peak oil could occur through a series of crises separating relatively stable states that could persist for decades if not centuries. The collapse of the global financial system might simply be the first of those crises that reorganise the world. The pathways that energy descent could take are enormously varied, but still little discussed, so it is not surprising that discussions about descent scenarios tend to default into ones of total collapse. As the language around energy descent and collapse has become more nuanced, we start to see the distinction between financial, economic, social and civilisational collapse as potential stages in an energy descent process where the first is fast changing and relatively superficial and the last is slow moving and more fundamental.
In Future Scenarios I suggested the more extreme scenarios of Earth Steward and Lifeboat could follow Green Tech and Brown Tech along the stepwise energy descent pathway. If we are heading into the Brown Tech world of more severe climate change, then as the energy sources that sustain the Brown Tech scenario deplete, and climate chaos increases, future crises and collapse could lead to the Lifeboat Scenario. In this scenario, no matter how fast or extreme the reductions in GGE due to economic collapse, we still end up in the climate cooker, but with only the capacity for very local, household and communitarian organisation.
If the climate crisis is already happening, and as suggested in Future Scenarios, the primary responses to the crisis increase rather than reduce GGE, then it is probably too late for any concerted effort to shift course to the more benign Green Tech energy descent future. Given that most of the world is yet to accept the inevitability of Energy Descent and are still pinning their faith in “Techno Stability” if not “Techno Explosion”, the globally cooperative powerdown processes needed to shift the world to Green Tech look unlikely. More fundamental than any political action, the resurgent rural and regional economies, based on a boom for agricultural and forestry commodities, that structurally underpins the Green Tech scenario, will not eventuate if climate change is fast and severe. Climate change will stimulate large investments in agriculture but they are more likely to be energy and resource intensive, controlled climate agriculture (greenhouses), centralised at transport hubs. This type of development simply reinforces the Brown Tech model including the acceleration of GGE.
While it may be too late for the Green Tech Scenario, it still may be possible to avoid more extreme climate change of a long drawn out Brown Tech Scenario before natural forcing factors lock humanity into the climate cooker of 4-6 degrees and resource depletion leads to a collapse of the centralised Brown Tech governance and a rise of local war lords (Lifeboat Scenario).
The novel structural vulnerabilities highlighted by David Korowicz, and the unprecedented extremity of the bubble economics highlighted by Nicole Foss suggest the strong tendencies towards a Brown Tech world could be short lived. Instead, severe global economic and societal collapse could switch off GGE enough to begin reversing climate change; in essence the Earth Steward scenario of recreated bioregional economies based on frugal agrarian resources and abundant salvage from the collapsed global economy and defunct national governance structures.
 During the early stages of the industrial revolution English economist William Stanley Jevons noticed that a doubling in the efficiency of steam engine technology led to an increase rather than a halving of coal consumption as businesses found more uses for the available power. See the Coal Question (1865).
 See Deficit Deeper Than Economy http://www.canberratimes.com.au/federal-politics/political-opinion/deficit-deeper-than-economy-20130929-2umd3.html#ixzz2js46nGBp
 See Wikipedia article for overview of movementhttp://en.wikipedia.org/wiki/Degrowth
 Of course true believers in global capitalism’s capacity to reduce GGE in time, still abound. See for example Christian Parenti’s piece from Dissent, reposted at Resilience.org, which is amusingly titled A Radical Approach to the Climate Crisiswhich is actually a plea for activists to forget trying to reform, let alone build systems based on sustainability principles, in favour of getting behind the power of corporations and governments to make big changes quickly (to get GGE falling fast enough).
 See for example, Peak oil and the fall of the Soviet Union by Douglas B. Reynolds on The Oil Drum.
 See Trade-Off, Metis Risk Consulting & Feasta, 2012
What is correct way to model the future course of energy and the economy? There are clearly huge amounts of oil, coal, and natural gas in the ground. With different approaches, researchers can obtain vastly different indications. I will show that the real issue is most researchers are modeling the wrong limit.
Most researchers assume that the limit that they should be concerned with is the amount of oil, coal, and natural gas in the ground. This is the wrong limit. While in theory we will eventually hit this limit, because of the way fossil fuels are integrated into the rest of the economy, we hit financial limits much earlier. These financial limits include lack of investment capital, inability of governments to collect enough taxes to fund their programs, and widespread debt defaults.
One of the things I show in this post is that Economic Growth is a positive feedback loop that is enabled by cheap energy sources. (Economists have postulated that Economic Growth is permanent, and has no connection to energy sources.) Economic Growth turns to economic contraction as the cost of energy extraction (broadly defined) rises. It is the change in this feedback loop that leads to the financial problems mentioned above. These effects tend to lead to collapse over a period of years (perhaps 10 or 20, we really don’t know), rather than a slow decline which is easily mitigated.
If, indeed, most analysts are concerned about the wrong limit, this has huge implications for energy policy:
1. Climate change models include way too much CO2 from fossil fuels. Lack of investment capital will bring down production of all fossil fuels in only a few years. The amounts of fossil fuels included in climate change models are based on “Demand Model” and “Hubbert Peak Model” estimates of fossil fuel consumption (described in this post), both of which tend to be far too high. This is not to say that the climate isn’t changing, and won’t continue to change. It is just that excessive fossil fuel consumption needs to move much farther down our list of problems contributing to future climate change.
2. It becomes much less clear whether high-priced replacements for fossil fuels are worthwhile. In theory, they might allow a particular economy to have electricity for a while longer after collapse, if the whole system can be kept properly repaired. Offsetting this potential benefit are several drawbacks: (a) they make the economy with the high-priced replacements less competitive in the world marketplace, (b) they tend to run up debt, increase government spending, and decrease discretionary income of citizens, all limits we are reaching, and (c) they tend to push the economic cycle more quickly toward contraction for the country purchasing the high-priced renewables.
3. A large share of academic writing is premised on a wrong understanding of the real limits we are reaching. Since writers base their analyses on the wrong analyses of previous writers, this leads to a nearly endless supply of misleading or wrong academic papers.
This post is related to a recent post I wrote, The Real Oil Extraction Limit, and How It Affects the Downslope.
Types of Forecasting Models
There are three basic ways of making forecasts regarding future energy supply and related economic growth:
1. “Demand Based” Approaches. In this method, the analyst first decides what future GDP will be, and uses that estimate, together with past relationships, to “work backwards” to figure out how much energy supply will be needed in the future. The expected needed future energy supply is then divided up among various types of fuels, giving more of the growth to types that are favored, and less to other types. Very often, estimates of growth in energy efficiency, growth in “renewables,” and growth in the amount of GDP that can be generated with a given amount of energy supply are included in the model as well.
This method is by far the most common approach for forecasting expected future energy supply, especially at high levels of aggregation. One advantage of this method is that can provide almost any answer the analyst wants. Governments are paying for reports such as the EIA and IEA forecasts, and oil companies are paying for forecasts such as those by BP,Shell, and Exxon-Mobil. Both governments and oil companies prefer reports that say that everything will be fine for the foreseeable future. Demand Based approaches are good for producing such reports.
Another advantage of this approach is that the analysts don’t have to think about pesky details like where all of the investment capital will come from, or how large an improvement in the ratio of GDP to energy consumption can actually occur. They can simply make assumptions and point out that the forecast won’t come true if the assumptions don’t hold.
2. “Hubbert Peak Model”. This model is based on an interpretation of what M. King Hubbert wrote (for example, Nuclear Energy and the Fossil Fuels, 1956) . The basic premise of this model is that future supply of oil, coal, or gas will tend to drop slowly after 50% (or somewhat more) of the fuel supply potentially available with current technology has been extracted.
In fact, we don’t really know how much oil or coal or natural gas will be extracted in the future–we just know how much looks like it might be extracted, if everything goes well–if there is plenty of investment capital, if the credit system works as planned, and if the government is able to collect enough tax revenue to fund all of its promises, including maintaining roads and offering benefits to the unemployed.
What most people miss is the fact that the world economy is a Complex Adaptive System, and energy supply is part of this system. If there are diminishing returns with respect to energy supply–evidenced by the rising cost of extraction and distribution–then this will affect the economy in many ways simultaneously. The limit we are reaching is not that oil (or coal or natural gas) extraction will run out; it is that economic system will at some point seize up, and rapidly contract. The Hubbert Peak Method shows how much fuel might be extracted in each future year if the economy doesn’t seize up because of financial problems. The estimate produced by the Hubbert Peak Method removes some of the upward bias of the Demand Model approach, but it still tends to give forecasts that are higher than we can really expect.
3. Modeling How the Economy Actually Works. This approach is much more labor-intensive than the other two approaches, but is the only one that can be expected to give an answer that is in the right ballpark of being correct with respect to future economic growth and energy consumption. Of course, observing signs of oncoming collapse can also give an indication that we are nearing collapse.
The only study to date modeling how long the economy can grow without seizing up is the one documented in the 1972 book The Limits to Growth, by D. Meadows et al. This analysis has proven to be surprisingly predictive. Several analyses, including this one by Charles Hall and John Day, have shown that the world economy is fairly close to “on track” with the base scenario shown in that book (Figure 1). If the world economy continues to follow this course shown, collapse would appear to be not more than 10 or 20 years away, as can be seen from Figure 1, below.
Figure 1. Base scenario from 1972 Limits to Growth, printed using today’s graphics by Charles Hall and John Day in “Revisiting Limits to Growth After Peak Oil”http://www.esf.edu/efb/hall/2009-05Hall0327.pdf
One of the findings of the 1972 Limits to Growth analysis is that lack of investment capital is expected to be a significant part of what brings the system down. (There are other issues as well, including excessive pollution and ultimately lack of food.) According to the book (p. 125):
The industrial capital stock grows to a level that requires an enormous input of resources. In the very process of that growth it depletes a large fraction of the resource reserves available. As resource prices rise and mines are depleted, more and more capital must be used for obtaining resources, leaving less to be invested for future growth. Finally investment cannot keep up with depreciation, and the industrial base collapses, taking with it the service and agricultural systems, which have become dependent on industrial inputs (such as fertilizers, pesticides, hospital laboratories, computers, and especially energy for mechanization).
Jorgen Randers’ 2052: A Global Forecast for the Next Forty Years
In 2012, the same organization that sponsored the original Limits to Growth study sponsored a new study, commemorating the 40th anniversary of the original report. A person might expect that the new study would follow similar or updated methodology to the 1972 report, but the approach is in fact quite different. (See my post, Why I Don’t Believe Randers’ Limits to Growth Forecast to 2052.)
The model in Jorgen Randers’ 2052: A Global Forecast for the Next Forty Yearsappears to be a Demand Based approach that perhaps uses a Hubbert Peak Model on the fossil fuel portion of the analysis. One telling detail is the fact that Randers mentions in the Acknowledgements Section only one person who worked on the model (apart from himself). There he thanks “My old friend Ulrich Goluke, for creating the quantitative foundation (statistical data, spreadsheets, and other models) for this forecast.” Ulrich Goluke’s biography suggests that he is able to prepare a Demand Model spreadsheet. It would be hard to believe that he that he could have substituted for the team of 17 researchers who put together the original Limits to Growth analysis.
The Need to Add to the Original Limits to Growth Analysis
The original Limits to Growth analysis was primarily concerned with quantities of items such as resources, pollution, population, and food. It did not get into financial aspects to any significant extent, except where flows of resources indicated a problem–namely in providing investment capital. One thing the model did not include at all was debt.
In the sections that follow, I show a model of how some parts of the economy that weren’t specifically modeled in the 1972 study work. If the economy works in the way described, it gives some insights as to why collapse may be ahead.
Economic Growth Arises from a Favorable Feedback Loop
Economic growth seems to arise from a favorable feedback loop, as shown in Figure 2, below.
Figure 2. Author’s representation of how economic growth occurs in today’s economy.
This model above is intended to reflect the situation from, say, 1800 to 2000. The situation was somewhat different before the use of fossil fuels, when far less economic growth took place. Furthermore, as we will see later in this post, the model changes again to reflect the impact of diminishing returns as the cost of energy production increases in recent years and in the future.
The critical variables that allow economic growth to take place are (1) cheap energy available from the ground, such as coal, oil, or natural gas–if cheap renewables were available, these would work as well (2) technology that allows us to put this cheap energy to work to make goods and services, and (3) a way to pay for the new goods and services.
Debt. In this model, debt plays a significant role. This happens because fossil fuels allow a huge “step up” in the quality of goods and services, and debt provides a way to bridge this gap. For example, with fossil fuels, we have electric light bulbs, metal machines in factories, and farm machinery, all of which vastly improve efficiency. The ability to pay for the new fuel and the new devices using the fuel, is much greater after the new devices using the fuel are put in place. The way around this problem is simple: debt.
The use of debt becomes important at many points in the economy. Increased debt can theoretically help (a) the companies doing the energy extraction, (b) the companies building factories to create the new goods and services, and (c) the end consumers, since all of these benefit greatly from the services that cheap fossil fuels provide, and can better pay afterward than before.
Government debt, such as debt used to finance World War II, can also be used to start and maintain the cycle. John Maynard Keynes noticed this phenomenon, and recommended using an increase in government debt to stimulate the economy, if it was not growing adequately. The detail he was unaware of is the fact that the debt only works in the context of cheap energy supplies being available to make use of this debt, enabling growth.
How the Feedback Loop Works. The loop starts with the combination of a cheap-to-exploit energy resource, technology that would use this resource, and debt that allows those would like to gain access to the resources to have the benefit of them, before they are actually able to pay cash for them.
This combination allows goods to be produced which initially may not be very cheap. Over time, new methods are tried, allowing technology to improve. Consumers are able to buy increasing amounts of goods and services, both because of their own increased productivity (enabled by fossil fuels and new technology) tends to raise their wages, and because the improving technology lowers the cost of goods. Government services are expanded as tax revenue per capita increases. Infrastructure such as roads are expanded making the economy more efficient.
In this context, profits of companies grow, allowing reinvestment. Investment is also enabled by increasing debt. This allows the cycle to start over again, with better technology and more infrastructure in place. The economy tends to grow, and the standard of living tends to rise.
Overview. One way of explaining the tendency toward economic growth is that a cheap-to-extract fossil rule has an extremely high return on investment. This very high return enables benefits to all: workers receive higher wages; businesses receive higher profits; and governments receive both higher tax revenue and the ability to build new roads and other infrastructure cheaply.
Another way of describing the tendency toward economic growth is to say that the value to society of the (cheap) energy product is far greater than its cost of extraction. This difference provides a benefit which flows through to many parts of the economy. Economists do not recognize that this situation can happen, but it seems to be a major source of economic growth.
The Spoiler: Diminishing Returns
The problem with energy extraction is that we extract the inexpensive-to-extract energy sources first. Eventually these sources get depleted, and we need to move on to more expensive-to-extract energy sources. I illustrate this situation with a triangle that has a dotted line at the bottom.
Figure 3. Resource triangle, with dotted line indicating uncertain financial cut-off.
Businesses start by extracting the cheapest to extract resources, found at the top of the triangle. As these resources deplete, they move on to the more expensive to extract resources, further down in the triangle. Looking downward, it always looks like there are more resources available–it is just that they are more expensive to extract. This is why reported reserves tend to increase over time, even as supplies are depleted. The limit is a financial limit, illustrated by a dotted line, which is why virtually no one can figure out when the limit will actually arrive.
One somewhat minor point: When I say, “Cheapest to extract resources,” I am referring to broadly defined costs. What businesses want is resources that produce goods and services most cheaply for the consumer. Thus, they are really concerned about cheapesttotal cost, considering the entire chain that goes all the way to the consumer, including refining and transportation. The costs would include energy used in extraction, labor costs, transportation costs, taxes, and the cost of debt. It probably should include the cost of mitigating pollution effects as well.
A major problem is that as the cost of energy extraction grows, the favorable gap between the cost of extraction and the benefit to society (as mentioned in the previous section) shrinks. There are many ways that this problem manifests itself in the economy. Figure 4 shows a list of such problem with respect to higher oil prices:
Figure 4. Image by author listing some of the problems created by rising oil prices.
One indirect impact of these issues is that there are more layoffs and fewer new job opportunities. If we calculate average wages by taking (total US wages) and dividing by (total US population), we see that during periods of high oil prices, wages tend not to grow, as they had in periods when oil prices were lower–just as we would expect (Figure 5, below).
Figure 5. Average US wages compared to oil price, both in 2012$. US Wages are from Bureau of Labor Statistics Table 2.1, adjusted to 2012 using CPI-Urban inflation. Oil prices are Brent equivalent in 2012$, from BP’s 2013 Statistical Review of World Energy.
Another issue is that it is not just the price of oil that rises. The price of natural gas rises as well. We have not felt this in the United States, because demand has kept the price down below the price of shale gas extraction. The cost of coal, delivered to its destination, has risen because transport uses oil, and transport costs are a significant share of total costs. The cost of base metals has also risen since 2002, because oil is used in metal extraction. Food prices in general have tended to rise as well, because oil is used in production and transport of food. When wages are close to flat, and the cost of many goods are rising, workers find that their paychecks are increasingly squeezed.
While costs of making goods in the US are rising, and paychecks are stagnating, an increasing amount of goods are imported from areas around the world where energy costs and wage costs are lower. This helps keep the cost of consumer goods down, but it makes the problem of lack of jobs for US workers worse.
With all of these things happening, the government has more and more problems with its funding. Expenditures continue to rise, but taxes flatten, as the government tries to help the economy grow by not raising taxes to match expenditures (Figure 5, below).
Figure 6. Based on Table 2.1 and Table 3.1 of Bureau of Economic Analysis data. Government spending includes Federal, State, and Local programs.
Government expenditures can be thought of as expenditures out of the surpluses of the economy. As indicated previously, these are to a significant extent possible because of the favorable difference between the cost of extracting fossil fuels and the benefit those fossil fuels provide to the economy. As the use of fossil fuels has grown over the years, these government services have grown. In recent years, the presence of more unemployed workers has driven a need for more government services.
Since the early 2000s, government revenues have flattened. The lack of revenue, together with the ever-rising government spending, is what is driving continued big deficits. The danger is that this difference cannot be fixed, without huge cuts to programs that people are depending on, like unemployment insurance, Social Security and Medicare.
How the Economic Growth Loop Changes to Contraction
In my view, what causes a shift to contraction is a shift to higher energy costs. With higher energy costs, there is less surplus between the cost of extraction (broadly defined) and the benefit to society. Because of the smaller surplus, the parts of the economy that use this surplus, such as government spending, must shrink.
Figure 7. Higher energy cost leads to unfavorable feedback loop. (Illustration by author.)
We gradually find that all the great things we had learned to enjoy–inexpensive roads and other infrastructure, cheap goods, rising wages, and rising government serves–start going away. We increasingly find consumers maxed out on debt. We also find companies (especially energy companies) reporting lower profits, so they have more trouble investing in new energy extraction. The government cannot collect enough taxes for all of its services, so finds itself needing to keep raising its own debt levels.
The government can kind of “paper over” its difficulties with growing debt levels for a while, by using Quantitative Easing (QE). QE has the effect of making the interest the US must pay on its own debt lower. It makes the cost of business investment in new plants and equipment (including shale oil drilling) cheaper. It also helps stretch the incomes of increasingly impoverished workers by allowing monthly payments on homes and cars to be lower than they would otherwise would be.
The Party Ends With a Thud
Most readers can deduce that a shift from a growing economy to a shrinking economy is not a pleasant situation. It has all of the makings of collapse.
One of the big problems is debt defaults, as it becomes increasingly impossible to repay debt with interest. This creates conflict between borrowers and lenders. Debt defaults are also likely to cause huge problems for banks, insurance companies, and pension plans, because of the impact on their balance sheets. Some institutions may close.
To the extent new credit is cut off, the lack of credit cuts off new investment in energy extraction, in buying new cars and trucks, and in almost everything else. Such a cut-off in credit is likely to increase job layoffs and to lead to yet more defaults. Lack of investment in new energy extraction causes oil supply to fall quickly–far more quickly than standard “decline” models would suggest.
Businesses that in the past found that they could benefit from “economies of scale” as they grew find that fixed costs stay the same, even as sales shrink. This means that they either need to raise prices to cover their higher per-unit costs, or lose money.
Governments find that they need to cut government services to balance their budgets. Discontent grows among citizens as those who lose their benefits become very unhappy. Discord grows among political parties, because no one can agree how to cut programs equitably.
We don’t know how this will end, but we do know that the Former Soviet Union collapsed into its constituent parts when fossil fuel surpluses were reduced, prior to 1991. Egypt and Syria both have had civil unrest as their oil exports ended. Clearly very large government changes are possible, as surpluses disappear.
This list of potential impacts could be expanded endlessly, but I will spare readers from a more comprehensive list.
Abstract: Government investment in carbon capture and storage (CCS) is a large and expensive fossil-fuel subsidy with a low probability of eventual societal benefit. Within the tight resource constrained environments that almost all governments are currently operating in, it is irresponsible to sustain this type of subsidy. CCS has been promoted as a ‘bridging’ technology to provide CO2reductions until non-fossil-fuel energy is ramped up. But the past decade of substantial government investment and slow progress suggests that the challenges are many, and it will take longer to build the CCS bridge than to shift away from fossil-fuels. Optimism about the potential of CCS is based primarily on research on technical feasibility, but very little attention has been paid to the societal costs of governments perpetuating fossil-fuels or to the sociopolitical requirements of long-term regulation of CO2 stored underground. Deep systemic change is needed to alter the disastrous global fossil-fuel trajectory. Government investment in CCS and other fossil-fuel technologies must end so that the distraction and complacency of the false sense of security such investments provide are removed. Instead of continuing to invest billions in CCS, governments should invest more aggressively in technologies, policies, and initiatives that will accelerate a smooth transition to non-fossil-fuel-based energy systems. We need to divest from perpetuating a fossil-fuel infrastructure, and invest instead in social and technical changes that will help us prepare to be more resilient in an increasingly unstable and unpredictable future.
For over a decade, billions of dollars of government investment in carbon capture and storage (CCS) technology have provided a glimmer of hope for reconciling carbon dioxide (CO2) emissions and global growth in fossil-fuel use.[1, 2] CCS has offered a vision of a future in which the impacts of growing fossil-fuel reliance are minimized by capturing and storing the CO2 instead of allowing it to accumulate in the atmosphere.[3, 4] Many have projected that CCS is a technology critical to ‘solving’ climate change while continuing our reliance on fossil-fuels.[5-10]
But it is becoming increasingly clear that investing in CCS is not money well spent. As the global climate-energy situation becomes increasingly dire, bold measures with near-term influence are needed to reduce, rather than sustain, fossil-fuel reliance. Governments around the world need to divest in fossil-fuel technology and stop subsidizing CCS and other fossil-fuel technologies. Instead of continuing to invest billions in CCS, governments should be investing more aggressively in technologies, policies, and initiatives that will accelerate a smooth transition to non-fossil-fuel-based energy systems. Despite the challenges of envisioning a less-fossil-fuel-dependent energy future, we know that an eventual move away from fossil-fuels is inevitable. A decrease in investment in fossil-based energy technology coupled with an increase in innovation investment in non-fossil-based energy systems will help us prepare for this transition promoting gradual change and reducing the likelihood of an abrupt, disruptive shift away from fossil-fuels.
A FALSE SENSE OF OPTIMISM
Given the magnitude of society’s reliance on fossil-fuels, the technological vision of CCS has had a powerful influence on governmental action on climate change.[11, 12] The emergence of the possibility of CCS over 10 years ago enabled many fossil-fuel dependent actors, particularly individuals and institutions in coal-dependent regions of the world, to stop denying the existence of climate change; CCS provided the possibility of continuing coal use while also addressing climate change. Now with recent increases in natural gas reliance, CCS similarly offers the possibility of reconciling climate mitigation goals with growth in natural gas power plants. But this vision of CCS has also enabled complacency about the growing dangers of sustained fossil-fuel dependence. And the billions of dollars in government funds devoted to CCS has reduced the level of investment in non-fossil-fuel energy including initiatives and technologies with more concrete, near-term societal benefits. As the need to reduce fossil-fuel reliance is increasingly acknowledged for climate and many other reasons, CCS investments are dangerous as they further incentivize and legitimize continued use of fossil-fuels, and they create a false sense of optimism that our current energy systems can be safely perpetuated.
Beyond acknowledging CCS investment as an additional fossil-fuel subsidy, many other factors indicate that the time has come for governments to stop investing in CCS. First, despite the billions of dollars already invested, widespread CCS deployment remains a distant, far-fetched, extremely expensive possibility.[15-17] The slow progress and long-time horizon for realizing any potential societal benefits from CCS investments is problematic because the CCS strategy has a limited lifetime. CCS has been promoted as a ‘bridging’ technology to provide some CO2 reductions until non-fossil-fuel energy is ramped up. But the past decade of steady investment but slow progress suggests that it will take longer to build this bridge than to shift away from fossil-fuels. Australia’s recent cuts and deferred investment in its CCS programs reflects recognition of this time-scale problem; Australia cut its investment in its long-term CCS strategy to provide near-term budgetary relief and also to offset costs of the country’s emission trading scheme, which represents a more direct, near-term approach to reducing atmospheric CO2 (the future of Australia’s cap-and-trade system is now uncertain following the September 2013 election).
In the current global economic situation, government expenditure of the magnitude required to advance CCS is no longer justifiable. A single CCS demonstration plant is estimated to cost on the order of 1 billion dollars, and those advocating for more investment in CCS are asking governments to spend $3–4 billion each year for the next decade.[9, 19] Reallocation of this level of funding to promoting non-fossil-fuel energy would be a much less-risky more responsible and justifiable way for government to invest public money.
The amount of energy required to capture and store CO2 is often not adequately recognized in optimistic perceptions of the potential of CCS. This so-called energy penalty has been estimated to be about 30% with a range from 11 to 40%. This means roughly that for every three coal-fired power plants utilizing CCS an additional power plant would be required simply to supply the energy needed to capture and store the CO2. The magnitude of this energy penalty (including even the lower estimates) is so high that it is difficult to imagine a future scenario in which consuming this much additional energy to enable CCS would actually make sense.
In addition, CCS is unlikely to ever become an effective global CO2 reduction strategy because of the political difficulties of managing and preventing leakage of the underground storage of CO2 for thousands of years after it is injected. Optimism about the potential of CCS is based primarily on research on technical feasibility, but very little attention has been paid to the sociopolitical requirements of regulating and enforcing long-term monitoring and maintenance of CO2 stored underground. Global institutional structures with capacity to enforce liability for thousands or even hundreds of years do not exist. And political instability, corruption, and inevitable tensions among countries create severe and constant risks of any proposed global CO2 storage management scheme.
The health and safety costs of perpetuating fossil-fuels represent another reason to end government investment in CCS. The large, industrial-scale, fossil-fuel power plants that CCS is being designed to enable cause major health and safety risks to both the communities surrounding the plant (including water and air pollution) and to the communities impacted by fossil-fuel extraction (including coal mining, hydraulic fracturing for natural gas extraction, and fossil-fuel transport). In addition, strong public concern about the health and safety risks of storing CO2 underground has derailed several large-scale CCS demonstration projects in the past 4 years including the Vattenfall project in Germany and the Barendrecht project in the Netherlands. Concern about earthquakes triggered by injection of large volumes of CO2 underground is contributing to technical understanding of the risks of leakage.[27, 28] The private sector has recognized the many risks of CCS and has only been willing to invest in CCS in conjunction with strong government investment.
ENCOURAGING COMPLACENCY WITH CLAIMS OF ‘SOLVING’ CLIMATE CHANGE
A final critical reason to end government investment in CCS relates to the impossibility of claims that CCS is critical to ‘solving’ climate change. Climate science now tells us very clearly that no matter what is done to curb greenhouse gas emissions the climate is changing irreversibly to a new and different reality. So any claims that a specific technology like CCS is critical to ‘solving’ climate change is misleading and perpetuates a false sense of complacency about the realities and risks of climate change. This complacency coupled with optimism that CCS provides a ‘solution’ to climate change is dangerous, and it detracts from the increasingly urgent need for systemic changes that are now desperately needed to prepare us for the changing climate regime.
Continued CCS investment appears to fuel optimism in the face of the dire global energy realities including rapid recent growth in coal-fired power plants in developing countries. During the past decade global coal consumption has grown by more than 50% with much of that growth concentrated in China and India. Maintaining optimism about this situation is extremely difficult, but the assumption and hope that one day these new coal-fired power plants might be retrofitted with CCS has been an important mechanism for remaining positive.[31-33]
CHALLENGING ASSUMPTIONS OF INEVITABILITY OF SUSTAINED COAL USE
For many climate and energy experts around the world, CCS has become the holy-grail of climate mitigation. Advocating for government support for CCS technology has become a passion for many deeply committed, technologically optimistic energy professionals. This optimism seems to make sense for those who believe the dominant narrative that continuing growth of coal is inevitable due to its low cost, abundance, and reliability. In this narrative coal offers unique potential to continue to expand electricity access in the developing world providing unparalleled economic development opportunity. The problem with this narrative is that the extreme negative social, economic, environmental, and human health impacts of coal are dismissed and not adequately considered. The time has come for energy analysts and governments to recognize that sustained growth of coal use is NOT inevitable. If governments invest in and focus on alternative visions, mainstream energy projections based on dominant current assumptions become increasingly unlikely.
The case for substantial government investment in CCS seems to have sustained such broad appeal because many assume that the economic, political, and social hurdles of advancing CCS are lower than the hurdles of moving away from fossil-fuels. CCS advocates frequently point out that CCS is preferable to moving away from fossil-fuels because CCS does not demand a radical alteration of national economies, global trade, or personal lifestyles. But radical systemic change in our energy systems is needed now more than ever before, and investments that slow down this transition are a dangerous distraction.
From a technological perspective, it has been suggested that the infrastructural requirements and inflexibility of CCS would exacerbate ‘technological lock-in’ to fossil-fuel use. From a political perspective, it now seems that the sunk-costs associated with the amount of money already invested in CCS is creating a difficult ‘political lock-in’. For governments that have already invested millions or billions of dollars and considerable political capital to advance CCS, ending this support is politically challenging. And the billions of dollars already spent has created a large and powerful CCS advocacy coalition that includes multiple institutions and individuals around the world whose professional responsibilities include advocating for more government funding for CCS.[34, 35] The technically optimistic focus of these CCS advocates has limited consideration of the societal risks of CCS investments and the societal value of investing instead in alternative non-fossil-fuel-based strategies.
For the well-being of societies around the world, divestment from fossil-fuels needs to become a governmental priority. Despite the obvious political challenges of resisting the powerful fossil-fuel establishment, a subtle but definite signal of movement toward such a rebellious idea was given by President Obama last summer when he mentioned ‘divestment’ in his speech on climate. Although the US officially continues to espouse an ‘all of the above’ energy strategy which includes investing in CCS, the time has come for the United States and other governments who have invested in CCS to exercise their influence to selectively divest in fossil-fuels and invest more heavily in non-fossil-fuel energy technologies. The perceived need for CCS has already been reduced in the EU where regulations now in place incentivize moving away from fossil-fuels by putting a price on CO2 emissions. And proposed new CO2 regulations in the United States have already changed firmly held assumptions of sustained long-term coal use in the United States and reduced expectations of widespread deployment of CCS.
Government investment in CCS is a large, expensive, and unnecessary fossil-fuel subsidy with an extremely low probability of eventual societal benefit. In the tight, resource constrained environment that almost all governments are operating within, it is irresponsible for governments to sustain this type of subsidy. Deep systemic change is required to alter the disastrous global fossil-fuel trajectory. Government investment in CCS and other fossil-fuel technologies must end, so that the distraction and complacency of the false sense of security such investments provide are removed.
Albert Einstein famously pointed out that problems cannot be solved with the same mindset in which they were created. We need to move beyond the powerful fossil-fuel mindset, and let go of the false sense of optimism that CCS investments provide. We also need to end the perception that CCS or any specific mix of technologies has the potential to ‘solve’ climate change. We need to divest from perpetuating a fossil-fuel infrastructure, and instead invest in social and technical changes that will help us prepare to be more resilient in an increasingly unstable and unpredictable future.
Experts say the evidence that climate change is being driven by human activities is convincing [GALLO/GETTY]
|Atmospheric volumes of greenhouse gases blamed for climate change have hit a new record in 2012, the World Meteorological Organisation says.
Heat-trapping carbon dioxide gas was measured at 393.1 parts per million last year, up 2.2 ppm from the previous year, said the Geneva-based World Meteorological Organisation in its annual greenhouse gas inventory.
That is far beyond the 350 ppm that some scientists and environmental groups promote as the absolute upper limit for a safe level.
“For all these major greenhouse gases the concentrations are reaching once again record levels,” WMO Secretary-General Michel Jarraud told a news conference.
Worse than ever
He said the accelerating trend was driving climate change, making it harder to keep global warming to within 2C of pre-industrial levels, a target agreed at a Copenhagen summit in 2009.
“This year is worse than last year, 2011. 2011 was worse than 2010,” he said. “Every passing year makes the situation somewhat more difficult to handle, it makes it more challenging to stay under this symbolic two degree global average.”
Greenhouse gas emissions are set to be 8-12 billion tons higher in 2020 than the level needed to keep global warming below 2 degrees, the UN Environment Programme said on Tuesday.
If the world pursues its “business as usual” trajectory, it will probably hit the 2C mark in the middle of the century, Jarraud said, noting that this would also affect the water cycle, sea levels and extreme weather events.
“The more we wait for action, the more difficult it will be to stay under this limit and the more the impact will be for many countries, and therefore the more difficult it will be to adapt.”
Delegates from more than 190 nations meet in Warsaw next week for a UN conference to work on emission cuts under a new climate pact to be signed by 2015, but to come into force only in 2020.
The WMO bulletin said the volume of carbon dioxide, or CO2, the primary greenhouse gas emitted by human activities, grew faster in 2012 than in the previous decade, reaching 393.1 parts per million (ppm), 41 percent above the pre-industrial level.
The amount of the gas in the atmosphere grew by 2.2 ppm, higher the average of 2.02 ppm over the past 10 years.
Based on that rate, the organisation says the world’s carbon dioxide pollution level is expected to cross the 400 ppm threshold by 2016. That level already was reached at some individual measurement stations in 2012 and 2013.
Carbon dioxide is very stable and is likely to remain in the atmosphere for a long time, Jarraud said. The concentrations were the highest for more than 800,000 years, he said.
“The increase in CO2 is mostly due to human activities,” Jarraud said. “The actions we take now or don’t take now will have consequences for a very, very long period.”
- Greenhouse gas volumes reached new high in 2012: WMO (reuters.com)
- Greenhouse gases continue relentless rise (irishtimes.com)
- Greenhouse Gases Rise to Record Levels in Atmosphere, WMO Says – Bloomberg (bloomberg.com)
- Concentrations of warming gases break record (syndicatednewsservices.com)
- Greenhouse Gas Emissions Reached New Highs In 2012, World Meterological Organization Says (huffingtonpost.com)
- Concentrations of warming gases breaks record (arunbabyveranakunnel.wordpress.com)
- Greenhouse gas at record high – 141% increase on pre-industrial levels (blueandgreentomorrow.com)
- NASA shows us what Antarctica would look like without ice (slashgear.com)
- Antarctica Digitally Stripped of the Ice Shows What Lies Underneath (geeky-gadgets.com)
- Sharp NASA Map Reveals What Lies Beneath Antarctica’s Icy Cloak (Video) (scienceworldreport.com)
- Incredible Technology: How to Explore Antarctica (livescience.com)
Why did the 400ppm carbon milestone cause barely a ripple? | Andrew Simms | Environment | guardian.co.uk
- Scientists: Global CO2 levels expected to break 400 ppm within days (dgrnewsservice.org)
- We’re About to Pass a Disheartening New Climate Change Milestone (blogs.smithsonianmag.com)
- Global carbon dioxide levels set to pass 400ppm milestone (guardian.co.uk)
- Carbon Dioxide Passes 400 PPM Milestone, NOAA Finds (themoderatevoice.com)
- In ‘March Toward Disaster,’ World Hits 400 PPM Milestone (commondreams.org)
- NEWS: Arctic Ocean “particularly vulnerable” to acidification: new report (nunatsiaqonline.ca)
- 10 Key Findings From a Rapidly Acidifying Arctic Ocean (motherjones.com)
- Ocean acidification affecting Arctic at fast pace (cbc.ca)
- Arctic faces further threat from ocean acidification (guardian.co.uk)
- Acidification: the latest unknown for stressed Arctic ecosystem (reuters.com)
- Scientists: Climate change causing Arctic Ocean to acidify at alarming rate (rawstory.com)
- Carbon dioxide levels in the global atmosphere are now above 400ppm (seldo.tumblr.com)
- The Garlic: Interview With Carbon Dioxide (saskboy.wordpress.com)
- Chart of the Century: The Keeling Curve Edges Up to 400 ppm (motherjones.com)
- Scientific American Compares CO2 At 400ppm To 9/11 (stoptheaclu.com)
- Carbon dioxide in atmosphere at highest level for 5 million years (independent.co.uk)
- Greenhouse gas level highest in two million years (dawn.com)
- Greenhouse gas sets record (wcpo.com)
- Greenhouse gas level highest in 2 million years (ktvb.com)