Carbon bubble toil and trouble

27 03 2014

There has been of late quite a few articles on the blogosphere about the potential for a Carbon bubble.  A bubble about to burst.  That this will occur is utterly undeniable, but the outcomes featured by different writers are a bit off the mark in my opinion……

First, let me start with Paul Gilding.  I have a lot of time for Paul.  I’ve even published some of his writings here; but his optimism often leaves me flabbergasted…….

In Carbon Crash Solar Dawn, published in Cockatoo Chronicles 

I think it’s time to call it. Renewables and associated storage, transport and digital technologies are so rapidly disrupting whole industries’ business models they are pushing the fossil fuel industry towards inevitable collapse.

Some of you will struggle with that statement. Most people accept the idea that fossil fuels are all powerful – that the industry controls governments and it will take many decades to force them out of our economy. Fortunately, the fossil fuel industry suffers the same delusion.

gilding

Paul Gilding

I don’t think the oil industry is under any such delusion.  Unable to make a profit with oil floundering around $100 a barrel, a price the market forces on them to accept, that industry is taking to selling its assets to prop up its bottom line, even borrowing money to pay shareholders’ dividends….

The only idea I struggle with Paul, is that “renewables, electric cars and associated technologies build the momentum needed to make their takeover unstoppable“.

Take here in Australia for instance; the coal fired power lobby has twisted the politicians’ arms (I don’t think much twisting was required either…) to thwart any further growth in the development of renewables.  In Queensland where I still live, the Newman government has indicated that the paltry 8c feed in tariff that the poor beggars who installed PVs on their roofs after the frankly overgenerous 44c feed in tariff was terminated, will become a zero FiT after July 1.  We who are on the overgenerous 44c FiT are ‘safe’ (until TSHTF that is – then all bets are off), because we are on a contract that lasts until 2028….. but everyone else misses out.  Why are they doing this?  It’s all explained very well here on The Conversation, but basically it’s to protect the dinosaur industries’ shareholders.  There’s no way they are borrowing to pay their shareholders like Shell had to do….  Money rules, and f*** you the consumer.

Paul also further writes:

I think it’s important to always start with a reminder of the underlying context. As I argued in my book The Great Disruption, dramatic economic change is not a choice we get to make it, but an inevitable result of physical science. This is because business as usual, with results like ever increasing resource constraint or a global temperature increase of 4 degrees or more, would trigger economic and social collapse. So the only realistic outcomes are such a collapse or an economic transformation that prevents it, with timing the only big unknown. I argued transformation was far more likely and, to my delight, that’s what we see emerging around us today – even faster than I expected.

In parallel, we are also seeing the physical impacts of climate change and resource constraint accelerating. This is triggering physical, economic and geopolitical responses – from melting arctic ice and spiking food prices to the Arab Spring and the war in Syria. (See here for further on that.) The goods news in this growing hard evidence is that the risk of collapse is being acknowledged by more mainstream analysts. Examples include this commentary by investment legend Jeremy Grantham and a recent NASA funded study explained here by Nafeez Ahmed. So the underlying driver – if we don’t change in a good way, we’ll change in a very bad way – is gathering acceptance.

Hang on……..  is he saying the Arab Spring is about people demanding “renewables, electric cars and associated technologies”?  Because collapse is exactly what is happening in Egypt and Syria.  Collapse does not begin in boardrooms, it begins in the streets when people run out of food, water, and petrol….

And where is the debt problem mentioned in this “dramatic economic change“?  How exactly will the “renewables, electric cars and associated technologies” be paid for?  More growth?  Has he never heard the saying “the best way to get out of a hole is by not digging any deeper”?

Over at Nature Climate Change, I found this too……

…major players in the financial markets are becoming increasingly uneasy about the extent of the impact of future climate policies on power companies. A supposition — fostered by the Carbon Tracker Initiative — is that fossil fuels may be nowhere near as profitable in the future as they have been so far. This is not simply because the costs of prospecting and drilling for oil, for example, are increasing, or that the fossil fuel resources that give the oil, coal and natural gas companies their value are about to run out — they are not. The problem is more that a large portion — perhaps as much as 80 per cent — of these reserves will have to be left untouched if society has any chance of limiting global temperature rise to 2 °C this century.

So, pray tell, what will we build the new energy system with…?  Let me remind you of just how many resources it takes to build wind turbines… or a solar thermal power plant

Paul ends his article with:

So, as I see it, the game is up for fossil fuels. Their decline is well underway and it won’t be a gentle one. Of course they won’t just be gone in few years but once the market and policy makers understand what’s happening, it will become self-reinforcing and accelerate rapidly. Markets come into their own in situations like this. They rarely initiate change, but once they’re racing down the hill, it’s time to jump on board or get out of the way. It’s an ugly and brutal process for those involved, but it gets the job done quickly.

When that occurs, we may find that those forecasts by myself and others like Tony Seba from Stanford University, that the oil, coal and gas companies will be all but obsolete by 2030, might turn out to be conservative after all. Interesting times indeed.

Yes, it is game over.  But not for the fossil fuel industries alone.  When they go down, everyone goes down.  Even the central bankers, to whom the global debt which has soared more than 40 percent to $100 trillion since the first signs of the financial crisis, will go down….. why do so few people see the big picture…….?  For someone who claims to understand the “inevitable result of physical science” as the driver of economic change, Paul truly puzzles me.

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4 responses

28 03 2014
Maponos

As Paul Gilding or any of the other Techno-Fantasists not looked at how the raw materials are mined, manufactured and transported?

1 04 2014
Mulga Mumblebrain

Gilding left Greenpeace years ago to work with Big Business. Rather like joining the Dracula family to study haemophilia. I’m sure that it has proved a profitable career move. Working through capitalist structures ensures destruction, of that there is simply no doubt. Hence the 50 years of approximately zero process in addressing a problem understood for all that time. Progress for humanity or profit for a few-we know who had to, and did, win.

28 03 2014
Get in early

Paul Gilding is simply linking some observations on technological advancement and uptake, their contribution to evolving distributed energy systems and the impact they are having on the price of energy from traditional grid systems. It isn’t rocket science.

Anyone with money in markets should think seriously about where this trend is heading. Your assertion that the energy mix will remain dominated by fossil fuels for a long time to come does not factor many of the variables that sensible investors take into account.

Want to buy a beach front mansion about now? Try and get it insured.

28 03 2014
mikestasse

I’m not asserting that ” the energy mix will remain dominated by fossil fuels for a long time to come”, I’m asserting we will be using very little energy of ANY kind in the future. Just like we did in the past.

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