Not so good news

16 04 2019

This is Tim Watkins at his best I think….. I wish I had time to write well researched articles like this, but I have a flailing mower arriving today, the double glazed windows at the end of the month, and the front wall to build in preparation of this event. Never a dull moment around here.

Put simply, if you cannot turn on your lights, operate your business or recharge your electric car, because there is no electricity, it is little comfort to learn that on a good day the grid is capable of supplying more electricity than you might need.

From the truly amazing Consciousness of Sheep website…

Protesters today intend bringing central London to a standstill by blockading several major arterial roads into the capital.  For once, this has nothing to do with Brexit.  Instead, it concerns the increasingly urgent call for government to “do something” about climate change.  Exactly what that “something” is that must be done is a little less clear, since current environmental concerns are almost always pared down to concern about the carbon dioxide emitted by cars and power stations.  Although how exactly this relates to the mass die-off of species resulting from industrial agriculture and deforestation, or growing oceanic dead zones and plastic islands, is far from clear.

Protesting environmental concerns involves a high degree of denial and self-deception; as it is based on two gross errors.  The first is the irrational belief that governments have the means to respond to the predicament we find ourselves in.  As a corrective to this, just look at the dog’s breakfast that the current British government has managed to make out of what is a simple (by comparison) trade negotiation.  Anyone who seriously thinks these clowns are going to do anything positive (save for by accident) for the environment is displaying almost clinical levels of delusion.   The second error is in believing the often unspoken conspiracy theory that insists that the only thing standing between us and the promised zero-carbon future is corrupt politicians and their corporate backers, who insist on putting the needs of the fossil fuel industry ahead of life on planet earth.

To maintain these deceits, a large volume of propaganda must be put out in order to prove that the zero-carbon future is possible if only the politicians would act in the way the people want.  So it is that we are treated to a barrage of media stories claiming that this town, city, country or industry runs entirely on “green” energy (don’t mention carbon offsetting).  Indeed, left to their own devices, we are told, the green energy industry is already well on the way to building the zero-carbon future we asked for; we just need the politicians to pull their fingers out and we could easily get there in just a few years’ time.  For example, Joshua S Hill at Green Technica tells us that:

“Renewable energy sources now account for around a third of all global power capacity, according to new figures published this week by the International Renewable Energy Agency, which revealed 171 gigawatts (GW) of new renewable capacity was installed in 2018…

“This brings total renewable energy generation capacity up to a whopping 2,351 GW as of the end of 2018, accounting for around a third of the globe’s total installed electricity capacity. Hydropower remains the largest renewable energy source based on installed capacity, with 1,172 GW, followed by wind energy with 564 GW and solar power with 480 GW.”

Stories like these play into the fantasy that we are well on our way to reversing climate change, and that all we need now is some “green new deal” mobilisation to replace the final two-thirds of our energy capacity with non-renewable renewable energy-harvesting technologies to finish the job.  If only it was that simple.

Notice the apparently innocuous word “capacity.”  This is perhaps the least important information about electricity.  Far more important is the amount that is actually generated.  The US Energy Information Administration explains the difference:

Electricity generation capacity is the maximum electric output an electricity generator can produce under specific conditions. Nameplate generator capacity is determined by the generator’s manufacturer and indicates the maximum output of electricity a generator can produce without exceeding design thermal limits….

Electricity generation is the amount of electricity a generator produces over a specific period of time. For example, a generator with 1 megawatt (MW) capacity that operates at that capacity consistently for one hour will produce 1 megawatthour (MWh) of electricity. If the generator operates at only half that capacity for one hour, it will produce 0.5 MWh of electricity…

Capacity factor of electricity generation is a measure (expressed as a percent) of how often an electricity generator operates during a specific period of time using a ratio of the actual output to the maximum possible output during that time period.”

In terms of understanding where we are and where we are heading, “electricity generation” is far more important than “capacity”; which only tells us how wind, wave, tide and solar technologies would perform if it were possible (it isn’t) for them to generate electricity all day (and night) every day.  Put simply, if you cannot turn on your lights, operate your business or recharge your electric car, because there is no electricity, it is little comfort to learn that on a good day the grid is capable of supplying more electricity than you might need.  From a planning point of view, knowing the capacity factor for various generating technologies matters because it gives an insight into how efficient they are.  A nuclear or fossil fuel power plant that runs more or less continuously for more than 60 years is likely to require far fewer inputs and far less land area than, say, vast solar farms (which have to be replaced every 10-20 years) that can only generate electricity when the sun is shining.

So where do non-renewable renewable energy-harvesting technologies stand when it comes to electricity generation?  According to the latest BP Statistical Review of World Energy, in 2017 human civilisation generated 25551.3 Terawatt hours (TW/h) of electricity.  Of this:

  • Non-renewable renewable energy-harvesting technologies provided 2151.5 TW/h (8.4%)
  • Nuclear provided 2635.6 TW/h (10.3%)
  • Hydroelectric dams provided 4059.9 TW/h (15.9%)
  • Fossil fuels provided 16521.7 TW/h (64.7%).

What this tells us is that far more non-renewable renewable energy-harvesting capacity has to be installed than the electricity that it can actually generate – it has a low capacity factor.  Indeed, Hill’s “around a third” figure includes the much larger capacity of hydroelectric dams (which have environmental issues of their own) for which there is little scope for further installation.  Only by adding in nuclear power can we get to a third of electricity generation from low-carbon sources.

Even this, however, misleads us when it comes to environmental impacts.  The implicit assumption is that non-renewable renewable energy-harvesting technologies are still valuable despite their inefficiency because they are replacing fossil fuels.  But this is not why countries like the UK, Saudi Arabia and (for insane reasons) Germany have been deploying them.  In the first two cases, the deployment of non-renewable renewable energy-harvesting technologies is primarily to maximise the amount of fossil fuels available for export.  In Germany’s case, renewables that might otherwise have weaned the economy off coal were deployed instead as a replacement for nuclear; leaving the economy overly-dependent upon often dirty (lignite) brown coal; and forcing them to turn to Russian gas as a future substitute for coal.  These states are not, however, where most of the world’s largely fossil fuelled industrial processes take place.  Asia accounts for the majority of global industry, and Asian economies use non-renewable renewable energy-harvesting technologies to supplement fossil fuels rather than to replace them; although Hill does not clarify this when he tells us that:

“Specifically, solar energy dominated in 2018, installing an impressive 94 GW… Asia continued to lead the way with 64 GW — accounting for around 70% of the global expansion last year — thanks to dominant performances from China, India, Japan, and South Korea.”

While, of course, electricity generated from wind, wave, sunlight and tide is energy that might otherwise have come from fossil fuels, the impact should not be exaggerated.  According to the 2019 edition of the BP Energy Outlook, in 2017:

  • Non-renewable renewable energy-harvesting technologies provided 4 percent of global primary energy
  • Nuclear provided 4 percent
  • Hydroelectric 7 percent
  • Gas 23 percent
  • Coal 28 percent
  • Oil 34 percent.

Just our additional energy demand since 2015 has been sufficient to account for all of the non-renewable renewable energy-harvesting technologies deployed to date.  That is, if we had simply accepted 2015 levels of consumption, we need not have deployed these technologies at all.  And, of course, if we had stabilized our energy consumption a couple of decades ago we could have left the bulk of the fossil fuels we now consume in the ground:

World Energy Consumption 2017
Source: Global carbon emissions 2007-17

What is really at issue here is that – to quote the late George H.W. Bush – “The American way of life is not up for negotiation.”  That is, we can have any energy transformation we like, so long as it does not involve any limitation on our continued exploitation and consumption of the planet we live on.  The too-big-too-fail banks must havepermanent economic growth and that, in turn, means that we have no choice other than to keep growing our energy consumption.

The trouble is that infinite growth on a finite planet is impossible.  Worse still, as the energy return on investment (aka Net Energy) declines, the increased energy and monetary cost of energy production causes the energy and monetary value available to the wider (non-energy) economy to decline.  In the first two decades of the century, this has caused an intractable financial crisis coupled to a massive decline in prosperity across the developed economy (resulting in the collapse in consumption of the “retail apocalypse”) which is beginning to generate political instability.  In the 2020s the crisis is set to worsen as the energy cost of producing a whole range of mineral resources raises their market price above that which can be sustained in the developed states (where most of the consumption occurs).  The result – whether we like it or not – is that we face a more or less sharp drop in consumption in the next couple of decades.

This raises questions about the purpose to which we deploy non-renewable renewable-energy harvesting technologies.  For several decades, people in the green movement have engaged in private arguments about whether they should spell out the likely localised and de-materialised economies that giving up or running out of accessible fossil fuels necessarily entails.  Since this would be politically toxic, most have chosen to promote the lie that humanity can simply replace coal, gas and oil with some combination of wind, wave, tide and sunlight without economic growth even needing to pause for breath.  This, in turn, has allowed our young people to believe that intransigence is the only thing preventing our political leaders from de-carbonising our economies.

Exactly what our politicians are told about our predicament is a matter of conjecture.  Most, I suspect, are as clueless as the population at large.  Nevertheless the permanent civil services across the planet have produced a raft of reports into the full spectrum of the catastrophe facing us, from the damage we are doing to the environment to the rapidly depleting stocks of key mineral resources and productive agricultural land, and the more imminent collapse in the global financial system.  And the more they become aware of this predicament, the more they realise just exactly what the word “unsustainable” actually means.  One way or another, six out of every seven humans alive today is going to have to go – either by a planned de-growth or via a more or less rapid collapse of our (largely fossil-fuelled) interconnected global life support systems.

With this in mind, there is something truly immoral about perpetuating the myth that we can maintain business as usual simply by swapping non-renewable renewable-energy harvesting technologies for fossil fuels.  This is because maintaining the myth results in precisely the kind of misallocation that we already witnessed in those states that are using renewable electricity to bolster fossil fuel production and consumption.  The more we keep doing this, the harder the crash is going to be when one or other critical component (finance, energy or resources) is no longer widely available.

There is a place for renewable energy in our future; just not the one we were promised.  As we are forced to re-localise and de-grow both our economies and our total population, the use of non-renewable renewable-energy harvesting technologies to maintain critical infrastructure such as health systems, water treatment and sewage disposal, and some key agricultural and industrial processes would make the transition less deadly.  More likely, however, is that we will find the technologies we need to prevent the combination of war, famine and pestilence that otherwise awaits us will have been squandered on powering oil wells, coal mines, electric car chargers, computer datacentres and cryptocurrencies (none of which are edible by the way).

At this stage, all one can say to the climate protestors and to the “green” media that encourage them is, “be careful what you wish for… it might just come true!”





“Renewables” – reality or illusion?

27 03 2019

ERIK MICHAELS·WEDNESDAY, MARCH 27, 2019

Originally posted in the Methane News Group (a considerable additional amount of information and discussion can only be seen by joining): https://www.facebook.com/groups/methanehydratesnews/

Lately I have fielded some rather interesting perspectives on “solutions” to climate change; not just here but in many other groups as well. I have pointed out that the ideas proposed as solutions are in fact just ideas; most of which require substantial amounts of energy not only to build, transport, erect, maintain, and replace at the end of their service life, but most of which serve no useful purpose to any other life form on this planet but us. Not only are these ideas unsustainable; if they don’t benefit other species, then they are ecologically extinct. Building a sustainable future means that we must incorporate ideas and things that interact with our biosphere in a manner that provides some sort of ecosystem service.

“Renewables” do not fit that description, so they are patently unsustainable.Ladies and Gentlemen, “optimism must be based in reality. If hope becomes something that you express through illusion, then it isn’t hope; it’s fantasy.” — Chris Hedges

I have spent a great deal of time lately discussing the issue of “renewables” and since this has been so pervasive as of late, I decided to draft a new file specifically for this purpose of outlining the facts.Before proceeding, please view this short video featuring Chris Hedges: https://vimeo.com/293802639

Recently, I discussed the fact that “renewables” are not a solution, and in fact, are actually making our existing predicaments worse. A considerable number of individuals are questioning these facts using all types of logical fallacies. I understand these questions; as I once thought that “renewable” energy and “green” energy and other ideas would save us as well – as little as 5 years ago. As I joined more climate change groups, I recognized the constantly repeating attack on these devices as non-solutions; so I decided to find out for myself once and for all, precisely whether they would work or not.Before going into further detail, I need to explain that IF these devices had been developed and installed back in the 1970s and 80s, along with serious efforts to quell population growth and tackling other unsustainable practices, they may have been beneficial.

However, the popular conclusion is not simply that they do not work (to serve their original intended purpose); but that they are actually causing more trouble than if they hadn’t been built at all. Many claim that these “solutions” are better than utilizing fossil energy; but this too, is an illusion. Having said that, please note that this article is in NO WAY promoting fossil energy; fossil energy use is every bit as bad, if not worse, than these devices; AND its use created the desire to build these devices in the first place.

Many people are utilizing a false dichotomy to justify continuing to build and use these devices. Using them creates no real desire to learn how to live without externally-produced energy, a loss we ALL face as time moves forward. Once the fossil fuel platform that these devices currently depend on disappears, so will the devices. Some individuals claim that we can continue to extract resources, manufacture, transport, and erect these devices after fossil energy is no longer available. This is true only on a MUCH smaller scale than the energy systems we have today, and only in small localities. On top of that, the systems of the future will continue to degrade over time and eventually, electricity will disappear altogether. Given this imminent fact, it makes little sense to continue building these devices, recognizing the environmental damage they are causing which only promotes the continued use of fossil energy as well.In order to comprehend why these devices are such a delusion, one must understand many different predicaments at once.

First, an understanding of energy and resource decline is critical. Secondly, a thorough understanding of pollution loading is essential, especially of the electronics, rare earths, mining, metals, plastics, and transportation industries. Understanding climate change and how our energy “addiction” has propelled it and continues to fuel it is absolutely necessary. Comprehension of biology along with the ecological and environmental degradation of habitat destruction and fragmentation is also necessary.

New information is constantly being made available as well, highlighting yet more reasons to stop building these devices. They are little more than energy “traps” that chain us to the same paradigm that is already killing life on this planet. The secret to resolving these issues isn’t a “new or different” energy source. It is eliminating the energy addiction altogether.The reason that eliminating energy addiction altogether is the only real strategy towards living a sustainable lifestyle is because of one seriously inconvenient fact: the diminishing returns on increasing complexity along with the fact that continuing to build these devices requires the continuation of mining, energy use, and industrial civilization – the very things killing all life on this planet.

As a system increases its complexity, the returns on that increasing complexity decrease. As we find more new ways to reduce the harm caused by energy use, misuse, and abuse, we continue to increase the complexity of producing said energy. Resistance and friction cause losses in motors, and inefficiency and sheer transmission losses produce yet further losses in all electrical systems. All these losses produce waste heat, no differently than traditional mechanical systems.

There is NO system that can be made 100% efficient, so there will ALWAYS be losses. This waste heat does nothing but add to the existing predicaments we already face; considering that in order to produce the energy to begin with, one must also pollute our atmosphere, water, and soil with toxins and byproducts of the processes themselves. Watch these three videos to understand why building each of these devices is a disaster in and of itself to wildlife around it. Focus on the devastation of the land that each unit sits on, as well as the habitat fragmentation caused by each road:

https://www.youtube.com/watch?v=mwwlxlMoVVQ

https://www.youtube.com/watch?v=84BeVq2Jm88

https://www.youtube.com/watch?v=1AAHJs-j3uw

Here is a handy reference guide about “renewables” with frequently asked questions:

https://deepgreenresistance.org/en/who-we-are/faqs/green-technology-renewable-energy Here are some links to more information that will help you understand WHY “renewable” energy is NOT a solution to climate change in any way, shape, or form:

  1. http://www.sixthtone.com/news/1002631/the-dark-side-of-chinas-solar-boom-
  2. https://www.wired.co.uk/article/lithium-batteries-environment-impact
  3. https://phys.org/news/2018-05-e-waste-wrong.html
  4. http://www.bbc.com/future/story/20150402-the-worst-place-on-earth
  5. https://www.scmp.com/news/china/society/article/2104162/chinas-ageing-solar-panels-are-going-be-big-environmental-problem
  6. https://www.nationalreview.com/2017/06/solar-panel-waste-environmental-threat-clean-energy/
  7. https://www.city-journal.org/wind-power-is-not-the-answer
  8. https://www.resilience.org/stories/2018-08-01/an-engineer-an-economist-and-an-ecomodernist-walk-into-a-bar-and-order-a-free-lunch/
  9. https://news.harvard.edu/gazette/story/2018/10/large-scale-wind-power-has-its-down-side/
  10. https://iopscience.iop.org/article/10.1088/1748-9326/aae102
  11. https://phys.org/news/2018-11-farm-predator-effect-ecosystems.html
  12. https://www.theatlantic.com/science/archive/2018/05/how-do-aliens-solve-climate-change/561479/
  13. https://patzek-lifeitself.blogspot.com/2018/10/all-is-well-on-our-planet-earth-isnt-it.html
  14. https://www.versobooks.com/blogs/3797-end-the-green-delusions-industrial-scale-renewable-energy-is-fossil-fuel

On a particular thread which featured the story link above, I wrote this detailed observation: “Ecocide is continuing BAU, which is precisely what “renewables” will allow for. They are nothing but a distraction for three reasons:

1. Building “renewables” does nothing to solve the predicament of energy use and energy growth. Replacing one type of energy with another is doing nothing but choosing a slightly less evil bad choice.

2. “Renewable” energy will never be able to replace the concentrated energy available in fossil fuels, and this fact is missed by both the MSM and most people in society. This is a recipe for disaster as the amount of fossil energy available inevitably dwindles and countries begin to fight for survival.

3. “Renewables” can not replace fossil energy in another way besides concentration of energy – each popular device such as solar panels and wind turbines only last around 20 years. This is if they survive that long – many have met an early demise due to extreme weather events. So not only do they represent a never-ending merry-go-round of maintain and replace, rinse and repeat; but due to continued energy growth, more are constantly needed as well. That is precisely what makes them every bit as unsustainable as fossil fuels.

4. Now, for a fourth issue that hasn’t been mentioned in the first three – building “renewables” doesn’t serve any truly needed service. Human beings and all other life forms on this planet don’t actually require external electricity in order to survive. So the ONLY species that benefits from building these devices is us. Sadly, building these devices kills off species through habitat destruction and habitat fragmentation along with pollution loading and other causes.

So in effect, these not only don’t solve the issue they were designed for, they continue the same ecological destruction that we are accomplishing through utilizing fossil energy. As we continue pulling the Jenga blocks out of the tree of life, how long will it be before we unwittingly become functionally extinct through using these to continue BAU? As one can clearly see, if humans want to continue living, they have no choice but to reduce fossil and all other energy use and bring it down to zero very quickly.

Sadly, I have little doubt that this will not be accomplished in any kind of reasonable time frame, IF AT ALL (we are currently going the wrong direction and have been for the last two decades DESPITE these devices having been built and installed), given what has transpired over the previous five decades even though we’ve known about these predicaments since then.” Here are several links to files that contain yet more links to more info:





2019: World Economy Is Reaching Growth Limits; Expect Low Oil Prices, Financial Turbulence

10 01 2019

Posted on January 9, 2019 by Gail Tverberg

Another incisive self explanatory article by Gail Tverberg explaining the recent volatility and what outcomes we can expect from that this coming year (and next) MUST READ.

Financial markets have been behaving in a very turbulent manner in the last couple of months. The issue, as I see it, is that the world economy is gradually changing from a growth mode to a mode of shrinkage. This is something like a ship changing course, from going in one direction to going in reverse. The system acts as if the brakes are being very forcefully applied, and reaction of the economy is to almost shake.

What seems to be happening is that the world economy is reaching Limits to Growth, as predicted in the computer simulations modeled in the 1972 book, The Limits to Growth. In fact, the base model of that set of simulations indicated that peak industrial output per capita might be reached right about now. Peak food per capita might be reached about the same time. I have added a dotted line to the forecast from this model, indicating where the economy seems to be in 2019, relative to the base model.

Figure 1. Base scenario from The Limits to Growth, printed using today’s graphics by Charles Hall and John Day in Revisiting Limits to Growth After Peak Oil with dotted line at 2019 added by author. The 2019 line is drawn based on where the world economy seems to be now, rather than on precisely where the base model would put the year 2019.

The economy is a self-organizing structure that operates under the laws of physics. Many people have thought that when the world economy reaches limits, the limits would be of the form of high prices and “running out” of oil. This represents an overly simple understanding of how the system works. What we should really expect, and in fact, what we are now beginning to see, is production cuts in finished goods made by the industrial system, such as cell phones and automobiles, because of affordability issues. Indirectly, these affordability issues lead to low commodity prices and low profitability for commodity producers. For example:

  • The sale of Chinese private passenger vehicles for the year of 2018 through November is down by 2.8%, with November sales off by 16.1%. Most analysts are forecasting this trend of contracting sales to continue into 2019. Lower sales seem to reflect affordability issues.
  • Saudi Arabia plans to cut oil production by 800,000 barrels per day from the November 2018 level, to try to raise oil prices. Profits are too low at current prices.
  • Coal is reported not to have an economic future in Australia, partly because of competition from subsidized renewables and partly because China and India want to prop up the prices of coal from their own coal mines.

The Significance of Trump’s Tariffs

If a person looks at history, it becomes clear that tariffs are a standard response to a problem of shrinking food or industrial output per capita. Tariffs were put in place in the 1920s in the time leading up to the Great Depression, and were investigated after the Panic of 1857, which seems to have indirectly led to the US Civil War.

Whenever an economy produces less industrial or food output per capita there is an allocation problem: who gets cut off from buying output similar to the amount that they previously purchased? Tariffs are a standard way that a relatively strong economy tries to gain an advantage over weaker economies. Tariffs are intended to help the citizens of the strong economy maintain their previous quantity of goods and services, even as other economies are forced to get along with less.

I see Trump’s trade policies primarily as evidence of an underlying problem, namely, the falling affordability of goods and services for a major segment of the population. Thus, Trump’s tariffs are one of the pieces of evidence that lead me to believe that the world economy is reaching Limits to Growth.

The Nature of World Economic Growth

Economic growth seems to require growth in three dimensions (a) Complexity, (b) Debt Bubble, and (c) Use of Resources. Today, the world economy seems to be reaching limits in all three of these dimensions (Figure 2).

Figure 2.

Complexity involves adding more technology, more international trade and more specialization. Its downside is that it indirectly tends to reduce affordability of finished end products because of growing wage disparity; many non-elite workers have wages that are too low to afford very much of the output of the economy. As more complexity is added, wage disparity tends to increase. International wage competition makes the situation worse.

growing debt bubble can help keep commodity prices up because a rising amount of debt can indirectly provide more demand for goods and services. For example, if there is growing debt, it can be used to buy homes, cars, and vacation travel, all of which require oil and other energy consumption.

If debt levels become too high, or if regulators decide to raise short-term interest rates as a method of slowing the economy, the debt bubble is in danger of collapsing. A collapsing debt bubble tends to lead to recession and falling commodity prices. Commodity prices fell dramatically in the second half of 2008. Prices now seem to be headed downward again, starting in October 2018.

Figure 3. Brent oil prices with what appear to be debt bubble collapses marked.

Figure 4. Three-month treasury secondary market rates compared to 10-year treasuries from FRED, with points where short term interest rates exceed long term rates marked by author with arrows.

Even the relatively slow recent rise in short-term interest rates (Figure 4) seems to be producing a decrease in oil prices (Figure 3) in a way that a person might expect from a debt bubble collapse. The sale of US Quantitative Easing assets at the same time that interest rates have been rising no doubt adds to the problem of falling oil prices and volatile stock markets. The gray bars in Figure 4 indicate recessions.

Growing use of resources becomes increasingly problematic for two reasons. One is population growth. As population rises, the economy needs more food to feed the growing population. This leads to the need for more complexity (irrigation, better seed, fertilizer, world trade) to feed the growing world population.

The other problem with growing use of resources is diminishing returns, leading to the rising cost of extracting commodities over time. Diminishing returns occur because producers tend to extract the cheapest to extract commodities first, leaving in place the commodities requiring deeper wells or more processing. Even water has this difficulty. At times, desalination, at very high cost, is needed to obtain sufficient fresh water for a growing population.

Why Inadequate Energy Supplies Lead to Low Oil Prices Rather than High

In the last section, I discussed the cost of producing commodities of many kinds rising because of diminishing returns. Higher costs should lead to higher prices, shouldn’t they?

Strangely enough, higher costs translate to higher prices only sometimes. When energy consumption per capita is rising rapidly (peaks of red areas on Figure 5), rising costs do seem to translate to rising prices. Spiking oil prices were experienced several times: 1917 to 1920; 1974 to 1982; 2004 to mid 2008; and 2011 to 2014. All of these high oil prices occurred toward the end of the red peaks on Figure 5. In fact, these high oil prices (as well as other high commodity prices that tend to rise at the same time as oil prices) are likely what brought growth in energy consumption down. The prices of goods and services made with these commodities became unaffordable for lower-wage workers, indirectly decreasing the growth rate in energy products consumed.

Figure 5.

The red peaks represented periods of very rapid growth, fed by growing supplies of very cheap energy: coal and hydroelectricity in the Electrification and Early Mechanization period, oil in the Postwar Boom, and coal in the China period. With low energy prices,  many countries were able to expand their economies simultaneously, keeping demand high. The Postwar Boom also reflected the addition of many women to the labor force, increasing the ability of families to afford second cars and nicer homes.

Rapidly growing energy consumption allowed per capita output of both food (with meat protein given a higher count than carbohydrates) and industrial products to grow rapidly during these peaks. The reason that output of these products could grow is because the laws of physics require energy consumption for heat, transportation, refrigeration and other processes required by industrialization and farming. In these boom periods, higher energy costs were easy to pass on. Eventually the higher energy costs “caught up with” the economy, and pushed growth in energy consumption per capita down, putting an end to the peaks.

Figure 6 shows Figure 5 with the valleys labeled, instead of the peaks.

Figure 6.

When I say that the world economy is reaching “peak industrial output per capita” and “peak food per capita,” this represents the opposite of a rapidly growing economy. In fact, if the world is reaching Limits to Growth, the situation is even worse than all of the labeled valleys on Figure 6. In such a case, energy consumption growth is likely to shrink so low that even the blue area (population growth) turns negative.

In such a situation, the big problem is “not enough to go around.” While cost increases due to diminishing returns could easily be passed along when growth in industrial and food output per capita were rapidly rising (the Figure 5 situation), this ability seems to disappear when the economy is near limits. Part of the problem is that the lower growth in per capita energy affects the kinds of jobs that are available. With low energy consumption growth, many of the jobs that are available are service jobs that do not pay well. Wage disparity becomes an increasing problem.

When wage disparity grows, the share of low wage workers rises. If businesses try to pass along their higher costs of production, they encounter market resistance because lower wage workers cannot afford the finished goods made with high cost energy products. For example, auto and iPhone sales in China decline. The lack of Chinese demand tends to lead to a drop in demand for the many commodities used in manufacturing these goods, including both energy products and metals. Because there is very little storage capacity for commodities, a small decline in demand tends to lead to quite a large decline in prices. Even a small decline in China’s demand for energy products can lead to a big decline in oil prices.

Strange as it may seem, the economy ends up with low oil prices, rather than high oil prices, being the problem. Other commodity prices tend to be low as well.

What Is Ahead, If We Are Reaching Economic Growth Limits?

1. Figure 1 at the top of this post seems to give an indication of what is ahead after 2019, but this forecast cannot be relied on. A major issue is that the limited model used at that time did not include the financial system or debt. Even if the model seems to provide a reasonably accurate estimate of when limits will hit, it won’t necessarily give a correct view of what the impact of limits will be on the rest of the economy, after limits hit. The authors, in fact, have said that the model should not be expected to provide reliable indications regarding how the economy will behave after limits have started to have an impact on economic output.

2. As indicated in the title of this post, considerable financial volatility can be expected in 2019if the economy is trying to slow itself. Stock prices will be erratic; interest rates will be erratic; currency relativities will tend to bounce around. The likelihood that derivatives will cause major problems for banks will rise because derivatives tend to assume more stability in values than now seems to be the case. Increasing problems with derivatives raises the risk of bank failure.

3. The world economy doesn’t necessarily fail all at once. Instead, pieces that are, in some sense, “less efficient” users of energy may shrink back. During the Great Recession of 2008-2009, the countries that seemed to be most affected were countries such as Greece, Spain, and Italy that depend on oil for a disproportionately large share of their total energy consumption. China and India, with energy mixes dominated by coal, were much less affected.

Figure 7. Oil consumption as a percentage of total energy consumption, based on 2018 BP Statistical Review of World Energy data.

Figure 8. Energy consumption per capita for selected areas, based on energy consumption data from 2018 BP Statistical Review of World Energy and United Nations 2017 Population Estimates by Country.

In the 2002-2008 period, oil prices were rising faster than prices of other fossil fuels. This tended to make countries using a high share of oil in their energy mix less competitive in the world market. The low labor costs of China and India gave these countries another advantage. By the end of 2007, China’s energy consumption per capita had risen to a point where it almost matched the (now lower) energy consumption of the European countries shown. China, with its low energy costs, seems to have “eaten the lunch” of some of its European competitors.

In 2019 and the years that follow, some countries may fare at least somewhat better than others. The United States, for now, seems to be faring better than many other parts of the world.

4. While we have been depending upon China to be a leader in economic growth, China’s growth is already faltering and may turn to contraction in the near future. One reason is an energy problem: China’s coal production has fallen because many of its coal mines have been closed due to lack of profitability. As a result, China’s need for imported energy (difference between black line and top of energy production stack) has been growing rapidly. China is now the largest importer of oil, coal, and natural gas in the world. It is very vulnerable to tariffs and to lack of available supplies for import.

Figure 9. China energy production by fuel plus its total energy consumption, based on BP Statistical Review of World Energy 2018 data.

A second issue is that demographics are working against China; its working-age population already seems to be shrinking. A third reason why China is vulnerable to economic difficulties is because of its growing debt level. Debt becomes difficult to repay with interest if the economy slows.

5. Oil exporters such as Venezuela, Saudi Arabia, and Nigeria have become vulnerable to government overthrow or collapse because of low world oil prices since 2014. If the central government of one or more of these exporters disappears, it is possible that the pieces of the country will struggle along, producing a lower amount of oil, as Libya has done in recent years. It is also possible that another larger country will attempt to take over the failing production of the country and secure the output for itself.

6. Epidemics become increasingly likely, especially in countries with serious financial problems, such as Yemen, Syria, and Venezuela. Historically, much of the decrease in population in countries with collapsing economies has come from epidemics. Of course, epidemics can spread across national boundaries, exporting the problems elsewhere.

7. Resource wars become increasingly likely. These can be local wars, perhaps over the availability of water. They can also be large, international wars. The timing of World War I and World War II make it seem likely that these wars were both resource wars.

Figure 10.

8. Collapsing intergovernmental agencies, such as the European Union, the World Trade Organization, and the International Monetary Fund, seem likely. The United Kingdom’s planned exit from the European Union in 2019 is a step toward dissolving the European Union.

9. Privately funded pension funds will increasingly be subject to default because of continued low interest rates. Some governments may choose to cut back the amounts they provide to pensioners because governments cannot collect adequate tax revenue for this purpose. Some countries may purposely shut down parts of their governments, in an attempt to hold down government spending.

10. A far worse and more permanent recession than that of the Great Recession seems likely because of the difficulty in repaying debt with interest in a shrinking economy. It is not clear when such a recession will start. It could start later in 2019, or perhaps it may wait until 2020. As with the Great Recession, some countries will be affected more than others. Eventually, because of the interconnected nature of financial systems, all countries are likely to be drawn in.

Summary

It is not entirely clear exactly what is ahead if we are reaching Limits to Growth. Perhaps that is for the best. If we cannot do anything about it, worrying about the many details of what is ahead is not the best for anyone’s mental health. While it is possible that this is an end point for the human race, this is not certain, by any means. There have been many amazing coincidences over the past 4 billion years that have allowed life to continue to evolve on this planet. More of these coincidences may be ahead. We also know that humans lived through past ice ages. They likely can live through other kinds of adversity, including worldwide economic collapse.





The shape of things to come…..?

30 11 2018

Consciousness of Sheep keeps coming up with magnificent articles, like this one…..  

I know I keep saying this too, but the Matrix can’t continue lurching about for too much longer….

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Despite a series of stock market scares, see-sawing oil prices and central banks jacking up interest rates, it seems likely that we are going to get through 2018 without experiencing the economic crash that many expected at the start of the year.  But while we may breathe a sigh of relief to have got to the festive season without a complete meltdown, the odds of another crash are still high.

Understanding what might go wrong is a particular problem according to Helen Thompson at the New Statesman.  Not least because 10 years on, we still cannot agree on what caused the last one:

“In July 2008 the then president of the European Central Bank (ECB), Jean-Claude Trichet, declared while announcing an increase in interest rates that the Eurozone’s fundamentals were sound. In fact, a recession had begun in the first quarter of that year.

“The causes of recessions are also sometimes wrongly diagnosed – even in retrospect. For instance, the impact of exceptionally high oil prices and the response of central banks to those prices are still routinely ignored as causes of the US and European recessions in the aftermath of the 2008 crash.”

Thompson’s article sets out a range of weaknesses across the global economy where a new economic meltdown could begin.  China, the (albeit anaemic) growth engine of the global economy for the last decade, has developed debt problems not dissimilar to those in the west in 2008:

“Economic growth in China has been slowing since the second half of 2017, and even the growth of the first half of that year was an interruption of a downward slope that began in 2013. Predictions of a Chinese financial crisis, owing to the country’s huge accumulation of debt since 2008, are made too readily. But China is now caught between a policy shift towards deleveraging to try to avoid such a debt-induced financial crisis, and another debt-financed push for higher growth amid an economic slowdown and a fierce trade war with the US. The Chinese government is struggling under these conflicting imperatives as the country’s dollar reserves fall.”

The Eurozone is also in trouble:

“Growth in the third quarter was the weakest since the second quarter of 2014. Germany’s economy contracted and Italy’s experienced no growth. If the Eurozone’s troubles were confined to Italy, there would be less cause for concern. But even Germany’s powerhouse economy is weakening: retail sales and exports have fallen for several successive months.”

Canada – like the UK – is a basket case just waiting the central bank to add that last interest rate hike to push it over the edge.  Things are more complicated across the border in the USA:

“The official US unemployment rate stands at 3.7 per cent, the lowest since 1969. But this masks a notably low participation rate (62.9 per cent), as significant numbers of people have withdrawn from the labour market. Ever-fewer jobs sustain middle-class lifestyles, especially in cities where housing costs have risen over the past decade.”

Of course, a “black swan” event beyond the areas that Thompson points to might also prove to be the trigger for the next meltdown.  A collapse in the Australian property market, renewed conflict in one of the successor states of the Soviet Union or an oil shock in the Middle East are not beyond the bounds of possibility in 2019.

What is clear, however, is that we are in uncharted territory when it comes to understanding and having any chance of fixing the next meltdown.  As Thompson points out:

“Central banks cannot fix what they set in motion after 2008. There appears to be no way forward that would let this economic cycle play out without risking much more disruption than the typical recession would bring. What is at stake is compounded by the problem of oil: shale production must be sustained by one or more of the following: high prices, extremely cheap credit or investors’ indifference to profitability.

“When a recession does come, central banks are unlikely to be able to respond without wading even further into uncharted monetary and political waters. And major economies will have significantly higher levels of debt than in 2008, interest rates will already be low and central banks will have enormous balance sheets. As a consequence, a policy response comparable to that of 2008 is likely to be more dangerous and insufficient to restore sustained growth. In times of fear, high debt ensures that, beyond a certain point, consumers simply cannot be incentivised to spend more. Even if they were to be tempted with ‘helicopter money’ from central banks – new money distributed freely to citizens – there is no guarantee at all that the money would do much for aggregate demand.”

Unusually for a mainstream academic Thompson – who is a professor of political economy at Cambridge University – grasps the impact of energy on the economy; particularly the hard choices that face politicians and central bankers as we transition from energy growth to energy decline:

“It has become impossible to confront the economic predicaments in the global economy without contemplating sacrifice, whether that be politicians and central bankers choosing where the heavy costs of the next policy response will fall, or recognising the role that energy sustainability has in maintaining material living standards and a liberal international politics…”

Tighter energy, coupled to the central bank policies that have kept business as usual limping along since the last meltdown, has given rise to a populist revolt that has thus far focused on the democratic pathways in liberal democracies, but has also favoured an emboldened nationalist right that has successfully targeted immigration as the cause of people’s woes.  Worse still, via social media, contrarian economists like Steve Keen, campaign groups like Positive Money and even central bank economists themselves, far more people understand that zero percent interest rates and quantitative easing were designed to favour the already wealthy at the expense of the majority of the population.  It would be lunacy for politicians and central bankers to attempt to do the same thing again this time around:

“The 2007-09 recessions exposed the political discontent that had grown in Western democracies over the previous decade. The next recession will begin with that discontent already bringing about substantial political disruption – from Brexit to Trump’s election to the Lega-Five Star coalition in Italy – which in itself has become a source of economic fear. The economic dangers that lurk are only likely to increase political fragmentation, especially when there is little understanding of the structural economic forces that serve to divide people.”

Unfortunately, the political left are like so many rabbits caught in the headlights in relation to the crisis that is coming.  Rather than the right wing economic and social policies of Trump or the European nationalist parties, the left is most opposed to the populism that these movements harness.  The opposite of populism, of course, is elitism… and that puts the political left on the same platform that Marie Antoinette found herself on in October 1793.

There is no written law that says that the political left or even benign liberals have to win in the end – that storyline only works in Hollywood movies.  In the crisis that we are about to face – whether it be 2019 or 2020 – responding with more policies that favour the wealthy while driving the faces of the poor into the dirt can only end one way, as Thompson reminds us:

“History is full of grisly episodes, usually in eras of revolution, when the politics of sacrifice have come to the fore. Indeed, in many ways, the whole ideal of Western liberal democracies in the postwar world has been about the importance of avoiding such a politics, even as the policies governments pursued unavoidably created winners and losers.

“But the conditions for politics have now become much harder, and the collective and individual question of our times has become how we can confront the inescapable political conflict generated by deep economic dysfunctionality without losing the democratic and liberal foundations of political order as we know it?”

The answer to this question might be the same as the answer to the two other existential crises facing us – How can we prevent runaway climate change without undermining our civilisation? And how can we prevent resource depletion and energy decline undermining it?  The answer is very likely to be that we can’t.





CLIMATE CHANGE: HOW TO STOP THE TITANIC

30 11 2018

dr_susan_krumdieckAn interesting narrative by Susan Krumdieck…….

Let’s explore a thought puzzle: Can you change the future?

You are transported onto the deck of the RMS Titanic, the largest ship ever built and designed to be unsinkable. It is midnight 13 April 1912. There are 2,224 people on the ship, which is under full steam on the fastest ever crossing of the Atlantic. You know what will happen, what will you do?

 

 

“You know that at 11:39pm on 14 April the lookout will spot an iceberg, and by 2:20am the ship and 1,517 people will be gone. Can you change the future?”

You know that at 11:39pm on 14 April the lookout will spot an iceberg, and by 2:20am the ship and 1,517 people will be gone. The ship was launched with lifeboats for less than half the number of people on board. You could take a self-sufficiency strategy and make sure you are near a lifeboat, but you know they will be allocated according to class and you might not get a spot.

Clearly, the best solution is to slow down, change course and not hit the iceberg. You know that the wireless operator will receive numerous warnings from other ships about large icebergs in the direct path. You could seek out the operator and help him communicate the danger to the captain. But the captain has hit icebergs with other ships, and the Titanic is unsinkable, so he may not think caution is warranted. Neither will the captain and senior officers want to contradict the owners. You could try to convince the first-class passengers to ask the captain to slow down. But they are not convinced of danger in such a comfortable and luxurious ship, and they don’t want to hear about problems when they have parties to attend. You could go below decks and organize the lower-class passengers to occupy the bridge and demand action to slow the ship and change the course. But the passengers don’t want to worry, they believe in the technology of the ship and that if there was a problem, the captain or the owners would do something.

You are running out of time. How can you slow down the ship, enabling the captain to avoid the iceberg? You could go to the engine room and explain to the men shovelling coal into the boilers that they need to reduce the use of coal by 80%, providing the chance to change course in time and safeguard the journey. They would probably be afraid for their jobs. Could you convince them to change the future?

Transition engineering, an approach to wicked problems

Transition engineering is the work of innovating and delivering the redevelopment of energy-consuming systems, which we must do to accomplish the 80% step down in greenhouse gas production required to avoid runaway climate change. Ingenuity, resourcefulness and creativity are the best resources for achieving change.  However, innovative thinking is stifled if we focus on catastrophic failure.

For example, modern buildings, cities, and the entire economy would fail if coal, oil and gas supplies suddenly dropped by 80%. A rapid reduction in energy supply would be a disaster — but rapid reduction in energy use is the only way to mitigate climate risk. The risks of unsustainable fossil energy use are exacerbated without immediate change, but imminent collapse due to energy shortage is unlikely. This dissonance between the problem and the possible actions can be referred to as a “wicked problem”.

Transition engineering is an approach to wicked problems. The approach starts with defining a specific system, learning the history and knowing the future. Energy use and emissions have grown beyond sustainable levels because the utility, energy return on energy invested, and net surplus to the economy from coal, oil and gas are colossal. Engineering and technology provided access to these benefits at bargain prices. We now refer to this unsustainable activity as business-as-usual (BAU), and it is difficult to imagine changing course or slowing down. Society and its leaders expect that technology will provide new sources of green energy, and keep the economy growing with minimal inconvenience. The transition approach includes honest assessment of green technologies and whether they actually can change or slow the BAU course.

The economics of short-term perceived risk

The innovation phase of the approach is an interdisciplinary discovery of the future, 100 years from now, where the wicked problem has been resolved and the energy system is managed sustainably. For example, when we explored Christchurch 100 years from now, we discovered a city with redevelopment of much of the paved land into productive uses, several electric trams and all buildings incorporating passive design and very low energy use. There was some reorganization of the land use, and the dominant travel mode was bicycles and electrified cargo cycles.

The back-casting phase uses this 100-year discovery model to interrogate the present and identify the key players in changing course. In all instances, the technology used in the 100-year discovery is known today, but projects to bring about the necessary change are few. The problem is the economics of short-term perceived risk. For example, the design tools and materials for near-zero passive buildings are already known, but the business of low-energy redevelopment is not growing fast enough.

Creating projects that shift energy use by 80%

The next phase is to develop shift projects and new business opportunities that improve energy performance through holistic measures. These shift projects must be beneficial and profitable. For example, From the Ground Up is a new social enterprise in Christchurch that forms partnerships between electric tram manufacturer Alstom, the city council, retailers along a main avenue, student volunteers, the local community and property developers. The aim is to redevelop an area of old, substandard low-density suburb near the university into higher density, transit-oriented development along a tram corridor into the central business district. The enterprise has developed the base data and business case for the redevelopments.

Another example is the redevelopment of old buildings in old areas of cities. Many are in locations that could become vibrant, walkable and transit-oriented urban eco-villages, but the projects must be done one at a time in each city. The shift project will develop a new renovation business that invests in old buildings in the right locations, becoming the owner of the improvements, taking over the energy, utility and waste contracts and charging clients rents. The return on the investments is in both capital gains and in improved rents and lower energy costs. The shift project includes an insurance product that de-risks investment in redevelopment by guaranteeing a minimum energy savings return for fully modelled and reviewed renovation designs.

The transition engineering approach is about creating projects that shift energy use to 80% less fossil fuel while realizing social benefits and making profits. The Global Association for Transition Engineering can provide consultation and training for companies, councils and organizations to take on their wicked problems and change course.

Susan Krumdieck is professor of mechanical engineering at the University of Canterbury, New Zealand, and founder of the Global Association for Transition Engineering





Jean Marc Jancovici on Radio Eco Shock

14 11 2018

I’ve just listened to his podcast, and it’s a must listen item……  you will not be disappointed!

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jean-marc-jancoviciDid you know energy is free, and Peak Oil is not dead? That comes from a French expert in technology, energy, and climate, Jean-Marc Jancovici. Jean-Marc co-founded Carbone 4 consultancy, and The Shift Project. He advises, writes books, and lectures mostly in French, but his ideas resonate with American writers like Richard Heinberg.

We have a special treat for you this week: the world premiere of an English language in-depth radio interview with Jean-Marc JancoviciJean-Marc is well known in Europe and beyond. He is a Professor, an author of several books, the latest being “Sleep quiet until 2100, and other misunderstandings about climate and energy” (French only, translation pending?). Jancovici is also a member of ASPO France, the Association for the Study of Peak Oil.

Listen to or download this Radio Ecoshock show in CD Quality (57 MB) or Lo-Fi (14 MB)

In a Foreword to the book by Bernard Durand, Jean-Marc writes

The only question, so to say, is when the peak occurs (and should we trigger it for environmental reasons, or wait for it to happen for other reasons?), at what level, and with what consequences. The oil production of the North Sea peaked in 2000, and the world production of conventional oil (everything except tar sands and shale oil) peaked in 2006, so this is no virtual process!





Italy and energy: a case study

22 10 2018

Since discovering Jean Marc Jancovici a couple of months ago, I have been following his work, which is mostly in French; but now and again he publishes something in English, so you guys can benefit from reading this while I prepare to drive my wife’s Suzuki Alto with a full load to Tasmania……  yes I am going to get my life back and get to enjoy sharing the fruits of my labour after a three year wait…..

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Italy is in trouble. Or more precisely, the country has been “abandonned by growth”. It is one of the few OECD countries that is unable to recover from the “2008 crisis”: its GDP is still lagging below 2007 levels. Would it be the simple result of the unability of the successive governments to make the “appropriate reforms”? It might well be that the explanation lies in something much more different, but much more unpleasant: physics.

First, statistics are unequivocal on the fact that growth has vanished, so far.

Year on year change of the GDP in Italy (or “annual growth rate”) since 1961 (blue curve), average per decade (red curve), and trend on the growth rate (green dotted line). It is easy to see that each decade has been less “successful” than the previous one since the beginning of this series, and that the decade that started in 2010 has an average growth rate which is… negative. Italy has therefore been in recession, “on average”, for the last 7 years.

Primary data from World Bank.

As the two are generally linked in Western countries, the debt on GDP ratio has risen to heights, botbh for public and private debt.

Debt on GDP ratio in Italy since 1995. Primary data from Eurostat.

Households debt on GDP ratio since 1960. Data from Bank for International Settlements.

Credit to the non financial sector on GDP ratio (corporates and households) for Italy. Data from Bank for International Settlements.

All this would not be so annoying – well, from an economic point of view – if growth were to resume, because then the money to repay all this extra debt would be available. But why doesn’t growth come back? Some say that this is due to the lack of reforms. This is due to the lack of reforms, but not the same (reforms), say others.

But what if the true reason is… the lack of energy? In Italy, as elsewhere, the machines that surround us everywhere (rolling mills, chemical plants, trains, fridges, elevators, trucks, cars, planes, stamping presses, drawers, extruders, tractors, pumps, cranes…) have 500 to 1000 times the power of the muscles of the population.

It’s these machines that produce, not men. Today, homes, cars, shirts, vacuum cleaners, fridges, chairs, glasses, cups, scissors, shampoo, books, frozen dishes, and all the other tens of thousands of products that you benefit from are produced by machines. If these machines lack energy, they operate less, production decreases, and so does the monetary counterpart of this production, that is the GDP. And it is probably what happened in our southern neighbor.

First of all, energy is definitely less abundant in Italy today than it was 10 years ago.

Primary energy used in Italy (sometimes called “primary energy consumption”; “primary” refers to the fact that it is the energy extracted from the environment in its raw form – raw coal, crude oil, crude gas, etc, not processed fuels or electricity that come out of the energy industries: refined fuels, electricity, processed gas, etc) since 1965. There was a maximum in 2005, i.e. 3 years before the fall of Lehman Brothers. It is impossible to attribute the decline in consumption to a crisis caused by the bankers’ negligence!

It is interesting to note that maximum of the energy consumption in Italy corresponds to the maximum gas production of Algeria (2005), Italy’s second largest gas supplier after Russia.

Oil and gas production in Algeria since 1965 (oil) and 1970 (gas). Oil production peaked in 2008, and gas production in 2003 so far (monthly data from the Energy Information Agency suggest that the gas production in Algeria is anew on the decline). Primary data from BP Statistical Review.

Italy is a major consumer of gas, because its electricity production relies on it for half of the domestic generation. This maximum (of energy consumption in Italy) also corresponds to the beginning of the stabilization of world oil production that took place between 2005 and 2010, which also led to a decrease in Italy’s import capacity in this precious liquid.

Monthly production of liquids (crude oil and condensates) worldwide. Data from the Energy Information Agency. We can clearly see the “plateau” that runs from 2005 to 2010, before the rise of the American shale oil, which has rekindled global growth and allowed the subsequent economic “rebound”.

Combined together, oil and gas accounted for 85% of Italian energy in 2005 (and accounted for 65% of its electricity production): less oil available on the world market (because a constant production must be shared with a growing importation from the emerging countries), and less gas available in Europe and Algeria led to a decline in supply beforethe beginning of the financial crisis.

In fact, when looking at trends over long periods, we can see that, in Italy as in all industrialized countries, i. e. with machines that produce instead of men, GDP is driven by available energy.

Rate of change (3 year running average) of the energy consumption in Italy (green curve) and rate of change (also 3 year running average) of the Italian GDP. It is noteworthy that the trend is the same for both. Where’s the hen, where’s the egg? For what follows, we just need one valid rule: less energy means less running machines and thus less GDP. And we see that when the energy growth slower, so does the GDP, one to two years later, which supports the idea that when it is energy that is constrained, GDP is forced to be constrained as well.

Data from BP Statistical Review for energy and World Bank for GDP

This “precedence” of energy over GDP will show up in another presentation of the same data.

Energy used in Italy (horizontal axis) vs. Italian GDP (in constant billions dollars) for the period 1965 to 2017. The curve start in 1965, at the bottom left, and then follows the chronological order upwards to the right

We note that the curve makes a series of “turns to the left” in 1974, 1979, and especially from 2005 onwards. The “turn on the left” means that it is first the energy that decreases, and then the GDP, excluding in fact a sequence that would explain the decrease in the energy consumed by the crisis alone (then the curve should “turn right”).

One can also notice that after the decline in GDP from 2006 to 2014, the line goes back to “normal”, that is going from “bottom left” to “top right”, which reflects a GDP that grows again because of an energy supply that does the same.

Author’s calculation based on BP Statistical Review & World Bank data

And then?

Well, for the moment energy supply is going downwards, but will it continue to do so in the future? For the first 3 components of the energy supply in Italy, things look pretty settled. For coal, all is imported. This fuel is a nightmare regarding logistics: a 1 GW power plant requires between 4000 and 10000 tonnes of coal per day, and this explains why when a country is not a coal producer its coal imports are never massive. Add on top that coal is clearly the first “climate ennemy” to shoot: calling massively on imported coal to compensate for the decline of the rest seems very unprobable.

Consumption (dotted lines) and production (solid line, actually zero all the time!) of coal in Italy. Data from BP Statistical Review.

Then comes oil. Italy imports almost all it uses, and when world production stopped growing in 2005, Italian consumption fell in a forced way – as in all OECD countries – because the emerging countries took an increasing share.

Consumption (dotted lines) and production (solid line) of oil in Italy. Data from BP Statistical Review.

Eventually comes gas. Here too, Italy had to reduce its consumption in a compulsory way after 2005, when Algerian production – which provides about a third of Italian consumption – peaked.

Consumption (dotted lines) and production (solid line) of gas in Italy. Data from BP Statistical Review.

Italy gave up nuclear power after Chernobyl, and so no “relief” can come from this technology. Hydroelectricity has been at its peak for decades, with all or most of the equippable sites having been equipped. In addition, the drying up of the Mediterranean basin due to climate change should also reduce rather than increase this production.

Hydroelectric production in Italy since 1965, in TWh (billion kWh) electricity. Data from BP Statistical Review.

Then remain the “new renewable”, mostly solar, biomass and wind energy, that now represent about the equivalent of hydropower. But solar and wind require a lot of capital to be deployed, and thus the irony is that if the economy “suffers” because of a decline in the supply of fossil fuels, there is fewer money to invest in this supply! Biomass requires a lot of land to become significant because of the biomass that has to be grown.

Non-fossil electricity production in Italy since 1965. We see that the “new renewable” (biomass, wind, solar) do a little more than hydroelectricity, i.e. 20% of the total production (of electricity only, of course). Data from BP Statistical Review.

As these means cannot quickly supply large extra quantities of electricity, and will quickly be limited by storage issues, the energy used in Italy remains massively fossil, and will do so in the short term.

Share of each energy in Italian consumption. Data from BP Statistical Review.

It is therefore likely that Italy will remain massively dependent on fossils fuels in the next 10 to 20 years, and since the supply of these fuels is likely to continue to decrease on average, which means that Italy will have to manage its destiny without a return to growth, or even with a structural recession.

It is to this conclusion that a “physical” reading of the economy leads. And what is happening to our neighbours to the south is, most probably, the “normal” way in which an industrialized country reacts to the beginning of an unexpected energy contraction (and then populists follow, because of promises that coldn’t be fulfiled). As other European countries do not anticipate any better their upcoming energy contraction (that will happen anyway because oil, gas and coal are not renewable), let us look carefully at what is happening in this country. Something similar is likely to happen in France (and in Europe, and in the OECD) too if we do not seriously address the issue of fossil fuels, or more precisely if we do not seriously begin to organise society with less and less fossil fuels, including if it means less and less GDP.