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.

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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.





The third curve…. concept vs reality

17 10 2018

Money vs Oil Real Combined - SmallerThanks to good old facebook, I have discovered another webside I want to share with my now nearly 800 followers…. Mansoor Khan is writing a book called The Third Curve, and is publishing it chapter by chapter on his website. I am currently distracted by a wedding and a funeral in Queensland, and haven’t yet delved too far into this book, but I was originally attracted to it by that telling graph at left, because it clearly describes the disconnect between concept and reality….

Khan studied engineering at IIT, Cornell University and MANSOOR_KHAN_4MIT but then went on to make four feature films including Qayamat Se Qayamat Tak and Jo Jeeta Wohi Sikander. In 2003, he moved to Coonoor, to realize his first passion of living on an organic farm. His first book, ‘The Third Curve – The End of Growth as we know it’ explains the limits of growth in economy and industry from an Energetics perspective.

Gail Tverberg, and others, have been saying for some time now, that the disconnect occurred during the 1970’s and 1980’s oil shocks, when the amount of net energy available from conventional oil (there was nothing else that far back) started going down. It was also the time when Thatcher and Reagan had to choose between managing limits to growth, or deregulating everything and, as Thatcher put it, move from a society to an economy. Of course the former never had a chance in hell of being applied, so now we are stuck with this neoliberalism cancer that will destroy civilisation…….

Debt has clearly replaced net energy to keep growth going until it can’t – like round about right now – and surely collapse can no longer be very far away……. Mnsoor Khan calls it deficit in real growth.

Phase 2 Deficit - Money and Oil - Smaller

Khan writes…….:

To most, the Modern Industrial World is the epitome of man’s ingenuity: a glorious manifestation of human intelligence and enterprise.
In my opinion, this is completely untrue.

The fact is that all the seemingly fabulous constructs and conveniences of the Modern Industrial World were only possible because of abundant and cheap fossil fuels. Human ingenuity was a co-factor and not the prime reason for it. As simple as that!

With a wild Concept like “Time-Value of Money” floating on the edge of our consciousness, we were simply looking for the perfect ally from Reality to make Exponential Growth possible.

And we found that ally. It was Oil – nothing but over 150 million years of ancient sunlight trapped in the bosom of the Earth.

A once-in-an-eternity bounty. Plentiful, cheap, energy-dense, portable, easily convertible to heat, motion, and electricity… A primeval elixir so varied in possibilities, having the unique innate ability to morph into a dazzling array of useful materials that it, but naturally, shaped the most powerful culture ever to dominate this Earth: modern industrial civilization.

No wonder oil has been referred to as the “blood of the devil”, a double-edged warning!

With the discovery of oil, the Concept and the Reality fused effortlessly and we took the easiest path. Whatever oil offered us, we seized: cars, airplanes, plastics, lubricants, complex electronics, computers, space travel, internet, gigabyte memory chips, mobile networks, artificial limbs, mega cities, automated garbage collection, robot-controlled assembly lines, global food networks, moving mountains or damming rivers, clearing forests or strip mining! Anything seemed possible! Nothing else could have achieved it on this scale of size, speed and complexity. Yes, oil allowed us to nurture the most audacious, wasteful, self-indulgent and even self-destructive ideas we could dream about, and turn them into reality.

This led the civilized world to believe that we did all this because of our superior intelligence as a species and as a culture. We patted ourselves on the back by terming it innate “human ingenuity”. We felt that, even if oil was removed or reduced, we could simply replace it with some other form of energy and continue on the same trajectory. This we also deemed to be our entitlement and inevitable destiny. Shoot the messenger but the message remains. This is a pipe-dream. Few ponder on why this is so.

It is because oil was not only an unbelievably cheap, plentiful, dense and portable source of energy to RUN our world, but also a divinely unique source of mind-boggling byproducts that BUILT our Modern Industrial World. Bitumen for our roads, plastics for everything, lubricants for all kinds of machinery, fertilizers and pesticides for our complex and vulnerable modern food production, chemical reagents for pharmaceuticals and endlessly more.

All these and more are intertwined in a complex web of interdependencies that are hard to unravel, let alone replace, to make the Modern Industrial World possible.
And reaching the peak of oil production means only an imminent decline of what is possible.

The world will not disappear because of Peak Oil but we will find ourselves in a considerably different world with a new set of economic rules, in fact, an inversion of the rules of Economics: Shrinkage instead of Growth. To appreciate fully what oil means, we first have to do a primer on energy.

The third curve is worth visiting just for the cartoons!

 

 





Why everything will collapse…..

23 09 2018

Very good video, although he displays his ignorance of meat farming and its ability to combat climate change when done properly. Largely immaterial I know, industrial agriculture will collapse as soon as the energy cliff arrives…….





Towards a new operating system……

28 08 2018

Scientists Warn the UN of Capitalism’s Imminent Demise

A climate change-fueled switch away from fossil fuels means the worldwide economy will fundamentally need to change.

Image: Shutterstock

ANOTHER brilliant piece of journalism from Nafeez Ahmed. Originally sighted on MOTHERBOARD….

nafeezCapitalism as we know it is over. So suggests a new report commissioned by a group of scientists appointed by the UN Secretary-General. The main reason? We’re transitioning rapidly to a radically different global economy, due to our increasingly unsustainable exploitation of the planet’s environmental resources.

Climate change and species extinctions are accelerating even as societies are experiencing rising inequalityunemploymentslow economic growthrising debt levels, and impotent governments. Contrary to the way policymakers usually think about these problems, the new report says that these are not really separate crises at all.

Rather, these crises are part of the same fundamental transition to a new era characterized by inefficient fossil fuel production and the escalating costs of climate change. Conventional capitalist economic thinking can no longer explain, predict, or solve the workings of the global economy in this new age, the paper says.

Energy shift

Those are the stark implications of a new scientific background paper prepared by a team of Finnish biophysicists. The team from the BIOS Research Unit in Finland were asked to provide research that would feed into the drafting of the UN Global Sustainable Development Report (GSDR), which will be released in 2019.

For the “first time in human history,” the paper says, capitalist economies are “shifting to energy sources that are less energy efficient.” This applies to all forms of energy. Producing usable energy (“exergy”) to keep powering “both basic and non-basic human activities” in industrial civilisation “will require more, not less, effort.”

“Economies have used up the capacity of planetary ecosystems to handle the waste generated by energy and material use”

The amount of energy we can extract, compared to the energy we are using to extract it, is decreasing “across the spectrum—unconventional oils, nuclear and renewables return less energy in generation than conventional oils, whose production has peaked—and societies need to abandon fossil fuels because of their impact on the climate,” the paper states.

The shift to renewables might help solve the climate challenge, but for the foreseeable future will not generate the same levels of energy as cheap, conventional oil.

In the meantime, our hunger for energy is driving what the paper refers to as “sink costs.” The greater our energy and material use, the more waste we generate, and so the greater the environmental costs. Though they can be ignored for a while, eventually those environmental costs translate directly into economic costs as it becomes more difficult to ignore their impacts on our societies.

And the biggest “sink cost,” of course, is climate change:

“Sink costs are also rising; economies have used up the capacity of planetary ecosystems to handle the waste generated by energy and material use. Climate change is the most pronounced sink cost,” the paper states.

The paper’s lead author, Dr. Paavo Järvensivu, is a “biophysical economist”—an emerging type of economist exploring the role of energy and materials in fuelling economic activity.

The BIOS paper suggests that much of the political and economic volatility we have seen in recent years has a root cause in ecological crisis. As the ecological and economic costs of industrial overconsumption continue to rise, the constant economic growth we have become accustomed to is now in jeopardy. That, in turn, has exerted massive strain on our politics.

But the underlying issues are still unacknowledged and unrecognised by most policymakers.

“We live in an era of turmoil and profound change in the energetic and material underpinnings of economies. The era of cheap energy is coming to an end,” the paper says.

Conventional economic models, the Finnish scientists note, “almost completely disregard the energetic and material dimensions of the economy.”

“More expensive energy doesn’t necessarily lead to economic collapse,” Järvensivu told me. “Of course, people won’t have the same consumption opportunities, there’s not enough cheap energy available for that, but they are not automatically led to unemployment and misery either.”

The scientists refer to the pioneering work of systems ecologist Professor Charles Hall of the State University of New York with economist Professor Kent Klitgaard from Wells College. Earlier this year, Hall and Klitgaard released an updated edition of their seminal book, Energy and the Wealth of Nations: An Introduction to BioPhysical Economics.

Hall and Klitgaard are highly critical of mainstream capitalist economic theory, which they say has become divorced from some of the most fundamental principles of science. They refer to the concept of ‘Energy Return on Investment’ (EROI) as a key indicator of the shift into a new age of difficult energy. EROI is a simple ratio that measures how much energy we use to extract more energy.

“For the last century, all we had to do was to pump more and more oil out of the ground,” say Hall and Klitgaard. Decades ago, fossil fuels had very high EROI values—a little bit of energy allowed us to extract large amounts of oil, gas and coal.

“We face a form of capitalism that has hardened its focus to short-term profit maximization with little or no apparent interest in social good.”

Earlier in August, billionaire investor Jeremy Grantham—who has a track record of consistently calling financial bubbles—released an update to his April 2013 analysis, ‘The Race of Our Lives.’

The new paper, ‘The Race of Our Lives Revisited,’ provides a bruising indictment of contemporary capitalism’s complicity in the ecological crisis. Grantham’s verdict is that “capitalism and mainstream economics simply cannot deal with these problems,” namely, the systematic depletion of planetary ecosystems and environmental resources:

“The replacement cost of the copper, phosphate, oil, and soil—and so on—that we use is not even considered. If it were, it’s likely that the last 10 or 20 years (for the developed world, anyway) has seen no true profit at all, no increase in income, but the reverse,” he wrote.

Many experts believe we’re moving past capitalism, but they disagree on what the ultimate outcome will be. In his book Postcapitalism: A Guide to Our Future, British economics journalist Paul Mason theorises that information technology is paving the way for the emancipation of labour by reducing the costs of knowledge production—and potentially other kinds of production that will be transformed by AI, blockchain, and so on—to zero. Thus, he says, will emerge a utopian ‘postcapitalist’ age of mass abundance, beyond the price system and rules of capitalism.

It sounds peachy, but Mason completely ignores the colossal, exponentially increasing physical infrastructure for the ‘internet-of-things.’ His digital uprising is projected to consume evermore vast quantities of energy (as much as one-fifth of global electricity by 2025), producing 14 percent of global carbon emissions by 2040.

Toward a new economic operating system

Most observers, then, have no idea of the biophysical realities pointed out in the background paper commissioned by the UN Secretary-General’s IGS—that the driving force of the transition to postcapitalism is the decline of what made ‘endless growth capitalism’ possible in the first place: abundant, cheap energy.

The UN’s Global Sustainable Development Report is being drafted by an independent group of scientists (IGS) appointed by the UN Secretary-General. The IGS is supported by a range of UN agencies including the UN Secretariat, the UN Educational, Scientific and Cultural Organization, the UN Environment Programme, the UN Development Programme, the UN Conference on Trade and Development and the World Bank.

The paper, co-authored by Dr Järvensivu with the rest of the BIOS team, was commissioned by the UN’s IGS specifically to feed into the chapter on ‘Transformation: the Economy.’ Invited background documents are used as the basis of the GSDR, but what ends up in the final report will not be known until the final report is released next year.

“No widely applicable economic models have been developed specifically for the upcoming era”

Overall, the paper claims that we have moved into a new, unpredictable and unprecedented space in which the conventional economic toolbox has no answers. As slow economic growth simmers along, central banks have resorted to negative interest rates and buying up huge quantities of public debt to keep our economies rolling. But what happens after these measures are exhausted? Governments and bankers are running out of options.

“It can be safely said that no widely applicable economic models have been developed specifically for the upcoming era,” write the Finnish scientists.

Having identified the gap, they lay out the opportunities for transition.

In this low EROI future, we simply have to accept the hard fact that we will not be able to sustain current levels of economic growth. “Meeting current or growing levels of energy need in the next few decades with low-carbon solutions will be extremely difficult, if not impossible,” the paper finds. The economic transition must involve efforts “to lower total energy use.”

Key areas to achieve this include transport, food, and construction. City planning needs to adapt to the promotion of walking and biking, a shift toward public transport, as well as the electrification of transport. Homes and workplaces will become more connected and localised. Meanwhile, international freight transport and aviation cannot continue to grow at current rates.

As with transport, the global food system will need to be overhauled. Climate change and oil-intensive agriculture have unearthed the dangers of countries becoming dependent on food imports from a few main production areas. A shift toward food self-sufficiency across both poorer and richer countries will be essential. And ultimately, dairy and meat should make way for largely plant-based diets.

The construction industry’s focus on energy-intensive manufacturing, dominated by concrete and steel, should be replaced by alternative materials. The BIOS paper recommends a return to the use of long-lasting wood buildings, which can help to store carbon, but other options such as biochar might be effective too.

But capitalist markets will not be capable of facilitating the required changes – governments will need to step up, and institutions will need to actively shape markets to fit the goals of human survival. Right now, the prospects for this look slim. But the new paper argues that either way, change is coming.

Whether or not the system that emerges still comprises a form of capitalism is ultimately a semantic question. It depends on how you define capitalism.

“Capitalism, in that situation, is not like ours now,” said Järvensivu. “Economic activity is driven by meaning—maintaining equal possibilities for the good life while lowering emissions dramatically—rather than profit, and the meaning is politically, collectively constructed. Well, I think this is the best conceivable case in terms of modern state and market institutions. It can’t happen without considerable reframing of economic-political thinking, however.”