The End of the Oilocene

19 02 2017

The Oilocene, if that term ever catches on, will have only lasted 150 years. Which must be the quickest blink in terms of geological eras…… This article was lifted from feasta.org but unfortunately I can’t give writing credits as I could not find the author’s name anywhere. The data showing we’ll be quickly out of viable oil is stacking up at an increasing rate.

Steven Kopits from Douglas-Westwood (whose work I published here three years ago almost to the day) said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programs. Nearly half of the industry needs more than $120,” he said”.

And if you don’t finish reading this admittedly long article, do not exit this blog without first taking THIS on board…….:

What people do not realise is that it takes oil to extract, refine, produce and deliver oil to the end user. The Hills Group calculates that in 2012, the average energy required by the oil production chain had risen so much that it was then equal to the energy contained in the oil delivered to the economy. In other words “In 2012 the oil industry production chain in total used 50% of all the energy contained in the oil delivered to the consumer”. This is trending rapidly to reach 100% early in the next decade.

So there you go…… as I posted earlier this year, do we have five years left…….?

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End of the “Oilocene”: The Demise of the Global Oil Industry and of the Global Economic System as we know it.

(A pdf version of this paper is here. Please refer to my presentation for supporting images and comments. )

In 1981 I was sitting on an eroded barren hillside in India, where less than 100 years previously there had been dense forest with tigers. It was now effectively a desert and I was watching villagers scavenging for twigs for fuelwood and pondering their future, thinking about rapidly increasing human population and equally rapid degradation of the global environment. I had recently devoured a copy of The Limits to Growth (LTG) published in 1972, and here it was playing out in front of me. Their Business as Usual (BAU) scenario showed that global economic growth would be over between 2010 -2020; and today 45 years later, that prediction is inexorably becoming true. Since 2008 any semblance of growth has been fuelled by astronomically greater quantities of debt; and all other indicators of overshoot are flashing red.

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One of the main factors limiting growth was regarded by the authors of LTG as energy; specifically oil. By mid 1970’s surprisingly, enough was known about accessible oil reserves that not a huge amount has since been added to what is known as reserves of conventional oil. Conventional oil is (or was) the high quality, high net energy, low water content, easy to get stuff. Its multi-decade increasing rate in production came to an end around 2005 (as predicted many years earlier by Campbell and Laherre in 1998). The rate of production peaked in 2011 and has since been in decline (IEA 2016).

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The International Energy Agency (IEA) is the pre-eminent global forecaster of oil production and demand. Recently it admitted that its oil production forecasts were based on economic projections rather than geology or cost; ie on the assumption that supply will always meet projected demand.
In its latest annual forecast however (New Policies Scenario 2016) the IEA has also admitted for the first time a future in which total global “all liquids” oil production could start to fall within the next few years.

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As Kjell Aklett of Upsala University Global Energy Research Group comments (06-12-16), “In figure 3.16 the IEA shows for the first time what will happen if its unrealistic wishful thinking does not become reality during the next 10 years. Peak Oil will occur even if oil from fracked tight sources, oil sands, and other (unconventional) sources are included”.

In fact – this IEA image clearly shows that the total global rate of production of “all hydrocarbon liquids” could start falling anytime from now on; and this should in itself raise a huge red flag for the Irish Government.

Furthermore, it raises a number of vital questions which are the core subject of this post.
Reserves of conventional “easy” oil have mostly been used up. How likely is it that remaining reserves will be produced at the rate projected? Rapidly diminishing reserves of conventional oil are now increasingly being supplemented by the difficult stuff that Kjell Aklett mentions; including conventional from deep water, polar and other inaccessible regions, very heavy bituminous and high sulphur oil; natural gas liquids and other xtl’s, plus other “unconventional oil” including tar sands and shale oil.

How much will it cost to produce all these various types? How much energy will be required, and crucially how much energy will be left over for use by the economy?

The global industrial economy runs on oil.

Oil is the vital and crucial link in virtually every production chain in the global industrial world economy partly because it supplies over 96% of global transport energy – with no significant non-oil dependent alternative in sight.

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Our industrial food production system uses over 10 calories of oil energy to plough, plant, fertilise, harvest, transport, refine, package, store/refrigerate, and deliver 1 calorie of food to the consumer; and imagine trying to build infrastructure; roads, schools, hospitals, industrial facilities, cities, railways, airports without oil, let alone maintain them.

Surprisingly perhaps, oil is also crucial to production of all other forms of energy including renewables. We cannot mine and distribute coal or even drill for gas and install pipelines and gas distribution networks without lots of oil; and you certainly cannot make a nuclear power station or build a hydroelectric dam without oil. But even solar panels, wind and biomass energy are also totally dependent on oil to extract and produce the raw materials; oil is directly or indirectly used in their manufacture (steel, glass, copper, fibreglass/GRP, concrete) and finally to distribute the product to the end user, and install and maintain it.

So it’s not surprising that excluding hydro and nuclear (which mostly require phenomenal amounts of oil to implement), renewables still only constitute about 3% of world energy (BP Energy Outlook 2016). This figure speaks entirely for itself. I am a renewable energy consultant and promoter, but I am also a realist; in practice the world runs on oil.

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The economy, Global GDP and oil are therefore mutually dependent and have enjoyed a tightly linked dance over the decades as shown in the following images. Note the connection between oil, total energy, oil price and GDP (clues for later).

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Click on image to enlarge

Rising cost of oil production

Since 2005 when the rate of production of conventional oil slowed and peaked, production costs have been rising more rapidly. By 2013, oil industry costs were approaching the level of the global oil price which was more than $100/barrel at that time; and industry insiders were saying that the oil industry was finding it difficult to break even.

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Click on image to enlarge

A good example of the time was the following article which is worth quoting in full in the light of the price of oil at the time (~$100/bbl), and the average 2016 sustained low oil price of ~$50/bbl.

Oil and gas company debt soars to danger levels to cover shortfall in cash By Ambrose Evans-Pritchard. Telegraph. 11 Aug 2014

“The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry. The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets.

The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions.

The EIA said the shortfall between cash earnings from operations and expenditure — mostly CAPEX and dividends — has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011”.

In another article (my highlights) he wrote

“The major companies are struggling to find viable reserves, forcing them to take on ever more leverage to explore in marginal basins, often gambling that much higher prices in the future will come to the rescue. Global output of conventional oil peaked in 2005 despite huge investment. The cumulative blitz on exploration and production over the past six years has been $5.4 trillion, yet little has come of it. Not a single large project has come on stream at a break-even cost below $80 a barrel for almost three years.

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said”.

The following images give a good idea of the trend and breakdown in costs of oil production. Getting it out of the ground is just for starters. The images show just how expensive it is becoming to produce – and how far from breakeven the current oil price is.

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Click on image to enlarge

It is important to note that the “breakeven cost” is much less than the oil price required to sustain the industry into the future (business as usual).

The following images show that the many different types of oil have (obviously) vastly different production costs. Note the relatively small proportion of conventional reserves (much of it already used), and the substantially higher production cost of all other types of oil. Note also the apt title and date of the Deutsche Bank analysis – production costs have risen substantially since then.

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The global oil industry is in deep trouble

You do not need to be an economist to see that the average 2016 price of oil ~ $50/bbl was substantially lower than just the breakeven price of all but a small proportion of global oil reserves. Even before the oil price collapse of 2014-5, the global oil industry was in deep trouble. Debts are rising quickly, and balance sheets are increasingly RED. Earlier this year 2016, Deloitte warned that 35% of oil majors were in danger of bankruptcy, with another 30% to follow in 2017.

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Click on image to enlarge

In addition to the oil majors, shrinking oil revenues in oil-producing countries are playing havoc with national economies. Virtually every oil producing country in the world requires a much higher oil price to balance its budget – some of them vastly so (eg Venezuela). Their economies have been designed around oil, which for many of them is their largest source of income. Even Saudi Arabia, the biggest global oil producer with the biggest conventional oil reserves is quickly using up its sovereign wealth fund.

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It appears that not a single significant oil-producing country is balancing its budget. Their debts and deficits grow bigger by the day. Everyone is praying for higher oil prices. Who are they kidding? The average BAU oil price going forward for business as usual for the whole global oil industry probably needs to be well over $100/bbl; and the world economy is on its knees even at the present low oil price. Why is this? The indicators all spell huge trouble ahead. Could there be another fundamental oil/energy/financial mechanism operating here?

The Root Cause

The cause is not surprising. All the various new types of oil and a good deal of the conventional stuff that remains require far more energy to produce.

In 2015, The Hills Group (US Oil Engineers) published “Depletion – A Determination of the Worlds Petroleum Reserve”. It is meticulously researched and re-worked with trends double checked against published data. It follows on from the Hills Group 2013 work that accurately predicted the approaching oil price collapse after 2014 (which no-one else did) and calculated that the average oil price of 2016 would be ~$50/bbl. They claim theirs is the most accurate oil price indicator ever produced, with >96% accuracy with published past data. The Hills Group work has somewhat clarified my understanding of the core issues and I will try to summarise two crucial points as follows.

Oil can only be useful as an energy source if the energy contained in the product (ie transport fuel) is greater than the energy required to extract, refine and deliver the fuel to the end user.

If you electrolyse water, the hydrogen gas produced (when mixed with air and ignited), will explode with a bang (be careful doing this at home!). The hydrogen contained in the world’s water is an enormous potential energy source and contains infinitely more energy (as hydrogen) than humans could ever need. The problem is that it takes far more energy to produce a given amount of hydrogen from water than is available by combusting it. Oil is rapidly going the same way. Only a small proportion of what remains of conventional oil resources can provide an energy surplus for use as a fuel. All the other types of oil require more energy to produce and deliver as fuel to the end user (taking into account the whole oil production chain), than is contained in the fuel itself.

What people do not realise is that it takes oil to extract, refine, produce and deliver oil to the end user. The Hills Group calculates that in 2012, the average energy required by the oil production chain had risen so much that it was then equal to the energy contained in the oil delivered to the economy. In other words “In 2012 the oil industry production chain in total used 50% of all the energy contained in the oil delivered to the consumer”. This is trending rapidly to reach 100% early in the next decade.

At this point – no matter how much oil is left (a lot) and in whatever form (many), oil will be of no use as an energy source for transport fuels, since it will on average require more energy to extract, refine and deliver to the end-user, than the oil itself contains.

Because oil reserves are of decreasing quality and oil is getting more difficult and expensive to produce and transform into transport fuels; the amount of energy required by the whole oil production chain (the global oil industry) is rapidly increasing; leaving less and less left over for the rest of the economy.

In this context and relative to the IEA graph shown earlier, there is a big difference between annual gross oil production, and the amount of energy left in the product available for work as fuel. Whilst total global oil (all liquids) production currently appears to be still growing slowly, the energy required by the global oil industry is growing faster, and the net energy available for work by the end user is decreasing rapidly. This is illustrated by the following figure (Louis Arnoux 2016).

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The price of oil cannot exceed the value of the economic activity generated from the amount of energy available to end-users per barrel.

The rapid decline in oil-energy available to the economy is one of the key reasons for the equally rapid rise in global debt.

The global industrial world economy depends on oil as its prime energy source. Increasing growth of the world economy during the oil age has been exactly matched by oil production and use, but as Louis’ image shows, over the last forty years the amount of net energy delivered by the oil industry to the economy has been decreasing.

As a result, the economic value of a barrel of oil is falling fast. “In 1975 one dollar could have bought, on average, 42,348 BTU; by 2010 a dollar would only have bought 6,946 BTU” (The Hills Group 2015).

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This has caused a parallel reduction in real economic activity. I say “real” because today the financial world accounts for about 40% of global GDP, and I would like to remind economists and bankers that you cannot eat 0000’s on a computer screen, or use them to put food on the table, heat your house, or make something useful. GDP as an indicator of the global economy is an illusion. If you deduct financial services and account for debt, the real world economy is contracting fast.

To compensate, and continue the fallacy of endless economic growth, we have simply borrowed and borrowed, and borrowed. Huge amounts of additional debt are now required to sustain the “Growth Illusion”.

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In 2012 the decreasing ability of oil to power the economy intersected with the increasing cost of oil production at a point The Hills Group refers to as the maximum affordable consumer price (just over $100/bbl) and they calculated that the price of oil must fall soon afterwards. In 2014 much to everyone’s surprise (IEA, EIA, World Bank, Wall St Oil futures etc) the price of oil fell to where it is now. This is clearly illustrated by The Hills Group’s petroleum price curve of 2013 which correctly calculated that the 2016 average price of oil would be ~$50/bbl (Depletion – The Fate of the Oil Age 2013).

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In their detailed 2015 study The Hills Group writes (Depletion – A determination of the world’s petroleum reserve 2015);

“To determine the affordability range it is first observed that the price of a unit of petroleum cannot exceed the value of the economic activity (generated by the net energy) it supplies to the end consumer. (Since 2012) more of the energy from petroleum was being committed to the production of petroleum than was delivered to the consumer. This precipitated the 2014 price decline that reduced prices by 50%. The energy delivered to the end consumer will continue to decline and the end consumer maximum affordability will decline with it.

Dr Louis Arnoux explains this as follows: “In 1900 the Global Industrial World received 61% of the gross energy in a barrel of oil. In 2016 this is down to 7%. The global industrial world is being forced to contract because it is being starved of net energy from oil” (Louis Arnoux 2016).

This is reflected in the slowing down of global economic growth and the huge increase in total global debt.

Without noticing it, in 2012 the world entered “Emergency Red Alert”

In the following image, Dr Arnoux has reworked Hills Group petroleum price curve showing the impending collapse of thermodynamically driven oil prices – and the end of the oil age as we know it. This analysis is more than amply reinforced by the dire financial straits of the global oil industry, and the parlous state of the global economy and financial system.

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Oil is a finite resource which is subject to the same physical laws as many other commodities. The debate about peak oil has been clouded by the fact that oil consists of many different kinds of hydrocarbons; each of which has its own extraction profile. But conventional oil is the only category of oil that can be extracted with a whole production chain energy surplus. Production of this commodity (conventional oil) has undoubtedly peaked and is now declining. The amount of energy (and cost) required by the global oil industry to produce and deliver much of the remainder of conventional reserves and the many alternative categories of oil to the consumer, is rapidly increasing; and we are equally rapidly heading toward the day when we have used up those reserves of oil which will deliver an energy surplus (taking into account the whole production chain from extraction to delivery of the end product as fuel to the consumer).

The Global Oil Industry is one of the most advanced and efficient in the world and further efficiency gains will be minor compared to the scale of the problem, which is essentially one of oil depletion thermodynamics.

Humans are very good at propping up the unsustainable and this often results in a fast and unexpected collapse (eg Joseph Tainter: The collapse of complex societies). An example of this is the Seneca Curve/Cliff which appears to me to be an often-repeated defining trait of humanity. Our oil/financial system is a perfect illustration.

Debt is being used to extend the unsustainable and it looks as though we are headed for the “Mother of all Seneca Curves” which I have illustrated below:

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Because oil is the primary energy resource upon which all other energy sources depend, it is almost certain that a contraction in oil production would be reflected in a parallel reduction in other energy systems; as illustrated rather dramatically in this image by Gail Tverberg (the timing is slightly premature – but probably not by much).

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Energy and Money

Fundamental to all energy and economic systems is money. Debt is being used to prop up a contracting oil energy system, and the scale of money created as debt over the last few decades to compensate is truly phenomenal; amounting to hundreds of trillions (excluding “extra-terrestrial” amounts of “financials”), rising exponentially faster. This amount of debt, can never ever be repaid. The on-going contraction of the oil/energy system will exacerbate this trend until the financial system collapses. There is nothing anyone can do about it no matter how much money is printed, NIRP, ZIRP you name it – all the indicators are flashing red. The panacea of indefinite money printing will soon hit the thermodynamic energy wall of reality.

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The effects we currently observe such as exponential growth in debt (US Debt alone almost doubled from $10 trillion to nearly $20 trillion during Obama’s tenure), and the financial problems of oil majors and oil producing countries, are clear indicators of the imminent contraction in existing global energy and financial systems.

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The coming failure of the global economic system will be a systemic failure. I say “systemic” because for the last 150 years up till now there has always been cheap and abundant oil to power recovery from previous busts. This era is over. Cheap and abundant oil will not be available for recovery from the next crunch, and the world will need to adopt a completely different economic and financial model.

The Economics “profession”

Economists would have us believe it’s just another turn of the credit cycle. This dismal non-science is in the main the lapdog of the establishment, the global financial and corporate interests. They have engineered the “science” to support the myth of perpetual growth to suit the needs of their pay-masters, the financial institutions, corporations and governments (who pay their salaries, fund the universities and research, etc). They have steadfastly ignored all ecological and resource issues and trends and warnings such as LTG, and portrayed themselves as the pre-eminent arbiters of human enterprise. By vehemently supporting the status quo, they of all groups, I hold primarily responsible for the appalling situation the planet faces; the destruction of the natural world, and many other threats to the global environment and its ability to sustain civilisation as we know it.

I have news for the “Economics Profession”. The perpetual growth fantasy financial system based on unlimited cheap energy is now coming to an end. From the planet’s point of view – it simply couldn’t be soon enough. This will mark the end of what I call the “Oilocene”. Human activities are having such an effect on the planet that the present age has been classified by geologists as a new geological era “The Anthropocene”. But although humans had already made a significant impact on natural systems, the Anthropocene has largely been defined by the relatively recent discovery and use of liquid fossil energy reserves amounting to millions of years of stored solar energy. Unlimited cheap oil has fuelled exponential growth in human systems to the point that many of these are now greater than natural planetary ones.
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This cannot be sustained without huge amounts of cheap net oil energy, so we are inescapably headed for “the great deceleration”. The situation is very like the fate of the Titanic which I have outlined in my presentation. Of the few who had the courage to face the economic wind of perpetual growth, I salute the authors of LTG and the memory of Richard Douthwaite (The Growth Illusion 1992), and all at FEASTA who are working hard to warn a deaf Ireland of what is to come and why – and have very sensibly been preparing for it! We will all need a lot of courage and resilience to face what is coming down the line.

Ireland has a very short time available to prepare for hard times.

There are many things we could do here to soften the impact if the problem was understood for what it is. FEASTA publications such as the Before The Wells Run Dry and Fleeing Vesuvius; and David Korowicz’s works such as The Tipping Point and of course, The Hills Group 2015 publicationDepletion – a determination of the worlds petroleum reserve , and very many other references, provide background material and should be required urgent reading for all policy makers.

The pre-eminent challenge is energy for transport and agriculture. We could switch to use of compressed natural gas (CNG) as the urgent default transport/motive fuel in the short term since petrol and diesel engines can be converted to dual-fuel use with CNG; supplemented rapidly by biogas (since we are lucky enough to have plenty of agricultural land and water compared to many countries).

We could urgently switch to an organic high labour input agriculture concentrating on local self-sufficiency eliminating chemical inputs such as fertilisers pesticides and herbicides (as Cuba did after the fall of the Soviet Union). We could outlaw the use of oil for heating and switch to biomass.

We could penalise high electricity use and aim to massively cut consumption so that electricity can be supplied by completely renewable means – preserving our natural gas for transport fuel and the rapid transition from oil. The Grid could be urgently reconfigured to enable 100% use of renewable electricity within a few years. We could concentrate on local production of food, goods and services to reduce transport needs.

These measures would create a lot of jobs and improve the balance of payments. They have already been proposed in one form or another by FEASTA over the last 15 years.

Ireland has made a start, but it is insignificant compared to the scale and timescale of the challenge ahead as illustrated by the next image (SEAI: Energy in Ireland – Key Statistics 2015). We urgently need to shrink the oil portion to a small fraction of current use.

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Current fossil energy use is very wasteful. By reducing waste and increasing efficiency we can use less. For instance, a large amount of the energy used as transport fuels and for electricity generation is lost to atmosphere as waste heat. New technological solutions include a global initiative to mount an affordable emergency response called nGeni that is solely based on well-known and proven technology components, integrated in a novel way, with a business and financial model enabling it to tap into over €5 trillion/year of funds currently wasted globally as waste heat. This has potential for Ireland, and will be outlined in a subsequent post.

To finance all the changes we need to implement, quickly (and hopefully before the full impact of the oil/financial catastrophe really kicks in), we could for instance create something like a massive multibillion “National Sustainability and Renewable Energy Bond”. Virtually all renewables provide a better (often substantially better) return on investment compared to bank savings, government bonds, etc; especially in the age of zero and negative interest rate policies ZIRP, NIRP etc.

We may need to think about managing this during a contraction in the economy and financial system which could occur at any time. We certainly could do with a new clever breed of “Ecological Economists” to plan for the end of the old system and its replacement by a sustainable new one. There is no shortage of ideas. The disappearance of trillions of fake money and the shrinking of national and local tax income which currently funds the existing system and its social programmes will be a huge challenge to social stability in Ireland and all over the world.

It’s now “Emergency Red Alert”. If we delay, we won’t have the energy or the money to implement even a portion of what is required. We need to drag our politicians and policy makers kicking and screaming to the table, to make them understand the dire nature of the predicament and challenge them to open their eyes to the increasingly obvious, and to take action. We can thank The Hills Group for elucidating so clearly the root causes of the problem, but the indicators of systemic collapse have for many years been frantically jumping up and down, waving at us and shouting LOOK AT ME! Meanwhile the majority of blinkered clueless economists that advise business and government and who plan our future, look the other way.

In 1972 “The Limits to Growth” warned of the consequences of growing reliance on the finite resource called “oil” and of the suicidal economics mantra of endless growth. The challenge Ireland will soon face is managing a fast economic and energy contraction and implementing sustainability on a massive scale whilst maintaining social cohesion. Whatever the outcome (managed or chaotic contraction), we will soon all have to live with a lot less energy and physical resources. That in itself might not necessarily be such a bad thing provided the burden is shared. “Modern citizens today use more energy and physical resources in a month than our great-grandparents used during their whole lifetime” (John Thackera; “From Oil Age to Soil Age”, Doors to Perception; Dec 2016). Were they less happy than us?

PDF of this article
Powerpoint presentation

Featured image: used motor oil. Source: http://www.freeimages.com/photo/stain-1507366





The implications of collapsing ERoEI

25 01 2017

Judging by the relatively low level of interest the past few articles published here regarding the collapse of fossil fuel ERoEI (along with PV’s) have attracted, I can only conclude that most people just don’t get it……. How can I possibly fix this……?

When I first started ‘campaigning’ on the issue of Peak Oil way back in 2000 or so, 2020 seemed like a veoileroeiry long way away. I still thought at the time that renewables would ‘save us’, or at the very least that energy efficiency would be taken up on a massive scale. None of those things happened.

Way back then, I gave many public powerpoint presentations, foolishly thinking that, presented with the facts, (NOT alternative facts like we have today…) people would wake up to themselves. I even foolishly believed that the Australian Greens would take this up as a major issue, because after all the ‘solutions’ to Peak Oil also happen to be the ‘solutions’ for Climate Change. Now you know why I have turned into such a cynic.

In that presentation, there was one important slide, shown above. It is indelible in my memory.

I’ve now come across a very similar chart, except this one has dates on it….. and 2020 no longer seems very far away at all….

COLLAPSING ERoEI IN ONE CHART

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I have selected three years; 2017, in red; 2020 in black; 2025 in green.

Each year has two lines. One for how much energy is being extracted, and the lower one of the same colour shows the net energy available from that extraction. The ‘missing’ energy, lost to crashing ERoEI, is the difference between the two lines of the same colour….  Already, in 2017, we probably only have the amount of energy that was available mid 1980.

By 2020 (which I happen to believe will be crunch time), net energy available is roughly equal to what we had in ~1975.

By 2025, we will be down to 1950 levels………

It doesn’t matter whether I’m out by 1, 2, 5, or even 10 years (which I very much doubt). The point is, the global economy will have shrunk dramatically by then. It simply cannot grow without energy, more and more of it every year in fact. Without growth, the entire money system will have collapsed, and it’s anyone’s guess how many banks will be left standing. Or governments for that matter, the electorate has recently proven itself to be very very fickle……

Why this isn’t mainstream news beggars belief….

Good luck.





2017: The Year When the World Economy Starts Coming Apart

20 01 2017

Conclusion

The situation is indeed very concerning. Many things could set off a crisis:

  • Rising energy prices of any kind (hurting energy importers), or energy prices that don’t rise (leading to financial problems or collapse of exporters)
  • Rising interest rates.
  • Defaulting debt, indirectly the result of slow/negative economic growth and rising interest rates.
  • International organizations with less and less influence, or that fall apart completely.
  • Fast changes in relativities of currencies, leading to defaults on derivatives.
  • Collapsing banks, as debt defaults rise.
  • Falling asset prices (homes, farms, commercial buildings, stocks and bonds) as interest rates rise, leading to many debt defaults.

FOLLOWING ON from my last post exposing HSBC’s forecast of a peak oil caused economic collapse, along comes this piece from Gail Tverberg predicting it may all start this year…….

Most of this article is a rehash of things she’s said before all consolidated in one lengthy essay, and some of them were published here before. It’s becoming increasingly difficult to not recognise all our ducks are lining up on the wall…….

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Some people would argue that 2016 was the year that the world economy started to come apart, with the passage of Brexit and the election of Donald Trump. Whether or not the “coming apart” process started in 2016, in my opinion we are going to see many more steps in this direction in 2017. Let me explain a few of the things I see.

[1] Many economies have collapsed in the past. The world economy is very close to the turning point where collapse starts in earnest.  

Figure 1

The history of previous civilizations rising and eventually collapsing is well documented.(See, for example, Secular Cycles.)

To start a new cycle, a group of people would find a new way of doing things that allowed more food and energy production (for instance, they might add irrigation, or cut down trees for more land for agriculture). For a while, the economy would expand, but eventually a mismatch would arise between resources and population. Either resources would fall too low (perhaps because of erosion or salt deposits in the soil), or population would rise too high relative to resources, or both.

Even as resources per capita began falling, economies would continue to have overhead expenses, such as the need to pay high-level officials and to fund armies. These overhead costs could not easily be reduced, and might, in fact, grow as the government attempted to work around problems. Collapse occurred because, as resources per capita fell (for example, farms shrank in size), theearnings of workers tended to fall. At the same time, the need for taxes to cover what I am calling overhead expenses tended to grow. Tax rates became too high for workers to earn an adequate living, net of taxes. In some cases, workers succumbed to epidemics because of poor diets. Or governments would collapse, from lack of adequate tax revenue to support them.

Our current economy seems to be following a similar pattern. We first used fossil fuels to allow the population to expand, starting about 1800. Things went fairly well until the 1970s, when oil prices started to spike. Several workarounds (globalization, lower interest rates, and more use of debt) allowed the economy to continue to grow. The period since 1970 might be considered a period of “stagflation.” Now the world economy is growing especially slowly. At the same time, we find ourselves with “overhead” that continues to grow (for example, payments to retirees, and repayment of debt with interest). The pattern of past civilizations suggests that our civilization could also collapse.

Historically, economies have taken many years to collapse; I show a range of 20 to 50 years in Figure 1. We really don’t know if collapse would take that long now. Today, we are dependent on an international financial system, an international trade system, electricity, and the availability of oil to make our vehicles operate. It would seem as if this time collapse could come much more quickly.

With the world economy this close to collapse, some individual countries are even closer to collapse. This is why we can expect to see sharp downturns in the fortunes of some countries. If contagion is not too much of a problem, other countries may continue to do fairly well, even as individual small countries fail.

[2] Figures to be released in 2017 and future years are likely to show that the peak in world coal consumption occurred in 2014. This is important, because it means that countries that depend heavily on coal, such as China and India, can expect to see much slower economic growth, and more financial difficulties.

While reports of international coal production for 2016 are not yet available, news articles and individual country data strongly suggest that world coal production is past its peak. The IEA also reports a substantial drop in coal production for 2016.

Figure 2. World coal consumption. Information through 2015 based on BP 2016 Statistical Review of World Energy data. Estimates for China, US, and India are based on partial year data and news reports. 2016 amount for "other" estimated based on recent trends.

The reason why coal production is dropping is because of low prices, low profitability for producers, and gluts indicating oversupply. Also, comparisons of coal prices with natural gas prices are inducing switching from coal to natural gas. The problem, as we will see later, is that natural gas prices are also artificially low, compared to the cost of production, So the switch is being made to a different type of fossil fuel, also with an unsustainably low price.

Prices for coal in China have recently risen again, thanks to the closing of a large number of unprofitable coal mines, and a mandatory reduction in hours for other coal mines. Even though prices have risen, production may not rise to match the new prices. One article reports:

. . . coal companies are reportedly reluctant to increase output as a majority of the country’s mines are still losing money and it will take time to recoup losses incurred in recent years.

Also, a person can imagine that it might be difficult to obtain financing, if coal prices have only “sort of” recovered.

I wrote last year about the possibility that coal production was peaking. This is one chart I showed, with data through 2015. Coal is the second most utilized fuel in the world. If its production begins declining, it will be difficult to offset the loss of its use with increased use of other types of fuels.

Figure 3. World per capita energy consumption by fuel, based on BP 2016 SRWE.

[3] If we assume that coal supplies will continue to shrink, and other production will grow moderately, we can expect total energy consumption to be approximately flat in 2017. 

Figure 5. World energy consumption forecast, based on BP Statistical Review of World Energy data through 2015, and author's estimates for 2016 and 2017.

In a way, this is an optimistic assessment, because we know that efforts are underway to reduce oil production, in order to prop up prices. We are, in effect, assuming either that (a) oil prices won’t really rise, so that oil consumption will grow at a rate similar to that in the recent past or (b) while oil prices will rise significantly to help producers, consumers won’t cut back on their consumption in response to the higher prices.

[4] Because world population is rising, the forecast in Figure 4 suggests that per capita energy consumption is likely to shrink. Shrinking energy consumption per capita puts the world (or individual countries in the world) at the risk of recession.

Figure 5 shows indicated per capita energy consumption, based on Figure 4. It is clear that energy consumption per capita has already started shrinking, and is expected to shrink further. The last time that happened was in the Great Recession of 2007-2009.

Figure 5. World energy consumption per capita based on energy consumption estimates in Figure 4 and UN 2015 Medium Population Growth Forecast.

There tends to be a strong correlation between world economic growth and world energy consumption, because energy is required to transform materials into new forms, and to transport goods from one place to another.

In the recent past, the growth in GDP has tended to be a little higher than the growth in the use of energy products. One reason why GDP growth has been a percentage point or two higher than energy consumption growth is because, as economies become richer, citizens can afford to add more services to the mix of goods and services that they purchase (fancier hair cuts and more piano lessons, for example). Production of services tends to use proportionately less energy than creating goods does; as a result, a shift toward a heavier mix of services tends to lead to GDP growth rates that are somewhat higher than the growth in energy consumption.

A second reason why GDP growth has tended to be a little higher than growth in energy consumption is because devices (such as cars, trucks, air conditioners, furnaces, factory machinery) are becoming more efficient. Growth in efficiency occurs if consumers replace old inefficient devices with new more efficient devices. If consumers become less wealthy, they are likely to replace devices less frequently, leading to slower growth in efficiency. Also, as we will discuss later in this  post, recently there has been a tendency for fossil fuel prices to remain artificially low. With low prices, there is little financial incentive to replace an old inefficient device with a new, more efficient device. As a result, new purchases may be bigger, offsetting the benefit of efficiency gains (purchasing an SUV to replace a car, for example).

Thus, we cannot expect that the past pattern of GDP growing a little faster than energy consumption will continue. In fact, it is even possible that the leveraging effect will start working the “wrong” way, as low fossil fuel prices induce more fuel use, not less. Perhaps the safest assumption we can make is that GDP growth and energy consumption growth will be equal. In other words, if world energy consumption growth is 0% (as in Figure 4), world GDP growth will also be 0%. This is not something that world leaders would like at all.

The situation we are encountering today seems to be very similar to the falling resources per capita problem that seemed to push early economies toward collapse in [1]. Figure 5 above suggests that, on average, the paychecks of workers in 2017 will tend to purchase fewer goods and services than they did in 2016 and 2015. If governments need higher taxes to fund rising retiree costs and rising subsidies for “renewables,” the loss in the after-tax purchasing power of workers will be even greater than Figure 5 suggests.

[5] Because many countries are in this precarious position of falling resources per capita, we should expect to see a rise in protectionism, and the addition of new tariffs.

Clearly, governments do not want the problem of falling wages (or rather, falling goods that wages can buy) impacting their countries. So the new game becomes, “Push the problem elsewhere.”

In economic language, the world economy is becoming a “Zero-sum” game. Any gain in the production of goods and services by one country is a loss to another country. Thus, it is in each country’s interest to look out for itself. This is a major change from the shift toward globalization we have experienced in recent years. China, as a major exporter of goods, can expect to be especially affected by this changing view.

[6] China can no longer be expected to pull the world economy forward.

China’s economic growth rate is likely to be lower, for many reasons. One reason is the financial problems of coal mines, and the tendency of coal production to continue to shrink, once it starts shrinking. This happens for many reasons, one of them being the difficulty in obtaining loans for expansion, when prices still seem to be somewhat low, and the outlook for the further increases does not appear to be very good.

Another reason why China’s economic growth rate can be expected to fall is the current overbuilt situation with respect to apartment buildings, shopping malls, factories, and coal mines. As a result, there seems to be little need for new buildings and operations of these types. Another reason for slower economic growth is the growing protectionist stance of trade partners. A fourth reason is the fact that many potential buyers of the goods that China is producing are not doing very well economically (with the US being a major exception). These buyers cannot afford to increase their purchases of imports from China.

With these growing headwinds, it is quite possible that China’s total energy consumption in 2017 will shrink. If this happens, there will be downward pressure on world fossil fuel prices. Oil prices may fall, despite production cuts by OPEC and other countries.

China’s slowing economic growth is likely to make its debt problem harder to solve. We should not be too surprised if debt defaults become a more significant problem, or if the yuan falls relative to other currencies.

India, with its recent recall of high denomination currency, as well as its problems with low coal demand, is not likely to be a great deal of help aiding the world economy to grow, either. India is also a much smaller economy than China.

[7] While Item [2] talked about peak coal, there is a very significant chance that we will be hitting peak oil and peak natural gas in 2017 or 2018, as well.  

If we look at historical prices, we see that the prices of oil, coal and natural gas tend to rise and fall together.

Figure 6. Prices of oil, call and natural gas tend to rise and fall together. Prices based on 2016 Statistical Review of World Energy data.

The reason that fossil fuel prices tend to rise and fall together is because these prices are tied to “demand” for goods and services in general, such as for new homes, cars, and factories. If wages are rising rapidly, and debt is rising rapidly, it becomes easier for consumers to buy goods such as homes and cars. When this happens, there is more “demand” for the commodities used to make and operate homes and cars. Prices for commodities of many types, including fossil fuels, tend to rise, to enable more production of these items.

Of course, the reverse happens as well. If workers become poorer, or debt levels shrink, it becomes harder to buy homes and cars. In this case, commodity prices, including fossil fuel prices, tend to fall.  Thus, the problem we saw above in [2] for coal would be likely to happen for oil and natural gas, as well, because the prices of all of the fossil fuels tend to move together. In fact, we know that current oil prices are too low for oil producers. This is the reason why OPEC and other oil producers have cut back on production. Thus, the problem with overproduction for oil seems to be similar to the overproduction problem for coal, just a bit delayed in timing.

In fact, we also know that US natural gas prices have been very low for several years, suggesting another similar problem. The United States is the single largest producer of natural gas in the world. Its natural gas production hit a peak in mid 2015, and production has since begun to decline. The decline comes as a response to chronically low prices, which make it unprofitable to extract natural gas. This response sounds similar to China’s attempted solution to low coal prices.

Figure 7. US Natural Gas production based on EIA data.

The problem is fundamentally the fact that consumers cannot afford goods made using fossil fuels of any type, if prices actually rise to the level producers need, which tends to be at least five times the 1999 price level. (Note peak price levels compared to 1999 level on Figure 6.) Wages have not risen by a factor of five since 1999, so paying the prices that fossil fuel producers need for profitability and growing production is out of the question. No amount of added debt can hide this problem. (While this reference is to 1999 prices, the issue really goes back much farther, to prices before the price spikes of the 1970s.)

US natural gas producers also have plans to export natural gas to Europe and elsewhere, as liquefied natural gas (LNG). The hope, of course, is that a large amount of exports will raise US natural gas prices. Also, the hope is that Europeans will be able to afford the high-priced natural gas shipped to them. Unless someone can raise the wages of both Europeans and Americans, I would not count on LNG prices actually rising to the level needed for profitability, and staying at such a high level. Instead, they are likely to bounce up, and quickly drop back again.

[8] Unless oil prices rise very substantially, oil exporters will find themselves exhausting their financial reserves in a very short time (perhaps a year or two). Unfortunately, oil importerscannot withstand higher prices, without going into recession. 

We have a no win situation, no matter what happens. This is true with all fossil fuels, but especially with oil, because of its high cost and thus necessarily high price. If oil prices stay at the same level or go down, oil exporters cannot get enough tax revenue, and oil companies in general cannot obtain enough funds to finance the development of new wells and payment of dividends to shareholders. If oil prices do rise by a very large amount for very long, we are likely headed into another major recession, with many debt defaults.

[9] US interest rates are likely to rise in the next year or two, whether or not this result is intended by the Federal reserve.

This issue here is somewhat obscure. The issue has to do with whether the United States can find foreign buyers for its debt, often called US Treasuries, and the interest rates that the US needs to pay on this debt. If buyers are very plentiful, the interest rates paid by he US government can be quite low; if few buyers are available, interest rates must be higher.

Back when Saudi Arabia and other oil exporters were doing well financially, they often bought US Treasuries, as a way to retain the benefit of their new-found wealth, which they did not want to spend immediately. Similarly, when China was doing well as an exporter, it often bought US Treasuries, as a way retaining the wealth it gained from exports, but didn’t yet need for purchases.

When these countries bought US Treasuries, there were several beneficial results:

  • Interest rates on US Treasuries tended to stay artificially low, because there was a ready market for its debt.
  • The US could afford to import high-priced oil, because the additional debt needed to buy the oil could easily be sold (to Saudi Arabia and other oil producing nations, no less).
  • The US dollar tended to stay lower relative to other currencies, making oil more affordable to other countries than it otherwise might be.
  • Investment in countries outside the US was encouraged, because debt issued by these other countries tended to bear higher interest rates than US debt. Also, relatively low oil prices in these countries (because of the low level of the dollar) tended to make investment profitable in these countries.

The effect of these changes was somewhat similar to the US having its own special Quantitative Easing (QE) program, paid for by some of the counties with trade surpluses, instead of by its central bank. This QE substitute tended to encourage world economic growth, for the reasons mentioned above.

Once the fortunes of the countries that used to buy US Treasuries changes, the pattern of buying of US Treasuries tends to change to selling of US Treasuries. Even not purchasing the same quantity of US Treasuries as in the past becomes an adverse change, if the US has a need to keep issuing US Treasuries as in the past, or if it wants to keep rates low.

Unfortunately, losing this QE substitute tends to reverse the favorable effects noted above. One effect is that the dollar tends to ride higher relative to other currencies, making the US look richer, and other countries poorer. The “catch” is that as the other countries become poorer, it becomes harder for them to repay the debt that they took out earlier, which was denominated in US dollars.

Another problem, as this strange type of QE disappears, is that the interest rates that the US government needs to pay in order to issue new debt start rising. These higher rates tend to affect other rates as well, such as mortgage rates. These higher interest rates act as a drag on the economy, tending to push it toward recession.

Higher interest rates also tend to decrease the value of assets, such as homes, farms, outstanding bonds, and shares of stock. This occurs because fewer buyers can afford to buy these goods, with the new higher interest rates. As a result, stock prices can be expected to fall. Prices of homes and of commercial buildings can also be expected to fall. The value of bonds held by insurance companies and banks becomes lower, if they choose to sell these securities before maturity.

Of course, as interest rates fell after 1981, we received the benefit of falling interest rates, in the form of rising asset prices. No one ever stopped to think about how much of the gains in share prices and property values came from falling interest rates.

Figure 8. Ten year treasury interest rates, based on St. Louis Fed data.

Now, as interest rates rise, we can expect asset prices of many types to start falling, because of lower affordability when monthly payments are based on higher interest rates. This situation presents another “drag” on the economy.

In Conclusion

The situation is indeed very concerning. Many things could set off a crisis:

  • Rising energy prices of any kind (hurting energy importers), or energy prices that don’t rise (leading to financial problems or collapse of exporters)
  • Rising interest rates.
  • Defaulting debt, indirectly the result of slow/negative economic growth and rising interest rates.
  • International organizations with less and less influence, or that fall apart completely.
  • Fast changes in relativities of currencies, leading to defaults on derivatives.
  • Collapsing banks, as debt defaults rise.
  • Falling asset prices (homes, farms, commercial buildings, stocks and bonds) as interest rates rise, leading to many debt defaults.

Things don’t look too bad right now, but the underlying problems are sufficiently severe that we seem to be headed for a crisis far worse than 2008. The timing is not clear. Things could start falling apart badly in 2017, or alternatively, major problems may be delayed until 2018 or 2019. I hope political leaders can find ways to keep problems away as long as possible, perhaps with more rounds of QE. Our fundamental problem is the fact that neither high nor low energy prices are now able to keep the world economy operating as we would like it to operate. Increased debt can’t seem to fix the problem either.

The laws of physics seem to be behind economic growth. From a physics point of view, our economy is a dissipative structure. Such structures form in “open systems.” In such systems, flows of energy allow structures to temporarily self-organize and grow. Other examples of dissipative structures include ecosystems, all plants and animals, stars, and hurricanes. All of these structures constantly “dissipate” energy. They have finite life spans, before they eventually collapse. Often, new dissipative systems form, to replace previous ones that have collapsed.





Final Warning Limits to Growth

24 11 2016

Just when I thought I knew it all regarding Limits to Growth, along comes this one year old little doco produced by DW. What I particularly liked about this one is its historical perspective on the complete lack of action during the past forty years…..

In 1972, the study ‘Limits to Growth’ warned against the impact of capitalism. Did anyone act on it? It shows that Capitalism lies at the root of problems such as overpopulation and environmental pollution, yet few seem to be aware of the connection.

After its publication in 1972, the Club of Rome’s study, “Limits to Growth,” came to epitomize a historical turning point. The book calls into question the fundamental principle of the American economic ideology of capitalism, with its insatiable pursuit of growth. However, the work did not just pillory contemporary practices. It also warned of the extremely diverse and massive consequences for all of humanity. Although there is scarcely any doubt as to the validity of the study and its 1992 successor, “Beyond the Limits,” governments worldwide have done very little to solve the major problems. Topics such as overpopulation, environmental pollution, depletion of resources, and consumption are now familiar to everyone, but few people are aware of the impact they can have in the context of exponential growth on Earth, and therefore on all of humanity. This documentary sheds light on the effect the work has had on public perceptions in the past four decades.

Date 25.11.2015 Duration 42:30 mins.





Deflationary Collapse Ahead?

24 07 2016

The big thing that is happening is that the world financial system is likely to collapse. Back in 2008, the world financial system almost collapsed. This time, our chances of avoiding collapse are very slim.

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tverberg

Gail Tverberg

Both the stock market and oil prices have been plunging. Is this “just another cycle,” or is it something much worse? I think it is something much worse.

Back in January, I wrote a post called Oil and the Economy: Where are We Headed in 2015-16? In it, I said that persistent very low prices could be a sign that we are reaching limits of a finite world. In fact, the scenario that is playing out matches up with what I expected to happen in my January post. In that post, I said

Needless to say, stagnating wages together with rapidly rising costs of oil production leads to a mismatch between:

  • The amount consumers can afford for oil
  • The cost of oil, if oil price matches the cost of production

This mismatch between rising costs of oil production and stagnating wages is what has been happening. The unaffordability problem can be hidden by a rising amount of debt for a while (since adding cheap debt helps make unaffordable big items seem affordable), but this scheme cannot go on forever.

Eventually, even at near zero interest rates, the amount of debt becomes too high, relative to income. Governments become afraid of adding more debt. Young people find student loans so burdensome that they put off buying homes and cars. The economic “pump” that used to result from rising wages and rising debt slows, slowing the growth of the world economy. With slow economic growth comes low demand for commodities that are used to make homes, cars, factories, and other goods. This slow economic growth is what brings the persistent trend toward low commodity prices experienced in recent years.

A chart I showed in my January post was this one:

Figure 1. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.

The price of oil dropped dramatically in the latter half of 2008, partly because of the adverse impact high oil prices had on the economy, and partly because of a contraction in debt amounts at that time. It was only when banks were bailed out and the United States began its first round of Quantitative Easing (QE) to get longer term interest rates down even further that energy prices began to rise. Furthermore, China ramped up its debt in this time period, using its additional debt to build new homes, roads, and factories. This also helped pump energy prices back up again.

The price of oil was trending slightly downward between 2011 and 2014, suggesting that even then, prices were subject to an underlying downward trend. In mid-2014, there was a big downdraft in prices, which coincided with the end of US QE3 and with slower growth in debt in China. Prices rose for a time, but have recently dropped again, related to slowing Chinese, and thus world, economic growth. In part, China’s slowdown is occurring because it has reached limits regarding how many homes, roads and factories it needs.

I gave a list of likely changes to expect in my January post. These haven’t changed. I won’t repeat them all here. Instead, I will give an overview of what is going wrong and offer some thoughts regarding why others are not pointing out this same problem.

Overview of What is Going Wrong

  1. The big thing that is happening is that the world financial system is likely to collapse. Back in 2008, the world financial system almost collapsed. This time, our chances of avoiding collapse are very slim.
  2. Without the financial system, pretty much nothing else works: the oil extraction system, the electricity delivery system, the pension system, the ability of the stock market to hold its value. The change we are encountering is similar to losing the operating system on a computer, or unplugging a refrigerator from the wall.
  3. We don’t know how fast things will unravel, but things are likely to be quite different in as short a time as a year. World financial leaders are likely to “pull out the stops,” trying to keep things together. A big part of our problem is too much debt. This is hard to fix, because reducing debt reduces demand and makes commodity prices fall further. With low prices, production of commodities is likely to fall. For example, food production using fossil fuel inputs is likely to greatly decline over time, as is oil, gas, and coal production.
  4. The electricity system, as delivered by the grid, is likely to fail in approximately the same timeframe as our oil-based system. Nothing will fail overnight, but it seems highly unlikely that electricity will outlast oil by more than a year or two. All systems are dependent on the financial system. If the oil system cannot pay its workers and get replacement parts because of a collapse in the financial system, the same is likely to be true of the electrical grid system.
  5. Our economy is a self-organized networked system that continuously dissipates energy, known in physics as a dissipative structureOther examples of dissipative structures include all plants and animals (including humans) and hurricanes. All of these grow from small beginnings, gradually plateau in size, and eventually collapse and die. We know of a huge number of prior civilizations that have collapsed. This appears to have happened when the return on human labor has fallen too low. This is much like the after-tax wages of non-elite workers falling too low. Wages reflect not only the workers’ own energy (gained from eating food), but any supplemental energy used, such as from draft animals, wind-powered boats, or electricity. Falling median wages, especially of young people, are one of the indications that our economy is headed toward collapse, just like the other economies.
  6. The reason that collapse happens quickly has to do with debt and derivatives. Our networked economy requires debt in order to extract fossil fuels from the ground and to create renewable energy sources, for several reasons: (a) Producers don’t have to save up as much money in advance, (b) Middle-men making products that use energy products (such as cars and refrigerators) can “finance” their factories, so they don’t have to save up as much, (c) Consumers can afford to buy “big-ticket” items like homes and cars, with the use of plans that allow monthly payments, so they don’t have to save up as much, and (d) Most importantly, debt helps raise the price of commodities of all sorts (including oil and electricity), because it allows more customers to afford products that use them. The problem as the economy slows, and as we add more and more debt, is that eventually debt collapses. This happens because the economy fails to grow enough to allow the economy to generate sufficient goods and services to keep the system going – that is, pay adequate wages, even to non-elite workers; pay growing government and corporate overhead; and repay debt with interest, all at the same time. Figure 2 is an illustration of the problem with the debt component.Figure 2. Repaying loans is easy in a growing economy, but much more difficult in a shrinking economy.

Where Did Modeling of Energy and the Economy Go Wrong?

  1. Today’s general level of understanding about how the economy works, and energy’s relationship to the economy, is dismally low. Economics has generally denied that energy has more than a very indirect relationship to the economy. Since 1800, world population has grown from 1 billion to more than 7 billion, thanks to the use of fossil fuels for increased food production and medicines, among other things. Yet environmentalists often believe that the world economy can somehow continue as today, without fossil fuels. There is a possibility that with a financial crash, we will need to start over, with new local economies based on the use of local resources. In such a scenario, it is doubtful that we can maintain a world population of even 1 billion.
  2. Economics modeling is based on observations of how the economy worked when we were far from limits of a finite world. The indications from this modeling are not at all generalizable to the situation when we are reaching limits of a finite world. The expectation of economists, based on past situations, is that prices will rise when there is scarcity. This expectation is completely wrong when the basic problem is lack of adequate wages for non-elite workers. When the problem is a lack of wages, workers find it impossible to purchase high-priced goods like homes, cars, and refrigerators. All of these products are created using commodities, so a lack of adequate wages tends to “feed back” through the system as low commodity prices. This is exactly the opposite of what standard economic models predict.
  3. M. King Hubbert’s “peak oil” analysis provided a best-case scenario that was clearly unrealistic, but it was taken literally by his followers. One of Hubbert’s sources of optimism was to assume that another energy product, such as nuclear, would arise in huge quantity, prior to the time when a decline in fossil fuels would become a problem.Figure 2. Figure from Hubbert's 1956 paper, Nuclear Energy and the Fossil Fuels.

    The way nuclear energy operates in Figure 2 seems to me to be pretty much equivalent to the output of a perpetual motion machine, adding an endless amount of cheap energy that can be substituted for fossil fuels. A related source of optimism has to do with the shape of a curve that is created by the sum of curves of a given type. There is no reason to expect that the “total” curve will be of the same shape as the underlying curves, unless a perfect substitute (that is, having low price, unlimited quantity, and the ability to work directly in current devices) is available for what is being modeled–here fossil fuels. When the amount of extraction is determined by price, and price can quickly swing from high to low, there is good reason to believe that the shape of the sum curve will be quite pointed, rather than rounded. For example we know that a square wave can be approximated using the sum of sine functions, using Fourier Series (Figure 4).

    Figure 3. Source: Wolfram Mathworld.

  4. The world economy operates on energy flows in a given year, even though most analysts today are accustomed to thinking on a discounted cash flow basis.  You and I eat food that was grown very recently. A model of food potentially available in the future is interesting, but it doesn’t satisfy our need for food when we are hungry. Similarly, our vehicles run on oil that has recently been extracted; our electrical system operates on electricity that has been produced, essentially instantaneously. The very close relationship in time between production and consumption of energy products is in sharp contrast to the way the financial system works. It makes promises, such as the availability of bank deposits, the amounts of pension payments, and the continuing value of corporate stocks, far out into the future. When these promises are made, there is no check made that goods and services will actually be available to repay these promises. We end up with a system that has promised very many more goods and services in the future than the real world will actually be able to produce. A break is inevitable; it looks like the break will be happening in the near future.
  5. Changes in the financial system have huge potential to disrupt the operation of the energy flow system. Demand in a given year comes from a combination of (wages and other income streams in a given year) plus the (change in debt in a given year). Historically, the (change in debt) has been positive. This has helped raise commodity prices. As soon as we start getting large defaults on debt, the (change in debt) component turns negative, and tends to bring down the price of commodities. (Note Point 6 in the previous section.) Once this happens, it is virtually impossible to keep prices up high enough to extract oil, coal and natural gas. This is a major reason why the system tends to crash.
  6. Researchers are expected to follow in the steps of researchers before them, rather than starting from a basic understudying of the whole problem. Trying to understand the whole problem, rather than simply trying to look at a small segment of a problem is difficult, especially if a researcher is expected to churn out a large number of peer reviewed academic articles each year. Unfortunately, there is a huge amount of research that might have seemed correct when it was written, but which is really wrong, if viewed through a broader lens. Churning out a high volume of articles based on past research tends to simply repeat past errors. This problem is hard to correct, because the field of energy and the economy cuts across many areas of study. It is hard for anyone to understand the full picture.
  7. In the area of energy and the economy, it is very tempting to tell people what they want to hear. If a researcher doesn’t understand how the system of energy and the economy works, and needs to guess, the guesses that are most likely to be favorably received when it comes time for publication are the ones that say, “All is well. Innovation will save the day.” Or, “Substitution will save the day.” This tends to bias research toward saying, “All is well.” The availability of financial grants on topics that appear hopeful adds to this effect.
  8. Energy Returned on Energy Investment (EROEI) analysis doesn’t really get to the point of today’s problems. Many people have high hopes for EROEI analysis, and indeed, it does make some progress in figuring out what is happening. But it misses many important points. One of them is that there are many different kinds of EROEI. The kind that matters, in terms of keeping the economy from collapsing, is the return on human labor. This type of EROEI is equivalent to after-tax wages of non-elite workers. This kind of return tends to drop too low if the total quantity of energy being used to leverage human labor is too low. We would expect a drop to occur in the quantity of energy used, if energy prices are too high, or if the quantity of energy products available is restricted.
  9. Instead of looking at wages of workers, most EROEI analyses consider returns on fossil fuel energy–something that is at least part of the puzzle, but is far from the whole picture. Returns on fossil fuel energy can be done either on a cash flow (energy flow) basis or on a “model” basis, similar to discounted cash flow. The two are not at all equivalent. What the economy needs is cash flow energy now, not modeled energy production in the future. Cash flow analyses probably need to be performed on an industry-wide basis; direct and indirect inputs in a given calendar year would be compared with energy outputs in the same calendar year. Man-made renewables will tend to do badly in such analyses, because considerable energy is used in making them, but the energy provided is primarily modeled future energy production, assuming that the current economy can continue to operate as today–something that seems increasingly unlikely.
  10. If we are headed for a near term sharp break in the economy, there is no point in trying to add man-made renewables to the electric grid. The whole point of adding man-made renewables is to try to keep what we have today longer. But if the system is collapsing, the whole plan is futile. We end up extracting more coal and oil today, in order to add wind or solar PV to what will soon become a useless grid electric system. The grid system will not last long, because we cannot pay workers and we cannot maintain the grid without a financial system. So if we add man-made renewables, most of what we get is their short-term disadvantages, with few of their hoped-for long-term advantages.

Conclusion

The analysis that comes closest to the situation we are reaching today is the 1972 analysis of limits of a finite world, published in the book “The Limits to Growth” by Donella Meadows and others. It models what can be expected to happen, if population and resource extraction grow as expected, gradually tapering off as diminishing returns are encountered. The base model seems to indicate that a collapse will happen about now.

Figure 5. Base scenario from 1972 Limits to Growth, printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf

The shape of the downturn is not likely to be correct in Figure 5.  One reason is that the model was put together based on physical quantities of goods and people, without considering the role the financial system, particularly debt, plays. I expect that debt would tend to make collapse quicker. Also, the modelers had no experience with interactions in a contracting world economy, so had no idea regarding what adjustments to make. The authors have even said that the shapes of the curves, after the initial downturn, cannot be relied on. So we end up with something like Figure 6, as about all that we can rely on.

Figure 6. Figure 5, truncated shortly after production turns down, since modeled amounts are unreliable after that date.

If we are indeed facing the downturn forecast by Limits to Growth modeling, we are facing  a predicament that doesn’t have a real solution. We can make the best of what we have today, and we can try to strengthen bonds with family and friends. We can try to diversify our financial resources, so if one bank encounters problems early on, it won’t be a huge problem. We can perhaps keep a little food and water on hand, to tide us over a temporary shortage. We can study our religious beliefs for guidance.

Some people believe that it is possible for groups of survivalists to continue, given adequate preparation. This may or may not be true. The only kind of renewables that we can truly count on for the long term are those used by our forefathers, such as wood, draft animals, and wind-driven boats. Anyone who decides to use today’s technology, such as solar panels and a pump adapted for use with solar panels, needs to plan for the day when that technology fails. At that point, hard decisions will need to be made regarding how the group will live without the technology.

We can’t say that no one warned us about the predicament we are facing. Instead, we chose not to listen. Public officials gave a further push in this direction, by channeling research funds toward distant theoretically solvable problems, instead of understanding the true nature of what we are up against. Too many people took what Hubbert said literally, without understanding that what he offered was a best-case scenario, if we could find something equivalent to a perpetual motion machine to help us out of our predicament.





The Extreme Implausibility of Ecomodernism.

20 07 2016

Another essay by Ted Trainer.

tedtrainer

Ted Trainer

16.3.2016

Abstract: “Ecomodernism” is a recently coined term for that central element in mainstream Enlightenment culture previously well-described as “Tech-fix faith”. The largely taken for granted assumption has been that by accelerating modern technologies high living standards can be achieved for all, while resolving resource and ecological problems.  The following argument is that ecomodernism falls far short of having a substantial, persuasive or convincing case in its support. It stands as a contradiction of the now voluminous “limits to growth” literature, but it does not attempt to offer a case against the limits thesis. Elements in the limits case will be referred to below but the main line of argument will be to do with the reasons why achievement of the reductions and “decouplings” assumed by ecomodernism is extremely implausible. The conservative social and political implications are noted before briefly arguing that the solution to global problems must be sought via The Simpler Way.

What is ecomodernism?.

The 32 page Ecomodernist Manifesto (2015), by 18 authors, is a clear and emphatic restatement of the common belief that technical advance within the existing social structure can or will solve global problems, and there is therefore no need for radical change in directions, systems, values or lifestyles. Thus the fundamental commitment to ever more affluent “living standards”, capital intensive systems, technical sophistication and constantly rising levels of consumption and GDP is sound, and indeed necessary as it is the only way to enable the future technical advance that it is believed will solve global problems. This will enable human demands to be met while resource and ecological impacts on nature are reduced, thus making it possible to set more of nature aside to thrive. Modern agriculture for instance will producer more from less land, enabling more to be returned to nature and freeing Third World people from backbreaking work while moving into urban living.  Thus the fundamental assumption frequently asserted is that economic growth can be “decoupled” from the environment.

These kinds of visions would obviously require vastly increased quantities of energy but renewable sources are judged not to be capable of providing these, so it is no surprise to find late in the document that it is being assumed that nuclear reactors are going to do the job, nor that the pro-nuclear Breakthrough Institute champions the Manifesto.

Unfortunately the Manifesto is little more than a claim.  It provides almost no supporting case apart from giving some examples where technical advance has improved human welfare at reduced resource or ecological impact. It does not deal with the many reasons for thinking that technical advance cannot do what the ecomodernists are assuming it can do.  Above all it does not provide grounds for thinking that that resource demand and ecological damage can be sufficiently decoupled from economic growth. When one of the authors was asked for the supporting case reference was made to the 106 page document Nature Unbounded by Blomqvist, Nordhaus and Shellenberger, (2015.) However this document too is essentially a statement of claims and faith and can hardly be said to present a case that those claims can be realized.

The following discussion is mainly intended to show how implausible and unsubstantiated the general “tech-fix” and decoupling claims are, and that they are contrary to existing evidence.  Most if not all critical discussions of ecomodernism and of left modernization theorists such as Phillips (2015), e.g., by Hopkins (2015), Caradonna et al., 2015, Crist, (2015) and Smaje, (2015a, 2015b), have been impressionistic and “philosophical”. In contrast, the following analysis focuses on numerical considerations which establish the enormity of the ecomodernist claims. When estimates and actual numbers to do with resource demands, resource bases, and ecological impacts are attended to it becomes clear that the task for technical advance set by the ecomodernists is implausible in the extreme.

The basic limits to growth thesis.

The “limits to growth” thesis is that with respect to many factors crucial to planetary sustainability affluent-industrial-consumer society is grossly unsustainable. It has already greatly exceeded important limits. Levels of production and consumption are far beyond those that could be kept up for long or extended to all people.  Present consumption levels are achieved because resource and ecological “stocks” are being depleted much faster than they can regenerate.

But the unsustainable present levels of production, consumption, resource use and environmental impact only begin to define of the problem.  What is overwhelmingly crucial is the universal obsession with continual, never ending economic growth, i.e., with increasing production and consumption, incomes and GDP as much as possible and without limit.  The most important criticism of the ecomodernist position is its failure to grasp the magnitude of the task it confronts when the present overshoot is combined with the commitment to growth.  The main concern in the following discussion is with quantities and multiples, to show how huge and implausible ecomodernist achievements and decouplings would have to be.

The magnitude of the task.

It is the extent of the overshoot that is crucial and not generally appreciated. This is the issue which the ecomodernists fail to deal with and it only takes a glance at the numbers to see how implausible their pronouncements are in relation to the task they set themselves. Their main literature makes no attempt to carry out quantitative examinations of crucial resources and ecological issues with a view to showing that the apparent limits can be overcome.

Let us look at the overall picture revealed when some simple numerical aggregates and estimates are combined.  The normal expectation is for around 3% p.a. growth in GDP, meaning that by 2050 the total amount of producing and consuming going on in the world would be about three times as great as at present. World population is expected to be around 10 billion by 2050.  At present world  $GDP per capita is around $13,000, and the US figure is around $55,000. Thus if we take the ecomodernist vision to imply that by 2050 all people will be living as Americans will be living then, total world output would have to be around 3 x 10/7 x 55,000/13,000 = 18 times as great as it is now.  If the assumptions are extended to 2100 the multiple would be in the region of 80.

However, even the present global level of producing and consuming has an unsustainable level of impact.  The world Wildlife Fund’s “Footprint” measure (2015) indicates that the general overshoot is around 1.5 times a sustainable rate.  (For some factors, notably greenhouse gas emissions, the multiple is far higher.) This indicates that the target for the ecomodernist has to be to reduce overall resource use and ecological impact per unit of output by a factor of around 27 by 2050, and in the region of 120 by 2100. In other words, by 2050 technical advance will have to have reduced the resource demand and environmental impact per unit of output to under 4% of their present levels.

The consideration of required multiples shows the inadequacy of the earlier pronouncements and expectations of the well-known tech-fix optimist Amory Lovins who enthused about the possibility of “Factor Four” or better reductions in materials and energy uses per unit of GDP.  (Von Weisacker and Lovins, 1997, and Hawken, Lovins and Lovins, 1999).If there is a commitment to constant, limitless increase in economic output then the reductions in resource use and environmental damage that can be achieved by such technical advance are soon likely to be overwhelmed.  For instance if use and impact rates per unit of GDP were cut by one-third, but 3% p.a. growth in total output continued, then in about 17 years the resource demands and impacts would be back up to as high as they were before the cuts, and would be twice as great in another 23 years.

This issue of multiples is at the core of the limits and decoupling issues. If ecomodernists wish to be taken seriously they must provide a numerical case showing that in all the relevant domains the degree of decoupling that can be achieved is likely to be of the magnitude that would be required.  There appears to be no ecomodernist text which even attempts to do this.  At best their case refers to a few instances where impressive decoupling has taken place.

Note also the importance here of the Leibig “law of the minimum.” It does not matter how spectacular various technical gains can be if there remains one crucial area where they can’t be made on the required scale.  Plants for instance might have available all the nutrients they need except for one required in minute quantities but if it is not available there will be little or no growth.  High-tech systems often depend heavily on tiny quantities of “mineral vitamins”, notably rare earths which are extremely scarce.

The typically faulty national accounting.

An easily overlooked factor is that in general measures and indices of rich world resource and ecological performance greatly misrepresent and underestimate the seriousness of the situation, because they do not include the large volumes of energy, materials and ecological impact embodied in imported goods.  Rich countries now do not carry out much manufacturing but import most of the goods they consume from Third World plantations and factories.  The implications for resource depletion and ecological impact have only recently begun to be studied. (Weidmann, et al., 2014, 2015, Lenzen, et al., 2012, Wiebe, et al,

2012, Dittrich, et al., 2014, Schütz, et al., 2004.)

An example is given by the conventional measure of CO2 emissions. Australia’s 550 MtCO2e/y equates to a per capita rate of around 25 t/y, which is about the highest in the world. But this does not include the emissions in Third World countries generated by the production of goods imported into Australia.  For Australia and for the UK this amount is actually about as great as the emissions within the country.  (Clark, 2011, Australian Government Climate Change Authority, 2013.)

In addition Australia’s “prosperity” is largely achieved by exporting coal, oil and gas and these contain about three times as much carbon as all the energy used within Australia.  It could be argued therefore that the country’s contribution to the greenhouse gas problem more or less corresponds to five times the official and usually quoted 25 t/pp/y.  The IPCC estimates that by 2050 global emissions must be cut to about 0.3 t/pp/y. (IPCC, 2014.)  This is around one-three hundredth of the amount Australia is now responsible for. Again the centrality of the above magnitude point is evident; how aware are tech-fix optimists of the need for reductions of such proportions?

Assessing the validity of the general “tech-fix” thesis.

Firstly attention will be given to some overall numerical considerations which show the extreme implausibility of the general tech-fix claim, such as the gulf between current “decoupling” achievements and the far higher levels that ecomodernism would require. But that does not take into account the fact that it is going to take increasing effort just to maintain current achievements, for instance as ore grades deteriorate. This what the limits to growth analysis makes clear.  The added significance of this will be discussed later via brief examination of some domains such as energy scarcity, declining ore grades, and deteriorating ecological conditions.

How impressive have the overall gains been?

It is commonly assumed that in general rapid, large or continuous technical gains are being routinely made in crucial areas such as energy efficiency, and will continue if not accelerate.  As a generalisation this belief is quite challengeable. Ayres (2009) notes that for many decades there have been plateaus for the efficiency of production of electricity and fuels, electric motors, ammonia and iron and steel production. His Fig. 4.21a shows no increase in the overall energy efficiency of the US economy since 1960.  He reports that the efficiency of electrical devices in general has actually changed little in a century (2009) “…the energy efficiency of transportation probably peaked around 1960.” This has been partly due to greater use of accessories since then. Ayres notes that reports tend to publicise selected isolated spectacular technical advances and this is misleading regarding long term average trends across whole industries or economies. Mackay (2008) reports that little gain can be expected for air transport.  Huebner’s historical study (2005) found that the rate at which major technical advances have been made (per capita of world population) is declining.  He says that for the US the peak was actually in 1916.

Decoupling can be regarded as much the same as productivity growth and this has been in long term decline since the 1970s. Even the advent of computerisation has had a surprisingly small effect, a phenomenon now labelled the “Productivity Paradox.”

The historical record suggests that at best productivity gains have been modest. It is important not to focus on national measures such as “Domestic Materials Consumption” as these do not take into account materials in imported goods.  Thus the OECD (2015) claims that materials used within its countries has fallen 45% per dollar of GDP, but this figure does not take into account materials embodied in imported goods. When they are included rich countries typically show very low or worsening ratios. The commonly available global GDP (deflated) and energy use figures between 1980 and 2008 reveals only a 0.4% p.a. rise in GDP per unit of energy consumed.   Hattfield-Dodds et al. (2015) say that the efficiency of materials use has been improving at c. 1.5% p.a., but they give no evidence for this and other sources indicate that the figure is too high. Weidmann et al. (2014) show that when materials embodied in imports are taken into account rich countries have not improved their resource productivity in recent years. They say “…for the past two decades global amounts of iron ore and bauxite extractions have risen faster than global GDP.” “… resource productivity…has fallen in developed nations.” “There has been no improvement whatsoever with respect to improving the economic efficiency of metal ore use.”

The fact that the “energy intensity” of rich world economies, i.e., ratio of GDP to gross energy used within the country has declined is often seen as evidence of decoupling but this is misleading. It does not take into account the above issue of failure to include energy embodied in imports. Possibly more important is the long term process of “fuel switching”, i.e., moving to forms of energy which are of “higher quality” and enable more work per unit. For instance a unit of energy in the form of gas enables more value to be created than a unit in the form of coal, because gas is more easily transported, switched on and off, or converted from one function to another, etc. (Stern and Cleveland, 2004, p. 33, Cleveland et al., 1984, Kaufmann, 2004,  Office of Technology Assessments, 1990, Berndt, 1990, Schurr and Netschurt, 1960.)

Giljum et al. (2014, p. 324) report only a 0.9% p.a. improvement in the dollar value extracted from the use of each unit of minerals between 1980 and 2009, and that over the 10 years before the GFC there was no improvement. “…not even a relative decoupling was achieved on the global level.” They note that the figures would have been worse had the production of much rich world consumption not been outsourced to the Third World. Their Fig. 2, shows that over the period 1980 to 2009 the rate at which the world decoupled materials use from GDP growth was only one third of that which would have achieved an “absolute” decoupling, i.e., growth of GDP without any increase in materials use.

Diederan’s account (2009) of the productivity of minerals discovery effort is even more pessimistic. Between 1980 and 2008 the annual major deposit discovery rate fell from 13 to less than 1, while discovery expenditure went from about $1.5 billion p.a. to $7 billion p.a., meaning the productivity expenditure fell by a factor in the vicinity of around 100, which is an annual decline of around 40% p.a. Recent petroleum figures are similar; in the last decade or so discovery expenditure more or less trebled but the discovery rate has not increased.

A recent paper in Nature by a group of 18 scientists at the high-prestige Australian CSIRO (Hatfield-Dodds et al., 2015) argued that decoupling could eliminate any need to worry about limits to growth at least to 2050. The article contained no support for the assumption that the required rate of decoupling was achievable and when it was sought (through personal communication) reference was made to the paper by Schandl et al. (2015.)  However that paper contained the following surprising statements, “ … there is a very high coupling of energy use to economic growth, meaning that an increase in GDP drives a proportional increase in energy use.”  (They say the EIA, 2012, agrees.) “Our results show that while relative decoupling can be achieved in some scenarios, none would lead to an absolute reduction in energy or materials footprint.” In all three of their scenarios “…energy use continues to be strongly coupled with economic activity…”

The Australian Bureau of Agricultural Economics (ABARE, 2008) reports that the energy efficiency of energy-intensive industries is likely to improve by only 0.5% p.a. in future, and of non-energy-intensive industries by 0.2% p.a. In other words it would take 140 years for the energy efficiency of the intensive industries to double the amount of value they derive from a unit of energy.

Alexander (2014) concludes his review of decoupling by saying, ”… decades of extraordinary technological development have resulted in increased, not reduced, environmental impacts.”  Smil (2014) concludes that even in the richest countries absolute dematerialization is not taking place. Alvarez found that for Europe, Spain and the US GDP increased 74% in 20 years, but materials use actually increased 85%. (Latouche, 2014.) Similar conclusions re stagnant or declining materials use productivity etc. are arrived at by Aadrianse, 1997, Dettrich et al., (2014), Schutz, Bringezu and Moll, (2004), Warr, (2004), Berndt, (undated), and Victor (2008, pp. 55-56).

These sources and figures indicate the lack of support for the ecomodernists’ optimism. It was seen above that they are assuming that in 35 years time there can be massive absolute decoupling, i.e., that energy, materials and ecological demand associated with $1 of GDP can be reduced by a factor of around 27. But even if the 1.5% p.a. rate Hattfield-Dodds et al. say has been the recent achievement for materials use could be maintained the reduction would only be around a factor of 1.7, and various sources noted above say that their assumed rate is incorrect. There appears to be no ecomodernist literature that even attempts to provide good reason to think a general absolute decoupling is possible, let alone on the required scale.

The overlooked role of energy in productivity growth and decoupling.

Discussions of technical advance and economic growth have generally failed to focus on the significance of increased energy use. Previously productivity has been analysed only in terms of labour and capital “factors of production”, but it is now being recognized that in general greater output etc. has been achieved primarily through increased use of energy (and switching to fuels of higher “quality”, such as from coal and gas to electricity.)  Agriculture is a realm where technical advance has been predominantly a matter of increased energy use. Over the last half century productivity measured in terms of yields per ha or per worker have risen dramatically, but these have been mostly due to even greater increases in the amount of energy being poured into agriculture, on the farm, in the production of machinery, in the transport, pesticide, fertilizer, irrigation, packaging and marketing sectors, and in getting the food from the supermarket to the front door, and then dealing with the waste food and packaging. Less than 2% of the US workforce is now on farms, but agriculture accounts for around 17% of all energy used (not including several of the factors listed above.) Similarly the “Green Revolution” has depended largely on ways that involve greater energy use.

Ayres, et al., (2013), Ayres, Ayres and Warr (2002) and Ayres and Vouroudis (2013) are among those beginning to stress the significance of energy in productivity, and pointing to the likelihood of increased energy problems in future and thus declining productivity. Murillo-Zamorano, (2005, p. 72) says  “…our results show a clear relationship between energy consumption and productivity growth.” Berndt (1990) finds that technical advance accounts for only half the efficiency gains in US electricity generation. These findings caution against undue optimism regarding what pure technical advance can achieve independently from increased energy inputs; in general its significance for productivity gains appears not to have been as great as has been commonly assumed.

The productivity trend associated with this centrally important factor, energy, is itself in serious decline, evident in long term data on EROI ratios. Several decades ago the expenditure of the energy in one barrel of oil could produce 30 barrels of oil, but now the ratio is around 18 and falling. The ratio of petroleum energy discovered to energy required has fallen from 1000/1 in 1919 to 5/1 in 2006. (Murphy, 2010.) Murphy and others suspect  that an industrialised society cannot be maintained on a general energy ratio under about 10. (Hall, Lambert and Balough, 2014.)

The changing components of GDP.

Over recent decades there has been a marked increase in the proportion of rich nation GDP that is made up of “financial” services. These stand for “production” that takes the form of key strokes moving electrons around.  A great deal of it is wild speculation, making risky loans and making computer driven micro-second switches “investments”. These operations deliver massive increases in income to banks and managers, and these have significantly contributed to GDP figures. It could be argued that this domain should not be included in estimates of productivity because it misleadingly inflates the numerator in the output/labour ratio.

When output per worker in the production of “real” goods and services such as food and vehicles, or aged care is considered very different impressions can be gained.  For instance Kowalski (2011) reports that between 1960 and 2010 world cereal production increased 250%, but nitrogen fertilizer use in cereal production increased 750%, and land area used increased 40%. This aligns with the above evidence on steeply falling productivity of various inputs for ores and energy. It is therefore desirable to avoid analysing productivity, the “energy intensity” of an economy, and decoupling achievements in relation to the GDP measure.

Factors limiting the benefits from a technical advance.

There are several factors which typically determine the gains a technical advance actually enables are well below those that seem possible at first.  Engineers and economists make the following distinctions.

“Technical potential”  refers to what could be achieved if the technology could be fully applied with no regard to cost or other problems.

Economic (or ecological) potential”.  This is usually much less than the technical potential because to achieve all the gains that are technically possible would cost too much.  For instance some The Worldwide Fund for Nature quotes Smeets and Faiij (2007) as finding that it would be technically possible for the world’s forests to produce another 64 EJ/y of biomass energy p.a., but they say that the ecologically tolerable potential is only 8 EJ/y.

What are the net gains?  Enthusiastic claims about a technical advance typically focus on the gains and not the costs which should be subtracted to give a net value.  For instance the energy needed to keep buildings warm can be reduced markedly, but it costs a considerable amount of energy to do this, in the electricity needed to run the air-conditioning and heat pumps, and in the energy embodied in the insulation and triple glazing. There are also knock-on effects.  The Green Revolution doubled food yields, but only by introducing crops that required high energy inputs in the form of expensive fertlilzer, seeds and irrigation, and created social costs to do with the disruption of peasant communities.

  • What is socially/politically possible?  There are limits set by what people will accept.  It would be technically possible for many more people in any city to get to work by public transport, but large numbers would not give up the convenience of their cars even if they saved money doing so.
  • The Jeavons or “rebound” effect.  There is a strong tendency for savings made possible by a technical advance to be spent on consuming more of the thing saved, or something else.

Thus it is important to recognise that initial claims usually refer to “technical potential”, but significantly lower savings etc. are likely in the real world.

Now add the worsening limits.

The discussion so far has only dealt with decoupling achievements to date, but the difficulties involved in those achievements are in general likely to have been much less severe than those ahead, as there is continued deterioration in ore grades, forests, soils, chemical pollution, water supplies etc.  It is important now to consider briefly some of these domains, to see how they will make the task for the ecomodernist increasingly difficult.

Before looking at some specific areas the general “low hanging fruit” effect should be mentioned.  When effort is put into dealing with problems, recycling, conserving, increasing efficiency etc. the early achievements might be spectacular but as the easiest options are used up progress typically becomes more difficult and slow. This is so even when there are no problems of dwindling resource availability.

                        Minerals.

The grades of several ores being mined are falling and production costs have increased considerably since 1985. Topp (2008) reports that the productivity for Australian mining has declined 24% between 2000 and 2007. While reserve estimates can be misleading as they only state quantities miners have found to date, and they often increase over time, there is considerable concern about the depletion rate.

Dierderen (2009) says that continuation of current consumption rates will mean that we will have much less than 50 years left of cheap and abundant access to metal minerals, and that it will take exponentially more energy and minerals input to grow or even sustain the current extraction rate of metal minerals. He expects copper, nickel, molybdenum and cobalt to peak before 2035. Deideren’s conclusion is indeed, as his title says, sobering; “The peak in primary production of most metals may be reached no later than halfway through the 2020s.” (p. 23.) “Without timely implementation of mitigation strategies, the world will soon run out of all kinds of affordable mass products and services.”  Such as… “cheap mass-produced consumer electronics like mobile phones, flat screen TVs and personal computers, for lack of various scarce metals (amongst others indium and tantalum). Also, large-scale conversion towards more sustainable forms of energy production, energy conversion and energy storage would be slowed down by a lack of sufficient platinum-group metals, rare-earth metals and scarce metals like gallium. This includes large-scale application of high-efficiency solar cells and fuel cells and large-scale electrification of land-based transport.” Deideren points out that Gallium, Germanium, Indium and Tellurium are crucial for renewable technologies but are by-products currently available in low quantity from the mining of other minerals.  If the latter peak so will the availability of the former.

Scarcities in one domain often have knock-on and negative feedback effects in others.  Diederan says, “The most striking (and perhaps ironic) consequence of a shortage of metal elements is its disastrous effect on global mining and primary production of fossil fuels and minerals: these activities require huge amounts of main and ancillary equipment and consumables (e.g. barium for barite based drilling mud)”. (p. 9.)

The ecomodernist’s response must be to advocate mining poorer grade ores, but this means dealing with marked increases in energy and environmental costs.

  • The quantity of rock that has to be dug up increases. For ores at half the initial grade the quantity doubles, and so does the energy needed to dig, transport and crush it.
  • Poorer ores require finer grinding and more chemical reagents to release mineral components, meaning greater energy demand and waste treatment.
  • Meanwhile the easiest deposits to access are being depleted so it takes more energy to find, get to, and work the newer ones. They tend to be further away, deeper, and smaller.
  • Processing rich ores can be chemically quite different to processing poor ores. Only a very small proportion of any mineral existing in the earth’s crust has been concentrated by natural processes into ore deposits, between .001% and .01%, and the rest exists in common rock, mostly in silicates which are more energy-intensive to process than oxides and sulphides.  To extract a metal from its richest occurrence in common rock would take 10 to 100 times as much energy as to extract if from the poorest ore deposit. To extract a unit of copper from the richest common rocks would require about 1000 times as much energy per kg as is required to process ores used today.

Now consider the minerals situation in relation to the multiples issue. At present only a few countries are using most of the planet’s minerals production.  For instance the per capita consumption of iron ore for the ten top consuming countries is actually around 90 times the figure for all other countries combined. (Weidmann et al., 2013.) How long would mineral supply hold up, at what cost, if 9 – 10 people billion were to try to rise to rich world “living standards”? How likely is it that in view of current ore grade depletion rates and the miniscule decoupling achievement for minerals, the global amount of producing and consuming could multiply by 27, or 120, while the absolute amount of minerals consumed declined markedly?

The ecomodernist cannot hope to deal with the minerals problem without assuming very large scale adoption of nuclear energy, which they are willing to do.

Climate.

Most climate scientists now seem to accept the approach put forward by Meinshausen et al., (2009), and followed by the IPCC (2013) in analyzing in terms of a budget, an amount of carbon release that must not be exceeded if the 2 degree target is to be met.  They estimate that to have a 67% chance of keeping global temperature rise below this the amount of CO2e that can be released between 2000 and 2050 is 1,700 billion tonnes. By 2012 emissions accounted for 36% of this amount, meaning that if the present emission rate is kept up the budget would have been used up by 2033.  Given the seriousness of the possible consequences many regard a 67% chance as being too low and a2 degree rise as too high. (Anderson and Bows, 2008, and Hansen, 2008.)  For an 80% chance the budget limit would be 1,370 billion tonnes.

Few would say there is any possibility of eliminating emissions by 2033. Many emissions come from sources that would be difficult to control or reduce, such as carbon electrodes in the electric production of steel and aluminium. Only about 40% of US emissions come from power generation. Thus power station Carbon Capture and Storage technology cannot solve the problem.

Even the IPCC’s most optimistic emissions reduction scenario, RCP 2.6, could be achieved only if as yet non-existent technology will be able to take 1 billion tonnes of carbon out of the atmosphere every year through the last few decades of this century. (IPCC, 2014.)

Ecomodernists mostly regard the climate problem as solvable by the intensive adoption of nuclear energy. However even the most rapid build conceivable could not achieve the Meinschausen et al. target.

Urbanisation.

About half the world’s people now live in cities, and the ecomodernist strongly advocates increasing this markedly, on the grounds that intensification of settlement will enable freeing more space for nature.  This is an area where knock-on effects are significant. Urban living involves many high resource and ecological costs, including having to move in vast amounts of energy, goods, services and workers, to maintain elaborate infrastructures including those to lift water and people living in high-rise apartments, having to move out all “wastes”, having to provide artificial light, heating, cooling, air purification, having to build freeways, bridges, railways, airports, container terminals, and having to staff complex systems with expensive highly trained professionals and specialists.  Little or none of this dollar, energy, resource or ecological cost has to be met when people live in villages (See on Simpler Way settlements below).

The frequent superficiality and invalidity of the Manifesto’s case is illustrated by the following statement. “Cities occupy just 1 to 3 percent of the Earth’s surface, yet are home to nearly 4 billion people. As such, cities both drive and symbolize the decoupling of humanity from nature, performing far better than rural economies in providing efficiently for material needs…” This statement overlooks the vast areas needed to produce and transport food etc. into the relatively small urban areas. If four billion were to live as San Franciscans do now, with a footprint over 7 ha per person, the total global footprint would be almost 30 billion ha, 200% of the Earth’s surface, not 1- 3%. (WWF, 2014.) Urbanisation does not  “decouple humanity from nature”.

Biological resources and impacts.

Perhaps the most worrying limits being encountered are not to do with minerals or energy but involve the deterioration of biological resources and environmental systems. The life support systems of the planet, the natural resources and processes on which all life on earth depends, are being so seriously damaged that the World Wildlife Fund claims there has been a 30% deterioration since about 1970. Steffen et al., (2015) state much the same situation. A brief reference to a number of impacts is appropriate here to again indicate the magnitude of present problems and their rate of growth.

Biodiversity loss.

Species are being driven to extinction at such an increasing rate that it is claimed the sixth holocaust of biodiversity loss has begun. The rate has been estimated at 114 times the natural background rate. (Ceballos, et al., 2015, Kolbert, 2014.) The numbers or mass of big animals has declined dramatically. “… vertebrate species populations across the globe are, on average, about half the size they were 40 years ago.” (Carrington, 2014.) The mass of big animals in the sea is only 10% of what it was some decades ago. The biomass of corals on the Great Barrier Reef is only half what it was about three decade ago. By the end of the 20th century half the wetlands and one third of coral reefs had been lost. (Washington, 2014.)

Disruption of the nitrogen cycle.

Humans are releasing about as much nitrogen via artificial production, especially for agriculture, as nature releases. This has been identified as one of the nine most serious threats to the biosphere by the Planetary Boundaries Project. (Rockstrom and Raeworth, 2014.)

The increasing toxicity of the environment.

Large volumes of artificially produced chemicals are entering ecosystems disrupting and poisoning them.  This includes the plastics concentrating in the oceans and killing marine life.

Water.

Serious water shortages are impacting in about 80 countries. More than half the world’s people live in countries where water tables are falling. Over 175 million Indians and 130 million Chinese are fed by crops watered by pumps running at unsustainable rates. (Brown, 2011, p. 58.) Access to water will probably be the major source of conflict in the world in coming years. About 480 million people are fed by food produced from water pumped from underground. The water tables are falling fast and the petrol to run the pumps might not be available soon. In Australia overuse of water has led to serious problems, such as salinity in the Murray-Darling system. By 2050 the volume of water in these rivers might be cut to half the present amount, as the greenhouse problem impacts.

Fish.

Nearly all fisheries are being over-fished and the global fish catch is likely to go down from here on.  The mass of big fish in the oceans, such as shark and tuna, is now only 10% of what it was some decades ago. Ecomodernists assume that aquaculture will solve the fish supply problem. It is not clear what they think the farmed fish will be fed on.

Oceans.

Among the most worrying effects is the increasing acidification of the seas, dissolving the shells of many ocean animals, including the krill which are at the base of major ocean food chains.  This effect plus the heating of the oceans is seriously damaging corals.  The coral life on the Great Barrier Reef is down 30% on its original level, and there is a good chance the whole reef will be lost in forty years. (Hoegh-Guldberg, 2015.)

Food, land, agriculture.

Food supply will have to double to provide for the expected 2050 world population, and it is increasingly unlikely that this can be done. Food production increase trends are only around 60% of the rate of increase needed. (Ray, et al., 2013.) Food prices and shortages are already serious problems, causing riots in some countries.  If all people we will soon have on earth had an American diet we would need 5 billion ha of cropland, but there are only 1.4 billion ha on the planet and that area is likely to reduce as ecosystems deteriorate, water supply declines, salinity and erosion continue, population numbers and pressures to produce increase, land is used for new settlements and to produce more meat and bio-fuels, and as global warming has a number of negative effects on food production.

Burn, (2015) and Vidal (2010) both report the rate of food producing land loss at 30 million ha p.a. Vidal says, “…the implications are terrifying”, and he believes major food shortages are threatening. Pimentel says one third of all cropland has been lost in the last 40 years. China might be the worse case, losing 600 square miles p.a. in the 1950 – 1970 period, but by 2000 the rate had risen to 1,400 square miles p.a.  For 50 years about 500 villages have had to be abandoned every year due to incoming sand from the expanding deserts. If the estimates by Burn and Vidal are correct then more than 1 billion ha of cropland will have been lost by 2050, which is two-thirds of all cropland in use today.

The Ecomodernist Manifesto devotes considerable attention to the issue of future food production, using it as an example of the wonders technical advance can bring, including liberating peasants from backbreaking work. It is claimed that advances in modern agriculture will enable production of far more food on far less land, enabling much land to go back to nature. There is no recognition of the fact that modern agriculture is grossly unsustainable, on many dimensions.  It is extremely energy intensive, involving large scale machinery, international transport, energy-intensive inputs of fertilizer and pesticides, packaging, warehousing, freezing, dumping of less than perfect fruit and vegetables, serious soil damage through acidification and compaction, carbon loss and erosion, the energy-costly throwing away of nutrients in animal manures, the destruction of small scale farming and rural communities, the loss of the precious heritage that is genetic diversity … and the loss of food nutrient and taste quality (most evident in the plastic tomato.)

On all these dimensions peasant and home gardening and other elements in local agriculture such as ”edible landscapes”, community gardens and commons are superior. The one area where modern agriculture scores better is to do with labour costs, but that is due to the use of all that energy-intensive machinery. Ecomodernists do not seem to realize what a fundamental challenge is set for them by the well-established “inverse productivity relationship”, i.e., the fact that small scale food producers achieve higher yields per ha. (Smaje, 2015a, 2015b.) They are able to almost completely avoid food packaging, advertising and transport costs, to recycle all nutrients to local soils, benefit from overlaps and multiple functions (e.g., geese weed orchards, ducks eat snails, kitchen scraps feed poultry…) Possibly most importantly, local food production systems maximize the provision of livelihoods and are fundamental elements in resilient and sustainable communities.

Again a daunting challenge is set for the ecomodernist. Presumably the far higher yields from far less land will involve energy intensive high-rise greenhouses, water desalinisation, aquaculture, near 100% phosphorus and other nutrient recycling, elimination of nitrogen run-off, restoration of soil carbon levels, synthetic meat, and extensive global transport and packaging systems. Again numerical analyses aimed at showing what the energy, materials  and dollar budgets would be, or that the goals can be met, are not offered. In addition a glance at the tech fix vision for future food supply reveals the many knock on effects that would multiply problems in many other areas, most obviously energy, infrastructure and water provision and the associated demand for materials.

A glance at the energy implications for beef production should again establish the magnitude point. To produce one kg of beef take can take 20,000 litres of water, and it can take 4 kWh to desalinize 1 liter of water. Again it is evident that there would have to be very large scale commitment to nuclear energy.

            Summarising the biological resource situation.

The environmental problem is essentially due to the huge and unsustainable volumes of producing and consuming taking place.  Vast quantities of resources are being extracted from nature and vast quantities of wastes are being dumped back into nature. Present flows are grossly unsustainable but the ecomodernist believes the basic commitment to ever-increasing “living standards” that is creating the problems can and should continue, while population multiplies by 1.5, resources dwindle, and consumption multiplies perhaps by eight by 2100.

The energy implications.

In all the fields discussed it is evident that the ecomodernist vision would have to involve a very large increase in energy production and consumption, including for processing lower grade ores, producing much more food from much less land, desalinisation of water, dealing with greatly increased amounts of industrial waste (especially mining waste), and constructing urban infrastructures. The “no-limits-to-growth” scenario for Australia 2050 put forward by Hattfield-Dodds et al. concludes that present energy use would have to multiply by 2.7, more than most if not all other projections, and their scenarios do not take into account the energy needed to deal with any of the knock-on effects discussed above. (And their conclusion is based on a highly implausible rate of decoupling materials use from GDP growth, i.e., up to 4.5% p.a.)

If 9 billion people were to live on the per capita amount of energy Americans now average, world energy consumption in 2050 would be around x5 (for the US to world average ratio) x10/7 (for population growth) times the present 550 EJ p.a., i.e., around 3,930 EJ. Let us assume it is all to come from nuclear reactors, that technical advance cuts one-third off the energy needed to do everything, but that moving to poorer ores, desalinisation etc. and converting to (inefficient) hydrogen supply for many storage and transport functions counterbalance that gain.  The nuclear generating capacity needed would be around 450 times as great as at present.

Conclusions re the significance of the limits to growth.

This brief reference to themes within the general “limits to growth” account makes it clear that the baseline on which ecomodernist visions must build is not given by presentconditions. As Steffen et al. (2015) stress the baseline is one of not just deteriorating conditions, but accelerating deterioration. It is as if the ecomodernists are claiming that their A380 can be got to climb at a 60 degree angle, which is far steeper than it has ever done before, but at present it is in an alarming and accelerating decline with just about all its systems in trouble and some apparently beyond repair. The problem is the wild party on board, passengers and crew dancing around a bonfire and throwing bottles at the instruments, getting more drunk by the minute. A few passengers are saying the party should stop, but no one is listening, not even the pilots. The ecomodernist’s problem is not just about producing far more metals, it is about producing far more as grades decline, it is not just about producing much more food, it is about producing much more despite the fact that problems to do with water availability, soils, the nitrogen cycle, acidification, and carbon loss are getting worse.  It can be argued that on many separate fronts halting the deteriorating trends is now unlikely to be achieved. Yet the ecomodernist wants us to believe that the curves can be made to cease falling and to rise dramatically, without abandoning the quests for affluence and growth which are responsible for their deterioration.  Stopping the party is not thought to warrant consideration.

            The implications for centralisation, control and power.

The ecomodernist vision would have to involve vast, technically sophisticated, expert-run, bureaucratized and centralized global systems, most obviously for the control of the nuclear sector, e.g., to prevent access to weapons grade material. Both corporate and governmental agencies would have to be very large in scale, and relations between the corporate sector and top levels of government would set problems to do with openness, public accountability, democratic control, and corruption. Most production would be from a relatively few gigantic and automated mines, factories, feed lots, mega-greenhouses and plantations compressed into the relatively few best sites.  How this would provide jobs and livelihoods to perhaps 6 billion Third world poor would need to be explained. The provision of large amounts of capital would probably become much more centralised and problematic than it has been in the GFC era.

A “development” model focused on these massive, centralized, expert-dependent and capital intensive systems is not obviously going to improve the already severe problem of global inequality. Mega corporations will run the automated vertical farms and desal plants, assisted by governments who in the past have had no difficulty legislating to clear the locals out of the way, as when Third World governments enable GDP-raising palm oil plantations, logging, big dams and aquaculture. Thus Smaje regards ecomodernism as a new enclosure movement.

Morgan (2012) and Korrowicz (2012) provide disturbing accounts of the fragility and lack of resilience of highly integrated and complex systems. Tainter, (1988), draws attention to the way increasing system complexity leads towards negative synergisms and breakdown. For instance where two roads cross in a village no infrastructure might be needed but in a city multi-million dollar flyovers can be required. As Rome’s road system grew the effort needed just to maintain them grew towards taking up all road building capacity. Among the chief virtues of the small and local path are its robustness, redundancy and resilience, the capacity for simple repairs to simple systems, as well as its capacity to provide livelihoods to large numbers of people.

Above all the ecomodernist vision stands for the rejection of any suggestion that the economy needs altering, let alone scrapping, or that rampant-consumer culture needs to be replaced.  The problems are defined as purely technical. If minerals are becoming scare the solution is not to reduce use of them but to increase production of them. Thus there is no need to think about giving up consumerism, economic growth, the market system or the capitalist system. Radical thought and action need not be considered. Smaje describes it as “neoliberalism with a green veneer.” These messages are as consoling to the present working class and the precariat as they are to the capitalist class.

The mistaken “uni-dimensional” assumption.

Frequently evident in ecomodernist thinking is the way that development, emancipation, technology, progress, comfort, the elimination of disease and hunger are seen to lie along the one path that runs from primitive through peasant worlds to the present and the future.  At the modern end of the dimension there is material abundance, science and high technology, the market economy, freedom from backbreaking work, complex civilization with high educational standards and sophisticated culture. It is taken for granted that your choice is only about where you are on that dimension. Third World “development” can only be about moving up the dimension to greater capital investment, involvement in the global market, trade, GDP and consumer society. Thus they see localism and small is beautiful as “going back”, and condemning billions to continued hardship and deprivation.  Opposition to their advocacy of more modernism is met with, “…well, what period in history do you want to go back to?”

This world-view fails to grasp several things.  The first is the possibility that there might be more than one path; the Zapatista’s do not want to follow our path.  Another is that we  might opt for other end points than the one modernization is taking us to.  A third is that we might deliberately select desirable development goals rather than just accept where modernization takes us, and on some dimensions we might choose not to develop any further.  Ecomodernism has no concept of sufficiency or good enough; Smaje sees how it endorses being incessantly driven to strive for bigger and better, and he notes the spiritual costs. Many ecovillages are developed enough.

Possibly most important, it is conceivable that we could opt for a combination of elements from different points on the path. For instance there is no reason why we cannot have both sophisticated modern medicine and the kind of supportive community that humans have enjoyed for millennia, and have both technically astounding aircraft along with small, cheap, humble, fireproof, home made and beautiful mud brick houses, and have modern genetics along with neighbourhood poultry co-ops. Long ago humans had worked out how to make excellent and quite good enough houses, strawberries, dinners and friendships. We could opt for stable, relaxed, convivial and sufficient ways in some domains while exploring better ways in others, but ecomodernists see only two options; going forward or backward. They seem to have no interest in which elements in modernism are worthwhile and which of them should be dumped. The Frankfurt School saw some of them leading to Auschwitz and Hiroshima.

The inability to think in other than uni-dimensional terms is most tragic with respect to Third World “development”.  Conventional-capitalist development theory can only promise a “growth and trickle down” path, which if it continues would take many decades to lift all to tolerable conditions while the rich rise to the stratosphere, but which cannot continue if the limits to growth analysis of the global situation is correct. Yet The Simpler Way might quickly lift all to satisfactory conditions using mostly traditional technologies and negligible capital. (Trainer, 2012, 2013a, 2013b, Leahy, 2009.)

In his critique of Phillips (2014) Smaje (2015b) sees the Faustian bargain here, the readiness to suffer, indeed embrace, the relentless discontent, struggle, disruption and insecurity that modernism involves, without realizing that we might opt to take the benefits of modernism while dumping the disadvantages and designing ways of life that provide security, stability, a relaxed pace and a high quality of life for all.

A radically alternative vision; The Simpler Way.

Until the last decade or so there was no alternative to the dominant implicit ecomodernist world view, but now significant challenges have emerged, most evidently in the overlapping Eco-village, Degrowth, Transition Towns and localism movements. The fundamental beginning point for these is acceptance of the “limits to growth” case that levels of production, consumption, resource use and ecological impact are extremely unsustainable and that the resulting global problems cannot be solved unless there are dramatic reductions.  The core Simpler Way vision claim is that these reductions can be made while significantly improving the quality of life, even in the richest countries, but not without radical change in systems and lifestyles.  Following is a brief indication of some of the main elements in this vision. (For the detailed account see Trainer, 2011.)

The basic settlement form is the small scale town or suburb, restructured to be a highly self-sufficient local economy running mostly on local resources and requiring a minimal amount of resources and goods to be imported from further afield.  State and national governments would still exist but with relatively few functions. There would be extensive development of local commons such as community watersheds, forests, edible landscapes, workshops and windmills etc. and cooperatives would provide many goods and services. Extensive use could be made of high tech systems but mostly relatively low technologies would be used in small firms and farms, especially earth building, hand tool craft production, Permaculture, community gardening and commons. Leisure committees would maintain leisure rich communities, and other committees would manage orchards, woodlots, agricultural research, and the welfare of disabled, teenage, aged and other groups. Local economies would dramatically reduce the need for vehicles and transport, enabling conversion of many roads to community food production.

These settlements would have to be self-governing via thoroughly participatory procedures, including town meetings and referenda. Citizens are the only ones who can understand local conditions, problems and needs, and they would have to work out the best policies for the town and to own the decisions arrived at. Centralised states could not govern them at all effectively, especially given the much diminished resources that will be available to states.  More importantly the town would not meet its own needs well unless its citizens had a strong sense of empowerment and control and responsibility for their own affairs.

Systems, procedures and the overriding ethos would have to be predominantly cooperative and collective, given the recognition that individual welfare would depend heavily on how well the town was functioning. It would not be likely to thrive unless there was an atmosphere of inclusion and care, solidarity and responsibility.

An entirely new kind of economy would be needed, one that did not grow, rationally geared productive capacity to social need, had per capita levels of production, consumption, resource use and GDP far below current levels, was under public control, and was not driven by market forces, profit or competition. However, there might also be a large sector made up of privately owned small firms and farms, producing to sell in local markets, but operating under careful guidelines set by the town to ensure optimum benefit for the town. The transition period would essentially be about slowly establishing those enterprises, infrastructures, cooperatives, commons and institutions (Economy B) whereby the town developed its capacity to make sure that what needs doing is done, within the exiting mainly fee enterprise system (Economy A.) Over time experience would indicate the best balance between the two, and whether there was any need for the market sector.

There would be many free” goods from the commons, a large non-cash sector involving sharing, giving, helping and voluntary working bees, and almost no finance sector. Small public banks with elected boards would hold savings and arrange loans for maintenance or restructuring.  Some people might pay all their tax by extra contributions to the community working bees. Communities would ensure that there was no unemployment or poverty, no isolation or exclusion, all felt secure, and that all had a livelihood, a worthwhile and valued contribution to make to the town. Because the goal would be material lifestyles that were frugal but sufficient, involving for instance small and very low cost earth built houses, on average people might need to work for money only two days a week. It can be argued that the quality of life would be higher than it is for most people in rich countries today. Lest these ideas seem fanciful, they describe the ways many thousands now live in ecovillages and Transition Towns.

Beyond the town or suburban level there would be regional and national economies, and larger cities containing universities, steel works, and large scale production, e.g., of railway equipment, but their activities would be greatly reduced, and re oriented to provisioning the local economies. There would be little international trade or travel. The termination of the present vast expenditure on wasteful production would enable the amount spent on socially useful R and to be significantly increased.

A detailed analysis of an Australian suburban geography (Trainer, 2016) concludes that technically it would be relatively easy to carry out the very large reductions and restructurings indicated, possibly cutting in energy and dollar costs by around 90%.

It is obvious that the Simpler Way vision could not be realised unless there was enormous “cultural” change, especially away from competitive, acquisitive, maximising individualism and towards frugality, collectivism, sufficiency and responsible citizenship. Fortunately there is now increasing recognition that pursuing ever greater material wealth and GDP is not a promising path to greater human welfare. In a zero-growth settlement there could be no concern with the accumulation of wealth; all would have to be content with stable and secure circumstances, to enjoy non-material life satisfactions, and to be aware that their “welfare” depended not on their individual monetary wealth but on public wealth, i.e., on their town’s infrastructures, systems, edible landscapes, free concerts, working bees, committees, leisure resources, solidarity and morale.

Thus from The Simpler Way perspective the solution to global problems is not a technical issue; it is a value issue. We have all the technology we need to create admirable societies and idyllic lives. But this can’t be done if growth and affluence remain the overriding goals.

At present there would seem to be little chance that a transition to The Simpler Way will be achieved, but that is not central here; the issue is whether this vision or that of the ecomodernist makes more sense.

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Wiebe, C., M. Bruckner, S. Giljum, C. Lutz, and C. Polzin, (2012), “Carbon and materials embodied in the international trade of emerging economies: A multi-regional input-output assessment of trends between 1995 and 2005”, J. Ind. Ecol., 16, 636–646.

Weidmann, T. O., H. Shandl, and D. Moran, (2014), “The footprint of using metals; The new metrics of consumption and productivity,” Environ. Econ. Policy Stud.,  DOI 10.1007/s10018-014-0085-y

Wiedmann, T. O., H. Schandl, M. Lenzen, D. Moran, S. Suh, J. West, and K. Kanemoto, (2015), “The material footprint of nations”, PNAS, 6272 -6276.

Word Wide Fund for Nature, (2014), Living Planet Report,  WWF International, Switzerland.





“But Can’t Technical Advance Solve the Problems?”

16 07 2016

More from Ted Trainer…..

tedtrainer

Ted Trainer

Ted Trainer.

9.4.16

The “limits to growth” analysis argues that the pursuit of affluent lifestyles and economic growth are the basic causes of the many alarming global problems we are running into.  We have environmental destruction, resource depletion, an impoverished Third World, problems of armed conflict and deteriorating cohesion and quality of life in even the richest countries…essentially because the levels of producing and consuming going on are far too high.  There is no possibility of these levels being maintained, let alone spread to all the world’s people. We must shift to far lower levels of consumption in rich countries. (For the detail see Trainer, 2011.)

The counter argument most commonly raised against the limits case is that the development of better technology will solve the problems, an enable us to go on living affluently in growth economies.  Almost everyone seems to hold this belief. It has recently been reasserted as “Ecomodernism.” (For the main statements see Asaef-Adjaye, 2016, and  Blomqvist, Nordhaus Shellenbeger, 2015. For a detailed critique see Trainer 2016a.)

It is not surprising that this claim is regarded as plausible, because technology does constantly achieve miraculous breakthroughs, and publicity is frequently given to schemes that are claimed could be developed to solve this or that problem.  However there is a weighty case that technical advance will not be able to solve the major global problems we face.

The Simpler Way view is that technical advances cannot solve the big global problems and therefore we must change to lifestyles and social systems which do not generate those problems.  This could easily be done if we wanted to do it, and it would actually enable a much higher quality of life than most of us have now in consumer society.  But it would involve abandoning the quest for affluent lifestyles and limitless economic growth…so it is not at all likely that this path will be taken.

The problems are already far too big for technical advance alone to solve.

Most people have little idea how serious the main problems are, or how far beyond sustainable levels we are. Here are some indicators of how far we have exceeded the limits to growth.

  • The 2007 IPCC Report said that if greenhouse gas emissions are to be kept to a “safe” level they must be cut by 50-80% by 2050, and more after that. The 50% figure would mean that the average American or Australian would have to go down to under 5% of their present per capita emission rate. Some argue that all emissions should cease well before 2030. (Anderson and Bows, 2009, Hansen, 2008, Spratt, 2014.
  • By 2050 the amount of productive land on the planet per capita will be 0.8 ha (assuming we will stop damaging and losing land.)  The present amount required to give each Australian their lifestyle is 8 ha.  This means we are 10 times over a sustainable amount, and there is not the slightest possibility of all the world’s people ever rising to anywhere near our level.
  • Australians use about 280 GJ of energy per capita p.a.  Are we heading for 500 GJ/person/y by 2050?  If all the world’s expected 9.7 billion people were to live as we live world energy supply would have to be around 4,500 EJ/y…which is 9 times the present world energy production and consumption.
  • Almost all resources are scarce and dwindling. Ore grades are falling, and there have been food and water riots. Fisheries and tropical forests are in serious decline. Yet only about one-fifth of the world’s people are using most of these; what happens when the rest rise to our levels?
  • Many of the world’s ecosystems are in alarmingly rapid decline.  This is essentially because humans are taking so much of the planet’s area,  and 40% of the biological productivity of the lands.  We are causing a holocaust of biodiversity die-off mainly because we are taking the habitats other species need.  Of about 8 billion ha of productive land we have taken 1.4 billion ha for cropland, and about 3.5 billion ha for grazing.  We are depleting most of the fisheries.  The number of big fish in the oceans is down to 10% of what it was. We are destroying around 15 million ha of tropical forest every year.  And if all 9 billion people expected are going to live as we do now, resource demands would be about 10 times as great as they are now.  There are many other environmental impacts that are either past the limits biologists think are tolerable, or approaching them, including the rate of nitrogen release, ozone destruction, chemical poisoning of the earth and atmospheric aerosol loads. (Rockstrom, 2009.)
  • The World Wildlife Fund estimates that we are now using up resources at a rate that it would take 1.5 planet earths to provide sustainably. (WWF, 2014.) If 9.7 billion are to live as we expect to in 2050 we will need more than 20 planet earths to harvest from.

These are some of the many ways in which we have already greatly exceeded the planet’s capacity to meet human demands, and they define the task the tech-fix believer is faced with.  So ask the tech-fix optimist, “If technology is going to solve our problems, when is it going to start?  Just about all of them seem to be getting worse at present.”

Now add the absurdity of economic growth.

These and many other facts and figures only indicate the magnitude of the present problems caused by over-production and over-consumption.  To this alarming situation we must now add the fact that our society is committed to rapid and limitless increases in “living standards” and GDP; i.e., economic growth is the supreme goal.

If we Australians have 3% p.a. economic growth to 2050, and by then all 9.7 billion people will have come up to the “living standards” we will have by then, the total amount of economic production in the world each year will be about 20 times as great as it is now.  The present amount of production and resource use is grossly unsustainable, yet we are committed to economic system which will see these rates multiplied 20 times by 2050.

And note that most of the resources and ecosystems we draw on to provide consumer lifestyles are deteriorating. The WWF’s Footprint index tells us that at present we would need 1.5 planet Earth’s to provide the resources we use sustainably. So the Tech-fix advocate’s task is to explain how we might cope with a resource demand that is 20×1.5 = 30 times a currently sustainable level by 2050…and twice as much by 2073 given 3% p.a. growth.

Huge figures such as these define the magnitude of the problem for technical-fix believers.  We are far beyond sustainable levels of production and consumption; our society is grossly unsustainable, yet its fundamental determination is to increase present levels without limit.  If technical advance is going to solve the problems caused by all that producing and consuming it must cut resource use and impacts by a huge multiple…and keep it down there despite endless growth.  Now ask the tech-fix believer what precisely he thinks will enable this.

Faith-based tech-fix optimism.

At this point we usually find that the belief in tech–fix is nothing but a faith, and one that has almost no supporting evidence.   Because technology has achieved many wonders it is assumed that it will come up with the required solutions, somehow.  This is as rational as someone saying, “I have a very serious lung disease, but I still smoke five packs of cigarettes a day, because technical advance could come up with a cure for my disease.”  This argument is perfectly true… and perfectly idiotic.  If you are on a path that is clearly leading to disaster the sensible thing is to get off it.  If technology does come up with solutions then it might make sense to get back on that path again.

The tech-fix optimist should be challenged to show in detail what are the grounds for us accepting that solutions will be found, to each and every one of the big problems we face.  What precisely might solve the biodiversity loss problem, the water shortage, the scarcity of phosphorus, the collapse of fish stocks, etc., and how likely are these possible beak-throughs?   Does it not make better sense to change from the lifestyles and systems that are causing these problems, at least until we can see that we can solve the resulting problems?

It should be stressed that the argument here is not to deny or undervalue the many astounding advances being made all the time in fields like medicine, astronomy, genetics, sub-atomic physics and IT, or to imply that these will not continue. The point is that technical advance is very unlikely to come up with ways that solve the resource and environmental problems being generated by affluent lifestyles.  The argument is that when the magnitude of the task (above) and the evidence on the significance of technical advance for resource and ecological problems is considered (below), tech-fix faith is seen to be extremely unwarranted … and the solutions have to be sought in terms of shifting to a Simpler Way of some kind.

Amory Lovins and Factor 4 or 5 reductions.

For decades Amory Lovins has been possibly the best known of several people who argue that technical advances could cut resource use per unit of GDP considerably.  He says we could in effect have 4 times the output with the same impact.  (Von Weizacher and Lovins, 1997).  But the above numbers make it clear that this is far from sufficient.  If by 2050 we should cut ecological impact and resource use in half (remember footprint and other indices show this is far from enough), but we also increase economic output by 20, then we’d need a factor 40 reduction, not Factor 4…and resource demand would be twice as high in another 23 years if 3% growth continued.

The factors limiting what technical advance can do.

It is important to keep in mind that there are several factors which typically determine the gains a technical advance actually enables are well below those that seem possible at first.  Engineers and economists make the following distinctions.

  • “Technical potential.”  This is what the technology could achieve if fully applied with no regard to cost or other problems.
  • Economic (or ecological) potential”.  This is usually much less than the technical potential because to achieve all the gains that are technically possible would cost too much.  For instance it is technically possible for passenger flights to be faster than sound, but it is far too costly.  It would be technically possible to recycle all lead used, but it would be much too costly in dollars and convenience to do so. Some estimate that it would be technically possible to harvest 1,400 million ha for biomass energy per year, but when ecologically sensitive regions are taken out some conclude that the yield could only be 250 million ha or less. (World Wildlife Fund, 2010, p. 181.)  The WWF study quotes Smeets and Faiij (2007) as finding that it would be technically possible for the world’s forests to produce another 64 EJ/y of biomass energy p.a., but Field, Campbelo and Lobell (2007) conclude that only 27 EJ/y can be obtained, under 2 per cent of the Smeets and Faiij figure.
  • What are the net gains?  Enthusiastic claims about a technical advance typically focus on the gains and not the costs which should be subtracted to give a net value.  For instance the energy needed to keep buildings warm can be reduced markedly, but it costs a considerable amount of energy to do this, in the electricity needed to run the air-conditioning and heat pumps, and in the energy embodied in the insulation and triple glazing.

The WWF Energy Report (2010) claims that big savings can be made in building heating and cooling, but their Figs. 3 – 11 and 3 – 12 show that although their measures would reduce heat used in buildings by 90%, electricity used would increase c. 50% (and there is no reference to what the embodied energy cost of manufacturing the equipment and insulation might be.)  The graphs don’t seem to show any net reduction in building energy use.

The Green Revolution doubled food yields, but only by introducing crops that required high energy inputs in the form of expensive fertilizers, seeds and irrigation.  One result was that large numbers of very poor farmers went out of business because they couldn’t afford the inputs.

Similarly, it is possible to solve some water supply problems by desalination, but only by increasing the energy and greenhouse problems.

  • What is socially/politically possible?  Then there are limits set by what people will accept.  It would be technically possible for many people in Sydney to get to work by public transport, but large numbers would not give up the convenience of their cars even if they saved money doing so.  The energy efficiency of American cars is much lower than what is technically possible, and in fact lower than it was decades ago … because many people want energy-intensive vehicles.  Australians are now building the biggest and most energy wasteful houses in the world.  A beautiful, tiny, sufficient mud brick house could be built for less than $10,000…but most people would not want one.  These examples make it clear that the problems of over-consumption in many realms are mainly social rather than technical, and that they can’t be solved by technical advance.  The essential tech-fix issue is to do with whether or not the problems can be solved by technical advances which allow us to go on living and consuming as we were before, or whether we must change to values and behaviour that don’t cause problems.
  • The Jevons or “rebound” effect.  Then there is the strong tendency for savings made possible by a technical advance to be spent on consuming more of the thing saved or something else.  For instance if we found how to get twice the mileage per litre of petrol many would just drive a lot more, or spend the money saved on buying more of something else.  The Indians have recently developed a very cheap car, making it possible for many more low income people to drive, consume petrol and increase greenhouse gases.

So it is always important to recognise that an announced technical miracle breakthrough probably refers to its technical potential but the savings etc. that it is likely to enable in the real world will probably be well below this.

Some evidence on technical advance in the relevant fields.

Again the focus here is on fields which involve high resource or ecological impacts and demands, not on the many advances being made in fields like medicine or particle physics. It should not be assumed that in general rapid, large or continuous technical gains are being routinely made in the relevant fields, especially in crucial areas such as energy efficiency. Ayres (2009) notes that for many decades there have been plateaus for the efficiency of production of electricity and fuels, electric motors, ammonia and iron and steel production.  The efficiency of electrical devices in general has actually changed little in a century (Ayres, 2009, Figs. 4.1 and 4.19, p. 127.)  “…the energy efficiency of transportation probably peaked around 1960”.  (p. 126), probably due to increased use of accessories.  Ayres’ Fig. 4.21a shows no increase in the overall energy efficiency of the US economy since 1960. (p. 128.)  He notes that reports tend to publicise particular spectacular technical advances and this can be misleading regarding long term average trends across whole industries or economies.

We tend not to hear about areas where technology is not solving problems, or appears to have been completely defeated.  Not long ago everyone looked forward to super-sonic mass passenger flight, but with the demise of Concorde this goal has been abandoned.  It would be too difficult and costly, even without an energy crunch coming up.  Sydney’s transport problems cannot be solved by more public transport; more rail and bus would improve things, but not much because the sprawling city has been build for the car on 70 years of cheap oil.  Yes you could solve all its problems with buses and trains, but only at an infinite cost.   The Murray-Darling river can only be saved by drastic reduction in the amount of water being taken out of it.  The biodiversity holocaust taking place could only be avoided if humans stopped taking so much of nature, and returned large areas of farmland and pasture to natural habitat. (For an extremely pessimistic analysis of what future technology might achieve, see Smith and Positrano, 2010.)

Most indices of technical progress, efficiency and productivity show long term tapering towards ceilings.  “But what about Moore’s law, where by computer chip power has followed a steep upward curve?”  Yes in some realms this happens, for a time, but the trend in IT is highly atypical.  (By the way, the advent of computers has not made much difference at all to the productivity of the economy; indeed in recent decades productivity growth indices for national economies have fallen.  This is identified as “The Productivity Paradox.”)

There are two important areas where recent trends seem to run counter to this argument; the remarkable fall in the costs of PV panels and the advent of new batteries. However the significance of these is uncertain. The PV cost is largely due to latge subsidies, very cheap labour, and the general failure of the Chinese economy to pay ecological costs of production. (On the enormous difference the last factor makes see Smith, 2016.)  Thus the real cost, and that which we will have to pay in future is likely to be much higher.  (… the EIA thinks costs will probably rise before long.), The significance of the new battery technology is clouded by the fact that costs would have to fall by perhaps two-thirds before they could be used for grid storage without greatly increasing the cost of power, and it is not likely that there is enough Lithium to enable grid level storage of renewable energy.

The crucial “decoupling” issue.

The fundamentally important element in the tech-fix or ecomodernist position is the belief/claim that resource demand and ecological impact can be “decoupled” from economic growth, that is, that new ways will enable the economy to keep growing and “living standards”, incomes and consumption to continue rising without increasing resource use or environmental damage (or while keeping these down to sustainable levels.) The following passages deal with considerable evidence on decoupling and show this belief to be extremely implausible, to put it mildly.

What about the falling “energy intensity” of the economy?”

The fact that the “energy intensity” of rich world economies, i.e., ratio of GDP to gross energy used within the country has declined is often seen as evidence of decoupling but this is misleading. It does not take into account the large amounts of energy embodied in imports, i.e., energy use we benefit from but does not show up in our national accounts.  (below.) Possibly more important is the long term process of “fuel switching”, i.e., moving to forms of energy which are of “higher quality” and enable more work per unit. For instance a unit of energy in the form of gas enables more value to be created than a unit in the form of coal, because gas is more easily transported, switched on and off, or converted from one function to another, etc. (Stern and Cleveland, 2004, p. 33, Cleveland et al., 1984, Kaufmann, 2004,  Office of Technology Assessments, 1990, Berndt, 1990, Schurr and Netschurt, 1960.)

What about productivity increases?

It is commonly thought that the power of technology is evident in the constantly improving productivity of the economy.  Again this is misleading, firstly because productivity gains have been low and decreasing in recent decades and this is a constant concern and puzzle among economists and politicians. Even the advent of computerisation has had a surprisingly small effect, a phenomenon now labelled the “Productivity Paradox.”

The overlooked role of energy in productivity growth and decoupling.

Most of the productivity growth that  has taken place now seems to have been due not to technical advance but to increased use of energy. Previous analyses have not realized this but have analysed only in terms of labour and capital input “factors of production”. Agriculture is a realm where technical advance has been predominantly a matter of increased energy use. Over the last half century productivity measured in terms of yields per ha or per worker have risen dramatically, but these have been mostly due to even greater increases in the amount of energy being poured into agriculture, on the farm, in the production of machinery, in the transport, pesticide, fertilizer, irrigation, packaging and marketing sectors, and in getting the food from the supermarket to the front door, and then dealing with the waste food and packaging. Less than 2% of the US workforce is now on farms, but agriculture accounts for around 17% of all energy used (not including several of the factors listed above.) Similarly the “Green Revolution” has depended largely on ways that involve greater energy use.

Ayres, et al., (2013), Ayres, Ayres and Warr (2002) and Ayres and Vouroudis (2013) are among those beginning to stress the significance of energy in productivity, and pointing to the likelihood of increased energy problems in future and thus declining productivity. Murillo-Zamorano, (2005, p. 72) says “…our results show a clear relationship between energy consumption and productivity growth.” Berndt (1990) finds that technical advance accounts for only half the efficiency gains in US electricity generation. These findings caution against undue optimism regarding what pure technical advance can achieve independently from increased energy inputs; in general its significance for productivity gains appears not to have been as great as has been commonly assumed.

The productivity trend associated with this centrally important factor, energy, is itself in serious decline, evident in long term data on EROI ratios. Several decades ago the expenditure of the energy in one barrel of oil could produce 30 barrels of oil, but now the ratio is around 18 and falling. The ratio of petroleum energy discovered to energy required has fallen from 1000/1 in 1919 to 5/1 in 2006. (Murphy, 2010.) Murphy and others suspect  that an industrialised society cannot be maintained on a general energy ratio under about 10. (Hall, Lambert and Balough, 2014.)

So when we examine the issue of productivity growth we find little or no support for the general tech-fix faith.  It is not the case that technical breakthroughs are constantly enabling significantly more to be produced per unit of inputs. The small improvements in productivity being made seem to be largely due to changes to more energy-intensive ways, and energy itself is exhibiting marked deterioration in productivity (ie, as evident in its EROI.) Some analysts (e.g., Ayres, 2009, Ayres et al., 2013) believe that any gains occurring now will probably disappear with coming rises in energy scarcity and cost.

Lets examine ewhere materials are used; not general GDP

Evidence on low past and present decoupling achievement.

The historical record suggests that at best rates of decoupling materials and energy use from GDP have been very low or less than zero; i.e., some important measures show materials or energy use to be increasing faster than GDP. It is important not to focus on national measures such as “Domestic Materials Consumption” as these do not take into account materials in imported goods.  For example the OECD (2015) claims that materials used within its countries has fallen 45% per dollar of GDP, but this figure does not take into account materials embodied in imported goods. When they are included rich countries typically show very low or worsening ratios. The commonly available global GDP (deflated) and energy use figures between 1980 and 2008 reveals only a 0.4% p.a. rise in GDP per unit of energy consumed.   Tverberg () reproduces the common plot for global energy use and GWP, showing an almost complete overlay; i.e., no tendency for energy use to fall away from GWP growth.

Weidmann et al. (2014) show that when materials embodied in imports are taken into account rich countries have not improved their resource productivity in recent years. They say “…for the past two decades global amounts of iron ore and bauxite extractions have risen faster than global GDP.” “… resource productivity…has fallen in developed nations.” “There has been no improvement whatsoever with respect to improving the economic efficiency of metal ore use.”

Giljum et al. (2014, p. 324) report only a 0.9% p.a. improvement in the dollar value extracted from the use of each unit of minerals between 1980 and 2009, and that over the 10 years before the GFC there was no improvement. “…not even a relative decoupling was achieved on the global level.” Their Fig. 2, shows that over the period 1980 to 2009 the rate at which the world decoupled materials use from GDP growth was only one third of that which would have achieved an “absolute” decoupling, i.e., growth of GDP without any increase in materials use. It must be stressed here that, as they point out, these findingss would have been worse had the production of much rich world consumption not been outsourced to the Third World (that is, had energy embodied in imports been included.)

Diederan’s account (2009) of the productivity of minerals discovery effort is even more pessimistic. Between 1980 and 2008 the annual major deposit discovery rate fell from 13 to less than 1, while discovery expenditure went from about $1.5 billion p.a. to $7 billion p.a., meaning the productivity expenditure fell by a factor in the vicinity of around 100, which is an annual decline of around 40% p.a. Recent petroleum figures are similar; in the last decade or so discovery expenditure more or less trebled but the discovery rate has not increased.

A recent paper in Nature by a group of 18 scientists at the high-prestige Australian CSIRO (Hatfield-Dodds et al., 2015) argued that decoupling could eliminate any need to worry about limits to growth at least to 2050. The article contained no support for the assumption that the required rate of decoupling was achievable and when it was sought (through personal communication) reference was made to the paper by Schandl et al. (2015.)  However that paper contained the following surprising statements, “ … there is a very high coupling of energy use to economic growth, meaning that an increase in GDP drives a proportional increase in energy use.”  (They say the EIA, 2012, agrees.) “Our results show that while relative decoupling can be achieved in some scenarios, none would lead to an absolute reduction in energy or materials footprint.” In all three of their scenarios “…energy use continues to be strongly coupled with economic activity…”

The Australian Bureau of Agricultural Economics (ABARE, 2008) reports that the energy efficiency of energy-intensive industries is likely to improve by only 0.5% p.a. in future, and of non-energy-intensive industries by 0.2% p.a. In other words it would take 140 years for the energy efficiency of the intensive industries to double the amount of value they derive from a unit of energy.

Alexander (2014) concludes his review of decoupling by saying, ”… decades of extraordinary technological development have resulted in increased, not reduced, environmental impacts.”  Smil (2014) concludes that even in the richest countries absolute dematerialization is not taking place. Alvarez found that for Europe, Spain and the US GDP increased 74% in 20 years, but materials use actually increased 85%. (Latouche, 2014.) Similar conclusions re stagnant or declining materials use productivity etc. are arrived at by Aadrianse, 1997, Dettrich et al., (2014), Schutz, Bringezu and Moll, (2004), Warr, (2004), Berndt, (undated), and Victor (2008, pp. 55-56).

A version of the decoupling thesis is the “Environmental Kuznets Curve”, i.e., the claim that as economic development takes place environmental impacts increase but then decrease. The evidence on this thesis indicates that it is not correct. Greenhouse gas emissions give us a glaring example. Alexander concludes his review, (2014),  “If the EKC hypothesis sounds too good to be true, that is because, on the whole, it is false.”

These sources and figures indicate the apparently total lack of support for the ecomodernists’ optimism. They are assuming that there can be massive absolute decoupling, i.e., that by 2050 energy, materials and ecological demand associated with $1 of GDP can be reduced by a factor of around 30. There appears to be noecomodernist literature that even attempts to provide good reason to think a general absolute decoupling is possible, let alone on the required scale. (I have made about five attempts to have such evidence sent to me from the leading ecomodernist authors, without receiving any.)

            The changing components of GDP.

There is another consideration that makes the situation much worse. Over recent decades there has been a marked increase in the proportion of rich nation GDP that is made up of “financial” services. These stand for “production” that takes the form of key strokes that move electrons around.  A great deal of it is wild speculation, making risky loans and making computer driven micro-second switches in “investments”. These operations deliver massive increases in income to banks and managers, commissions, loans, interest, consultancy fees.  These make a big contribution to GDP figures. In one recent year 40% of US corporate profits came from the finance sector. It could be argued that this domain should not be included in estimates of productivity because it misleadingly inflates the numerator in the output/labour ratio.

This means that the most significant measures will be to do with industries that use material and ecological inputs.  The crucial question is, in those industries that are causing the pressure on resources and ecosystems is significant decoupling taking place? However when output per worker in the production of “real” goods and services such as food and vehicles, or aged care is considered we do not seem to find reassuring evidence of decoupling.  Again agricultural industry provides some of the best examples. Over the last 50 years there has been a huge increase in energy used in fuel, pesticides, fertilizers, transport, packaging, marketing and waste treatment. Kowalski (2011) reports that between 1960 and 2010 world cereal production increased 250%, but nitrogen fertilizer use in cereal production increased 750%. Between 1997 and 2002 the US household use of energy on food increased 6 times as fast as use for all household purposes. (Canning et al., 2010.)

The enormous implications for energy demand.

The main ecomodernist texts make clear that if the technical advances envisaged could not take place unless there was extremely large scale increase in the amount of energy produced.  They look forward to shifting a large fraction of agriculture off land into intensive systems such as high rise greenhouses and acquaculture, massive use of desalination for water supply, processing lower grade ores, dealing with greatly increased amounts of industrial waste (especially mining waste), and constructing urban infrastructures for billions to live in as they propose shifting people from the land to allow more of it to be returned to nature.  They do not think renewable energy sources can provide these quantities of energy, so their proposals would have to involve very large numbers of fourth generation nuclear reactors (which run on plutonium). How large?

If 9 billion people were to live on the per capita amount of energy Americans now average, world energy consumption in 2050 would be around x5 (for the US to world average ratio) x10/7 (for population growth) times the present 550 EJ p.a., i.e., around 3,930 EJ. The nuclear generating capacity needed would be around 450 times as great as at present.

And the baseline is deteriorating…

The general “limits to growth” analysis of the global situation makes it clear that the baseline on which ecomodernist visions must build is not given by present conditions such as resource availability. As Steffen et al. (2015) and many others stress the baseline is one of not just deteriorating conditions, but accelerating deterioration.

It is as if the ecomodernists are claiming that their A380 can be got to climb at a 60 degree angle, which is far steeper than it has ever done before, but at present it is in an alarming and accelerating decline with just about all its systems in trouble and some apparently beyond repair. The problem is the wild party on board, passengers and crew dancing around a bonfire and throwing bottles at the instruments, getting more drunk by the minute. A few passengers are saying the party should stop, but no one is listening, not even the pilots. The ecomodernist’s problem is not just about producing far more metals, it is about producing far more as grades decline, it is not just about producing much more food, it is about producing much more despite the fact that problems to do with water availability, soils, the nitrogen cycle, acidification, and carbon loss are getting worse.  It can be argued that on many separate fronts halting the deteriorating trends is now unlikely to be achieved. Yet the ecomodernist wants us to believe that the curves can be made to cease falling and to rise dramatically, without abandoning the quests for affluence and growth which are responsible for their deterioration.  Stopping the party is not thought to warrant consideration.

This is not an argument against technology.

Research and development and improving things are obviously important and in The Simpler Way vision we would have more resources going into technical research than we have now despite a much lower GDP, because we would have phased out the enormous waste of resources that occurs in consumer-capitalist society.  But it is a mistake to think that the way to solve our problems is to develop better technology.  That will not solve the problems, because they are far too big, and they are being generated by trying to live in ways that generate impossible resource demands. The big global problems have been caused by our faulty social systems and values.  The solution is to develop ways and systems that don’t generate the problems, and this requires movement away from affluent, high energy, centralised, industrialised, globalised etc., systems and standards. Above all it requires a shift from obsession with getting rich, consuming and acquiring property. It requires a willing acceptance of frugality and sufficiency, of being content with what is good enough.

Hundreds of years ago we knew how to produce not just good enough but beautiful food, houses, cathedrals, clothes, concerts, works of art, villages and communities, using little more than hand tools and crafts.  Of course we should use modern technologies including computers (if we can keep the satellites up there) where these make sense.  But we don’t need much high-tech to design and enjoy high quality communities.

Some of our most serious problems are to do with social breakdown, depression, stress, and falling quality of life.  These problems will not be solved by better technology, because they derive from faulty social systems and values.  Technical advances often make these problems worse, e.g., by increasing the individual’s capacity to live independently of others and community, and by enabling machines to cause unemployment. Especially worrying is the fact that ecomodernist dreams would involve massive globally integrated professional and corporate run systems involving centralised control and global regulatory systems (e.g., to prevent proliferation of radioactive materials from all those reactors.  Firstly this is not a scenario that will have a place for billions of poor people.  It will enable a few super-smart techies, financiers and CEOs to thrive, making inequality far more savage, and it will set impossible problems for democracy because there will be abundant opportunities for those in the centre to sdrure their own interests, to be corrupt and secretive. (See Richard Smith’s disturbing account of China today: 2015.)

(For a detail account of The Simpler Way vision of a sustainable and satisfactory society see The Simpler Way website,  thesimplerway.info and  in particular thesimplerway.info/THEALTSOCLong.htm

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ABARE, (2008), Australian Energy Projections to 2029-30.  http://www.abare.gov.au/publications_html/energy/energy_10/energy_proj.pdf

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