We Could Be Witnessing the Death of the Fossil Fuel Industry—Will It Take the Rest of the Economy Down With It?

24 04 2016


Nafeez Mosaddeq Ahmed

Originally published on Alternet’s website, this compelling article by Nafeez Ahmed supports much of what has been published on Damnthematrix…..

It’s not looking good for the global fossil fuel industry. Although the world remains heavily dependent on oil, coal and natural gas—which today supply around 80 percent of our primary energy needs—the industry is rapidly crumbling.

This is not merely a temporary blip, but a symptom of a deeper, long-term process related to global capitalism’s escalating overconsumption of planetary resources and raw materials.

New scientific research shows that the growing crisis of profitability facing fossil fuel industries is part of an inevitable period of transition to a post-carbon era.

But ongoing denialism has led powerful vested interests to continue clinging blindly to their faith in fossil fuels, with increasingly devastating and unpredictable consequences for the environment.

Bankruptcy epidemic

In February, the financial services firm Deloitte predicted that over 35 percent of independent oil companies worldwide are likely to declare bankruptcy, potentially followed by a further 30 percent next year—a total of 65 percent of oil firms around the world. Since early last year, already 50 North American oil and gas producers have filed bankruptcy.

The cause of the crisis is the dramatic drop in oil prices—down by two-thirds since 2014—which are so low that oil companies are finding it difficult to generate enough revenue to cover the high costs of production, while also repaying their loans.

Oil and gas companies most at risk are those with the largest debt burden. And that burden is huge—as much as $2.5 trillion, according to The Economist. The real figure is probably higher.

At a speech at the London School of Economics in February, Jaime Caruana of the Bank for International Settlements said that outstanding loans and bonds for the oil and gas industry had almost tripled between 2006 and 2014 to a total of $3 trillion.

This massive debt burden, he explained, has put the industry in a double-bind: In order to service the debt, they are continuing to produce more oil for sale, but that only contributes to lower market prices. Decreased oil revenues means less capacity to repay the debt, thus increasing the likelihood of default.

Stranded assets

This $3 trillion of debt is at risk because it was supposed to generate a 3-to-1 increase in value, but instead—thanks to the oil price decline—represents a value of less than half of this.

Worse, according to a Goldman Sachs study quietly published in December last year, as much as $1 trillion of investments in future oil projects around the world are unprofitable; i.e., effectively stranded.

Examining 400 of the world’s largest new oil and gas fields (except U.S. shale), the Goldman study found that $930 billion worth of projects (more than two-thirds) are unprofitable at Brent crude prices below $70. (Prices are now well below that.)

The collapse of these projects due to unprofitability would result in the loss of oil and gas production equivalent to a colossal 8 percent of current global demand. If that happens, suddenly or otherwise, it would wreck the global economy.

The Goldman analysis was based purely on the internal dynamics of the industry. A further issue is that internationally-recognized climate change risks mean that to avert dangerous global warming, much of the world’s remaining fossil fuel resources cannot be burned.

All of this is leading investors to question the wisdom of their investments, given fears that much of the assets that the oil, gas and coal industries use to estimate their own worth could consist of resources that will never ultimately be used.

The Carbon Tracker Initiative, which analyzes carbon investment risks, points out that over the next decade, fossil fuel companies risk wasting up to $2.2 trillion of investments in new projects that could turn out to be “uneconomic” in the face of international climate mitigation policies.

More and more fossil fuel industry shareholders are pressuring energy companies to stop investing in exploration for fear that new projects could become worthless due to climate risks.

“Clean technology and climate policy are already reducing fossil fuel demand,” said James Leaton, head of research at Carbon Tracker. “Misreading these trends will destroy shareholder value. Companies need to apply 2C stress tests to their business models now.”

In a prescient report published last November, Carbon Tracker identified the energy majors with the greatest exposures—and thus facing the greatest risks—from stranded assets: Royal Dutch Shell, Pemex, Exxon Mobil, Peabody Energy, Coal India and Glencore.

At the time, the industry scoffed at such a bold pronouncement. Six months after this report was released—a week ago—Peabody went bankrupt. Who’s next?

The Carbon Tracker analysis may underestimate the extent of potential losses. A new paper just out in the journal Applied Energy, from a team at Oxford University’s Institute for New Economic Thinking, shows that the “stranded assets” concept applies not just to unburnable fossil fuel reserves, but also to a vast global carbon-intensive electricity infrastructure, which could be rendered as defunct as the fossil fuels it burns and supplies to market.

The coming debt spiral

Some analysts believe the hidden trillion-dollar black hole at the heart of the oil industry is set to trigger another global financial crisis, similar in scale to the Dot-Com crash.

Jason Schenker, president and chief economist at Prestige Economics, says: “Oil prices simply aren’t going to rise fast enough to keep oil and energy companies from defaulting. Then there is a real contagion risk to financial companies and from there to the rest of the economy.”

Schenker has been ranked by Bloomberg News as one of the most accurate financial forecasters in the world since 2010. The US economy, he forecasts, will dip into recession at the end of 2016 or early 2017.

Mark Harrington, an oil industry consultant, goes further. He believes the resulting economic crisis from cascading debt defaults in the industry could make the 2007-8 financial crash look like a cakewalk. “Oil and gas companies borrowed heavily when oil prices were soaring above $70 a barrel,” he wrote on CNBC in January.

“But in the past 24 months, they’ve seen their values and cash flows erode ferociously as oil prices plunge—and that’s made it hard for some to pay back that debt. This could lead to a massive credit crunch like the one we saw in 2008. With our economy just getting back on its feet from the global 2008 financial crisis, timing could not be worse.”

Ratings agency Standard & Poor (S&P) reported this week that 46 companies have defaulted on their debt this year—the highest levels since the depths of the financial crisis in 2009. The total quantity in defaults so far is $50 billion.

Half this year’s defaults are from the oil and gas industry, according to S&P, followed by the metals, mining and the steel sector. Among them was coal giant Peabody Energy.

Despite public reassurances, bank exposure to these energy risks from unfunded loan facilities remains high. Officially, only 2.5 percent of bank assets are exposed to energy risks.

But it’s probably worse. Confidential Wall Street sources claim that the Federal Reserve in Dallas has secretly advised major U.S. banks in closed-door meetings to cover-up potential energy-related losses. The Federal Reserve denies the allegations, but refuses to respond to Freedom of Information requests on internal meetings, on the obviously false pretext that it keeps no records of any of its meetings.

According to Bronka Rzepkoswki of the financial advisory firm Oxford Economics, over a third of the entire U.S. high yield bond index is vulnerable to low oil prices, increasing the risk of a tidal wave of corporate bankruptcies: “Conditions that usually pave the way for mounting defaults—such as growing bad debt, tightening monetary conditions, tightening of corporate credit standards and volatility spikes – are currently met in the U.S.”

The end of cheap oil

Behind the crisis of oil’s profitability that threatens the entire global economy is a geophysical crisis in the availability of cheap oil. Cheap here does not refer simply to the market price of oil, but the total cost of production. More specifically, it refers to the value of energy.

There is a precise scientific measure for this, virtually unknown in conventional economic and financial circles, known as Energy Return on Investment—which essentially quantifies the amount of energy extracted, compared to the inputs of energy needed to conduct the extraction. The concept of EROI was first proposed and developed by Professor Charles A. Hall of the Department of Environmental and Forest Biology at the State University of New York. He found that an approximate EROI value for any energy source could be calculated by dividing the quantity of energy produced by the amount of energy inputted into the production process.

Therefore, the higher the EROI, the more energy that a particular source and technology is capable of producing. The lower the EROI, the less energy this source and technology is actually producing.

A new peer-reviewed study led by the Institute of Physics at the National Autonomous University of Mexico has undertaken a comparative review of the EROI of all the major sources of energy that currently underpin industrial civilization—namely oil, gas, coal, and uranium.

Published in the journal Perspectives on Global Development and Technology, the scientists note that the EROI for fossil fuels has inexorably declined over a relatively short period of time: “Nowadays, the world average value EROI for hydrocarbons in the world has gone from a value of 35 to a value of 15 between 1960 and 1980.”

In other words, in just two decades, the total value of the energy being produced via fossil fuel extraction has plummeted by more than half. And it continues to decline.

This is because the more fossil fuel resources that we exploit, the more we have used up those resources that are easiest and cheapest to extract. This compels the industry to rely increasingly on resources that are more difficult and expensive to get out of the ground, and bring to market.

The EROI for conventional oil, according to the Mexican scientists, is 18. They estimate, optimistically, that: “World reserves could last for 35 or 45 years at current consumption rates.” For gas, the EROI is 10, and world reserves will last around “45 or 55 years.” Nuclear’s EROI is 6.5, and according to the study authors, “The peak in world production of uranium will be reached by 2045.”

The problem is that although we are not running out of oil, we are running out of the cheapest, easiest to extract form of oil and gas. Increasingly, the industry is making up for the shortfall by turning to unconventional forms of oil and gas—but these have very little energy value from an EROI perspective.

The Mexico team examine the EROI values of these unconventional sources, tar sands, shale oil, and shale gas: “The average value for EROI of tar sands is four. Only ten percent of that amount is economically profitable with current technology.”

For shale oil and gas, the situation is even more dire: “The EROI varies between 1.5 and 4, with an average value of 2.8. Shale oil is very similar to the tar sands; being both oil sources of very low quality. The shale gas revolution did not start because its exploitation was a very good idea; but because the most attractive economic opportunities were previously exploited and exhausted.”

In effect, the growing reliance on unconventional oil and gas has meant that, overall, the costs and inputs into energy production to keep industrial civilization moving are rising inexorably.

It’s not that governments don’t know. It’s that decisions have already been made to protect the vested interests that have effectively captured government policymaking through lobbying, networking and donations.

Three years ago, the British government’s Department for International Development (DFID) commissioned and published an in-depth report, “EROI of Global Energy Resources: Status, Trends and Social Implications.” The report went completely unnoticed by the media.

Its findings are instructive: “We find the EROI for each major fossil fuel resource (except coal) has declined substantially over the last century. Most renewable and non-conventional energy alternatives have substantially lower EROI values than conventional fossil fuels.”

The decline in EROI has meant that an increasing amount of the energy we extract is having to be diverted back into getting new energy out, leaving less for other social investments.

This means that the global economic slowdown is directly related to the declining resource quality of fossil fuels. The DFID report warns: “The declining EROI of traditional fossil fuel energy sources and its eventual effect on the world economy are likely to result in a myriad of unforeseen consequences.”

Shortly after this report was released, I met with a senior civil servant at DFID familiar with its findings, who spoke to me on condition of anonymity. I asked him whether this important research had actually impacted policymaking in the department.

“Unfortunately, no,” he told me, shrugging. “Most of my colleagues, except perhaps a handful, simply don’t have a clue about these issues. And of course, despite the report being circulated widely within the department, and shared with other relevant government departments, there is little interest from ministers who appear to be ideologically pre-committed to fracking.”

Peak oil

The driving force behind the accelerating decline in resource quality, hotly denied in the industry, is ‘peak oil.’

An extensive scientific analysis published in February in Wiley Interdisciplinary Reviews: Energy & Environment lays bare the extent of industry denialism. Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications which runs authoritative reviews of the literature across relevant academic disciplines.

The new WIRES paper is authored by Professor Michael Jefferson of the ESCP Europe Business School, a former chief economist at oil major Royal Dutch/Shell Group, where he spent nearly 20 years in various senior roles from Head of Planning in Europe to Director of Oil Supply and Trading. He later became Deputy Secretary-General of the World Energy Council, and is editor of the leading Elsevier science journal Energy Policy.

In his new study, Jefferson examines a recent 1865-page “global energy assessment” (GES) published by the International Institute of Applied Systems Analysis. But he criticized the GES for essentially ducking the issue of ‘peak oil.”

“This was rather odd,” he wrote. “First, because the evidence suggests that the global production of conventional oil plateaued and may have begun to decline from 2005.”

He went on to explain that standard industry assessments of the size of global conventional oil reserves have been dramatically inflated, noting how “the five major Middle East oil exporters altered the basis of their definition of ‘proved’ conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their ‘proved’ conventional oil reserves of some 435 billion barrels.”

Added to those estimates are reserve figures from Venezuelan heavy oil and Canadian tar sands, bringing up global reserve estimates by a further 440 billion barrels, despite the fact that they are “more difficult and costly to extract” and generally of “poorer quality” than conventional oil.

“Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the ‘peak oil’ issue remains with us.”

Jefferson believes that a nominal economic recovery, combined with cutbacks in production as the industry reacts to its internal crises, will eventually put the current oil supply glut in reverse. This will pave the way for “further major oil price rises” in years to come.

It’s not entirely clear if this will happen. If the oil crisis hits the economy hard, then the prolonged recession that results could dampen the rising demand that everyone projects. If oil prices thus remain relatively depressed for longer than expected, this could hemorrhage the industry beyond repair.

Eventually, the loss of production may allow prices to rise again. OPEC estimates that investments in oil exploration and development are at their lowest level in six years. As bankruptcies escalate, the accompanying drop in investments will eventually lead world oil production to fall, even as global demand begins to rise.

This could lead oil prices to climb much higher, as rocketing demand—projected to grow 50 percent by 2035—hits the scarcity of production. Such a price spike, ironically, would also be incredibly bad for the global economy, and as happened with the 2007-8 financial crash, could feed into inflation and trigger another spate of consumer debt-defaults in the housing markets.

Even if that happens, the assumption—the hope—is that oil industry majors will somehow survive the preceding cascade of debt-defaults. The other assumption, is that demand for oil will rise.

But as new sources of renewable energy come online at a faster and faster pace, as innovation in clean technologies accelerates, old fossil fuel-centric projections of future rising demand for oil may need to be jettisoned.

Clean energy

According to another new study released in March in Energy Policy by two scientists at Texas A&M University, “Non-renewable energy”—that is “fossil fuels and nuclear power”—“are projected to peak around mid-century … Subsequent declining non-renewable production will require a rapid expansion in the renewable energy sources (RES) if either population and/or economic growth is to continue.”

The demise of the fossil fuel empire, the study forecasts, is inevitable. Whichever model run the scientists used, the end output was the same: the almost total displacement of fossil fuels by renewable energy sources by the end of the century; and, as a result, the transformation and localisation of economic activity.

But the paper adds that to avoid a rise in global average temperatures of 2C, which would tip climate change into the danger zone, 50 percent or more of existing fossil fuel reserves must remain unused.

The imperative to transition away from fossil fuels is, therefore, both geophysical and environmental. On the one hand, by mid-century, fossil fuels and nuclear power will become obsolete as a viable source of energy due to their increasingly high costs and low quality. On the other, even before then, to maintain what scientists describe as a ‘safe operating space’ for human survival, we cannot permit the planet to warm a further 2C without risking disastrous climate impacts.

Staying below 2C, the study finds, will require renewable energy to supply more than 50 percent of total global energy by 2028, “a 37-fold increase in the annual rate of supplying renewable energy in only 13 years.”

While this appears to be a herculean task by any standard, the Texas A&M scientists conclude that by century’s end, the demise of fossil fuels is going to happen anyway, with or without considerations over climate risks:

… the ‘ambitious’ end-of-century decarbonisation goals set by the G7 leaders will be achieved due to economic and geologic fossil fuel limitations within even the unconstrained scenario in which little-to-no pro-active commitment to decarbonise is required… Our model results indicate that, with or without climate considerations, RES [renewable energy sources] will comprise 87–94 percent of total energy demand by the end of the century.

But as renewables have a much lower EROI than fossil fuels, this will “quickly reduce the share of net energy available for societal use.” With less energy available to societies, “it is speculated that there will have to be a reprioritization of societal energetic needs”—in other words, a very different kind of economy in which unlimited material growth underpinned by endless inputs of cheap fossil fuel energy are a relic of the early 21st century.

The 37-fold annual rate of increase in the renewable energy supply seems unachievable at first glance, but new data just released from the Abu Dhabi-based International Renewable Energy Agency shows that clean power is well on its way, despite lacking the massive subsidies behind fossil fuels.

The data reveals that last year, solar power capacity rose by 37 percent. Wind power grew by 17 percent, geothermal by 5 percent and hydropower by 3 percent.

So far, the growth rate for solar power has been exponential. A Deloitte Center for Energy Solutions report from September 2015 noted that the speed and spread of solar energy had consistently outpaced conventional linear projections, and continues to do so.

While the costs of solar power is consistently declining, solar power generation has doubled every year for the last 20 years. With every doubling of solar infrastructure, the production costs of solar photovoltaic (PV) has dropped by 22 percent.

At this rate, according to analysts like Tony Seba—a lecturer in business entrepreneurship, disruption and clean energy at Stanford University—the growth of solar is already on track to go global. With eight more doublings, that’s by 2030, solar power would be capable of supplying 100 percent of the world’s energy needs. And that’s even without the right mix of government policies in place to support renewables.

According to Deloitte, while Seba’s forecast is endorsed by a minority of experts, it remains a real possibility that should be taken seriously. But the firm points out that obstacles remain:

“It would not make economic sense for utility planners to shutter thousands of megawatts of existing generating capacity before the end of its economic life and replace it with new solar generation.”

Yet Deloitte’s study did not account for the escalating crisis in profitability already engulfing the fossil fuel industries, and the looming pressure of stranded assets due to climate risks. As the uneconomic nature of fossil fuels becomes evermore obvious, so too will the economic appeal of clean energy.

Race against time

The question is whether the transition to a post-carbon energy system—the acceptance of the inevitable death of the oil economy—will occur fast enough to avoid climate catastrophe.

Given that the 2C target for a safe climate is widely recognized to be inadequate—scientists increasingly argue that even a 1C rise in global average temperatures would be sufficient to trigger dangerous, irreversible changes to the earth’s climate.

According to a 2011 report by the National Academy of Sciences, the scientific consensus shows conservatively that for every degree of warming, we will see the following impacts: 5-15 percent reductions in crop yields; 3-10 percent increases in rainfall in some regions contributing to flooding; 5-10 percent decreases in stream-flow in some river basins, including the Arkansas and the Rio Grande, contributing to scarcity of potable water; 200-400 percent increases in the area burned by wildfire in the US; 15 percent decreases in annual average Arctic sea ice, with 25 percent decreases in the yearly minimum extent in September.

Even if all CO2 emissions stopped, the climate would continue to warm for several more centuries. Over thousands of years, the National Academy warns, this could unleash amplifying feedbacks leading to the disappearance of the polar ice sheets and other dramatic changes. In the meantime, the risk of catastrophic wild cards “such as the potential large-scale release of methane from deep-sea sediments” or permafrost, is impossible to quantify.

In this context, even if the solar-driven clean energy revolution had every success, we still need to remove carbon that has already accumulated in the atmosphere, to return the climate to safety.

The idea of removing carbon from the atmosphere sounds technologically difficult and insanely expensive. It’s not. In reality, it is relatively simple and cheap.

A new book by Eric Toensmeier, a lecturer at Yale University’s School of Forestry and Environmental Studies, The Carbon Farming Solution, sets out in stunningly accessible fashion how ‘regenerative farming’ provides the ultimate carbon-sequestration solution.

Regenerative farming is a form of small-scale, localised, community-centred organic agriculture which uses techniques that remove carbon from the atmosphere, and sequester it in plant material or soil.

Using an array of land management and conservation practices, many of which have been tried and tested by indigenous communities, it’s theoretically possible to scale up regenerative farming methods in a way that dramatically offsets global carbon emissions.

Toensmeier’s valuable book discusses these techniques, and unlike other science-minded tomes, offers a practical toolkit for communities to begin exploring how they can adopt regenerative farming practices for themselves.

According to the Rodale Institute, the application of regenerative farming on a global scale could have revolutionary results:

Simply put, recent data from farming systems and pasture trials around the globe show that we could sequester more than 100 percent of current annual CO2 emissions with a switch to widely available and inexpensive organic management practices, which we term ‘regenerative organic agriculture’… These practices work to maximize carbon fixation while minimizing the loss of that carbon once returned to the soil, reversing the greenhouse effect.

This has been widely corroborated. For instance, a 2015 study part-funded by the Chinese Academy of Sciences found that “replacing chemical fertilizer with organic manure significantly decreased the emission of GHGs [greenhouse gases]. Yields of wheat and corn also increased as the soil fertility was improved by the application of cattle manure. Totally replacing chemical fertilizer with organic manure decreased GHG emissions, which reversed the agriculture ecosystem from a carbon source… to a carbon sink.”

Governments are catching on, if slowly. At the Paris climate talks, 25 countries and over 50 NGOs signed up to the French government’s ‘4 per 1000’ initiative, a global agreement to promote regenerative farming as a solution for food security and climate disaster.

The birth of post-capitalism

There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources.

Whatever choices we make this century, the coming generations in the post-carbon future will have to deal with the realities of an overall warmer, and therefore more unpredictable, climate. Even if regenerative processes are in place to draw-down carbon from the atmosphere, this takes time—and in the process, some of the damage climate change will wreak on our oceans, our forests, our waterways, our coasts, and our soils will be irreversible.

It could take centuries, if not millennia, for the planet to reach a new, stable equilibrium.

But either way, the work of repairing and mitigating at least some of the damage done will be the task of our childrens’ children, and their children, and on.

Economic activity in this global society will of necessity be very different to the endless growth juggernaut we have experienced since the industrial revolution. In this post-carbon future, material production and consumption, and technological innovation, will only be sustainable through a participatory ‘circular economy’ in which scarce minerals and raw materials are carefully managed.

The fast-paced consumerism that we take for granted today simply won’t work in these circumstances.

Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food.

In the place of such top-down structures, smaller-scale, networked forms of political, social and economic organization, connected through revolutionary information technologies, will be most likely to succeed. For communities to not just survive, but thrive, they will need to work together, sharing technology, expertise and knowledge on the basis of a new culture of human parity and cooperation.

Of course, before we get to this point, there will be upheaval. Today’s fossil fuel incumbency remains in denial, and is unlikely to accept the reality of its inevitable demise until it really does drop dead.

The escalation of resource wars, domestic unrest, xenophobia, state-militarism, and corporate totalitarianism is to be expected. These are the death throes of a system that has run its course.

The outcomes of the struggles which emerge in coming decades—struggles between people and power, but also futile geopolitical struggles within the old centers of power (paralleled by misguided struggles between peoples)—is yet to be written.

Eager to cling to the last vestiges of existence, the old centers of power will still try to self-maximize within the framework of the old paradigm, at the expense of competing power-centers, and even their own populations.

And they will deflect from the root causes of the problem as much as possible, by encouraging their constituents to blame other power-centers, or worse, some of their fellow citizens, along the lines of all manner of ‘Otherizing’ constructs, race, ethnicity, nationality, color, religion and even class.

Have no doubt. In coming decades, we will watch the old paradigm cannibalize itself to death on our TV screens, tablets and cell phones. Many of us will do more than watch. We will be participant observers, victims or perpetrators, or both at once.

The only question that counts, is as follows: amidst this unfolding maelstrom, are we going to join with others to plant the seeds of viable post-carbon societies for the next generations of human-beings, or are we going to stand in the way of that viable future by giving ourselves entirely to defending our ‘interests’ in the framework of the old paradigm?

Whatever happens over coming decades, it will be the choices each of us make that will ultimately determine the nature of what survives by the end of this pivotal, transitional century.

Nafeez Ahmed is an investigative journalist and international security scholar. He writes the System Shift column for VICE’s Motherboard, and is the winner of a 2015 Project Censored Award for Outstanding Investigative Journalism for his former work at the Guardian. He is the author of A User’s Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi thriller novel Zero Point, among other books.

‘Sleepwalking to Extinction’: Capitalism and the Destruction of Life and Earth

23 11 2013

Reblogged from http://www.commondreams.org/view/2013/11/15-3

“even if we immediately replaced every fossil-fuel-powered electric generating plant on the planet with 100% renewable solar, wind and water power, this would only reduce global GHG emissions by around 17%.”

When, on May 10th, scientists at Mauna Loa Observatory on the big island of Hawaii announced that global CO2 400ppm
emissions had crossed a threshold at 400 parts per million (ppm) for the first time in millions of years, a sense of dread spread around the world and not only among climate scientists. CO2 emissions have been relentlessly climbing since Charles David Keeling first set up his tracking station near the summit of Mauna Loa Observatory in 1958 to monitor average daily global CO2 levels. At that time, CO2 concentrations registered 315 ppm. CO2 emissions and atmospheric concentrations have been rising ever since and have recently passed a dangerous tipping point: 440ppm.

For all the climate summits, promises of “voluntary restraint,” carbon trading and carbon taxes, the growth of CO2 emissions and atmospheric concentrations have not just been unceasing, they have been accelerating in what scientists have dubbed the “Keeling Curve.” In the early 1960s, CO2 ppm concentrations in the atmosphere grew by 0.7ppm per year. In recent decades, especially as China has industrialized, the growth rate has tripled to 2.1 ppm per year. In just the first 17 weeks of 2013, CO2 levels jumped by 2.74 ppm compared to last year.

Carbon concentrations have not been this high since the Pliocene period, between 3m and 5m years ago, when global average temperatures were 3˚C or 4˚C hotter than today, the Arctic was ice-free, sea levels were about 40m higher and jungles covered northern Canada; Florida, meanwhile, was under water along with other coastal locations we now call New York, London, Shanghai, Hong Kong, Sydney and many others. Crossing this threshold has fuelled fears that we are fast approaching converging “tipping points” — melting of the subarctic tundra or the thawing and releasing of the vast quantities of methane in the Arctic sea bottom — that will accelerate global warming beyond any human capacity to stop it.

“I wish it weren’t true, but it looks like the world is going to blow through the 400 ppm level without losing a beat,” said Scripps Institute geochemist Ralph Keeling, son of Charles Keeling.

“At this pace, we’ll hit 450 ppm within a few decades.”

“It feels like the inevitable march toward disaster,” said Maureen E. Raymo, a scientist at the Lamont-Doherty Earth Observatory, a unit of Columbia University.

Why are we marching toward disaster, “sleepwalking to extinction” as the Guardian’s George Monbiot once put it? Why can’t we slam on the brakes before we ride off the cliff to collapse? I’m going to argue here that the problem is rooted in the requirement of capitalist production. Large corporations can’t help themselves; they can’t change or change very much. So long as we live under this corporate capitalist system we have little choice but to go along in this destruction, to keep pouring on the gas instead of slamming on the brakes, and that the only alternative — impossible as this may seem right now — is to overthrow this global economic system and all of the governments of the 1% that prop it up and replace them with a global economic democracy, a radical bottom-up political democracy, an eco-socialist civilization.

Although we are fast approaching the precipice of ecological collapse, the means to derail this train wreck are in the making as, around the world we are witnessing a near simultaneous global mass democratic “awakening” — as the Brazilians call it — from Tahir Square to Zucotti Park, from Athens to Istanbul to Beijing and beyond such as the world has never seen. To be sure, like Occupy Wall Street, these movements are still inchoate, are still mainly protesting what’s wrong rather than fighting for an alternative social order. Like Occupy, they have yet to clearly and robustly answer that crucial question: “Don’t like capitalism, what’s your alternative?” Yet they are working on it, and they are for the most part instinctively and radically democratic; in this lies our hope.

Capitalism is, overwhelmingly, the main driver of planetary ecological collapse

From climate change to natural resource overconsumption to pollution, the engine that has powered three centurieshttps://i0.wp.com/www.newscientist.com/data/images/archive/2605/26051202.jpg of accelerating economic development, revolutionizing technology, science, culture and human life itself is, today, a roaring out-of-control locomotive mowing down continents of forests, sweeping oceans of life, clawing out mountains of minerals, pumping out lakes of fuels, devouring the planet’s last accessible natural resources to turn them into “product,” while destroying fragile global ecologies built up over eons of time. Between 1950 and 2000 the global human population more than doubled from 2.5 to 6 billion. But in these same decades, consumption of major natural resources soared more than sixfold on average, some much more. Natural gas consumption grew nearly twelvefold, bauxite (aluminium ore) fifteenfold. And so on. At current rates, Harvard biologist E.O. Wilson says that “half the world’s great forests have already been levelled and half the world’s plant and animal species may be gone by the end of this century.”

Corporations aren’t necessarily evil, though plenty are diabolically evil, but they can’t help themselves. They’re just doing what they’re supposed to do for the benefit of their shareholders. Shell Oil can’t help but loot Nigeria and the Arctic and cook the climate. That’s what shareholders demand. BHP Billiton, Rio Tinto and other mining giants can’t resist mining Australia’s abundant coal and exporting it to China and India. Mining accounts for 19% of Australia’s GDP and substantial employment even as coal combustion is the single worst driver of global warming. IKEA can’t help but level the forests of Siberia and Malaysia to feed the Chinese mills building their flimsy disposable furniture (IKEA is the third largest consumer of lumber in the world). Apple can’t help it if the cost of extracting the “rare earths” it needs to make millions of new iThings each year is the destruction of the eastern Congo — violence, rape, slavery, forced induction of child soldiers, along with poisoning local waterways. Monsanto and DuPont and Syngenta and Bayer Crop Science have no choice but to wipe out bees, butterflies, birds, small farmers and extinguish crop diversity to secure their grip on the world’s food supply while drenching the planet in their Roundups and Atrazines and neonicotinoids.

This is how giant corporations are wiping out life on earth in the course of a routine business day. And the bigger the corporations grow, the worse the problems become.

In Adam Smith’s day, when the first factories and mills produced hat pins and iron tools and rolls of cloth by the thousands, capitalist freedom to make whatever they wanted didn’t much matter because they didn’t have much impact on the global environment. But today, when everything is produced in the millions and billions, then trashed today and reproduced all over again tomorrow, when the planet is looted and polluted to support all this frantic and senseless growth, it matters — a lot.

The world’s climate scientists tell us we’re facing a planetary emergency. They’ve been telling us since the 1990s that if we don’t cut global fossil fuel greenhouse gas emissions by 80-90% below 1990 levels by 2050 we will cross critical tipping points and global warming will accelerate beyond any human power to contain it. Yet despite all the ringing alarm bells, no corporation and no government can oppose growth and, instead, every capitalist government in the world is putting pedal to the metal to accelerate growth, to drive us full throttle off the cliff to collapse.

Marxists have never had a better argument against capitalism than this inescapable and apocalyptic “contradiction.” Solutions to the ecological crisis are blindingly obvious but we can’t take the necessary steps to prevent ecological collapse because, so long as we live under capitalism, economic growth has to take priority over ecological concerns.

We all know what we have to do: suppress greenhouse gas emissions. Stop over-consuming natural resources. Stop the senseless pollution of the earth, waters, and atmosphere with toxic chemicals. Stop producing waste that can’t be recycled by nature. Stop the destruction of biological diversity and ensure the rights of other species to flourish. We don’t need any new technological breakthroughs to solve these problems. Mostly, we just stop doing what we’re doing. But we can’t stop because we’re all locked into an economic system in which companies have to grow to compete and reward their shareholders and because we all need the jobs.

James Hansen, the world’s preeminent climate scientist, has argued that to save the humans:

“Coal emissions must be phased out as rapidly as possible or global climate disasters will be a dead certainty … Yes, [coal, oil, gas] most of the fossil fuels must be left in the ground. That is the explicit message that the science provides. […] Humanity treads today on a slippery slope. As we continue to pump greenhouse gases in the air, we move onto a steeper, even more slippery incline. We seem oblivious to the danger — unaware of how close we may be to a situation in which a catastrophic slip becomes practically unavoidable, a slip where we suddenly lose all control and are pulled into a torrential stream that hurls us over a precipice to our demise.”

But how can we do this under capitalism? After his climate negotiators stonewalled calls for binding limits on CO2 emissions at Copenhagen, Cancun, Cape Town and Doha, President Obama is now trying to salvage his environmental “legacy” by ordering his EPA to impose “tough” new emissions limits on existing power plants, especially coal-fired plants. But this won’t salvage his legacy or, more importantly, his daughters’ futures because how much difference would it make, really, if every coal-fired power plant in the U.S. shut down tomorrow when U.S. coal producers are free to export their coal to China, which they are doing, and when China is building another coal-fired power plan every week? The atmosphere doesn’t care where the coal is burned. It only cares how much is burned.

Yet how could Obama tell American mining companies to stop mining coal? This would be tantamount to socialism. But if we do not stop mining and burning coal, capitalist freedom and private property is the least we’ll have to worry about. Same with Obama’s “tough” new fuel economy standards. In August 2012 Obama boasted that his new Corporate Average Fuel Economy (CAFE) standards would “double fuel efficiency” over the next 13 years to 54.5 miles per gallon by 2025, up from 28.6 mpg at present — cutting vehicle CO2 emissions in half, so helping enormously to “save the planet.” But as the Center for Biological Diversity and other critics have noted, Obama was lying, as usual.

Four tonne Ford Excursion

First, his so-called “tough” new CAFE standards were so full of loopholes, negotiated with Detroit, that they actually encourage more gas-guzzling, not less. That’s because the standards are based on a sliding scale according to “vehicle footprints” — the bigger the car, the less mileage it has to get to meet its “standard.” So in fact Obama’s “tough” standards are (surprise) custom designed to promote what Detroit does best — produce giant Sequoias, mountainous Denalis, Sierras, Yukons, Tundras and Ticonderogas, Ram Chargers and Ford F series luxury trucks, grossly obese Cadillac Escalades, soccer-kid Suburbans, even 8,000 (!) pound Ford Excursions — and let these gross gas hogs meet the “fleet standard.” These cars and “light” trucks are among the biggest selling vehicles in America today (GM’s Sierra is #1) and they get worse gas mileage than American cars and trucks half a century ago. Cadillac’s current Escalade gets worse mileage than its chrome bedecked tail fin-festooned land yachts of the mid-1950s! Little wonder Detroit applauded Obama’s new CAFE standards instead of damning them as usual. Secondly, what would it matter even if Obama’s new CAFE standards actually did double fleet mileage — when American and global vehicle fleets are growing exponentially?

populationCO2In 1950 Americans had one car for every three people. Today we have 1.2 cars for every American. In 1950 when there were about 2.6 billion humans on the planet, there were 53 million cars on the world’s roads — about one for every 50 persons. Today, there are 7 billion people but more than 1 billion cars and industry forecasters expect there will be 2 to 2.5 billion cars on the world’s roads by mid-century. China alone is expected to have a billion. So, at the end of the day, incremental half measures like CAFE standards can’t stop rising GHG missions. Barring some technical miracle, the only way to cut vehicle emissions is to just stop making them — drastically suppress vehicle production, especially of the worst gas hogs.

In theory, Obama could simply order GM to stop building its humongous gas guzzlers and switch to producing small economy cars. After all, the federal government owns the company! But of course, how could he do any such thing? Detroit lives by the mantra “big car big profit, small car small profit.” Since Detroit has never been able to compete against the Japanese and Germans in the small car market, which is already glutted and nearly profitless everywhere, such an order would only doom GM to failure, if not bankruptcy (again) and throw masses of workers onto the unemployment lines. So given capitalism, Obama is, in fact, powerless. He’s locked in to promoting the endless growth of vehicle production, even of the worst polluters — and lying about it all to the public to try to patch up his pathetic “legacy.” And yet, if we don’t suppress vehicle production, how can we stop rising CO2 emissions?

In the wake of the failure of climate negotiators from Kyoto to Doha to agree on binding limits on GHG emissions, exasperated British climate scientists Kevin Anderson and Alice Bows at the Tyndall Centre, Britain’s leading climate change research center, wrote in September 2012 that we need an entirely new paradigm:

Government policies must “radically change” if “dangerous” climate change is to be avoided “We urgently need to acknowledge that the development needs of many countries leave the rich western nations with little choice but to immediately and severely curb their greenhouse gas emissions… [The] misguided belief that commitments to avoid warming of 2˚C can still be realized with incremental adjustments to economic incentives. A carbon tax here, a little emissions trading there and the odd voluntary agreement thrown in for good measure will not be sufficient … long-term end-point targets (for example, 80% by 2050) have no scientific basis. What governs future global temperatures and other adverse climate impacts are the emissions from yesterday, today and those released in the next few years.”

And not just scientists. In its latest world energy forecast released on November 12, 2012, the International Energy Agency (IEA) warns that despite the bonanza of fossil fuels now made possible by fracking, horizontal and deepwater drilling, we can’t consume them if we want to save the humans: “The climate goal of limiting global warming to 2˚C is becoming more difficult and costly with each year that passes… no more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2˚C goal…” Of course the science could be wrong about this. But so far climate scientists have consistently underestimated the speed and ferocity of global warming, and even prominent climate change deniers have folded their cards.

Still, it’s one thing for James Hansen or Bill McKibben to say we need to “leave the coal in the hole, the oil in the soil, the gas under the grass,” to call for “severe curbs” in GHG emissions — in the abstract. But think about what this means in our capitalist economy. Most of us, even passionate environmental activists, don’t really want to face up to the economic implications of the science we defend.

That’s why, if you listen to environmentalists like Bill McKibben for example, you will get the impression that global warming is mainly driven by fossil fuel powered electric power plants, so if we just “switch to renewables” this will solve the main problem and we can carry on with life more or less as we do now. Indeed, “green capitalism” enthusiasts like Thomas Friedman and the union-backed “green jobs” lobby look to renewable energy, electric cars and such as “the next great engine of industrial growth” — the perfect win-win solution. This is a not a solution. This is a delusion: greenhouse gasses are produced across the economy not just by power plants. Globally, fossil-fuel-powered electricity generation accounts for 17% of GHG emissions, heating accounts for 5%, miscellaneous “other” fuel combustion 8.6%, industry 14.7%, industrial processes another 4.3%, transportation 14.3%, agriculture 13.6%, land use changes (mainly deforestation) 12.2%. This means, for a start, that even if we immediately replaced every fossil-fuel-powered electric generating plant on the planet with 100% renewable solar, wind and water power, this would only reduce global GHG emissions by around 17%.

What this means is that, far from launching a new green-energy-powered “industrial growth” boom, barring some tech-fix miracle, the only way to impose “immediate and severe curbs” on fossil fuel production/consumption would be to impose an EMERGENCY CONTRACTION in the industrialized countries: drastically retrench and in some cases shut down industries, even entire sectors, across the economy and around the planet — not just fossil fuel producers but all the industries that consume them and produce GHG emissions — autos, trucking, aircraft, airlines, shipping and cruise lines, construction, chemicals, plastics, synthetic fabrics, cosmetics, synthetic fiber and fabrics, synthetic fertilizer and agribusiness CAFO operations.

Of course, no one wants to hear this because, given capitalism, this would unavoidably mean mass bankruptcies, global economic collapse, depression and mass unemployment around the world. That’s why in April 2013, in laying the political groundwork for his approval of the XL pipeline in some form, President Obama said “the politics of this are tough.” The earth’s temperature probably isn’t the “number one concern” for workers who haven’t seen a raise in a decade; have an underwater mortgage; are spending $40 to fill their gas tank, can’t afford a hybrid car; and face other challenges.” Obama wants to save the planet but given capitalism his “number one concern” has to be growing the economy, growing jobs. Given capitalism — today, tomorrow, next year and every year — economic growth will always be the overriding priority … till we barrel right off the cliff to collapse.

The necessity of denial and delusion

There’s no technical solution to this problem and no market solution either. In a very few cases — electricity generation is the main one — a broad shift to renewables could indeed sharply reduce fossil fuel emissions in that sector. But if we just use “clean” “green” energy to power more growth, consume ever more natural resources, then we solve nothing and would still be headed to collapse. Producing millions of electric cars instead of millions of gasoline-powered cars, as I explained elsewhere, would be just as ecologically destructive and polluting, if in somewhat different ways, even if they were all run on solar power.

Substituting biofuels for fossil fuels in transportation just creates different but no less environmentally-destructive problems: converting farm land to raise biofuel feedstock pits food production against fuels. Converting rainforests, peatlands, savannas or grasslands to produce biofuels releases more CO2 into the atmosphere than the fossil fuels they replace and accelerates species extinction. More industrial farming means more demand for water, synthetic fertilizers and pesticides. And so on. Cap and trade schemes can’t cut fossil fuel emissions because business understands, even if some environmentalists do not, that “dematerialization” is a fantasy, that there’s no win-win tech solution, that capping emissions means cutting growth. Since cutting growth is unacceptable to business, labor and governments, cap and trade has been abandoned everywhere.

Carbon taxes can’t stop global warming either because they do not cap emissions. That’s why fossil fuel execs like Rex Tillerson, CEO of ExxonMobil (the largest private oil company in the world) and Paul Anderson, CEO of Duke Energy (the largest electric utility in the U.S.) support carbon taxes. They understand that carbon taxes would add something to the cost of doing business, like other taxes, but they pose no limit, no “cap” on growth. ExxonMobil predicts that, carbon tax or no carbon tax, by 2040 global demand for energy is going to grow by 35%, 65% in the developing world and nearly all of this is going to be supplied by fossil fuels. ExxonMobil is not looking to “leave the oil in the soil” as a favor to Bill McKibben and the humans. ExxonMobil is looking to pump it and burn it all as fast as possible to enrich its shareholders.

Hansen, McKibben, Obama — and most of us really — don’t want to face up to the economic implications of the need to put the brakes on growth and fossil fuel-based overconsumption. We all “need” to live in denial, and believe in delusions that carbon taxes or some tech fix will save us because we all know that capitalism has to grow or we’ll all be out of work. And the thought of replacing capitalism seems so impossible, especially given the powers arrayed against change. But what’s the alternative? In the not-so-distant future, this is all going to come to a screeching halt one way or another — either we seize hold of this out-of-control locomotive, or we ride this train right off the cliff to collapse.

Emergency Contraction or Global Ecological Collapse?

If there’s no market mechanism to stop plundering the planet then, again, what alternative is there but to impose an emergency contraction on resource consumption?

This doesn’t mean we would have to de-industrialize and go back to riding horses and living in log cabins. But it does mean that we would have to abandon the “consumer economy” — shut down all kinds of unnecessary, wasteful and polluting industries from junkfood to cruise ships, disposable Pampers to disposable H&M clothes, disposable IKEA furniture, endless new model cars, phones, electronic games, the lot. Plus all the banking, advertising, junk mail, most retail, etc. We would have completely redesign production to replace “fast junk food” with healthy, nutritious, fresh “slow food,” replace “fast fashion” with “slow fashion,” bring back mending, alterations and local tailors and shoe repairmen. We would have to completely redesign production of appliances, electronics, housewares, furniture and so on to be as durable and long-lived as possible. Bring back appliance repairmen and such. We would have to abolish the throwaway disposables industries, the packaging and plastic bag industrial complex, bring back refillable bottles and the like. We would have to design and build housing to last for centuries, to be as energy efficient as possible, to be reconfigurable, and shareable. We would have to vastly expand public transportation to curb vehicle use but also build those we do need to last and be shareable like Zipcar or Paris’ municipally-owned “Autolib” shared electric cars.

These are the sorts of things we would have to do if we really want to stop overconsumption and save the world. All these changes are simple, self-evident, no great technical challenge. They just require a completely different kind of economy, an economy geared to producing what we need while conserving resources for future generations of humans and for other species with which we share this planet.

The spectre of eco-democratic revolution

Economic systems come and go. Capitalism has had a 300 year run. The question is: will humanity stand by and let the world be destroyed to save the profit system?

That outcome depends to a great extent on whether we on the left can answer that question “what’s your alternative?” with a compelling and plausible vision of an eco-socialist civilization. We have our work cut out for us. But what gives the growing global eco-socialist movement an edge in this ideological struggle is that capitalism has no solution to the ecological crisis, no way to put the brakes on collapse, because its only answer to every problem is more of the same growth that’s killing us.

“History” was supposed to have “ended” with the fall of communism and the triumph of capitalism two decades ago. Yet today, history is very much alive and it is, ironically, capitalism itself which is being challenged more broadly than ever and found wanting for solutions.

Today, we are very much living in one of those pivotal world-changing moments in history. Indeed, it is no exaggeration to say that this is the most critical moment in human history.

We may be fast approaching the precipice of ecological collapse, but the means to derail this train wreck are in the making as, around the world, struggles against the destruction of nature, against dams, against pollution, against overdevelopment, against the siting of chemical plants and power plants, against predatory resource extraction, against the imposition of GMOs, against privatization of remaining common lands, water and public services, against capitalist unemployment and precarité are growing and building momentum.

Today we are riding a swelling wave of near simultaneous global mass democratic “awakening,” an almost global mass uprising. This global insurrection is still in its infancy, still unsure of its future, but its radical democratic instincts are, I believe, humanity’s last best hope.

Let’s make history!

This article is an excerpt from Smith’s essay, “Capitalism and the destruction of life on Earth,” published in the Real-World Economics Review.