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#215: Economic History in 10 Minutes

MuseLetter #215 / April 2010 by Richard Heinberg

Download printable PDF version here (PDF, 104 KB)

Economic History in 10 Minutes

Throughout over 90 percent of our species’ history, we humans lived by hunting and gathering in what anthropologists call gift economies. People had no money, and there was neither barter nor trade among members of any given group. Trade did exist, but it occurred only between members of different communities.

It’s not hard to see why sharing was the norm within each band of hunter-gatherers, and why trade was restricted to relations with strangers. Groups were small, usually comprising between 15 and 50 persons, and everyone knew and depended upon everyone else. Trust was essential to individual survival, and competition would have undermined trust. Trade is an inherently competitive activity: each trader tries to get the best deal possible, even at the expense of other traders. For hunter-gatherers, cooperation—not competition—was the route to success, and so innate competitive drives (especially among males) were moderated through ritual and custom, while a thoroughly entangled condition of mutual indebtedness helped maintain a generally cooperative attitude on everyone’s part.

Today we still enjoy vestiges of the gift economy, notably in the family. We don’t keep close tabs on how much we are spending on our three-year-old child in an effort to make sure that accounts are settled at some later date; instead, we provide food, shelter, education and more as free gifts, out of love. Yes, parents enjoy psychological rewards, but (at least in the case of mentally healthy parents) there is no conscious process of bargaining, in which we tell the child, "I will give you food and shelter if you repay me with goods and services of equivalent or greater value."

For humans in simple societies, the community was essentially like a family. Freeloading was occasionally a problem, and when it became a drag on the rest of the community it was punished by subtle or not-so-subtle social signals—ultimately, ostracism. But otherwise no one kept score of who owed whom what; to do so would have been considered very bad manners.

We know this from the accounts of 20th-century anthropologists who visited surviving hunter-gatherer societies. Often they reported on the amazing generosity of people who seemed eager to share everything they owned despite having almost no material possessions and being officially listed by aid agencies as among the poorest people on the planet. Anthropologists routinely felt embarrassed by this generosity, and, in one instance after another, after being gifted some prized food or a painstakingly hand-made basket, immediately offered a manufactured knife or ornament in return. The anthropologists assumed that natives would be happy to receive the trinkets, but the recipients instead appeared insulted. What had happened? The natives’ initial gifts were a way of saying, "You are part of the family; welcome!" But the immediate offering of a gift in return smacked of trade—something only done with strangers. The anthropologists were understood as having said, "No, thanks. I do not wish to be considered part of your family; I want to remain a stranger to you." It was the ultimate faux pas!

Here is all of economic history compressed into one sentence: As societies have grown more complex, larger, more far-flung and diverse, the tribe-based gift economy has shrunk in importance, while the trade economy has grown to dominate nearly every aspect of people’s lives, and has expanded in scope to encompass the entire planet.

With more and more of our daily human interactions based on exchange rather than gifting, we have developed polite ways of being around each other on a daily basis while maintaining an exchange-mediated social distance. This is particularly the case in large cities, where anonymity is fostered also by the sheer numbers of people one sees from day to day. In the best instances, we still take care of one another—through government programs and private charities. We still enjoy some of the benefits of the old gift economy in our families and churches. But increasingly, the market rules our lives. Our apparent destination in this relentless trajectory toward expansion of trade is a world in which everything is for sale, and all human activities are measured by and for their monetary value.

Humanity has benefited in many obvious ways from this economic evolution: the gift economy really only worked when we lived in small bands and had almost no possessions to speak of. So letting go of the gift economy was a trade-off for progress—houses, cities, cars, iPods, and all the rest. Still, saying goodbye to community-as-family was painful, and there have been various attempts throughout history to try to revisit it. Communism was one such attempt, and we know how that worked out. Trying to institutionalize a gift economy at the scale of the nation state introduces all kinds of problems, including those of how to reward initiative and punish laziness in ways that everyone finds acceptable, and how to deter corruption among those whose job it is to collect, count, and reapportion the wealth.

But, back to our tour of economic history. Along the road from the gift economy to the trade economy there were several important landmarks. Of these, the invention of money was arguably the most important. Money is essentially a tool to facilitate trade. People invented it because they needed a medium of exchange to make trading easier, simpler, and more flexible. Once money came into use, the exchange process was freed to grow and to insert itself into aspects of life where it had never been permitted previously. Money simultaneously began to serve other functions as well—principally, as a measure and store of value.

Today we take money for granted. But until fairly recent times it was an oddity, something only merchants used on a daily basis. Some complex societies, including ancient Egypt, managed to do almost completely without it; even in the U.S., until the mid-20th century, many rural families used money only for occasional trips into town to buy nails, boots, glass, or other items they couldn’t grow or make for themselves on the farm. In his marvelous book The Structures of Everyday Life: Civilization & Capitalism 15th-18th Century, historian Fernand Braudel wrote of the gradual insinuation of the money economy into the lives of medieval peasants: "What did it actually bring? Sharp variations in prices of essential foodstuffs; incomprehensible relationships in which man no longer recognized either himself, his customs or his ancient values. His work became a commodity, himself a ‘thing.’"

While early forms of money consisted of anything from sheep to shells, coins made of gold and silver gradually emerged as the most practical, universally accepted means of exchange, measure of value, and store of value.

Money’s ease of storage enabled industrious individuals to accumulate substantial amounts of wealth. But this concentrated wealth also presented a target for thieves. Thievery was especially a problem for traders: while the portability of money enabled them to travel for long distances to purchase rare fabrics and spices, highwaymen often lurked along the way, ready to snatch a purse at knife-point. These problems led to the invention of banking—a practice in which metal-smiths who routinely dealt with large amounts of gold and silver (and who were accustomed to keeping it in secure, well-guarded vaults) agreed to store other people’s coins, offering storage receipts in return. Storage receipts could then be traded as money, thus making trade easier and safer.

Eventually, goldsmith-bankers realized that they could issue paper receipts for more gold than they had in their vaults, without anyone being the wiser. They did this by making loans of the receipts, for which they charged a fee amounting to a percentage of the loan.

Initially the Church regarded the practice of profiting from loans as a sin—known as "usury"—but the bankers found a loophole in religious doctrine: it was permitted to charge for reimbursement of expenses incurred in making the loan; this was termed "interest." Gradually bankers widened the definition of "interest" to include what had formerly been called "usury."

The practice of loaning out receipts for gold that didn’t really exist worked fine, unless many receipt-holders wanted to redeem paper notes for gold or silver all at once. Fortunately for the bankers, this happened so rarely that eventually the writing of receipts for more money than was on deposit became a perfectly respectable practice known as fractional reserve banking.

It turned out that having increasing amounts of money in circulation was a benefit to traders and industrialists during the historical period when all of this was happening—a time when unprecedented amounts of new wealth were being created, first through colonialism and slavery, but then through the harnessing of the enormous energies of fossil fuels.

The last impediment to money’s ability to act as a lubricant for transactions was its remaining tie to precious metals. As long as paper notes were redeemable for gold or silver, the amounts of these substances existing in vaults put at least a theoretical restraint on the process of money creation. Paper currencies not backed by metal had sprung up from time to time previously; by the late 20th century, they were the near-universal norm.

Along with more abstract forms of currency, the past century has also seen the appearance and growth of ever-more sophisticated investment instruments. Stocks, bonds, options, futures, long- and short-selling, derivatives, credit default swaps, and more now enable investors to make (or lose) money on the movement of prices of real or imaginary properties and commodities, and to insure their bets, and even their bets on other investors’ bets.

Probably the most infamous investment scheme of all time was created by Charles Ponzi, an Italian immigrant to the U.S. who, in 1919, began promising investors he could double their money within 90 days. Ponzi told clients the profits would come from buying discounted postal reply coupons in other countries and redeeming them at face value in the United States—a technically legal practice that could yield up to a 400 percent profit on each coupon redeemed due to differences in currency values. What he didn’t tell them was that each coupon had to be redeemed individually, so the red tape involved would entail prohibitive costs if large numbers of the coupons (which were only worth a few pennies) were bought and redeemed. In reality, Ponzi was merely paying early investors returns from the principal amounts put down by later investors. It was a way of shifting wealth from the many to the few, with Ponzi skimming off a lavish income as the money passed through his hands. At the height of the scheme, Ponzi was raking in $250,000 a day, millions in today’s dollars. Thousands of people lost their life savings, in some cases having mortgaged or sold their houses in order to invest.

A few critics (primarily advocates of gold-backed currency) have called fractional reserve banking a kind of Ponzi scheme, and there is some truth to the claim. As long as the real economy of goods and services within a nation is growing, an expanding money supply seems justifiable, arguably necessary. However, a resource-consuming economy cannot continue to grow forever on a finite planet. Units of currency—which exist today mostly in the form of electronic bookkeeping entries—are essentially claims on labor and resources; and, as those claims multiply (with the growth of the money supply), and as resources deplete, eventually the remaining resources will be insufficient to satisfy all of the existing monetary claims. And so those claims will lose value, perhaps dramatically and suddenly. When this happens, paper and electronic currency systems based on money creation through fractional reserve banking will produce results somewhat similar to those of a Ponzi scheme: i.e., a few may profit, at least temporarily, but the vast majority will lose much or all of what they have.

Is this the end of the story? As society dramatically simplifies itself in the wake of fossil fuel depletion, will we revert to some form of gift economy? Or will we catch and steady ourselves on some intermediate rung on the ladder of economic development?

Only time will tell. Perhaps a general knowledge of our economic history can help us assess the options ahead and plan for a managed "money descent," just as some far-seeing Transition communities are planning for "energy descent."

It’s Time to Deal with Peak Oil

(Published in the National Post of Canada, March 19)

The "Peak Oil" concept — that the world’s petroleum-production rate will soon reach its maximum and commence an inevitable decline, with negative economic consequences — has been around in scientifically articulated form at least since 1998, long enough to see it confirmed in significant ways.

The rate of discovery of new oilfields has been falling since 1964. The biggest find in recent years is Tupi, in Brazilian waters, which is claimed to hold five-to-eight billion barrels of oil; but that’s only enough to slake the world’s thirst for 60 to 90 days. Most producing nations are past their domestic peaks and are experiencing slowing output, despite every effort to maintain flow rates.

Skeptics point out that total world oil reserves continue to grow. But this may not be a reliable indication of where we stand: Often, in nations that have seen a peak and subsequent decline in production, domestic reserves continued to rise right up to, or even past, the date of peak production. Why? Oil companies replace reserves of high-quality, cheaply-produced oil with reserves of low-quality, slow-, or expensive-to-produce oil or tar sands.

Rates of output decline in older, giant oilfields have proven to be more trustworthy indicators of long-term trends. (For instance, they’ve enabled successful peaking forecasts for the United States, the North Sea and other regions). For the world, the average decline rate from existing fields has been calculated by the International Energy Agency at 4.5% per year. The world needs to develop the equivalent of a Saudi Arabia’s worth of oil production capacity every four years to offset such declines. This is quite a burden for the industry, which must now look for oil in ultra-deep water, in polar regions, or in politically fractured nations, since all the easy-to-find, easy-to-extract oil already has been located and much of it pumped.

So far, the record year for world crude production was 2005, and the record month was July 2008. Tellingly, the leveling-off of extraction rates between 2005 and 2008 occurred in the context of rising oil prices; indeed, in July 2008, the price spiked 50% higher than the previous inflation-adjusted record, set in the 1970s. Yet as both oil demand and prices rose, production barely budged in response.

While many commentators believe the jury is still out on Peak Oil, the list of petroleum analysts who say world oil production has already peaked, or will do so in the next five years, lengthens almost daily, and includes CEOs and other well-placed leaders within the oil industry.

The argument that oil production could theoretically continue to grow past 2015 is mainly put forward by organizations such as Cambridge Energy Research Associates and Saudi Aramco, which explain away evidence of dwindling discoveries, depleting oilfields and stagnating total production by claiming that it is demand for oil that has peaked, not supply — a claim that hinges on the observation that oil prices are high enough to discourage potential buyers. But high prices for a commodity usually signify scarcity, so the "peak demand" argument doesn’t hold water.

Peak Oil has significant implications for our economy. In response to the 2008 price spike, the global airline industry nose-dived and auto companies suffered. Worldwide shipping slowed drastically and hasn’t recovered. Demand for oil plummeted in late 2008, and so did the price — temporarily. But today’s price is again high, almost to the point of nipping economic recovery.

What should we do about Peak Oil? Start with what the U.K. Industry Task Force on Peak Oil (which included Sir Richard Branson of Virgin Airlines) has done: Acknowledge the reality of supply limits. Then study the vulnerabilities of Canada’s transport and food systems to high and volatile oil prices, and start making those systems more resilient and less oil-dependent.

But do it fast. Adaptation will take decades, and we are starting very late.

Quacks Like a Duck…

According to an article in Le Monde on March 25, the U.S. Department of Energy "admits that ‘a chance exists that we may experience a decline’ of world liquid fuels production between 2011 and 2015 ‘if the investment is not there.’" This bombshell emerged in "an exclusive interview with Glen Sweetnam, main official expert on the oil market in the Obama administration."

The Le Monde article goes on: "The DoE dismisses the ‘peak oil’ theory, which assumes that world crude oil production should irreversibly decrease in a nearby future, in want of sufficient fresh oil reserves yet to be exploited. The Obama administration supports the alternative hypothesis of an ‘undulating plateau.’ Lauren Mayne, responsible for liquid fuel prospects at the DoE, explains : ‘Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline.‘"

In other words, we don’t believe that world oil production will soon reach a maximum and begin to decline (the "peak oil theory"); instead, we believe that world oil production will reach a maximum, stay there for a few years, and then decline. That decline could commence as soon as next year.

Two comments: First, what’s the difference? Is this just a way to announce Peak Oil without acknowledging it? The idea of the "undulating plateau" has been part of the Peak Oil discussion for years (see my book Powerdown), and world oil production has in fact been at a plateau since late 2004. Second, how is it that readers in France now know more about U.S. Department of Energy oil supply forecasts than Americans do? There has been no equivalent article in the mainstream press in North America.

It’s time for the DoE to answer some tough questions. Too bad U.S. media outlets are evidently too timid, busy, or uninformed to bother themselves with the trivial business of alerting the American people to an impending calamity that is entirely foreseeable and that a few people in government are evidently willing to speak about (at least in code), if only someone asks.

#214: Life After Growth

MuseLetter #214 / March 2010 by Richard Heinberg

Download printable PDF version here (PDF, 139 KB)
 
This month’s Museletter contains two pieces. The first is a rather long essay containing an autobiographical sketch of the path that led me to write full-time about the transition to a post-carbon world, titled “Life After Growth.” The second piece, “Goldilocks and the Three Fuels,” was recently published by Reuters.

Life After Growth

What if the economy doesn’t recover?

In 2008 the U.S. economy tripped down a steep, rocky slope. Employment levels plummeted; so did purchases of autos and other consumer goods. Property values crashed; foreclosure and bankruptcy rates bled. For states, counties, cities, and towns; for manufacturers, retailers, and middle- and low-income families, the consequences were—and continue to be—catastrophic. Other nations were soon caught up in the undertow.

In late 2009 and early 2010, the economy showed some signs of renewed vigor. Understandably, everyone wants it to get “back to normal.” But here’s a disturbing thought: What if that is not possible? What if the goalposts have been moved, the rules rewritten, the game changed? What if the decades-long era of economic growth based on ever-increasing rates of resource extraction, manufacturing, and consumption is over, finished, and done? What if the economic conditions that all of us grew up expecting to continue practically forever were merely a blip on history’s timeline?

It’s an uncomfortable idea, but one that cannot be ignored: The “normal” late-20th century economy of seemingly endless growth actually emerged from an aberrant set of conditions that cannot be perpetuated.

That “normal” is gone. One way or another, a “new normal” will emerge to replace it. Can we build a different, more sustainable economy to replace the one now in tatters?

Let’s be clear: I believe we are in for some very hard times. The transitional period on our way toward a post-growth, equilibrium economy will prove to be the most challenging time any of us has ever lived through. Nevertheless, I am convinced that we can survive this collective journey, and that if we make sound choices as families and communities, life can actually be better for us in the decades ahead than it was during the heady days of seemingly endless economic expansion.

In this essay, I would like to share my conclusions on this subject and the process by which I arrived at them. It’s a bit of a long story, so please bear with me. First, the conclusions.

Four Propositions

The following summary statements are fundamental both to grasping our current situation and managing our way toward a desirable future:

  1. We have reached the end of economic growth as we have known it. The “growth” we are talking about consists of the expansion of the overall size of the economy (with more people being served and more money changing hands) and of the quantities of energy and material goods flowing through it. The economic crisis that began in 2008 was both foreseeable and inevitable, and that it marks a permanent, fundamental break from past decades—a period in which economists adopted the unrealistic view that perpetual economic growth is necessary and also possible to achieve. As we will see, there are fundamental constraints to ongoing economic expansion, and the world is beginning to encounter those constraints. This is not to say the U.S. or the world will never see another quarter or year of growth relative to the previous year. Rather, the point is that when the bumps are averaged out, the general trend-line of the economy (measured in terms of production and consumption of real goods) will be level or downward rather than upward from now on.
  2. The basic factors that will inevitably shape whatever replaces the growth economy are knowable. To survive and thrive for long, societies have to operate within the planet’s budget of sustainably extractable resources. This means that even if we don’t know exactly what a desirable post-growth economy and lifestyle will look like, we know enough to begin working toward them.
  3. It is possible for economies to persist for centuries or millennia with no or minimal growth. That is how most economies operated until recent times. If billions of people through countless generations lived without economic growth, we can do so as well—now and far into the future. The end of growth does not mean the end of the world.
  4. Life in a non-growing economy can be fulfilling, interesting, and secure. The absence of growth does not imply a lack of change or improvement. Within a non-growing or equilibrium economy there can still be a continuous development of practical skills, artistic expression, and technology. In fact, some historians and social scientists argue that life in an equilibrium economy can be superior to life in a fast-growing economy: while growth creates opportunities for some, it also typically intensifies competition—there are big winners and big losers, and (as in most boom towns) the quality of relations within the community can suffer as a result. Within a non-growing economy it is possible to maximize benefits and reduce factors leading to decay, but doing so will require pursuing appropriate goals: instead of more, we must strive for better; rather than promoting increased economic activity for its own sake, we must emphasize whatever increases quality of life without stoking consumption. One way to do this is to reinvent and redefine growth itself.

The transition to a no-growth economy (or one in which growth is defined in a fundamentally different way) is inevitable, but it will go much better if we plan for it rather than simply watching in dismay as institutions we have come to rely upon fail, and then try to improvise a survival strategy in their absence.

In effect, we have to create a desirable “new normal” that fits the constraints imposed by depleting natural resources. Maintaining the “old normal” is not an option; if we do not find new goals for ourselves and plan our transition from a growth-based economy to a healthy equilibrium economy, we will by default create a much less desirable “new normal” whose emergence we are already beginning to see in the forms of persistent high unemployment, a widening gap between rich and poor, and ever more frequent and worsening financial and environmental crises—all of which translate to profound distress for individuals, families, and communities.


‘Limits to Growth’

The journey that led to my formulating these propositions began in 1972, when a book called Limits to Growth was making headlines. This relatively compact volume, which went on to become the best-selling environmental book of all time, provoked the first Great Wake-up Call of my adult life, changing the course of everything I have thought and done ever since.

Let me explain why Limits to Growth impacted me so deeply.

That book, which reported on the first attempts to use computers to model the likely interactions between trends in resources, consumption, and population, was also the first major scientific study to question the assumption that economic growth can and will continue more or less uninterrupted into the foreseeable future.

The idea was heretical at the time—and still is: during the past few decades, growth has become virtually the sole index of national economic well-being. When the economy grows, jobs appear, investments yield high returns, and everyone is happy. When the economy stops growing, financial bloodletting ensues. And so predictably a book saying that growth cannot and will not continue beyond a certain point proved profoundly upsetting in some quarters, and soon Limits to Growth was prominently “debunked” by public relations efforts organized by pro-growth business interests. In reality, this “debunking” merely amounted to taking a few numbers in the book completely out of context, citing them as “predictions” (which they explicitly were not), and then claiming that these predictions had failed. The ruse was quickly exposed, but rebuttals often don’t gain nearly as much publicity as accusations, and so today millions of people mistakenly believe that the book was long ago discredited. In fact, the original Limits to Growth scenarios have held up quite well*.

In principle, the argument for eventual limits to growth is a slam-dunk. If any quantity grows steadily by a certain fixed percentage per year, this implies that it will double in size every so-many years; the higher the percentage growth rate, the quicker the doubling. A rough method of figuring doubling times is known as the rule of 70: dividing the percentage growth rate into 70 gives the approximate time required for the initial quantity to double. If a quantity is growing at 1 percent per year, it will double in 70 years; at 2 percent per year growth, it will double in 35 years; at 5 percent growth, it will double in only 14 years, and so on. If you want to be more precise, you can use the Y^x button on your calculator, but the rule of 70 works fine for most purposes.

Here’s a real-world example: Over the past two centuries, human population has grown at rates ranging from less than one percent to more than two percent per year. In 1800, world population stood at about one billion; by 1930 it had doubled to two billion. Only 30 years later (in 1960) it had doubled again to four billion; currently we are on track to achieve a third doubling, to eight billion humans, around 2025. No one seriously expects human population to continue growing for centuries into the future. But imagine if it did—at just 1.3 percent per year (its growth rate in the year 2000). By the year 2780 there would be 148 trillion humans on Earth—one person for each square meter of land on the planet’s surface.

It won’t happen, of course.

In nature, growth always slams up against non-negotiable constraints sooner or later. If a species finds that its food source has expanded, its numbers will increase to take advantage of those surplus calories—but then its food source will become depleted as more mouths consume it, and its predators will likewise become more numerous (more tasty meals for them!). Population “blooms” (that is, periods of rapid growth) are always followed by crashes and die-offs. Always.

Here’s another real-world example. In recent years China’s economy has been growing at eight percent or more per year; that means it is more than doubling in size every ten years. Indeed, China consumes more than twice as much coal as it did a decade ago—the same with iron ore and oil. The nation now has four times as many highways as it did, and almost five times as many cars. How long can this go on? How many more doublings can occur before China has used up its key resources—or has simply decided that enough is enough and has stopped growing?

It makes sense that economies should follow rules analogous to those that govern biological systems. Plants and animals tend to grow quickly when they are young, but then they reach a more or less stable mature size. In organisms, growth rates are largely controlled by genes. In economies, growth seems tied to factors such as the availability of resources—chiefly energy resources (“food” for the industrial system). During the 20th century, cheap and abundant fossil fuels enabled rapid economic expansion; at some point, therefore, fossil fuel depletion could put a brake on growth. It is also possible that industrial wastes could accumulate to the point that the biological systems that underpin economic activity (such as forests, crops, and human bodies) begin to fail.

But economists generally don’t see things this way. That’s probably because most current economic theories were formulated during an anomalous historical period of sustained growth. Economists are merely generalizing from their experience: they can point to decades of steady growth in the recent past, and so they simply project that experience into the future. Moreover, they have ways to explain why modern market economies are immune to the kinds of limits that constrain natural systems; the two main ones concern substitution and efficiency.

If a useful resource becomes scarce, its price will rise, and this creates an incentive for users of the resource to find a substitute. For example, if oil gets expensive enough, energy companies might start making liquid fuels from coal. Or they might develop other energy sources undreamed of today. Economists theorize that this process of substitution can go on forever. It’s part of the magic of the free market.

Increasing efficiency means doing more with less. In the U.S., the number of inflation-adjusted dollars generated in the economy for every unit of energy consumed has increased steadily over recent decades (the amount of energy, in British Thermal Units, required to produce a dollar of GDP has been dropping steadily, from close to 20,000 BTU per dollar in 1949 to 8,500 BTU in 2008). That’s one kind of economic efficiency. Another has to do with locating the cheapest sources of materials, and the places where workers will be most productive and work for the lowest wages. As we increase efficiency, we use less—of either resources or money—to do more. That enables more growth.

Finding substitutes for depleting resources and upping efficiency are undeniably effective adaptive strategies of market economies. Nevertheless, the question remains open as to how long these strategies can continue to work in the real world—which is governed less by economic theories than by the laws of physics. In the real world, some things don’t have substitutes, or the substitutes are too expensive, or don’t work as well, or can’t be produced fast enough. And efficiency follows a law of diminishing returns: the first gains in efficiency are usually cheap, but every further incremental gain tends to cost more, until further gains become prohibitively expensive.

Unlike economists, most physical scientists recognize that growth within any functioning, bounded system has to stop sometime.

But this discussion has very real implications, because the economy is not just an abstract concept; it is what determines whether we live in luxury or poverty; whether we eat or starve. If economic growth ends, everyone will be impacted, and it will take society years to adapt to this new condition. Therefore it is important to be able to forecast whether that moment is close or distant in time.

Hence the Limits to Growth study. The authors fed in data for world population growth, consumption trends, and the abundance of various important resources, ran their computer program, and concluded that the end of growth would probably arrive between 2010 and 2050. Industrial output and food production would then fall, leading to a decline in population. (By the way, the Limits to Growth scenario study has been re-run repeatedly in the years since the original publication, using more sophisticated software and updated input data. The results were similar. See Limits to Growth: The 30-Year Update.)


My Personal Story of Waking Up to Limits

That’s why Limits to Growth meant so much to me when I encountered it at age 21. I realized that the world in which I had been born, raised, and educated was headed toward what is politely known as a “historical discontinuity,” but more colloquially termed “collapse,” “a cliff,” or “a brick wall.” Millions of young people today are having the same experience as they learn about climate change. Welcome to the club.

At the time, I had been trying to make my way as a young musician. My father had been a chemistry and physics teacher, but I had gravitated toward the arts: after being trained as a classical violinist, I had taught myself also to play electric guitar.

As I absorbed the implications of Limits to Growth, I realized that there were more important things than band rehearsals and gigs to attend to, so I mostly left the music business (though I continue to be an avid amateur violinist) and began looking for ways to help shift society toward a more sustainable path. I became a freelance writer-editor and started pursuing projects I thought might lead me toward a better understanding of global trends and of how our species might avert an overwhelming economic and environmental disaster.

It was clear that society would need to undertake fundamental changes. But what were those changes, exactly? I thought the best way to find out would be to form an intentional community as a kind of social laboratory in which to explore alternatives in energy, food production, and lifestyles. I ended up spending most of the next 20 years living in three communities—one in Toronto that I helped establish, and others in Colorado and southern California that had already been going for some time before I joined. Intentional communities (sometimes also known as communes, with many now thriving under the banner of “eco-villages”) are a fascinating social phenomenon, and hundreds still flourish worldwide.

By the early 1990s, I was eager to reconnect with mainstream society and bring what I had learned to a wider audience. My wife, Janet Barocco, and I had met in an intentional community in southern California; together we moved to a suburban home in Santa Rosa. By the latter years of the decade I was teaching in a college program on sustainability that I had helped initiate and design, while also continuing to make my way as a freelance environmental writer.

It was at this point, in 1998, that I heard a second Great Wake-up Call.


Peak Oil

It came in the form of an article in Scientific American by veteran petroleum geologists Colin Campbell and Jean Laherrère (both of whom had overseen exploration and production in major oil companies), explaining why world oil extraction would reach a maximum around 2010 and begin its permanent decline thereafter. I quickly realized that Peak Oil would likely be the first non-negotiable global limit to growth. The hazy forecast that industrial society would hit a wall sometime in the 21st century was suddenly focused to a painful specificity. Growth had acquired a hard expiration date.

Of course, oil does not pose our only societal limit, or even the most important one in the bigger scheme of things: climate, water, and topsoil are clearly more crucial in the long run. But the peaking of world oil production could potentially bring modern industrial civilization to its knees, while also undercutting coordinated efforts to deal with all sorts of other problems.

Up to this point I had little interest in the subject of oil, or energy generally. However, as I re-read the Scientific American article, I realized the pivotal role petroleum plays in the modern world—in transportation, agriculture, and the chemicals and materials industries. I began spending hours each day studying energy history and oil production statistics. I soon realized that the Industrial Revolution was really the Fossil Fuel Revolution, and that our modern food system is based on cheap fossil energy. Further, the entire phenomenon of continuous economic growth—including the development of the financial institutions that facilitate growth, such as fractional reserve banking and the marketing of derivatives—is ultimately based on ever-increasing supplies of cheap energy. Growth requires more manufacturing, more trade, and more transport, and those all in turn require more energy. This means that if energy supplies can’t expand and energy therefore becomes significantly more expensive, economic growth will falter and the financial system built on expectations of perpetual growth will fail, possibly in a rather spectacular way.

As early as 1998, Campbell, Laherrère, and others were discussing a Peak Oil impact scenario that went like this. Sometime around the year 2010, they theorized, stagnant or falling oil supplies would lead to soaring and more volatile petroleum prices, which would precipitate a global economic crash. This rapid economic contraction would in turn lead to sharply curtailed energy demand, so oil prices would then fall; but as soon as the economy regained strength, demand for oil would recover, prices would again soar, and the economy would relapse. This cycle would continue, with each recovery phase being shorter and weaker, and each crash deeper and harder, until the economy was in ruins. Meanwhile, volatile oil prices would frustrate investments in energy alternatives: one year, oil would be so expensive that almost any other energy source would look cheap by comparison; the next year, the price of oil would have fallen so far that energy users would be flocking back to it, with investments in other energy sources looking foolish. Investment capital would be in short supply in any case because the banks would be insolvent due to the crash, and governments would be broke due to declining tax revenues. Meanwhile, international competition for dwindling oil supplies might lead to wars between petroleum importing nations, between importers and exporters, and between rival factions within exporting nations.

Naturally, I also examined the arguments against the likelihood of a near-term peak in global oil production. What if Campbell and Laherrère were simply wrong? There are those who claim that new technologies for crude oil extraction will increase the amount of oil that can be obtained from each well drilled, and that there are nearly endless reserves of alternative hydrocarbon resources (principally tar sands and oil shale) whose development will seamlessly replace conventional oil, thus delaying the inevitable peak for decades. There are also those who say that Peak Oil won’t be much of a problem even if it happens soon, because the market will find substitutes as quickly as needed—whether electric cars, hydrogen, or liquid fuel made from coal. I found all of these arguments weak: the new oil extraction technologies won’t come into wide use for several years, and will be applicable mostly to newly developed fields (of which there are fewer and fewer each year as exploration efforts continue to show mostly disappointing results), not to the old super-giant oilfields that produce the great bulk of oil that we use today. Tar sands and oil shale will be slow to extract; indeed, in the case of oil shale, we may never derive liquid fuels in any substantial quantity due to the enormous costs of processing this very low-grade material. And substitutes like electric cars, liquids from coal, and hydrogen will take a very long time to develop and will in most cases be much more costly than the equivalent elements of our current system of petroleum fuels and internal combustion engines.

I continued to study the world energy situation for the next few years. And, with every passing year, events appeared to be supporting the Peak Oil thesis and undercutting the views of the oil optimists. Oil prices were trending upward—and for entirely foreseeable reasons: discoveries of new oilfields were continuing to peter out, with most new fields being much more difficult and expensive to develop than ones found in previous years. More oil-producing countries were seeing their extraction rates peaking and beginning to decline despite efforts to maintain production growth using high-tech, expensive secondary and tertiary extraction methods like the injection of water, nitrogen, or CO2 to force more oil out of the ground. Production decline rates in the world’s old, super-giant oilfields, which are responsible for the lion’s share of the global petroleum supply, were accelerating. Production of liquid fuels from tar sands was expanding only slowly, while the development of oil shale remained a hollow promise for the distant future.

I corresponded with and met the authors of the Scientific American article, and interviewed other petroleum geologists and engineers. One expert after another offered further reasons for concluding that the thesis of “The End of Cheap Oil” was correct, that there were no ready substitutes for crude oil, and that the consequences of a near-term global oil production peak would be profound.

Given the almost complete absence of mainstream media coverage of the subject, I spent several months assessing whether I should step into the breach and write a book on Peak Oil. The fact that I had no background in the oil industry or in any relevant academic field weighed against doing so. Yet the need was clearly overwhelming, so I decided to try. I spent 2001 and 2002 writing The Party’s Over: Oil, War and the Fate of Industrial Societies, which was published the following year and went on to sell over 50,000 copies with translations in six languages. I began receiving lecture invitations, and, over the next few years, gave over 300 talks to a wide variety of audiences in a dozen countries. More books followed: PowerDown: Options and Actions for a Post Carbon World (2004); The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Economic Collapse (2006); Peak Everything: Waking Up to the Century of Declines (2007); and Blackout: Coal, Climate and the Last Energy Crisis (2009).

I was determined to sound a warning not just to the general public, but especially to politicians and appointed government officials. Members of a burgeoning informal global network of Peak Oil activists arranged for me speak to hundreds of national, state, and local politicians and appointed officials in the U.S., to about a hundred members of the European Parliament, and to national Parliamentarians in the U.K., Australia, and New Zealand.


From Scary Theory to Scarier Reality

Then in 2008, the Peak Oil scenario became all too real. Global oil production had been stagnant since 2005 and petroleum prices had been soaring upward. In July, 2008, the per-barrel price shot up nearly to $150—half again higher (in inflation-adjusted terms) than the price spikes of the 1970s that had triggered the worst recession since World War II. By summer 2008, the auto industry, the trucking industry, international shipping, agriculture, and the airlines were all reeling.

But what happened next riveted the world’s attention to such a degree that the oil price spike was all but forgotten: in September 2008, the global financial system nearly collapsed. The reasons for this sudden, gripping crisis apparently had to do with housing bubbles, lack of proper regulation of the banking industry, and the over-use of bizarre financial products that almost nobody understood. However, there are reasons for concluding that the oil price spike was a much more important contributor to this economic meltdown than is generally discussed (see www.energybulletin.net/node/49798).

In the aftermath of that global financial near-death experience, both the Peak Oil impact scenario proposed a decade earlier and the Limits to Growth standard-run scenario of 1972 seemed to be confirmed with uncanny and frightening accuracy. Global trade was falling. The world’s largest auto companies were on life support. The U.S. airline industry had shrunk by almost a third. Food riots were erupting in poor nations around the world. Lingering wars in Iraq (the nation with the world’s second-largest crude oil reserves) and Afghanistan (the site of disputed oil and gas pipeline projects) continued to bleed the coffers of the world’s foremost oil-importing nation.

Meanwhile, the debate about what to do to rein in global climate change exemplified the political inertia that had kept the world on track for calamity since the early ’70s. It had by now become obvious to nearly every person of modest education and intellect that the world has two urgent, incontrovertible reasons to rapidly end its reliance on fossil fuels: the twin threats of climate catastrophe and impending constraints to fuel supplies (with most of the remaining oil reserves located in just a few countries). Yet at the Copenhagen climate conference in December, 2009, the priorities of the most fuel-dependent nations were clear: carbon emissions should be cut, and fossil fuel dependency reduced, but only if doing so does not threaten economic growth.

The cruel irony, obvious to my Peak Oil-aware colleagues but apparently not to the delegates at Copenhagen, was that the decades-long era of rapid economic growth based on increased fossil-fueled production and consumption is over anyway. The world’s last chance to collectively, cooperatively negotiate a turn away from the precipice was being squandered for the sake of a goal that was no longer achievable.

I could take no satisfaction from these confirmations of the Limits to Growth and Peak Oil scenarios; being able to say “I told you so” hardly made up for the shock of knowing that our last opportunities to change direction had been missed and that the train of industrial civilization was now not merely still chugging toward a broken bridge, but was actually starting to plummet into the gorge below. We had succeeded somewhat in helping increase public awareness of an issue: due to the efforts of thousands of scientists, writers, and activists, “peak oil” had become a recognizable term in public discourse. But we had failed to budge government policy in more than very minor ways (I had, for example, assisted the City Council-appointed Peak Oil Task Force of Oakland, California, which produced a sensible report on which, so far, little action has been taken).

The world has entered a new era. The project of awakening and warning policy makers and the general public was worthy of the investment of all the effort we could muster. In fact, it would have been negligent of the Limits to Growth authors, Colin Campbell, Jean Laherrère, and thousands of climate and environmental scientists and activists (myself included) not to give it our best shot. But it is now too late to avert a collapse of the existing system. The collapse has begun.

It is time for a different strategy.

By saying this, I am not suggesting that we should all simply give up and accept an inevitable, awful fate. Even though the collapse of the world’s financial and industrial systems has started, effort now at minimizing further dire consequences is essential. Collapse does not mean extinction. A new way of life will almost certainly emerge from the wreckage of the fossil-fueled growth era. It is up to those of us who have some understanding of what is happening, and why, to help design that new way of life so that it will be sustainable, equitable, and fulfilling for all concerned. We all need practical strategies and tools to weather the collapse and to build the foundation of whatever is to come after.


Journey to a New Economy

The propositions described above, and my personal journey, are the starting points for a search that can be summarized in a single question: What are the guideposts toward a livable, inviting post-growth society?

This search has in many instances entailed a literal, geographic journey. During the past few years, as I traveled the lecture circuit, I met thousands of people who had already concluded on their own that the global stage was being set for an economic crash of epic proportions. They had passed through the psychological stages of grief—denial, anger, bargaining, depression, and acceptance. They were thinking creatively, building new lives, and experimenting with a wide range of strategies for meeting basic human needs while using much less of just about everything.

Some of these folks, like me, had been thinking along these lines for a long time—since the 1970s. Many were much younger, though, had learned about Peak Oil or climate change just within the past few years, and had recently decided to devote their lives to building a post-hydrocarbon world. Some were clearly members of what was known in the 1970s as the “counterculture.” Others were mainstream citizens—investment bankers, real estate sellers, high school teachers, small business owners, corporate middle managers—who had chanced upon information that awakened them forcibly from their routines. Many of these folks lived in large cities, but others in small towns or on farms; some were rich, some poor (a few by choice); some were devout, others agnostic or atheist; some were working alone on survivalist projects, while others were building community organizations; some saw the transition as a business opportunity while others were working through non-profit organizations. Here are just three examples that stand out.

In 2005, while on a lecture tour in Ireland, I met a young college teacher named Rob Hopkins who believed that life could be better without fossil fuels. He had led his students in developing an “Energy Descent Action Plan” for their town, and believed he had the seed for something larger and more significant. He soon moved back to his native England to earn his Ph.D., and designed his thesis project around helping the village of Totnes begin a cooperative, phased process of transitioning away from its dependence on fossil fuels. This project in turn led to the start of a series of Transition Initiatives in villages, towns, and neighborhoods throughout the U.K. In 2007, a version of Rob’s written Ph.D. thesis was published as a book (The Transition Handbook) that quickly began inspiring others to take up this strategy. Today there are hundreds of Transition Initiatives at various stages of development in a dozen countries (including over 50 in the U.S.).

While in Montana for a speaking engagement at the University of Montana in Helena in spring 2009, some local Peak Oil activists drove me to the town of Ronan and introduced me to Billie Lee, who had helped start Mission Mountain Food Enterprise Center. The Center is housed in a fairly small, non-descript building and features medium-scale food processing equipment that local small food producers can rent at reasonable rates. This enables small farmers to produce value-added products (everything from canned soups to herbal tea bags) that are profitable and are price-competitive with those made by industrial food companies located hundreds or thousands of miles from Ronan. Local food has become an obsession for the sustainability-minded during the past few years, and local food systems will be a necessary pillar of post-growth economies. Yet aspiring small-scale farmers often have a hard time getting started because they cannot afford the equipment to enable them to produce profitable value-added products. Here in the tiny hamlet of Ronan was an ingenious solution to the problem, and one that deserves to be replicated in every agricultural county in the nation.

On a trip to New England in 2007, I met Lynn Benander, a community energy activist and entrepreneur who had started a project called Co-op Power to bring renewable energy to low-income and multi-ethnic communities throughout the Northeast. Typically, renewable energy projects cost more to get going than conventional coal or gas power projects, and so they tend to be found in wealthier communities and regions. Conversely, the most polluting energy projects tend to be sited in or near poor neighborhoods or regions. Co-op Power aims to change that imbalance of power—in a way that any community can copy. A typical project: You help four people put up a solar hot water system and everyone comes to help you put up yours; you save 40 to 50 percent off your total system price, get to know your neighbors, and learn how your system works. Co-op Power had also pioneered a cooperative financing method that cuts through the usual roadblocks to renewable energy projects in poorer neighborhoods by leveraging member equity.

Individually, these initiatives and projects may seem to be on too small a scale to make much of a difference. But multiplied by thousands, with examples in nearly every community, they represent a quiet yet powerful movement.

Few of these efforts have gained national media attention. Most media commentators who address economic issues are focused on the prospects—positive or negative—of the existing growth-based economy. These projects don’t seem all that important within that framework of thinking. But in the new context of the no-growth economy, they may mean the difference between ruinous poverty and happy sufficiency.

The trends are already in evidence: as the financial crisis worsens, more people are planting gardens, and seed companies are working hard to keep up with the demand. More young people are taking up farming now than in any recent decade. In 2008, more bicycles were sold in the U.S. than automobiles (not good news for the struggling car companies, but great news for the climate). And since the crisis started, Americans have been spending much less on non-essentials—repairing and re-using rather than replacing and adding.

Many economists assume these trends are short-term and that Americans will return to consumerism as economic crisis shifts into recovery. But if there is no “recovery” in the usual sense, then these trends will only grow.

This is what the early adopters are assuming. They believe that the nation and the world have turned a corner. They understand something the media either ignore or deny. They’re betting on a future of local food systems, not global agribusiness; of community credit co-ops rather than too-big-to-fail Wall Street megabanks; of small-scale renewable energy projects, not a world-spanning system of fossil-fuel extraction, trade, and consumption. A future in which we do for ourselves, share, and cooperate.

They’re embarking on a life after growth.

* * *

The realization that growth is at an end raises many questions. Will the financial impact be inflationary or deflationary? Will some nations fare better than others, leading to protectionist trade wars? Will the “down-sizing” of social and economic complexity lead also to a substantial die-off of the human species? How quickly will all of this happen?

There simply are no hard and fast answers to such questions. The financial, energy, food, transport, and political systems on which we rely are complex, so it is almost impossible to reliably model their response to a shock such as a resource limits-imposed end to economic growth. The only reasonable response, it seems to me, is to act as if survival is possible, and to build resilience throughout society as quickly as can be, acting locally wherever there are individuals or groups with the understanding and wherewithal. We must assume that a satisfactory, sustainable way of life is achievable in the absence of fossil fuels and conventional economic growth, and go about building it. This will be the focus of my work from now on—and it is likely to be the work of the next few generations as well. Call it Transition, call it cultural survival and renewal, call it what you will, it is the only game in town for the foreseeable future.

* A recent study by Australian Commonwealth Scientific and Industrial Research Organization (CSIRO) concluded, “[Our] analysis shows that 30 years of historical data compares favorably with key features of [the Limits to Growth] business-as-usual scenario….”

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Goldilocks and the Three Fuels:

A Cautionary Tale of Resource Depletion
(published by Reuters, Feb. 18, 2010)

Where are oil prices headed in 2010? Forecasts for the end of the year are all over the map, from over $100 a barrel to under $50. The difference hinges mostly on assumptions about whether the economy will recover or relapse. But it may be that price volatility has become an inherent feature of the oil market—and fossil fuel markets in general—for reasons that can perhaps best be explained with the help of a little history and an old children’s story.

Once upon a time (about a dozen years past), oil sold for $12 a barrel and a lot of people thought it would get even cheaper because the market was glutted. But instead the price rose: many big oilfields were aging and yielding less, and it was getting harder to find new ones—especially in places easy and cheap to drill. So the glut eroded and petroleum prices rose. Seeing a perfect opportunity (a necessary commodity with stagnating supply and growing demand), speculators drove the price up even further.

As prices lofted, oil companies and private investors also saw opportunity and started funding expensive projects to explore for oil in remote and inconvenient places, or to make synthetic liquid fuels out of lower-grade carbon materials like bitumen, coal, or kerogen.

But then in 2008, as the price of a barrel of oil reached its all-time high of $147, the economy crashed. Airlines and trucking companies downsized, motorists stayed home, and demand for oil plummeted. So did the price, bottoming out at $32 at the end of 2008.

But with prices so low, investments in hard-to-find oil and hard-to-make substitutes began to look tenuous, so tens of billions of dollars’ worth of projects got canceled. Yet the industry had been counting on those projects to maintain a steady stream of liquid fuels a few years out, so worries about a future supply crunch began to make headlines.

By mid-2009 the oil price had settled within a Goldilocks range—not too high (so as to kill the economy and, with it, fuel demand), and not too low (so as to scare away investment in future energy projects and thus reduce supply). That just-right price band appeared to be between $60 and $80 a barrel.

How long prices can stay in the Goldilocks range is anybody’s guess, but production declines in the world’s old super-giant oilfields continue to accelerate and exploration costs continue to mount, which means that the lower boundary of that just-right range will inevitably continue to migrate upward. Meanwhile the world economy remains frail, so that even $80 oil could strain the recovery.

When discussing the increasing perils of the current oil supply-demand-price balancing act, some commentators opine that the world supply of oil has peaked; others say it is demand that has peaked. It is a distinction without a difference.

There are similarities with U.S. natural gas. Recent shale gas projects have yielded significant quantities of fuel, and reserves of the stuff are enormous. But drilling costs and per-well decline rates are high, so producers can make a profit only if gas prices are toward the upper end of their historic range.

Nearly everyone believes that U.S. coal supplies are virtually endless, but the Goldilocks syndrome is coming into play there, too. Coal prices just about doubled in the two years leading up to the economic crash of 2008, and high-quality coals from the eastern region of the country are depleting fast.

We will never run out of coal, oil, or natural gas—in the absolute sense. The Industrial Revolution started in British coalfields, and there is still an enormous amount of coal in Britain; but the coal that’s left there is prohibitively expensive to mine, so that nation’s coal industry is virtually gone. Goldilocks grew dissatisfied with her options, got up, and left. The same has been gradually transpiring in the U.S. oil patch over the past four decades, and the same will happen wherever useful non-renewable resources are found.

Economic theory says the Market will always find a substitute for whatever resource is depleting to the point of scarcity. When it comes to fuels, the substitutes are alternatives to coal, oil, and gas—primarily, renewables like wind and solar. Investing in them should be a no-brainer. But, during the Goldilocks interval, increasing price volatility for oil, gas, and coal can make all energy investments dicey. That means that, as a society, our main strategy for navigating the energy transition will almost certainly have to be conservation.

The lesson of the parable: If you’re an investor, beware—oil prices are going to be increasingly hard to predict over the longer term. And if you make energy policy, don’t get any more hooked on non-renewable resources than you already are. If you do, you’ll eventually be spending much of your time chasing fickle Goldilocks—and in the end, she’s a bear.

#213: China or the U.S.: Which Will Be the Last Nation Standing?

MuseLetter #213 / February 2010 by Richard Heinberg

Download printable PDF version here (PDF, 111 KB)

View a Spanish translation of this article

China or the U.S.:

Which Will Be the Last Nation Standing?

Silly me. Here I had thought that world leaders would want to keep their nations from collapsing. They must be working hard to prevent currency collapse, financial system collapse, food system collapse, social collapse, environmental collapse, and the onset of general, overwhelming misery—right? But no, that’s not what the evidence suggests. Increasingly I am forced to conclude that the object of the game that world leaders are actually playing is not to avoid collapse; it’s simply to postpone it a while so as to be the last nation to go down, so yours can have the chance to pick the others’ carcasses before it meets the same fate.

I know, that sounds unbearably cynical. And in fact it may not accurately describe the conscious attitudes of leaders of some smaller nations. But for the U.S. and China, arguably the countries most likely to lead the way for the rest of the world, actions speak louder than words. (Mental health advisory: readers with a low tolerance for bad news should turn back now; there are lots of cheerier articles on the Internet and this might be a good time to find and enjoy one.)

For these two nations, avoiding collapse would require solving a range of enormous problems, of which at least four are non-negotiable: climate change; peak fossil fuels (in effect, stagnating and, soon, declining energy supplies); the inherent instability of growth-based financial systems; and the vulnerability of food systems to factors like fresh water scarcity and soil erosion (in addition to global warming and fuel scarcity). If they fail to address any one of these, societal collapse is inevitable—in a few decades certainly, but perhaps in just the next few years.

So how are our contestants doing? There’s not much to report on the climate score—just vague promises for future action. So their apparent strategy in this case is to delay (not to delay the impacts, mind you, but to delay efforts to address the problem).

Likewise, there is little positive action occurring regarding food systems: the assumption appears to be that conventional industrial agriculture—which is responsible for most of the global food system’s enormous and growing vulnerabilities—will somehow shoulder the task of feeding seven to nine billion humans. We just need to continue with what we are already doing, but on a larger scale and using more gene-engineered crop varieties.

Officially, peak energy is not even a concern, so evidently the strategy being adopted here is denial. We’ll see how that works out.

How about the financial mess? Here the U.S. and China are in situations so different that a more extended discussion seems justified.

China Surges to the Lead!

The U.S. is in debt up to its eyeballs and has mortgaged the paychecks of every generation approximately until hell freezes over in order to bail out its “too-big-to-fail” banks. In contrast, China has piles of cash (resulting from its enormous trade surpluses) and has bought a mountain of U.S. debt in order to keep its main customer’s currency from losing value. It would seem that, in this department, one nation is set to flag while the other is poised to leap into first place as world economic superpower.

And that happens to be the conventional wisdom on the subject. It’s not hard to find commentators who say the United States is a has-been for a variety of reasons. In addition to its huge debt burden, the U.S. also suffers from a shrinking manufacturing base, a big trade deficit, eroding quality of education, and a foreign policy that serves the interests of arms manufacturers while undermining the long-term interests of the nation. Regarding the last of these items, a 2006 World Public Opinion poll showed large majorities in four leading ally nations (Egypt, Morocco, Pakistan, and Indonesia), together accounting for a third of the Muslim world’s population, believe the U.S. is determined to destroy or undermine Islam. Within those countries, most people surveyed support attacks on American targets. And it just so happens that most of the world’s future oil supplies will be coming from Muslim nations. Brilliant.

By contrast, China is enjoying springtime on amphetamines. It now has the biggest car market in the world. And, according to Stuart Staniford in a recent fact-filled article, “if present trends continue, the Chinese expressway system will likely grow larger than the U.S. interstate highway system within the next couple of years, and Chinese car ownership will exceed U.S. car ownership by somewhere in the neighborhood of 2017.” As of 2010 China is the leading producer of hydroelectric and solar power and by 2011 will be the top producer of wind power. China’s smart grid investments dwarf those of the U.S. by 200 to one. The Chinese are also investing heavily in nuclear energy. Staniford goes on: “Oversimplifying greatly, it’s as though the U.S. borrowed a pile of money from China in order to fight a war to free up oil supply in Iraq in order that China could become the greatest industrial power the world has ever seen.”

China’s foreign policy consists largely of buying friends by purchasing rights to oil, gas, coal, and other resources (in Canada, Australia, Venezuela, Iraq, Kazakhstan, and throughout Africa), while the U.S. spends money it doesn’t have rooting out bad guys and making more enemies in the process.

In an October, 2009 lecture, George Soros showed refreshing candor about the seriousness of the continuing global financial crisis: “What differentiated [the recent economic crisis] from the Great Depression is that this time the financial system was not allowed to collapse, but was put on artificial life support. In fact [however], the magnitude of the credit and leverage problem we have today is even greater than the 1930s.” Soros then went on to discuss the relative positions of the U.S. and China:

In the short term, all countries were negatively affected. But in the long term, there will be winners and losers. . . . To put it bluntly, the U.S. stands to lose the most, and China is poised to emerge as the greatest winner. . . . China has been the primary beneficiary of globalization, and it has been largely insulated from the financial crisis. For the West, and the U.S. in particular, the crisis was an internally-generated event [that] led to the collapse of the financial system. For China, it was an external shock [that] has hurt exports, but left the financial, political, and economic system unscathed.

China Stumbles!

But remember: without solutions to climate change, peak energy, and the looming food crisis, winning the financial contest is only temporary solace. Consider just the energy conundrum: China may be building nukes and windmills, but there’s no way it can maintain 8 percent annual growth for long with flat or declining energy from coal. China and India, between them, are currently planning to build 800 new coal-fired power plants by 2020. Where will the coal come from? Both countries are already experiencing domestic production shortfalls and are starting to import the fuel. But coal-exporting countries will be unable to keep up with their growing combined demand.

Moreover, there is a school of thought that says China’s apparently unstoppable economic miracle is a bubble waiting to burst. Beijing’s housing market is overheated, like that of Las Vegas circa 2006. Last year, the Chinese economy enjoyed 9 percent GDP growth—on paper. But in order to achieve that goal, the government and banks had to loan out 30 percent of China’s GDP (the rate of growth in loans accelerated during the latter part of the year; at year-end rates, banks were on track to loan out an amount equal to the nation’s entire GDP in 2010). In any case, much of that growth probably occurred through speculation on real estate and questionable stocks.

Generally, China is at a Wild West stage of economic development: it is a collection of powerful local capitalist power bases unaccountable to anyone, all jockeying to create and inflate assets and credit. While the central government has recently exerted control over the banks, its ability to halt regional Ponzi schemes is still limited.

In January the Chinese banking regulatory commission attempted to rein in lending in order to slow the rapid increase in real estate and stock market values. (On the other hand, during the same month, China’s cabinet agreed to permit margin trading and short selling of stocks and to launch a stock futures index.) Significantly, there is evidence that China’s central bank’s attempts to harmlessly deflate the housing and stock market bubbles may be going badly. The sudden suspension in lending has, according to Joe Weisenthal in Business Insider, “caught importers, along with many other companies, by surprise and could cause turbulence in China’s import orders. Letters of credit (LoC) suddenly became unavailable, despite previous agreements. We believe that this will inevitably lead to delays or cancellations in China’s imports. Import orders for commodities and machineries could be affected most.” Translation: the government was faced with the options of letting a rapidly growing bubble burst, taking the economy down; or deliberately deflating the bubble, risking taking the economy down by another route. The central bank chose the latter, and the risked takedown may be unfolding.

Meanwhile Google and the Obama Administration have been exerting external pressure on China to relax its censorship of electronic communications—moves that some see as reducing the central government’s options for controlling both information flow and the economy.

In a recent op-ed, New York Times columnist Tom Friedman countered worries about a bursting of the China bubble with a robust display of confidence in Beijing’s unstoppable expansionary momentum. Given Friedman’s record (remember his columns in 2003 extolling the benefits that would flow to America from an invasion of Iraq?), this alone should be cause to doubt whether the Chinese locomotive can stay on its tracks much longer.

What Does It Mean to “Win”?

In his book Reinventing Collapse: The Soviet Example and American Prospects, Dmitry Orlov discusses the “collapse gap” between the United States and the old Soviet Union: the latter, he argues, was in effect much better prepared for economic crisis and the fall of its central government; when the U.S. eventually goes the way of the U.S.S.R., the pain and suffering of its citizens will be much greater. (I can’t adequately summarize Orlov’s evidence and reasoning here, but they are persuasive; if you haven’t read the book, do yourself a favor.)

So: How is the U.S. doing today in terms of collapse preparedness as compared to China?

After six decades of nearly uninterrupted economic growth, Americans have developed unrealistic expectations about the future. They are urbanized consumers whose manufacturing capability has shriveled and whose practical survival skills are in most cases vestigial. The Chinese, in contrast, have less of a steep fall ahead of them. Most still dwell in the countryside, and many who live in the cities are only one generation removed from subsistence agriculture and can still draw on their own, or their parents’, practical skills learned during decades of poverty and immersion in a traditional farming culture.

Both nations face fierce political challenges. In the U.S., the central government has reached nearly complete paralysis: it is evidently incapable of solving even relatively minor problems, and confidence in it among the citizenry has largely evaporated. Political leaders have succeeded in polarizing the people geographically with “hot-button” issues, few of which have anything to do with the factors currently undermining the nation’s ability to survive. The Chinese central government appears far more capable of acting decisively and strategically, but it is confronted with nasty facts of geography and history: there is an extreme and growing economic and social division between the wealthy coastal cities and the poor, rural interior; and a demographic schism between those 40 years old or younger who have high economic expectations, and the older generation who grew up under Mao, with an ethic of collectivism and self-sacrifice. The young, especially, have accepted a trade-off between civil freedoms and economic prosperity. If the latter is not delivered, there will be shrill demands for the former. These divisions are so deep and profound that they could tear society apart if expectations are dashed—and the leaders know this.

Thus, in the event of collapse, both nations face the possibility of a breakdown in their political systems, entailing widespread violence (uprisings and crackdowns).

China still maintains a crucial advantage in one key area: its food system. Far more of its citizens still grow food, even taking into account recent trends toward rapid urbanization (in the U.S., full-time farmers make up only about two percent of the population and the average farmer is approaching retirement age). This is not to say that China will have the capacity to feed all its people; it is already moving in the direction of being a major net food importer. Meanwhile, the U.S. remains a significant food exporter. The key difference has to do with the resiliency of the two nations’ respective food systems: that of the United States is more centralized, more highly fuel dependent, and therefore probably more vulnerable.

The Geopolitics of Collapse

It’s easy to see the advantage of collapse preparedness for the citizenry—with better preparation, more will survive. But does a higher survival rate during and after collapse translate to some sort of geopolitical advantage?

The process of collapse will be determined by many factors, some hard to predict, and so it is difficult to know the size or scope of the political power structure that might re-emerge in either country. It’s possible that one nation, or both, could devolve into smaller political units squabbling among themselves and unable to engage much in global jockeying for resources. All new political units emerging within the present territories of China or the U.S. would be immediately beset with enormous practical problems, including poverty, hunger, environmental disasters, and mass migrations.

Presumably some potent weaponry from the age of global warfare would remain intact and usable, so it is possible in principle that one or another of these smaller political entities could assert itself on the world stage as a short-lived, bargain-basement empire of limited geographic scope. But even in that case “winning” the collapse race would be small comfort.

The possibility of armed conflict between the two powers prior to mutual collapse is not to be entirely excluded if, for example, U.S. efforts to contain Iran’s nuclear ambitions were to set off a deadly chain reaction of attacks and counter-attacks possibly involving Israel, with world powers being forced to choose sides; or if the U.S. were to persist in arming Taiwan. But neither the U.S. nor China wants a direct mutual military confrontation, and both nations are highly motivated to avoid one. Thus all-out nuclear war—still the worst-case imaginable scenario for homo sapiens and planet Earth—seems thankfully unlikely, though in the few decades ahead the use of some of these weapons, on some occasions, by one nation or another, is probable.

Trade wars are another matter, and we might even see one this year, according to Michael Pettis at Financial Times, who notes that

. . . trade imbalances are more necessary than ever to justify increased investment in surplus countries [i.e., China], but rising unemployment makes them politically and economically unacceptable in deficit countries [i.e., the U.S.]. Rising savings in the U.S. will collide with stubbornly high savings in China. Unless a long-term solution is jointly worked out immediately, trade conflict will worsen and it will become increasingly hard to reverse offensive policies. Most importantly, if deficit countries demand structural change faster than surplus countries can manage, we will almost certainly finish with a nasty trade dispute that will . . . poison relationships for years.

How likely is the prospect for the last nation standing to be able to, as I put it in the first paragraph above, “pick the carcasses” of its competitors? Such a scenario presupposes that one nation will be able to stay on its feet for at least a few years after others fall. But this may not be possible. Recall the prophetic words of Joseph Tainter in The Collapse of Complex Societies (1988):

“A nation today can no longer unilaterally collapse, for if any national government disintegrates, its population and territory will be absorbed by some other [or bailed out by international agencies]. . . . Collapse, if and when it comes again, will this time be global. No longer can any individual nation collapse.”

When the U.S.S.R. crashed, the U.S. and various multinational corporations were able to sweep in and gobble up some of the treasure left lying around. One example: U.S. nuclear power plants have for many years been using uranium fuel cannibalized from old Soviet missile warheads. Soon, international institutions such as the World Bank and IMF helped organize new financial structures for Russia, Ukraine, Belarus, Lithuania, Estonia, and the other nations born from Soviet political and economic disintegration, so as to limit and reverse the process of social disintegration that had already passed beyond its early stages.

But now the game has changed. A collapse of the U.S. would leave China devastated. Not only would Beijing lose its main customer, but the hundreds of billions of dollars’ worth of treasury notes it has accumulated would be rendered worthless. If China were internally stable, such impacts could be absorbed with difficulty. But in light of China’s own simmering social and financial predicaments, a U.S. collapse would almost certainly be enough to tip Beijing’s economy into a tailspin, resulting in both social and political crises.

A collapse of China would similarly devastate the U.S. Obviously, the loss of a source of cheap consumer products would discomfit WalMart shoppers, but the shock soon would go much deeper. The Treasury would lose its main foreign buyer of government debt, which means that the Fed would be forced to step in and monetize that debt (in common parlance, “turn on the printing presses”), undermining the dollar’s value. The result: a hyperinflationary economic crash. Such a crash is probably inevitable at some point anyway, but a collapse of the Chinese system would hasten and worsen it.

In neither instance would international institutions be capable of preventing substantial social and political fall-out. The last nation standing would not stand for long. We have reached the stage where, as Tainter says, “World civilization will disintegrate as a whole.”

The Transition Marathon

Okay, so there is no serious effort on the part of U.S. or Chinese leaders to avoid collapse in the long run (say, over the next 10 to 20 years). Perhaps this is because they have concluded that it is impossible to do so—there are just too many trends leading in the same direction, and actually dealing with any of those trends head-on would entail huge, immediate political risks. In reality, however, it is much more likely that they simply refuse seriously to think about these trends and their implications, because they do have another option—to postpone collapse through deficit spending, bailouts, and more financial bubbles, while enacting their parts in a climate-policy kabuki play and engaging in resource geopolitics. This way blame will at least fall on the next set of leaders. Postponing collapse is itself a big job, enough so as to take all of one’s attention away from having to contemplate the awfulness and inevitability of what is being postponed.

Do these short-term efforts in any way reduce the risk of dissolution? Hardly. In fact, the longer the reckoning is delayed, the worse it will be.

What would make more sense than just trying to put off the inevitable is quite simply to build resilience throughout society, re-localizing basic social systems involving food, manufacture, and finance. There is no need to rehearse the existing discourse about this strategy: readers who are not familiar with it can find plenty of useful pointers at www.transitiontowns.org, or in the books and articles of authors such as Rob Hopkins, Albert Bates, David Holmgren, Pat Murphy, and Sharon Astyk (and in some of my own writings, including Museletter #192).

It is understandably hard for national politicians to think along those lines. Building societal resilience means disregarding the dictates of economic efficiency; it means systematically reducing the power of the central government and national/global commercial institutions (banks and corporations). It also means questioning the central dogma of our modern world: the efficacy and possibility of unending economic growth.

So if the best outcome lies in a strategy of resilience and re-localization, and our national leaders can’t even contemplate such a strategy, that means those leaders are, in one sense at least, irrelevant to our future.

Some blog readers are so in tune with this line of thinking that they no longer see any point in paying attention to the global scene. They may even think this article is a waste of time (and I expect to get an email or two to that effect). But following world events is more than a matter of infotainment: when and how China and the U.S. come apart at the seams is a question of far greater consequence than that of whether the New Orleans Saints or the Indianapolis Colts will win the Superbowl. The reality is that no nation, and no community will be able to completely protect itself from the sudden, harsh winds that will rush to fill the vacuum left by an implosion of either superpower.

By the way, my apologies to the other 190 or so nations of the world, large and small: my singling out of the U.S. and China for discussion does not signify that other countries are unimportant, or that their destinies will not be as unique as their cultures and geographies; merely that those destinies will probably unfold in the context of a global collapse spreading from the two nations we have been discussing. For any nation—India, Bolivia, Russia, Brazil, South Africa—and for any community or family, survival will require some comprehension of the direction of large events, so as to get out of the way when debris is flying and to anticipate opportunities to regroup.

So: Pay attention to the weather reports from Washington and Beijing, but meanwhile build local resilience wherever you are. If the roof needs mending, don’t dawdle.

Meanwhile, after a long day of organizing neighborhood Transition gardens, you may want to get a foretaste of post-collapse America by reading James Howard Kunstler’s A World Made by Hand; or savor an entertainingly erudite discussion of collapse as an extended process (which it will likely be), rather than as a sudden, all-out event, by reading John Michael Greer’s books The Long Descent and The Ecotechnic Future.

Just because the sky is falling, that doesn’t mean it’s time to stop thinking.

#212: The Meaning of Copenhagen

MuseLetter #212 / January 2010 by Richard Heinberg

Download printable PDF version here (PDF, 125 KB)

It was the pivotal international conference of the new century. Tens of thousands showed up, including heads of state, officials at all levels of government, representatives of environmental organizations, and ordinary citizens from nearly 200 countries. Scientists had warned that, without a strong agreement to reduce carbon emissions, the consequences for civilization and the world’s ecosystems would be cataclysmic.

On the sidelines sat powerful forces (including pro-growth business interests and fossil fuel companies) that preferred a weak agreement or none at all. Their strategic public relations efforts (“by far and away the biggest public relations campaign that I’ve ever seen,” according to PR veteran James Hoggan, cofounder of DeSmogBlog.com and author of Climate Cover-Up: The Crusade to Deny Global Warming) paid off when, only days before the meeting, thousands of private emails between climate scientists were hacked and released to the public; during the next few days, prominent right-wing commentators assured one and all that “climategate” completely undercut any scientific basis for thinking that human actions cause global warming. While nothing in the emails did in fact call established climate science into question, the desired and actual effect of the exercise was to destabilize public support for a strong agreement in Copenhagen.

On the streets were tens of thousands of mostly young activists and NGO campaigners, and even a few scientists, who were prepared to raise hell if world leaders didn’t act boldly to reduce carbon emissions.

So, on the whole, heads of state still felt obliged to come up with some results—but nothing too radical.

U.S. President Barack Obama’s role in the proceedings seems to have been pivotal. He jetted in on the final day of negotiations and gave a tepid speech stating his country’s modest bargaining position. This was greeted coolly (some accounts mention choruses of boos). Then, later in the day, he apparently burst in on a meeting including heads of state or high-level negotiators from China, India, Brazil, and South Africa, insisting that an agreement be reached (up to this point, according to most accounts, the Chinese had been obstructing any deal). Obama managed to persuade the other leaders to sign onto a three-page, non-binding Accord, which, at a midnight press conference, he presented to the other 189 nations attending the conference for their acceptance (no changes to the text were to be permitted). The full text of the document can be found at [UNFCC Framework Convention on Climate Change].

Environmental activists and representatives of poor nations most vulnerable to rising sea levels or desertification were unhappy with these results. Bill McKibben of the organization 350.org called it “an end far worse than most [climate activists] had imagined.” Ian Fry of the drowning island nation of Tuvalu likened it to “being offered 30 pieces of silver to betray our people and our future.” Kumi Naidoo, the head of Greenpeace International, called Copenhagen simply “a crime scene.”

On the other hand, U.N. secretary-general Ban Ki-moon told a press conference that he welcomed the Accord as “an important beginning,” and Sierra Club executive director Carl Pope released a statement calling it “an historic, if incomplete, agreement.”

What was agreed—and what wasn’t

The main points of the Copenhagen Accord are easy to summarize:

  • Industrial countries must list their individual emissions reductions targets, and less-industrialized countries must list the actions they will take to cut emissions by specific amounts.
  • All countries must accept a transparent system for monitoring their emissions.
  • Poor countries will be paid to prevent deforestation.
  • Wealthy nations will establish a fund (growing from 30 billion dollars per year to $100 billion per year by 2020) to help poor and vulnerable nations adapt to climate change.
  • Signatory nations accept a goal of limiting global warming to 2 degrees Celsius by 2050.
  • The Accord creates a Technology Mechanism to accelerate development of low-carbon technology, but supplies no details.

It is important to emphasize that this is not a binding legal or political agreement. The Accord is not a U.N.-sanctioned document, though the U.N. has officially moved to “take note” of it, which essentially means it may be considered in future climate gatherings as the framework for a legally binding agreement. The U.S. delegation made it clear that the U.N. cannot modify the Accord. While it was negotiated effectively in secret by five countries, many other nations have now signed on to it, and the signing countries together account for over 80 percent of total global emissions. Some countries, including the island nation of Tuvalu, have strongly repudiated the document.

Criticisms of the Accord’s substance (leaving aside complaints about the exclusion of most nations from negotiations, its abandonment of the U.N. framework, and so on) include the following:

  • The limit of 2 degrees C is too high. A limit of 1.5 degrees was already supported by over 100 countries and is necessary to avert catastrophic climate impacts.
  • The Accord offers no cap for CO2 concentrations. The scientific consensus a few years ago was that an atmospheric CO2 level of 450 parts per million would translate to a temperature increase of 2 degrees over pre-industrial levels. But that conclusion has been called into question due to the likelihood of feedbacks (e.g., as arctic ice melts, it reflects less sunlight back into space, causing even more global warming). This is one of the reasons most scientists now support a 350 ppm cap on atmospheric CO2. By setting a limit of 2 degrees temperature increase without specifying a CO2 cap, the Accord may implicitly be adhering to the older scientific consensus, which would mean a 45o ppm cap and 3 degrees or more of real temperature increase. Any scientific assessment of temperature and CO2 targets is delayed until 2015.
  • There is no target date for peaking of emissions mentioned in the Accord, just a vague suggestion that emissions should “peak as soon as possible.”
  • There are no global emissions targets for 2020 or 2050. Instead, the Accord merely proposes listing the voluntary targets of developed and developing countries. Based on current assessments of country promises, these 2020 targets will put the world on a track toward 3.5 to 4 degrees of warming.
  • The Accord makes general statements about need for adaptation and an end to deforestation, but there is no concrete deal on reducing emissions from deforestation and forest degradation (although this may be a relatively good thing, as the negotiations were veering toward offset loopholes).
  • The promised finances for poor nations are too small. For example, African countries had sought $400 billion in short-term financing for climate change adaptation, with an immediate amount of $150 billion needed. In the longer term they say 5 percent of the industrial world’s GDP is needed (about $2 trillion). Not only were much smaller amounts offered, but U.S. negotiators including Hillary Clinton implied that poor nations needed to “associate” themselves with the Accord in order to be eligible for funds.

On the bright side: the Clean Development Mechanism negotiated in Copenhagen seems to have excluded carbon capture and storage, thus reducing the incentive for wasting money on this dead-end technology. Expect pushback from the coal industry on that.

Why agreeing was hard (and will continue to be)

The battle to rescue the planet from climate calamity has been waged uphill from the start. That’s essentially because we humans tend to discount future events, whether they’re perceived favorably or unfavorably: immediate profits are worth more to companies than similar profits ten years hence; similarly, the immediate cost of averting climate change looms large compared to the estimated cost of dealing with its consequences decades from now. This attitude was exemplified, for example, in the comment of U.S. House of Representatives member Joe Barton, who told Reuters on the sidelines of the Copenhagen conference, “We’re not going to let jobs be destroyed in America for some esoteric environmental benefit 100 years from now.”

But there’s more to it than that. Over the past couple of centuries economic growth has been closely tied to increased burning of fossil fuels. And economic growth has become the universal measure of national well-being. Thus when talking to politicians, climate scientists often try to gain traction by describing the impact of future CO2 emissions in terms of the cost to future economic growth. Their hope is that this future cost will be high enough to justify the immediate economic sacrifice that would result from phasing out the use of fossil fuels. This is a tough argument to win, though it plays differently according to the audience: relative receptivity depends on who will be impacted most by climate change and who will bear the highest immediate costs during the energy transition. (Sometimes environmentalists go so far as to suggest that the transition from fossil fuels to “green” energy sources will result in enormous economic growth; however, this ignores the very real economic benefits of cheap fossil fuels and the problems with most of the renewable alternatives, as outlined for example in the report “Searching for a Miracle”.

And so, at the climate talks in Copenhagen, bargaining positions closely reflected countries’ relative vulnerability to long-range environmental impacts versus short-range economic costs for adaptation.

As mentioned, China evidently obstructed any agreement from the start. No doubt this was largely due to the fact that this nation is the world’s top greenhouse gas emitter, uses over twice as much coal as the next country in line (the U.S.), and requires at least 8 percent economic growth per annum to stave off domestic political unrest. While China is quickly becoming the world leader in renewable energy technologies, it has no realistic prospect of phasing out coal without giving up its high GDP growth rates. China produces half the world’s cement and 40 percent of its iron and steel; over the next 15 years, it plans to urbanize a number of its people about equal to the total population of North America—a continent that took more than a century to accomplish a similar-sized task. That means more cement, steel, appliances, power plants, and all the other energy-guzzling accouterments of urban existence. Mark Lynas, an environmental writer who was present at the final Friday night negotiations at Copenhagen, summarized the situation this way: “China knows it is becoming an uncontested superpower; indeed its newfound muscular confidence was on striking display in Copenhagen. Its coal-based economy doubles every decade, and its power increases commensurately. Its leadership will not alter this magic formula unless they absolutely have to.” [How do I know China wrecked the Copenhagen deal? I was in the room]. In effect, by subverting a strong, binding climate agreement while directing blame for failure toward western nations, China is playing brilliant climate politics—with deadly consequences for all.

India’s economy is also highly coal dependent, also growing rapidly, also on a trajectory of rapid urbanization. And so it should come as no surprise that this country largely echoed China’s position.

There are many who correctly point out that wealthy western industrial nations are responsible for the vast bulk of historic greenhouse gas emissions, and who then go on to conclude that future climate policy must therefore center on achieving economic justice by requiring rich nations to reduce fossil fuel consumption much faster than poor ones while financing climate change mitigation and adaptation in those less-industrialized countries. If China and India have now grown big enough to bully their way around international negotiations, we should applaud them, say climate justice activists, because this means the already-rich countries are no longer in the driver’s seat. Those who hold this view tend to blame western nations (especially the U.S.) for lack of progress in the Copenhagen talks. The problem with this framing is that it doesn’t take account of the reality that China and India have little real interest in forging a strong, binding climate accord, and without them there can be no global agreement.

There’s plenty of blame to go around for slow progress on climate policy, but the bottom line is this: once we’re done fairly apportioning that blame, is there still a viable path toward an agreement?

Not if Russia gets a veto. This nation played a less visible role in wrecking the Copenhagen process, but that may be because it allowed China to play the spoiler on its behalf. Russia is the world’s top oil producer, the world’s biggest gas exporter, has the world’s second-largest coal reserves, and can claim hardly even a token renewable energy sector.

Some fossil fuel exporting nations are rich (think Australia or Kuwait) but most are poor (think Nigeria or Angola). Prior to Copenhagen, OPEC floated the proposal that fossil fuel importers should pay exporters for the oil, coal, or gas that the latter keep in the ground to avoid greenhouse gas emissions. It’s a nice idea, in the same way that that it’s nice to imagine money trees or horns of plenty. But in the real world nations grow their economies by using energy to produce goods and services, not by paying for energy they’ll never use.

Among the fossil fuel exporters, Venezuela was most vocal in promoting strong climate policy in Denmark: the politics and personality of that nation’s president, Hugo Chavez, in this instance evidently led to a bargaining position contrary to what would be expected based on his country’s economic interests. Or maybe Chavez was the originator of that OPEC policy proposal—which, by ensuring that his county’s oil was paid for even if it isn’t burned, would obviate almost all the economic sacrifice implied by strong climate policy.

Anyway, Venezuela’s oil production is generally declining, a situation this nation holds in common with Britain—which also favored a strong global climate agreement. The European countries (with the exception of Norway) are fossil fuel importers, which means they are more or less forced to plan for a future of ever more expensive fossil fuels. For them, a climate agreement that would phase out fossil fuels globally is not as scary as it is for those that make money from fuel exports.

Small island nations and very poor countries with few indigenous fossil fuel resources were of course the countries most in favor of a strong climate agreement. They have the least to lose from increased prices for fuels they hardly use anyway, the most to lose from climate change, and the most to gain when wealthy nations establish a climate adaptation fund.

That leaves the U.S., the biggest per capita carbon emitter (well, almost—Australia and a couple of OPEC members actually rank higher), but also the world’s top fossil fuel importer. With its domestic oil production long in decline but its oil and coal companies still powerfully wielding domestic political influence, the U.S. is deeply conflicted. This ambivalence is reflected in domestic climate politics and was also on display in President Obama’s efforts at Copenhagen.

The nations that negotiated the Accord included the world’s first and second foremost coal burners (China and the U.S.); the country home to the world’s largest coal company (India); a prominent coal exporter (South Africa); and what will probably prove to be the last nation to have luck finding large amounts of oil (Brazil). It should be noted that Brazil, which is also a major biofuels producer, has just (as of December 28) announced that it has unilaterally made its ambitious 2020 emissions reduction targets legally binding. Nevertheless, with the rest of this cast of characters at the table, it should have surprised no one when the Accord turned out to be non-binding and weak.

Further, the Accord’s implementation could turn out to be a joke. The document says nothing about how voluntary targets are to be achieved—whether through carbon taxes, cap-and-trade, or other mechanisms. And, as climate scientist James Hansen has pointed out tirelessly during the past few months, cap-and-trade programs, unless set up and managed flawlessly, can easily be “gamed” by fossil fuel producers by buying phony offsets while continuing to increase total emissions.

If all of this sounds shamefully self-interested and corrupt, just put yourself in the shoes of a high-level politician. No would-be leader who fails to promise economic growth is taken seriously to begin with, so the only politicians we have are ones committed to producing growth. Those who succeed at this are rewarded; those who fail are sidelined and forgotten.

Should we ever seriously have expected a much different outcome from Copenhagen?

What nobody talked about

Normally we humans like to focus on one problem at a time. It’s how our brains are wired, and it’s how the political process is set up to function. But reality is not always so simple and clear-cut.

Climate change is just one of several enormous interrelated dilemmas that will sink civilization unless all are somehow addressed. These include at least five long-range problems:

  • topsoil loss (25 billion tons per year),
  • worsening fresh water scarcity,
  • the death of the oceans (currently forecast for around 2050 based on current trends),
  • overpopulation and continued population growth, and
  • the accelerating, catastrophic loss of biodiversity.

As events are unfolding now, these problems, together with climate change, will combine over the next few years or decades to trigger a food crisis of a scale and intensity that will dwarf to insignificance any famine in human history.

To make matters even more grim, there are two near-term dilemmas that may make climate change and these other problems much harder to address: peak oil and economic collapse.

Some of my friends who were on the streets of Copenhagen in early December assure me that most activists and concerned citizens they talked to there knew about peak oil. But the media offered no clue that the officials negotiating in the Bella Center ever mentioned fossil fuel supply limits. For many years the default assumption in all climate negotiations has been that the world has enough conventional fossil fuels to enable it to continue increasing oil, coal, and gas consumption (and hence carbon emissions) up until at least the end of this century. In fact, global oil production has probably already entered its terminal decline and coal and gas extraction will likewise do so in about 15 years—which means that the world may have seen its all-time peak of total energy production from fossil fuels during the years 2005 to 2008. Earth probably has enough economically extractable conventional fossil fuels to raise atmospheric CO2 levels to about 470 ppm—high enough to trigger human and environmental catastrophe (remember, the “safe” level is 350 ppm), but not nearly as high as the projections commonly mentioned in U.N. climate literature. (The potential amount of carbon emissions from unconventional fossil fuels, such as tar sands and oil shale, is immense, but actual production of those fuels is likely to be constrained by a variety of economic factors, as discussed in “Searching for a Miracle”.)

Because petroleum has been the driver of most economic expansion during the past few decades and there is no ready substitute for it, peak oil basically means the end of economic growth as we have known it. And without economic growth, our entire financial system comes apart. Indeed, that’s exactly what we’ve been seeing over the past 18 months in the failure of trillions of dollars’ worth of bets on future economic expansion. (For a discussion of the role of peak oil in the financial crisis, see “Temporary Recession or the End of Growth?”.

No politician can ignore the worldwide economic crisis, yet its significance for the climate talks is rarely discussed. Now that people can’t afford to drive as much, or even heat their homes in many cases, global carbon emissions have declined during the past year. That means that if the economy is in only a temporary state of “recovery” and resumes its swoon (as many financial analysts anticipate), and if global oil production has indeed peaked, then global carbon emissions have probably already peaked too. In which case, the world has achieved its first major goal in mitigating climate catastrophe.

Economic crisis makes climate change much harder to solve in the way everyone wants to see—i.e., with lots of green-tech growth. But it makes almost inevitable a “solution” that nobody wants: dramatic economic contraction leading to sharply declining energy demand. This is similar to famine “solving” overpopulation.

Responsible officials can discuss none of this in public lest investors lose their nerve and head for the exits. But a conversation that excludes such essential realities is delusional.

How might that pivotal Friday night negotiation in the Bella Center have gone if it had been grounded in reality?

President Obama might have said something like this: “Colleagues, global oil production has peaked and we have witnessed the resulting carnage in the global economy. We have likely seen the last of economic growth, in an overall sense. We are in an entirely new era. Adopting strict carbon emissions caps will help us end our dependence on fossil fuels—which we must do both to mitigate climate change and also to reduce the economic impacts of fuel scarcity. While giving up fossil fuels means reducing opportunities for growth, continuing to use them is no longer an option. We must adapt to this new reality.”

The Chinese delegate would have objected: “But our nation needs to continue using coal in ever-increasing amounts. If we don’t continue to grow our economy at 8 percent annually, the people will revolt. We’re doing all we can to develop renewable energy, but only coal can give us the growth we need.” To which Obama might have replied: “Your coal production will be peaking during the next few years anyway, and you won’t be able to import enough from Australia and Indonesia to maintain growth in total energy production. Your economy is about to stall in any case—it is heavily dependent on exports, and Americans just aren’t going to be buying a lot more Chinese goods. Your only hope, as ours, is to build renewable energy infrastructure at top speed, provide as much of a basic safety net for citizens as we can, try to enlist them in the overall energy transition, and hope for the best. Meanwhile, a strong climate agreement can at least help us change direction toward reducing our reliance on fossil fuels, and we are obligated to produce such an agreement anyway for the sake of the planet and future generations. Let’s get this done.”

But that’s evidently not what transpired. Instead, all accounts suggest the negotiations amounted to a theatrical set piece in which each player stayed rigidly on script.

If governments are having a difficult time addressing climate change in any serious fashion, they’re not doing much better with regard to any of the other problems mentioned. Key nations are going about “solving” their financial crises by shoveling money by the billions and trillions at bankers who were largely responsible for creating the mess to begin with. Peak oil is regarded by heads of state as a subject unworthy of mention. The crisis of fresh water scarcity is being dealt with by pumping ancient aquifers until they’re dry. Topsoil erosion has slowed in a few places, but overall continues at a staggering pace.

These problems, which will shape our destiny over the next few years and decades, are for the most part discussed only by experts in relevant fields. Meanwhile citizens are subjected to a steady stream of “infotainment” and political rhetoric utterly divorced from crumbling physical reality. This is easy to illustrate with ludicrously disinforming statements from industry-backed climate-change deniers. But responsible advocates of a strong climate policy are often nearly as soaked in delusion.

Here’s just one example. Professor Mark Maslin, Director of the Environment Institute at University College London, was recently quoted as saying: “The science tells us that we must drastically cut the amount of carbon going into the atmosphere to avoid catastrophic climate change. But we must also protect the moral and ethical right of countries to develop and achieve the same standard of living as we have in the west.” This is a completely unremarkable statement with which nearly everyone at the climate talks in Copenhagen would probably have agreed—at least publicly. But think about it: what does this “development” consist of? The assumption is that poor countries can and should use more fossil fuels while rich ones wean themselves. But there just aren’t enough fossil fuels available to enable that to happen. Poor countries will never achieve “the same standard of living as we have in the west.” Rather, in the decades ahead, as nonrenewable resources deplete, people in the west will involuntarily give up their material standard of living until their way of life is supported only by renewable resources and the recycling of non-renewables. That means economic contraction, big time. We have a very long downward ramp to negotiate until that sustainable baseline is achieved.

Economic justice or leveling is to some extent inevitable during the energy transition. But it won’t consist of poor families in Senegal adopting the living standards of folks in Seattle or Stuttgart. It will be a matter of industrialized countries seeing a huge increase in rates of absolute poverty.

In the meantime, countries of the global north could do a lot of good just by canceling the southern nations’ debts and by ceasing to enforce trade rules that continue to transfer wealth mostly from poor countries to rich. Moreover, if our goal is to achieve global equity, there is one other thing that actually might make a significant difference: that is the shifting of wealth and income away from truly rich individuals—from bankers, CEOs, and hedge fund managers—and from the global weapons industry. The money could be used to fund public programs for food, shelter, and medical care in the industrialized nations as these careen into economic depression, and to bankroll Asia, Central and South America, and Africa, not in “development” as conventionally conceived (meaning urbanization), but in adopting simple, cheap technologies to avoid burning wood, charcoal, and dung for cooking and home heating; in helping them replace slash-and-burn agriculture with small-scale ecological farming; and in supporting them in scrapping and (where possible) replacing inefficient, polluting, hand-me-down diesel vehicles and factories. None of these things would be easy to achieve, but they are all at least within the realm of the possible.

In summary, the discussions in Denmark took place in a conceptual fantasy world in which climate change is the only global crisis that matters much; in which rapid economic growth is still an option; in which fossil fuels are practically limitless; in which a western middle class staring at the prospect of penury can be persuaded voluntarily to transfer a significant portion of its rapidly evaporating wealth to other nations; in which subsistence farmers in poor nations should all aspire to become middle-class urbanites; and in which the subject of human overpopulation can barely be mentioned.

Once again: it’s no wonder more wasn’t achieved in Copenhagen.

Where does that leave us?

Copenhagen was a watershed event. Climate change has become, in many people’s minds, the central survival issue for our species, and the Copenhagen talks provided a pivotal moment for addressing that issue. The fact that the talks failed to produce a binding agreement is therefore of some significance.

The next opportunity to forge a binding global climate treaty will be the 2010 U.N. climate conference in Mexico City. Many see this as a chance to achieve what proved elusive in Copenhagen. But the same challenges will face leaders there. And if the global economy relapses in the meantime, national politicians may be even more reluctant to take bold action to limit fossil fuel consumption, as they’ll want to keep all their economic options open. Indeed, it seems likely that for the foreseeable future economic implosion will be sucking the air from any room in which heads of state are gathered.

So, international policies are needed if we are to deal with a potentially game-ending global issue like climate change, yet there is now convincing evidence that national and supra-national institutions are incapable of producing effective climate policies.

The same could be said for other crises mentioned above. It’s not enough that national governments can’t get together to solve climate change. They can’t solve economic meltdown, peak oil, water scarcity, soil erosion, or overpopulation either. Yes, there are individual nations like Tuvalu that can muster a decent policy on one issue or another. Denmark is probably the shining example among industrial nations: it has reduced its greenhouse gas emissions by 14 percent since 1990 while maintaining constant energy consumption and growing its GDP by more than 40 percent. But these are the rare exceptions, and apparently destined to stay that way. We have no global means of dealing with the toxic debt that is strangling the world economy. We have no agreements in place to prevent the death of the oceans. There is no global policy to avert economic impacts from fossil fuel depletion. There is no worldwide protocol to protect the precious layer of living topsoil that is all that separates us from famine. There is no effective global convention on fresh water conservation.

This is not to say there is nothing that can be done about these problems. In fact, there are organizations and communities in many nations doing path-breaking work to address each and every one of them. Some examples:

  • Agronomists at the Land Institute in Salina, Kansas, led by Wes Jackson, have for years been patiently developing perennial grain crops capable of feeding billions without destroying topsoil.
  • The city of Zurich has decided through popular vote to become a 2000-Watt society. This means cutting energy consumption from the current 6000 Watts per person to one-third that amount over the next three or four decades. This was evidently a response both to climate change and the problem of energy security.
  • Here in Sonoma County, California, a Go Local Co-op has formed; it’s an extension of the national organization, Business Alliance for a Living Local Economy (BALLE). One of its projects is “Sustaining Capital”—a community cooperative capital formation model that, if successful and replicated widely, could end local economies’ dependence on Wall Street banks.
  • At Sunga in Madhyapur Thimi, Nepal, a community-supported project has built a water treatment plant based on reed-bed constructed wetlands that also serves as the main source of irrigation for farmers in the region.

These are just a few items out of hundreds, maybe thousands that could be cited. But, in aggregate, are they enough? Obviously not—even in the estimation of the folks who are doing this admirable work. Some problems are more easily tackled at the local level than others (local efforts can help maintain biodiversity, but without international agreements it’s not obvious how the oceans could be rescued). And many local success stories actually depend on global systems of finance and provisioning (for example, the Nepalese water treatment plant mentioned above was built with financial support from the United Nations Human Settlements Program, U.N.-Habitat’s Water for Asian Cities Program, the Asian Development Bank, and Water Aid, and received technical support from the Environment and Public Health Organization).

Discouraging? Of course. But absent global agreements, local efforts are what we’ve got, and we will simply have to make the most of them that we can.

Meanwhile, given the amount of carbon emissions already in the atmosphere, climate impacts are in store no matter what happens at the U.N. negotiations in Mexico City. Something similar could be said with regard to all the other problems mentioned: even if strong policies could somehow be forged tomorrow, serious challenges will arise in the years ahead with regard to water, food, energy, and the economy.

If such impacts are unquestionably coming, then we should be doing something to prepare. Since we don’t know exactly what the impacts will be, or when or where they will land, the most sensible strategy is simply to build resilience throughout the system. Resilience implies dispersed control points and dispersed inventories, and hence regional self-sufficiency—the opposite of economic efficiency, the central rationale for globalization—and so it needs to be organized primarily at the local level.

To summarize: three factors—the need for resilience, the lack of effective policy at national and global levels, and the tendency of the best responses to emerge regionally and at a small scale—argue for dealing with the crushing crises of the new century locally, even though there is still undeniable need for larger-scale, global solutions.

Does this mean we should give up even trying to work at the national and global levels? Each person will have to make up her or his own mind on that one. To my thinking, Copenhagen is something of a last straw. I have no interest in trying to discourage anyone from undertaking national or global activism. Indeed, there is a danger in taking attention away from national and international affairs: policy could get hijacked not just by parties even less competent than those currently in command, but by ones that are just plain evil. Nevertheless, this writer is finally convinced that, with whatever energies for positive change may be available to us, we are likely to accomplish the most by working locally and on a small scale, while sharing information about successes and failures as widely as possible.

A final note: As 2010 begins we are about to enter the second decade of the 21st century. Historians often remark that the character of a new century doesn’t make itself apparent until its second decade (think World War I). Perhaps peak oil, the global financial crash, and the failure of Copenhagen are the signal events that will propel us into the Century of Decline. If these events are indeed indicative, it will be a century of economic contraction rather than growth; a century less about warnings of environmental constraints and consequences than about the fulfillment of past warnings; and a century of local action rather than grand global schemes.

I suspect that things are going to be noticeably different from now on.

#211: Is “Clean Coal” a Dead End?

MuseLetter #211 / December 2009 by Richard Heinberg

Download printable PDF version here (PDF, 109 KB)
richardheinberg.com

1. Is "Clean Coal" a Dead End?
Note: this article is being featured in the first issue of the new magazine Solutions.

Many energy experts, politicians on both sides of the aisle, and representatives of the coal industry agree on the need to spend billions to develop technologies to capture and store the carbon from burning coal, thus making coal "clean" from a climate standpoint. President Obama has repeatedly endorsed the development of "clean coal," and in July Department of Energy Secretary Stephen Chu announced that $1 billion of stimulus package funds would go toward re-launching FutureGen, a stalled project intended to show how carbon dioxide can be captured on a large scale from coal-fired power plants. The Waxman-Markey climate bill earmarks another $60 billion for "clean coal" research and development.

The "clean coal" argument runs like this: America is brimming with cheap coal, which provides almost half our electricity and is the most carbon-intensive of the conventional fossil fuels. The nation will need an enormous amount of energy over the next few decades, but renewable sources just aren’t ready to provide all—or even the bulk—of that energy. Meanwhile, preventing catastrophic climate change requires that we stop venting carbon dioxide into the atmosphere. It is possible to capture and store the CO2 that would otherwise be emitted from burning coal, and elements of carbon capture and storage (CCS) technology are already in use on a small scale. Put all of these factors together and the case for government funding of research and development of "clean coal" seems strong.

However, several recent studies of US coal supplies suggest that much that we think we know about coal is wrong. If these studies are correct, the argument for investing in "clean coal" becomes tenuous on economic grounds alone. These studies call into question the one "fact" that both pro-coal and anti-coal lobbies have taken for granted: that the US has a virtually limitless supply of cheap coal.

How much coal?

Doubts were first raised in a book-length 2007 report by the National Academy of Sciences titled "Coal: Research and Development to Support National Energy Policy" (1), which noted that "Present estimates of coal reserves are based upon methods that have not been reviewed or revised since — 1974," and concluded that a newer and better assessment "may substantially reduce the number of years’ supply."

Also in 2007, an energy analytics organization founded by a member of the German Parliament, Energy Watch Group (2), released a study of US and world coal supplies concluding that global coal production will reach a peak and begin to decline sometime around 2025, and that US coal production will peak only slightly later—perhaps by 2030 or 2035.

Last December the USGS issued a report (3) on the nation’s largest and most productive coalfield, in Wyoming, finding that, at current prices, only about six percent of the coal can be profitably mined; if coal prices soared, then more of the coal would be recoverable—but then coal wouldn’t be economically competitive with other energy sources.

On what do these studies base their pessimistic assessments of coal’s future?

America’s coal resources are indeed vast—none of the studies claims otherwise. However, during the past century, coal reserves (the portion of total coal resources that can be mined profitably with existing technologies) shrank much faster than could be accounted for by the depletion of those resources through mining. That is because geologists are doing a better job now of taking into account "restrictions" that make most coal impractical to mine—factors having to do with location, depth, seam thickness, and coal quality. In recent years, some nations have reduced their booked coal reserves by 90 percent or more on the basis of new, more realistic surveys. The National Academy of Sciences report mentioned above is essentially a plea for an updated US national survey, and it offers abundant reasons for thinking that such a survey would almost certainly reveal a much smaller reserve base than the one on which current supply forecasts are founded.

Moreover, when it comes to forecasting future coal supplies the official agencies seem to have been asking the wrong question, namely, "When will the nation run out of coal?" The customary answer is, "Not for a couple of hundred years or more"—which is a sufficiently long period for current energy planning. But more relevant questions are, "When will it no longer be possible to increase the rate at which coal is being extracted?", and "When will coal cease to be an economically competitive energy source?" These are addressed in the Energy Watch Group study, which reasons that, long before the nation runs out of coal, production will peak and start to decline due to the depletion of easily accessible, high-quality deposits. Already some of America’s most important coal regions are long past their glory days, and recent field surveys by the USGS (including the one cited above) suggest that the capacities of even the most abundant coalfields in the nation have been over-estimated.

No cheap coal, no "clean coal"

How would the prospect for "peak coal" sometime in the next two or three decades impact the debate over the development of carbon capture and storage? As we are about to see, the enormous investments that will be required to make coal "clean" only make sense if coal continues to be abundant and cheap.

The basic elements of carbon capture and storage technology already exist. Capturing carbon is relatively easy in coal gasification (IGCC) power plants, and such plants have been shown to be technically feasible. In such plants, coal, air, and water are brought together under high pressure and temperature, yielding "syngas," a mixture of carbon monoxide and hydrogen (along with solid waste byproducts); the hydrogen can be burned to turn a turbine to produce electricity, while the carbon monoxide is transformed into carbon dioxide—which can then potentially be piped to an underground sequestration site for permanent storage. IGCC power plants are efficient, using about a third less coal to produce a similar amount of electricity, and can also capture other pollutants from coal. However, nearly all existing US coal power plants are of an older, simpler type in which coal is burned directly, so replacing these with expensive-to-build plants in which the coal is first gasified will itself require enormous investment and decades of work.

We also know how to store carbon: the petroleum services industry routinely injects CO2 into old oil wells to make it easier to extract the remaining crude. But the quantities of carbon dioxide sequestered this way are trivial when compared with the amounts spewed from coal-burning power plants annually. Gathering and storing two or three billion tons of carbon each year from hundreds of geographically scattered coal power plants will require the construction of an enormous system of pipelines, compressors, and pumps. A 2007 MIT study, "The Future of Coal" (4), found that if just 60 percent of the CO2 from US coal-fired power plants were to be captured and compressed to a liquid, its daily volume would equal the amount of oil Americans consume each day (about 20 million barrels). The study also concluded that a huge increase in investment in industrial-scale demonstration plants would be required now even to know in 10 or 15 years if the technology can work at a meaningful scale. All of this underscores the basic fact that carbon capture and storage is going to be very expensive—if it is even possible to accomplish on the scale that is being proposed.

Yet there is a subtler but possibly even more decisive price tag for "clean coal": the energy cost. According to the most recent estimate (from Harvard University’s Belfer Center (5), at least 30 percent of the energy produced by burning coal will be needed to run the system for capturing, compressing, pumping, and burying CO2. Therefore any efficiency benefit from gasifying coal at IGCC power plants would be canceled out.

But already the average quality of coal being mined is declining—that is, we get less energy for each ton of coal burned today than we did ten years ago. This is a natural consequence of the "low-hanging-fruit" principle of resource extraction, in which we tend to consume the highest-quality, most easily accessed resources first.

So as time goes on, the US will need to burn more coal, while the coal itself will be more scarce and costly. And the technology used will be far more expensive and complex, both to build and to operate, than the system of power plants we have today. Taken together, these factors read like a recipe for cost overruns and spiraling electricity rates.

How high could coal-based electricity prices go? During the period from 2006 to 2008, prices for some grades of US coal doubled. This year the economic crisis has lowered demand for electricity and thus for coal, and so prices have softened. However, recent experience shows that, even in the absence of serious shortages, coal prices are increasingly subject to dramatic swings. Thus, taking higher coal prices into account, it is reasonable to assume coal-based electricity costs two to five times current rates by 2030. The current average generation cost of coal electricity is from 2 to 5 cents per kilowatt-hour; compare that to the current average cost for wind electricity of 3.5 to 7 cents per kWh (not counting tax credits), or about 12 cents per kWh for solar thermal electricity, or 25 cents per kWh for solar photovoltaic electricity, and the vulnerability of coal’s economic dominance becomes apparent.

Imagine a scenario in which the US goes ahead with the attempt to develop "clean coal" technologies. During the coming decade tens of billions of dollars (mostly from government) would likely need to be invested in research and the construction of demonstration projects. By 2020, the price of coal will already have begun to rise, as supply problems multiply, yet "clean coal" technology won’t be ready to deploy widely (the most ambitious proposals don’t see that happening until after 2025). Even if renewable energy doesn’t get cheaper due to technological advances (and most analysts assume it will), at some point along this timeline the "clean coal" bandwagon will almost certainly grind to a stop because it is simply too expensive to keep going.

What, then, are our options?

The most likely course for the Obama Administration and Congress is to continue developing "clean coal" based on current market conditions, and to change course only as market conditions evolve. The problem with doing so is that large infrastructure investments require long-range planning, and the success of those investments depends upon an accurate forecast of future resource prices and demand for product. Decisions made now on the basis of assumptions about future coal prices that are wildly wrong could waste enormous sums of money and foreclose opportunities to invest in ways that would leave society much better off two or three decades from now.

Some environmental organizations, such as National Resources Defense Council (NRDC) and Environmental Defense Fund (EDF), argue that the nation will almost certainly continue burning coal in any case, and since we cannot allow the resulting carbon dioxide to exacerbate climate change, "clean coal" technology is worth the investment.

But what sort of energy policy could force "clean coal" into existence? Government could legislate that all new coal power plants must capture and store carbon. But then, for reasons already explained, few new plants would probably get built—other than demonstration sites operating with public subsidies—and the nation would be stuck with its old, inefficient, and highly polluting coal plants. Alternatively, the government could mandate that, after a certain date, all coal power plants must capture and store carbon dioxide. Yet what would happen in the overwhelmingly likely event that the specified date arrived and most coal plants simply weren’t ready? Would regulators shut down non-compliant plants, reducing the nation’s electricity supply by a substantial percentage? Or would the utility operators face stiff fines—which they would quickly pass along to consumers in the form of higher rates? Or would the government simply push the date for compliance back — and back — and back?

Meanwhile, leading climate scientists are warning that we need to reduce CO2 in the atmosphere below current levels; how high will CO2 levels rise while we wait for "clean coal" technology to come online?

It might also be argued that partial deployment of carbon capture and storage technology would be better than nothing—at least some carbon emissions would be avoided. However, there is a problem there, too. The research and development costs for limited implementation are likely to be almost as high as for universal deployment (since the technology has to be made to work on a small scale before it can be built out on a large scale). This would represent an enormous investment in an energy source and a technology with a limited future. And that investment will be needed elsewhere.

Coal gasification plants without carbon capture would be less polluting and more efficient than current power plants, but, once again, the up-front costs are very high (and this is why several potential IGCC projects have been canceled or rejected in recent years).

The ongoing, relentless depletion of our nation’s—and the world’s—coal, oil, and natural gas resources will force us to depend increasingly upon renewable energy. By the end of this century, America will have an essentially all-renewable economy, whether or not we have planned for it. Over the short term, more electricity could come from natural gas, but it is unclear how long the current gas glut will last, given that the new, unconventional sources responsible for it (especially shale gas) are proving expensive to develop and quick to deplete. Building new nuclear plants will be costly and slow—and controversial. And uranium is itself a depleting, non-renewable resource.

But renewable energy sources are not without problems of their own. Their current share of total energy produced is relatively tiny, and a rapid build-up of capacity will require subsidies of some kind. Also, wind and solar power are intermittent, and the times of greatest abundance of sunshine and breeze do not always coincide with times of greatest electricity demand. This is a problem that can probably be solved, but not without an enormous upgrade to the nation’s electricity grid. Still other investments in national transport, food-system, and housing infrastructure will be needed to get us to a low-consuming, renewable energy future.

Altogether, it is hard to avoid the conclusion that the years ahead are likely to see increasingly expensive electricity, if not actual shortages. By mid-century, renewables must be ready to provide a substantial majority of energy consumed, or energy shortages could be rampant. An even faster transition will be needed if the nation’s goal is (as it should be) to reduce atmospheric carbon dioxide to 350 parts per million, as climate scientist James Hansen says is necessary (currently, we’re at 387 ppm, and rising by over 2 ppm per year).

Given a depleting resource base and the likelihood of soaring coal prices, the "clean coal" debate hinges on the question, Can we afford to do it all? That is, can we spend tens or hundreds of billions of dollars mitigating the impacts from burning increasingly expensive, depleting coal using expensive coal gasification power plants and unproven carbon capture and storage technologies, while at the same time spending hundreds of billions to develop an entirely different energy infrastructure that we will eventually be forced to rely upon as coal runs out? It would be nice to think so, but the harsh reality is that time and capital are both limited.

Abandoning "clean coal" need not be seen as a retreat in the effort to reduce carbon dioxide emissions. As a nation, we could simply halt the construction of new coal power plants. We could tax carbon. We could cap carbon emissions and ration or sell emissions permits. We could discourage coal mining by enforcing reasonable environmental regulations. None of these strategies would require substantial new investments by the government, just tough policy decisions.

There are other strong arguments against "clean coal." The mining of coal results in environmental, social, and economic ruin for communities in coal regions—witness the travesty of "mountaintop removal" mining practices in Appalachia. Capturing and storing the carbon from coal would do nothing to address that concern. Also, some doubt whether the carbon dioxide that is sequestered underground will really stay there.

While these arguments may be valid, they are unlikely to be decisive in the "clean coal" debate. That debate will be won or lost on the hard, practical basis of cost. And on that basis, the case for "clean coal" may have just fallen apart.

Tough energy choices

What would be a sound energy policy from both an energy supply and a climate standpoint? Unfortunately, there are no easy answers. Given the need for rapid reduction in the use of carbon fuels and the expense of building renewable energy infrastructure, energy conservation will almost certainly have to be the basis of our national strategy. This means finding ways to do more with less through increased energy efficiency—but it also means identifying and simply curtailing non-essential current energy consumption. Our climate and energy problems would become much easier to solve if America were to go on an energy diet so that it required only half, a third, or even a quarter of the energy it currently uses. Such demand reductions are certainly possible, but they would require fundamental changes in citizens’ habits and expectations, as well as massive investments in efficient technologies—from household gadgets to power plants and transport systems.

Investment will also be required in renewable energy sources, many of which are not currently cost-competitive with fossil fuels. If we wait for market signals to change so that alternative energy is cheaper in every instance (either because fossil fuels have depleted or renewable technology has advanced), we will have waited too long. It will take decades to fully replace the energy systems that power our society. Unless we begin now, the lights may begin to go out in a couple of decades—at about the same time we may be facing climate catastrophe.

All we have to do to realize that horrific future is to continue doing what we are doing now.

Notes

1. Coal: Research and Development to Support National Energy Policy
2. Coal: Resources and Future Production
3. Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming
4. The Future of Coal
5. Making Carbon Capture and Storage Work

This article is based on my book ‘Blackout: Coal, Climate and the Last Energy Crisis’ (New Society Publishers).

2. Just Tell Us the Truth

At last we know…sort of. An article in the UK newspaper The Guardian for November 9, titled “Key Oil Figures Were Distorted by US Pressure, Says Whistleblower,” reveals what hundreds of analysts have been trying to convey to world leaders for years: The global oil supply situation is critical and getting worse, and vested interests are playing key roles in covering up this devastatingly inconvenient truth.

Over a decade ago, when I began following the Peak Oil story, the main sources were a few highly-placed petroleum geologists with experience in oilfields around the globe. At that time, these brave scientists were saying that world oil production would peak sometime around 2010, and that the global economy would be hammered as a result. Since it will take decades to develop alternative energy sources to replace petroleum (if adequate replacements are even available), the consequences for transport, trade, and agriculture will be almost too awful to contemplate.

In the past few years these lone voices of warning have garnered the backing of a million-voice chorus: investment banks, oil analytics firms, and investigative journalists have joined the geologists in pointing out that oil production limits are within sight, and in calling for more transparency in official data reporting and forecasting.

But the International Energy Agency has stubbornly refused to come clean. And this is important: while financial analysts and investors are free to draw their own conclusions about Peak Oil (and a great many of them have seen the writing on the wall—hence recent run-ups in oil futures prices), national and local governments must rely on officially sanctioned fuel supply and price projections for all their planning. Energy policy, transport planning, agriculture policy, economic forecasting, and much more depend upon the august pronouncements of the Paris-based IEA.

There are always folks who are glad to tell us what we want to hear. Indeed, the presentation of plausible excuses for the denial of serious problems offers an attractive career track. Prominent oil optimists like Daniel Yergin and Michael C. Lynch find open doors at the New York Times and other major media outlets, and wealthy clients for their consulting services, because they reassure markets that all will be well.

Nevertheless, denial leads to complacency, not problem-solving. And the end of cheap, abundant oil is a problem that could cripple the global economy not just for another year or two, but more or less permanently.

This is not to say that the recently released IEA “World Energy Outlook 2009” is worthless: the current iteration of the agency’s annual report makes many excellent points (for example, that “Falling energy investment [resulting from the worldwide financial crisis] will have far-reaching consequences”). But, as the whistleblower quoted in the recent Guardian article notes, agency forecasts for future world oil production are still profoundly unrealistic:

Many inside the organisation believe that maintaining oil supplies at even 90 [million] to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources.

Sooner or later, we must face reality. If we do it sooner, our chances of adapting successfully are far better than if we wait and deny just a little longer.

On one hand, careers are at stake if IEA officials step forward and tell us the truth. On the other hand, the global economy is as risk if they don’t.

There is evidently a quiet battle raging within the agency, and within the consciences of many of its officials. So far, we are all the losers in that battle.

#210/Dilemma & Denial; ASPO 2009 Address

MuseLetter # 210 / November 2009 by Richard Heinberg

Download printable PDF version here (PDF, 122 KB)

richardheinberg.com

1. Dilemma & Denial

A couple of weeks ago Jerry Mander and I were discussing the best word to use in the heading for the back cover copy of a new short book being co-published by International Forum on Globalization and Post Carbon Institute, Searching for a Miracle: "Net Energy" and the Fate of Industrial Societies (I wrote the main text, Jerry wrote the Foreword). Jerry liked the word "conundrum," while I argued for "dilemma." We were in basic agreement, though, about a word we didn’t want: "problem." Problems can be solved; humanity’s energy and environmental crises will not be "solved," in the sense that there is no realistic strategy that will enable us to continue, as we have for the past few decades, to enjoy continuous growth in population and in consumption of resources and use of energy. If we are to survive, we will have to accept profound and fundamental changes to our economies and lifestyles.

The word dilemma characterizes a situation in which one must choose between two disagreeable options. This is a good description of the human condition in the early 21st century. Had our species foreseen and begun to adapt to resource limits back in the 1950s or even the ’70s, the transition to non-growing, sustainable levels of population and consumption might have been fairly painless. But now there really are no easy paths from here to a workable future.

This is not how we would like things to be. We want problems with solutions.

Problem: climate change. Solution: renewable energy.
Problem: poverty. Solution: more economic growth (a rising tide will lift all boats, we are told).
Problem: slow economic growth. Solution: more cheap energy (i.e., coal).

As should already be evident, the "problem" mindset can be maintained, in the current instance, only by narrowing our focus to just one variable. As soon as we begin to take multiple variables into account—population, economic instability and inequality, climate change, resource depletion, limits to capital investment—it quickly becomes apparent that some "solutions" just exacerbate other "problems."

So it’s powerfully tempting just to ignore some of the limitations and trade-offs we face. Many environmentalists, viewing the human predicament almost solely through the lens of climate change, see our choice as follows:

  • Dead planet and dead fossil-fueled economy
  • vs. living planet and thriving renewables-based economy.

Framed this way, the correct choice is obvious. But economists who see continued growth as the key to ending poverty, and who understand that the build-out of renewable energy sources is currently constrained by practical limits, might frame our choice this way:

  • Dead energy-constrained economy incapable of solving its problems
  • vs. thriving, problem-solving economy weaning itself from fossil fuels only as quickly as alternative energy sources are capable of picking up the slack.

Well, when you put it that way . . . naturally, option two looks better.
But in both cases the preferable second option is unrealistic, because factors that have been omitted from the framing of the problem preclude that option’s realization.

A more comprehensive statement of our choice might be this:

  • Dead planet and dead economy (if insufficient effort is mustered toward reducing carbon emissions, population, and consumption)
  • vs. crippled planet (so much climate change, and so many species extinctions are already in the pipeline and cannot now be averted, that a healthy planet is just no longer a real possibility, for at least the next many decades) and sharply downsized economy (if we do reduce carbon emissions, population, and consumption, that will constitute a form of economic contraction that will mean the end of prosperity as we have come to think of it).

That, friends, is a dilemma. Yes, the second option is still mightily preferable, as it is our only realistic survival option; but it’s a very tough sell for policy makers at every level, and for the general public as well. Ugh. Let’s pretend there’s a third option. It’s far more palatable simply to ignore a few factors, assume we have only a "problem," and then set out to "solve" it.

Now, it is true that within our overall dilemma there exist many problems (the relatively high cost of commercial solar panels is a problem that probably can be addressed with further research, as is bird and bat mortality from wind turbines). But we shouldn’t let the existence of these "trees" distract us from the necessity of dealing with the "forest" in which they grow.

In effect, discounting limiting factors (ignoring the "forest" while focusing only on one or two "trees") constitutes by far the most popular and acceptable form of denial. Very few people would actually deny the notion that there is something wrong in the world, but framing the situation as a problem rather than a dilemma enables us to avoid harsh reality while appearing not to do so. Indeed, the energetic pursuit of problem solving enables one to strike a heroic pose.

Science and Politics

Denial can sometimes take blatant and irrational forms—especially here in the politically polarized and increasingly bonkers U.S. of A. Here’s a recent example (caution: rant ahead!).

A few days ago my wife Janet and I attended a talk by author Bill McKibben here in Santa Rosa. Bill has been on a more-or-less perpetual lecture tour for the past few months promoting his ad-hoc organization 350.org, which is mounting a world-wide effort to persuade the international community to adopt 350 parts per million of atmospheric CO2 as its official target in emissions reduction efforts. The number comes from analyses by climate scientist James Hansen of NASA, who has concluded that this is the highest number that will enable us to continue to enjoy "a planet similar to the one on which civilization developed."

Bill’s lecture was informative and compelling, and Janet and I came away inspired to take the 350.org message into our community however we can.

The next day Janet happened to be volunteering as a Master Gardener. For those who don’t know, the Master Gardener program is a Cooperative Extension program of the University of California system, offering free science-based advice to the general public on nearly all aspects of home gardening. Janet mentioned to a female senior volunteer that it might be good for the program to give more attention to promoting ways that gardeners can help reduce greenhouse gas emissions. The woman replied that Master Gardeners aren’t allowed to engage in "political" activities while acting in their official capacity, and that anthropogenic climate change is "politics" rather than science; she then went on to make a few comments about how some parts of the world are actually cooling, and how scientists disagree on what’s really going on.

Janet was dumbfounded (as was I when she related the story to me). Yet the senior Master Gardener’s attitude reflects the majority opinion in the U.S., according to many polls. Janet immediately emailed her a few choice articles from www.realclimate.org—a website run by climate scientists. Of course, in reality the situation is nearly the opposite of "climate change is politics": indeed, the scientific consensus that humans’ combustion of fossil fuels is driving the great majority of observed climate change is overwhelming. Even Jim Hansen’s suggestion that 350 ppm must be the highest permissible number for atmospheric CO2 concentrations if we want to avert catastrophic impacts is entirely science-based, and the evidence and reasoning behind the number were published in a peer-reviewed journal. Instead, it is the well-funded effort to doubt and question climate science that is political—an example of denial that happens to suit the purposes of the fossil fuel industry and its friends on the political right.

Yes, I know: there is politics in science too (for examples, read Thomas Kuhn’s classic 1962 book, The Structure of Scientific Revolutions). Scientists do sometimes let herd instincts overwhelm critical thinking abilities. And absolute certainty regarding the degree of anthropogenic contribution to climate change is impossible to achieve: we can’t run repeated controlled experiments with the entire planet, changing one variable at a time. But the accumulating evidence that the bulk of observed climate instability is due to human action is overwhelmingly persuasive—and the vast majority of scientists accept it as such. As far as I have been able to tell, the objections of skeptics have been satisfactorily addressed. Spend an hour or so at www.realclimate.org, then spend an equivalent amount of time exploring a representative climate skeptic website (for example, www.climate-skeptic.com), then go back and forth matching assertions with evidence. Which one smells more like science, which more like polemics?

Come on, people. Surely as a society we can get beyond this "debate." If we don’t do so soon, it will be too late in the gravest possible sense of that phrase. (End of rant.)

Dilemma Adaptation

The hard fact is, denial is part of our human repertoire of responses. It’s adaptive, up to a point. We all want and need to avoid pitfalls, but doing so takes effort, so we need some sort of filter to help us sort real threats from spurious or inconsequential ones. Denial is also an understandable response to information that is so profoundly unsettling that it would be psychologically damaging to us if we were to deal with it head on. But what’s adaptive in one situation can be fatal in another.

I’m thinking a lot about adaptation these days as I read Nicholas Wade’s Before the Dawn: Recovering the Lost History of Our Ancestors. The book is a summary of recent evidence from the science of genetics about human origins and evolution—subjects that in the past have been largely the province of archaeology and anthropology.

The new genetic evidence suggests that human beings have continued to evolve right up to the present. Much of that evolution has occurred at the level of culture. But even within the past few centuries, new gene sequences have appeared in parts of the human population. Indeed, Wade suggests that cultural and biological evolution are now proceeding together: for example, genes that tend to make us more peaceful, social, and cooperative are being selected for, because those are characteristics that help us get along in densely populated urban societies.

These recent findings and the speculation surrounding them somewhat undercut ideas advanced in recent years by evolutionary psychologists, who have proceeded under the assumption that we modern humans still have the minds of Paleolithic hunters. The genetic evidence suggests instead that our brains, digestive systems, and immune systems are all subtly adapting to our altered environments.

The news that we humans can adapt rapidly, not only culturally but even physiologically, is certainly welcome: we need to change dramatically if we are to survive. But just how rapidly can we adapt? Can we, crucially, overcome our tendency toward denial before we’ve pushed the climate too far?

Characteristics are selected for when they permit an organism to leave more offspring. If we persist in denial, we may leave no surviving offspring, or very few. We’ve reached a point, or encountered a situation, where denial is not adaptive. We’re on the horns of history’s greatest dilemma, and only by accepting the options actually available, and pursuing the less-awful option with creativity and compassion, will we stand a chance.

There’s no guarantee that we will. Many societies have failed to adapt. Maybe we will too. But on the other hand, perhaps the very act of discussing our dilemma in frank terms shows that, somewhere among our species, denial is being overcome and adaptation is trying to happen.

2. Address to the ASPO International Conference 2009 (Denver, Colorado)

I’m happy to have the opportunity to spend the next few minutes sharing some personal thoughts on the subjects that bring us together for this excellent event—thoughts based on my experience, during the past few years, of trying to get the message of Peak Oil out to an ever-wider audience.

First, I should mention that I didn’t come to this subject out of any interest in oil per se. I have no background in the oil industry or journalism either; indeed, I can’t claim to be anything more than an incorrigibly persistent independent writer on environmental subjects. But back in the early 1970s I was powerfully impacted by the Limits to Growth report of the Club of Rome, and, like many thousands of others, began to see the path of our growth-based industrial society as inherently unsustainable and wrong-headed. As you will recall, in the “standard run” reference scenario of that report, industrial activity stalls out sometime in the first couple of decades of the 21st century, and food production and population then go into decline.

We were, it was suddenly evident, headed toward a cliff—but at that time the cliff was still somewhere just over the horizon.

In 1998, I read Colin Campbell and Jean Laherrere’s crucial article in Scientific American, titled “The End of Cheap Oil.” The article stuck with me like a mind worm. I quickly realized that oil depletion was likely to be the limiting factor or trigger that would shift the world system from growth to contraction or collapse, a process that would continue until the human economy could once again fit within the constraints of the planet’s renewable productive capacities, by then severely reduced by resource depletion, soil erosion, and environmental pollution. Further, these two petroleum geologists were forecasting the peaking of oil production for a fairly proximate date: around 2010—just over a decade hence.

Back in the last years of the 1990s, most of the discussion about Peak Oil seemed to be taking place in the EnergyResources Yahoo discussion group (which continues to this day with moderator Tom Robertson), and “Brainfood,” an occasional email posting from Jay Hanson, who would later go on to create the www.Dieoff.com website. I devoured these materials and found myself spending hours a day absorbing information about energy history, the oil industry, and oil geopolitics.

By 2003, I had published my first book on the subject, The Party’s Over. It was well received, eventually selling over 50,000 copies in North America, with translations in six languages, and I quickly found myself in demand as a speaker. In the years since, I have given between 300 and 400 lectures on Peak oil to audiences ranging from organic farmers to representatives of the packaging industry; from peace activists to insurance executives to high school students to earth-moving equipment manufacturers.

More books followed, along with interviews with Time magazine, Good Morning America, NPR, BBC, al Jazeera, the History Channel, and on and on.

All of this may sound like quite an accomplishment for an otherwise uncredentialed, introverted word geek, yet I assure you that on the ladder of public recognition, Richard Heinberg continues to occupy a very low and obscure rung—which is actually just fine by me, as the point of all this effort is not to acquire fame (which I assure you, from my limited exposure to it, is largely a nuisance), but simply to get the word out. And other more capable individuals are probably going to have to gain far more media prominence than I have in order to accomplish that.

The experiences of those years, with frequent travel and contact with a wide variety of audiences, lead me now to reflect on what has worked in getting the Peak Oil warning across, and what hasn’t. Certainly I think all of us would agree that high oil prices create a window of opportunity, a teachable moment, while low prices and news of big new oil discoveries tend to deflate interest in our message. That being the case, it’s useful, as a presenter, to have constantly updated information, to keep presentations topical, and to anticipate likely questions and objections based on recent news stories.

Of course, each presenter has a unique profile of strengths and weaknesses, and it’s important to know your strengths—whether they be facility with humor, experience in the industry, or skill at data analysis—and make the most of them. Further advice that I might give about how to be a successful Peak Oil communicator is likely to descend even further to the level of mere platitude, but platitudes occasionally have their place.

Here’s one: Make definite assertions. If you’re not quotable or memorable, you will not be quoted or remembered. But back your assertions up with evidence.

Know your audience. If you are speaking to people who have never heard of Peak Oil before, your primary objective is to be credible while raising awareness and concern. If you are speaking to an audience of the already worried, your goal may be to bring shared understanding to a new level, or to connect it with specific current events.

Be prepared to answer questions. Nothing raises your credibility as much as the act of effectively and elegantly de-fusing what might initially seem to be a killer objection. In my experience, this is largely just a matter of being conversant with the facts, and then being sufficiently quick on your feet. The answers are there, and the objections of the Peak Oil skeptics generally fall apart quickly under even a few moments’ careful analysis.

An example comes to mind: a few months ago I was debating a prominent oil economist before a large audience at an international business school in Madrid. This economist insisted that the world will have plenty of oil to provide for increasing rates of consumption until at least the middle of the century. One of his main arguments was that most of the world has been insufficiently explored: far more oil wells have been drilled in North America than elsewhere, and if similar drilling rates could be achieved in Africa, the Polar regions, and the vast ocean basins, we could find enormous quantities of new oil, thus rendering Peak Oil concerns pointless and even quaint. It’s easy to see how persuasive such an argument can be for a novice audience. However, as I pointed out then, North America is where the oil industry started: in the early 20th century, wildcatters were drilling scattershot, with no understanding of the geophysics of proper well spacing. Therefore far more wells were drilled on this continent than were actually needed. The rest of the world will never be drilled in the same way, and especially not now that exploratory wells can cost hundreds of millions of dollars apiece. Lower drilling rates are a reflection of better exploration technology, and also of the paucity of promising new places to drill.

I could cite other critiques and objections from the skeptics, but few of them are much more credible than the one just mentioned.

Parenthetically, I would suggest, as others have done before, that it might be a good idea for one of our organizations to build and maintain a robust website, or set of pages on an existing site, specifically to address each of the standard misconceptions and objections raised by the Peak Oil skeptics. This would need to be updated frequently to answer whatever fresh nonsense might be spewing from the editorial pages of, for example, the New York Times. Matt Savinar did a good initial job of this on his website www.lifeaftertheoilcrash.net, but that was a few years ago and it constitutes only a first draft of what’s really needed. This could be a useful area of collaboration for many of our experts and all our existing Peak Oil organizations, and many relevant articles already exist in the Oil Drum archives. With regard to the issue of climate change, the website www.realclimate.org already does an excellent job at debunking skeptics, and we might learn from their successes.

But back to my chronology. By January 2008 I had moved on from my teaching job (actually, my college went broke) and was working full-time for Post Carbon Institute. And by 2009 I was also working closely with Transition US. I’ll have more to say about those organizations and some others in a moment.

Meanwhile, the ground shifted beneath our feet. As we all know, the global economy began contracting last year—though that’s just a nice, abstract way to put it. Industrial production fell. Corporations downsized or disappeared. Fifty trillion dollars in global capital vaporized in stock market crashes, bankruptcies, foreclosures, and defaults. Millions of people lost employment and housing. Globalization went into reverse.

Also, in 2008 the oil price spiked 50 percent higher, in inflation-adjusted terms, than at any point in previous history. It would be an enormous oversimplification to say that the oil price spike “caused” the world recession, but the fact that the price spike and the economic crisis occurred at the same time is hardly meaningless coincidence.

In effect, we are seeing a vindication of what many of us have been predicting for a long time. Even if it is still technically possible in the next few years for the oil industry to exceed its July 2008 production levels, the world economy has entered a trap from which there is no exit. The oil price that the petroleum industry needs in order to justify developing a new marginal barrel’s worth of production capacity is now nearly as high as the price that is known, on the basis of recent history, to trigger further economic contraction. We have reached a fundamental limit to growth, and its name is Peak Oil.

But in some ways this doesn’t feel like vindication at all. In 2008, with the oil price nudging close to $150 a barrel, the real and metaphorical phones at ASPO, Oil Drum, and Post Carbon Institute were ringing off the hook; yet today, we see op eds in prominent periodicals reassuring us that new oil discoveries in the Gulf of Mexico and Brazil make the Peak Oil argument moot. The irony could hardly be more bitter or discouraging.

What has really happened, of course, is not that Peak Oil has been disproven or made irrelevant; but rather, that the issue has become more grave and complex.

There is still the need on our part to convey to the general public and policy makers that the technical data support the Peak Oil, and now also, by the way, the Peak Coal, theses—that need today, in fact, is greater than ever before. But now there is also the requirement to connect the issue of fossil fuel depletion with climate change, the financial crisis, and a score of indices of environmental decline—the other limits to growth. We must continue seeking to influence policy makers, but we also must respond to the needs of local governments and grassroots community groups that have already come to understand the problem and want to do something about it.

So while it’s useful to look back at what worked so far and what hasn’t, it’s probably even more important now to try to intuit the demands of circumstance in the next few months and years. We are in an entirely new economic period, and we must adapt our thinking and our messages accordingly.

It’s in view of this new economic landscape that I would like to go back now to a discussion of the two organizations I mentioned a moment ago, with which I find myself working.

Post Carbon Institute has gone through a process of learning and change over its short period of existence, and has arrived at a strategy that seems both reasonable and promising: We are positioning ourselves as a think tank for the transition. We have assembled a stable of about 30 Fellows, each with expertise in one of several relevant areas: Anthony Perl for transportation, Bill McKibben for climate change, Sandra Postel for water issues, David Fridley for renewable energy assessment, David Hughes for fossil fuel depletion, Wes Jackson and Michael Bomford in the areas of food and agriculture, Bill Ryerson on population, Josh Farley on steady-state economics—plus David Orr, Erika Allen, Gloria Flora, Chris Martenson, Majora Carter, Rob Hopkins, Tom Whipple, and others. Our goal is to provide a steady stream of communications products—papers, books, videos, and lectures—that show the links between the resource, environmental, population, and economic crises of our time, while also pointing to inspiring examples and strategies for reducing consumption, preserving biodiversity, and building community.

The other organization I mentioned, Transition US, is the United States support hub for Transition Initiatives. Often known as Transition Towns, these phenomenal entities first sprang up in the UK, seeded by the brilliant work of Permaculture teacher Rob Hopkins. They are grass-roots community self-organizing efforts, and they operate from the optimistic premise that life can be better without fossil fuels. Post Carbon Institute and the Transition Initiatives are working in ever-closer collaboration, one organization providing communications materials, the other a method of delivery to early-adopting individuals and communities.

So far, so good. But is this enough? What should we be trying to do? Whom should we be trying to reach? What are we up against?

The apparent fact that the world has reached the end of economic growth as we have known it is momentous information. It needs to get to as many people as possible, and as soon as possible, if we collectively are going to be able to plan for contraction and manage the transition away from fossil fuels without succumbing to rapid, chaotic civilizational collapse. Of course, chaotic collapse may occur in any case, but it seems pointless to concede that dismal outcome before we have done all we can to preserve as much as possible of both nature and human culture, and to maximize the survival chances of both our species and the rest of the biosphere.

But however certain we may be of the importance of what we have to communicate, that’s no guarantee that policy makers or the mainstream media will perceive our message as being relevant, interesting, or even particularly credible.

As communicators, we have our work cut out for us. We have very limited resources in terms of funding and organizational capacity. And we haven’t much time. Now that the world economy is in an unprecedented and probably terminal phase of contraction, future events are more uncertain than ever. What will happen to the value of the US dollar if oil importing and exporting nations move to denominate their trade in a basket of currencies, or if the US tries to deal with ballooning deficits by attempting to borrow much more from its trading partners? And what will ensue from Iran’s insistence on developing nuclear power and perhaps weaponry, while other nations insist that this cannot be permitted to happen? Perhaps neither of these threats to stability will prove serious. But these are only two examples out of a dozen that could be cited, so that many credible future scenarios branching outward from current circumstances lead to deepening international chaos. That means we may have only a few years at best in which to gain significant traction. We do not have the luxury of a couple of decades or more in which to patiently build networks of the required organizations—including foundations, think tanks, schools, and media outlets. So we have to be extremely strategic with the resources that we do have.

What are those? Our organizations have received some initial funding, but as of now it is coming from only a few sources, while for the vast majority of other funders Peak Oil is hardly even a recognizable issue. We have the groups I’ve mentioned, and a few more, including Community Solutions. And there is plenty of work for all of them to do. Everyone who is concerned about the issues we discuss here should be supporting these organizations or websites, and the organizations themselves need to find ways to cooperate more and to develop coordinated strategies.

For example, what is our collective message if the oil price spikes again—which it could do if the value of the dollar nosedives, or if NATO organizes an embargo of Iran? On the other hand, what is our message if the price of oil remains moderate or low—as is likely if economic activity remains so depressed as to keep oil demand falling faster than oil production capacity?

And what would help us most to get our answers to those questions out to the media—a press office? A public relations firm? A Washington bureau?

Most likely, we’ll need all of those and more. If we are to be successful, we will have to use every communications tool available: books, newspapers, magazines, reports, scientific papers, press releases, op-eds, how-to manuals, websites, social networking technologies, YouTube, documentaries, radio, and maybe even billboards. Some of these we can develop in-house, but we will also need to find increasingly effective ways of inserting our message into mainstream media programs, publications, and discussions. This means developing contacts in prominent media outlets, and that in turn requires public relations skills. This is largely the province of full-time professionals, whose services we will need to engage, and that in turn will most likely translate to the need for more funding, and therefore for professional fund raisers (or “development directors,” as they’re known in the trade), who can in turn educate funders.

In short, while we must expand our capacity quickly, we have the beginnings of the institutions we need: with The Oil Drum and Energy Bulletin, we have robust websites; with Tom Whipple’s and Steve Andrews’s “Peak Oil Review,” published by ASPO, we have amazingly concise, content-rich weekly updates that give any careful reader about as much knowledge of these issues as world leaders and market insiders have—in some cases, more. Also thanks to ASPO, and until recently also to Community Solutions, we have had yearly conferences where we can get together to learn, regroup and compare notes. With Post Carbon Institute, we have an identified cadre of experts who can be called upon to comment on developments in all aspects of the emerging world crisis, and who can point to adaptive strategies and best practices. With Community Solutions, there is a rapidly growing mine of practical information for local groups to increase energy efficiency. And with Transition Towns, we have an organizing strategy that brings together local businesses, concerned citizens, and town governments in efforts to Power Down. We have already done a lot with the resources available to us.

Yet events will not stop to applaud us for these achievements. The emerging crisis far exceeds our current ability to respond to it. If the survivors of Hurricane Katrina required help to rebuild their homes and their lives, soon the inhabitants of every town and city in this nation and around the world will be in equally dire straits. Increasingly, the need will be less for technical analysis, and more for practical knowledge of how to get by when there are few or no jobs, when there is rampant homelessness, when the necessities of life have become unaffordable or unavailable, when banks and businesses of all kinds are failing.

We cannot fill those needs directly. But we can help both policy makers and the general public realign their thinking. If humanity spends the next few years in failed efforts to re-start growth in the conventional sense, the prognosis is not good, because time and resources will be wasted in an effort to do what cannot and should not be done. In the opinion of many, this has already happened with the enormous Wall Street bailouts. And that’s what will continue to happen unless the message somehow is both transmitted and received that growth is over, and that our highly adaptable species must rapidly and cooperatively downsize nearly all its activities. Yes, we need alternative energy sources, better insulated buildings, and maybe even a few electric cars. But none of these things will enable us to cling to an expanding consumer culture serving a growing population. We have entered the century of transition, decline, contraction—choose your favorite word. It is the century of limits. And we must learn quickly to get by with less—ultimately, much less—of just about everything—in order to live within those limits.

It is a tough message. But it’s the truth, and somebody has to utter it. I guess it’s our job, because we are the ones who have shown up.