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Renewable Energy and the Economic Crisis

From Mark Simmonds

Wednesday, 14 December 2011

As a little bit of context to the highly entertaining energy security, windpower, nuclear, hydro, tidal, fuel poverty debate which trundles on, I'd like to add the following.

Human society over the next few years is about to receive 3 severe shocks. They are actually already happening, but in the order that they are likely to become critical, they are:

  1. "The financial crisis"
  2. The end of the era of cheap energy
  3. Significant climate change

Either one of these on its own could constitute the biggest challenge we have faced as a species. Together they are the oft referred to "perfect storm".

If we take the first of these: There is an imminent financial collapse due to the bursting of the biggest speculative bubble in human history. There is nothing like the money available to pay the debts we have created, whether they are sovereign, corporate or personal. The current strategies of repackaging the debt and imposing technocratic government which will in turn dismantle society with its austerity measures will not solve this problem but merely postpone and make worse the inevitable crash. When this occurs the value of assets (including your house) will collapse. Corporations and banks will fail.

The only long-term solutions being proposed are an increase in gross domestic product (GDP). This seems logical as the money needed to pay the interest on the debt needs to be created, either by creating more debt or by an increase in GDP. This "solution" is trotted out daily ignoring the elephant in the room - Continuous growth is impossible in a finite world. The only possible solution to the crisis is to "mark to market" - let everything that's insolvent, be it country, company or bank go bust - basically get rid of the debt and start again. Politicians know this is the inevitable outcome but they don't know how to do it and remain in power so they "kick the can down the road" instead.

The main difference between the coming crash and the great depression of the 1930s is that we have, since then, built a world so centralised and fragile that it has no resilience to such a shock. If we only consider our food system: Much of our food is imported and is traded only as a commodity - i.e. once it is no longer profitable to do so, lorries full of food will cease to arrive in our country and communities. How many days worth of food do we have in Hebden Bridge? Not many. Our food system is entirely dependent on oil and gas for fertiliser, pesticide and transport. For every calorie of food we eat we use 10 calories of fossil fuel to get it to our plate. We basically eat oil and it's running out fast.

This brings us to the second shock. According to the International Energy Agency, we reached "peak oil" in 2006. Peak oil is the point at which oil production peaks and then begins to decline - this is an illustration of just one of the limits to growth mentioned above.

A common response to this is "well we've still got loads of oil/coal/gas in the ground - what's the problem?" Well the problem is that, whilst it is true that there are lots of fossil fuels in the ground, they are becoming harder and harder to extract, even to the point that it takes more energy (from burning natural gas) to extract oil from the Alberta tar sands in Canada than is obtained by burning the oil recovered. Read that again - we burn a high quality more "efficient" fossil fuel to obtain less energy from a dirtier fossil fuel - insane! Tar sands are like much of the new "unconventional" fossil fuel discoveries (and nuclear) which are being promoted as the answer to the growing gap between our energy "needs" and actual supply - a mechanism for making money out of the problem whilst making it worse.

Fossil fuels are the remains of plants and animals equating to millions of years of stored sunlight. We do not appreciate how much of a lottery win fossil fuels have been for us. Unless we discover some new energy source, even with massive investment in renewables, we cannot hope to generate anything like the amount of energy we currently do. Some recent studies taking into account the fact that the second half of the oil will be so much harder to extract than the first half predict that oil production could fall to 19th Century levels by 2030. So we live in a world where we scrabble for dirtier, more inaccessible, more environmentally damaging, and more expensive and uneconomic fuels in a vain attempt to preserve our energy use and "growth" strategy. Meanwhile as a result we continue to generate increasing amounts of carbon dioxide and other greenhouse gases which brings us to the third shock.

Climate change is a fact. The earth is warming - fact. Some people still argue that the warming is not down to us - most of it almost certainly is -contested fact. Our collective governments' not very ambitious carbon dioxide emission reduction targets look increasingly shaky. It is almost certain that we will see a global temperature rise of more than 2 degrees above pre-industrial levels and there is a high probability that we will go higher. A 4 degree rise would make much of the planet uninhabitable. 6 degrees? - we'll be toast -literally..

Climate change sceptics and some politicians and pundits argue that we should somehow re-engineer our economic system which, climate change apart, poisons our environment, enslaves people, destroys community and elevates the rich 1% over us the 99%. This is a waste of time - the system will self-limit soon due to the financial collapse, resource scarcity and energy scarcity. Whether the resulting chaos will result in a drop in emission of greenhouse gases sufficient to avert the third shock I don't know. I suspect that our political system will not come up with any solutions other than various "corks for diarrhoea". So what can we do? We need to relocalise our economy and build resilience for a time soon when our wealth will be measured in the strength of our communities and our value within them. A low energy sustainable future, with economics as if people mattered, may emerge from this crisis, but wouldn't it be better if we'd actually planned it that way. I suggest that we've time to build lifeboats - small local businesses supplying what people need and using local resources; local food growing; local currencies; local energy generation.

We've certainly got some work to do.

From James Baker

Thursday, 15 December 2011

Mark you make a lot of points, I agree with lots of them. I think you are right about our need to find alternative to oil for our sources of energy, and the need to revalue an economy so it isn't based on debt.

At the moment the private debt of the banks was simply transferred by the government into a state bank owned collectively by tax payers. The debt is still there. I think I would have allowed a few banks to go bust and for others to have written down and then brought up the debt.

I do think there will always be international trade though. It has always been profitable to transport goods to places that can't produce them and that will continue. Maybe we will have to go back to horse drawn canal boats and sail! Local production will again become profitable as market forces readjust to the new economic landscape. We are well placed locally in terms of hydro and wind potential.

It is possible that other new technologies will help to solve problems. I suspect when oil starts to run short a lot of these new technologies will become profitable and swing into action. If the ITER project cracks fusion then that will help (not that we should place all our bets on that working!).

The biggest challenge will be a social one. Already we have disorder when people in wealthy western countries are faced with a change in their pension or reduced living standards. Maybe we will all have to get used to living like most people in the world do with a lot less material possessions. That doesn't mean life has to be less rich though, maybe communities will come together more. Incredible Edible in Todmorden shows the potential for a better tomorrow.

From Jonathan Timbers

Thursday, 15 December 2011

Mark, hi, difficult to respond to such a long and coherently written piece without seeming shoddy in comparison, but I think you deserve a response. So apologies if what I write isn't quite up to your standard.

Firstly, I agree that we may be facing a huge financial crisis in the West, even bigger than 2008, because we've lived beyond our means for too long and our version of capitalism is weak. Those who seek to locate the problem in the public sector have been distracted by neo-liberal ideology, based on an economic model which has been shown by events to be false (see Debunking Economics by Steve Keen for a better explanation than I am capable of giving). We do not live in an entrepreneurial culture, which drives the development of progressive new technologies, but in a service culture, where corporate brands make money through driving down costs through exploiting labour or destroying the environment.

Above all, since the 2001 dot com crash, we have continued to increase profilts (but not the relative value of wages) through asset inflation. We're reaping the rewards now of this, and the rich and those who reflect their thinking are turning on public sector workers (in fact, all workers if they introduce a right for employers to dismiss without good reason, which they're thinking of as we speak) rather than facing up to the real problem.

However, I disagree that the current financial crisis threatens the existence of our species. This is one of a long series of huge financial crises which have afflicted capitalist societies since at least the South Sea Bubble in the 18th century. Furthermore, capitalism is doing very nicely in other parts of the world, like China, India and many parts of South America. Life - or at least our moderately comfortable and secure life, and perhaps the whole 'lifestyle' associated with HB as we know it - may come to an end because of the financial crisis in the UK, but plenty of people will continue to make money and hope for a better future through business growth after we have passed into history.

Secondly, the 'end of cheap energy' is indeed as you say a threat to our way of life, but not to the survivial of our species. Even with reduced levels of energy production, we have means of producing substantial amounts of energy undreamt of by our great grandparents.

Thirdly, climate change could possibly spell the end of our species, but it is more likely to catastrophically reduce our numbers, particularly in more unfortunate parts of the world. This is hardly unprecedented. I've read that the whole of humanity is descended from about a thousand 'breeding pairs' of humans, so our capacity to recover is strong. The most immediate issue for the UK will be the pressure on it through immigration of those desperate to find stable lives for their families in an increasingly hostile world eco-system.

Finally, it is worth reminding ourselves that humanity has faced a number of catastrophic challenges in the past and overcome them all. Think of the end of the Western Roman Empire and the Dark Ages, when there was huge population decline, the collapse of urban culture, the enslavement of thousands over generations (mainly into Africa) and bubonic plague. Aside from the potential threat of climate change, the rest is relatively small beer for the species, if not for the likes of you and me.

From Ben Oubridge

Monday, 16 January 2012

"Localisation" as the late David Fleming said "stands, at best, at the limits of practical possibility, but it has the decisive argument in its favour that there will be no alternative."


Thanks for poking this particular elephant and making it squeal just a little bit in this Hebden shaped chat room.

I have wanted to poke it for some time but to stretch the metaphor just a bit further, I refrained from so doing as I thought the elephant might just squeak inaudibly like a mouse with a sore throat and the occupants of the room would carry on sitting oblivious in their armchairs and using the elephant as a side table for their chilled imported beers.