Pulling the plug on fossil fuel production subsidies

Also published at Resilience.org

How long would the fossil fuel economy last if we took it off life support?

Or to state the question more narrowly and less provocatively, what would happen if we removed existing subsidies to fossil fuel production?

Some fossil fuel producers are still highly profitable even without subsidies, of course. But a growing body of research shows that many new petroleum-extraction projects are economically marginal at best.

Since the global economy is addicted to energy-fueled growth, even a modest drop in fossil fuel supply – for example, the impact on global oil supplies if the US fracking industry were to crash – would have major consequences for the current economic order.

On the other hand, climate justice demands a rapid overall reduction to fossil fuel consumption, and from that standpoint subsidies aimed at maintaining current fossil fuel supply levels are counterproductive, to say the least.

As a 2015 review of subsidies put it:

“G20 country governments are providing $444 billion a year in subsidies for the production of fossil fuels. Their continued support for fossil fuel production marries bad economics with potentially disastrous consequences for the climate.” 1

This essay will consider the issue of fossil-fuel production subsidies from several angles:

  • Subsidies are becoming more important to fossil fuel producers as producers shift to unconventional oil production.
  • Many countries, including G20 countries, have paid lip service to the need to cut fossil fuel subsidies – but action has not followed.
  • Until recently most climate change mitigation policy has been focused on reducing demand, but a strong focus on reducing supply could be an important strategy for Green New Deal campaigners.

Ending subsidies to producers can play a key role in taking the fossil fuel economy off life support – or we can wait for the planet to take our civilization off life support.

Producer subsidies and the bottom line

A 2014 paper from the Oxford Centre for the Analysis of Resource Rich Economies takes a broad look at subsidization trends in many countries and over several decades. In “Into the Mire”2, Radoslav Stefanski aims to get around the problem of scarce or inconsistent data by, in his words, “a method of so-called revealed preference to back out subsidies.”

Stefanski does not focus specifically on subsidies to producers. Instead, he is concerned with inferring an overall net subsidy rate, which is the difference between subsidies aimed at either fossil fuel producers and consumers, and the taxes levied on fossil fuels at the production and consumption end.

He finds that “between 1980 and 2000 the world spent – on average – 268 billion USD (measured in 1990 PPP terms) a year on implicit fossil fuel subsidies.” Starting from the late 1990s, however – when it should have been clear that it was globally essential to begin the transition away from fossil-fuel dependence – the rate of subsidization grew rapidly in several regions.

In particular, Stefanski finds, “the vast majority of the increase comes from just two countries: China and the US.”

In North America, he says “until the 1990s the policy was fairly neutral with a slight tendency towards subsidization. Subsequently however, fossil fuel subsidies exploded and the region became the second highest subsidizing region after East Asia.”

Not only did the global price of oil see a rapid rise after 2000, but North American production saw a huge growth in production through two unconventional methods: hydraulic fracturing of oil-bearing shale, and mining of tar sands. These oil resources had been known for decades, but getting the oil out had always been too expensive for significant production.

A 2017 paper in Nature Energy shows how crucial subsidies have been in making such production increases possible.

Entitled “Effect of subsidies to fossil fuel companies on United States crude oil production”, the paper quantifies the importance of state and federal subsidies for new oil extraction projects.

The authors found that at then-current prices of about US$50 per barrel,

“tax preferences and other subsidies push nearly half of new, yet-to-be-developed oil investments into profitability, potentially increasing US oil production by 17 billion barrels over the next few decades.3”

The projects that would only be profitable if current subsidies continue include roughly half of those in the largest shale oil areas, and most of the deep-sea sites in the Gulf of Mexico – all areas which have been critical in the growth of a reputed new energy superpower often referred to triumphantly as “Saudi America”.

From Erickson et al, “Effect of subsidies to fossil fuel companies on United States crude oil production”, 2017.

The authors also estimate the greenhouse gas emissions that will result from continuing these subsidies to otherwise-failing projects. In their tally, the additional carbon emissions coming from these projects would amount to 20% of the US carbon budget between now and 2050, given the widely accepted need to keep global warming to a limit of 2°C. In other words, the additional carbon emissions from US oil due to producer subsidies is far from trivial.

Extending this theme to other jurisdictions with high-cost oil – think Canada, for example – the authors of Empty Promises note “the highest cost fields that benefit most from subsidisation often have higher carbon intensity per unit of fuel produced.”4,5

The Nature Energy study is based on an oil price of US$50 per barrel, and says that subsidies may not be so important for profitability at substantially higher prices.

Another recent look at the fracking boom, however, reveals that the US fracking boom – particularly fracking for crude oil as opposed to natural gas – has been financially marginal even when prices hovered near $100 per barrel.

Bethany McLean’s book Saudi America6 is a breezy look at the US fracking industry from its origins up to 2018. Her focus is mostly financial: the profitability (or not) of the fracking industry as a whole, for individual companies, and for the financial institutions which have backed it. Her major conclusion is “The biggest reason to doubt the most breathless predictions  about America’s future as an oil and gas colossus has more to do with Wall Street than with geopolitics or geology. The fracking of oil, in particular, rests on a financial foundation that is far less secure than most people realize.” (Saudi America, page 17)

Citing the work of investment analyst David Einhorn, she writes

“Einhorn found that from 2006 to 2014, the fracking firms had spent $80 billion more than they had received from selling oil and gas. Even when oil was at $100 a barrel, none of them generated excess cash flow—in fact, in 2014, when oil was at $100 for part of the year, the group burned through $20 billion.” (Saudi America, page 54-55)

It seems sensible to think that if firms can stay solvent when their product sells for $50 per barrel, surely they must make huge profits at $100 per barrel. But it’s not that simple, McLean explains, because of the non-constant pricing of the many services that go into fracking a well.

“Service costs are cyclical, meaning that as the price of oil rises and demand for services increases, the costs rise too. As the price of oil falls and demand dwindles, service companies slash to the bone in an effort to retain what meager business there is.” (Saudi America, page 90)

In the long run, clearly, the fracking industry is not financially sustainable unless each of the essential services that make up the industry are financially sustainable. That must include, of course, the financial services that make this capital-intensive business possible.

“If it weren’t for historically low interest rates, it’s not clear there would even have been a fracking boom,” McLean writes, adding that “The fracking boom has been fueled mostly by overheated investment capital, not by cash flow.”7

These low interest rates represent opportunity to cash-strapped drillers, and they represent a huge challenge for many financial interests:

“low interest rates haven’t just meant lower borrowing costs for debt-laden companies. The lack of return elsewhere also led pension funds, which need to be able to pay retirees, to invest massive amounts of money with hedge funds that invest in high yield debt, like that of energy firms, and with private equity firms—which, in turn, shoveled money into shale companies, because in a world devoid of growth, shale at least was growing.” (Saudi America, page 91)

But if the industry as a whole is cash-flow negative, then it can’t end well for either drillers or investors, and the whole enterprise may only be able to stay afloat – even in the short term – due to producer subsidies.

Supply and demand

Many regulatory and fiscal policies designed to reduce carbon emissions have focused on reducing demand. The excellent and wide-ranging book Designing Climate Solutions by Hal Harvey et al. (reviewed here) is almost exclusively devoted to measures that will reduce fossil fuel demand – though the authors state in passing that it is important to eliminate all fossil fuel subsidies.

The authors of the Nature Energy paper on US producer subsidies note that

“How subsidies to consumers affect energy decision-making is relatively well studied, in part because these subsidies have comparatively clear impacts on price …. The impact of subsidies to fossil fuel producers on decision-making is much less well understood ….” 8

Nevertheless there has been a strong trend in climate activism to stop the expansion of fossil fuels on the supply side – think of the fossil fuel divestment movement and the movement to prevent the construction of new pipelines.

A 2018 paper in the journal Climatic Change says that policymakers too are taking another look at the importance of supply-side measures: “A key insight driving these new approaches is that the political and economic interests and institutions that underpin fossil fuel production help to perpetuate fossil fuel use and even to increase it.”9

The issue of “lock-in” is an obvious reason to stop fossil fuel production subsidies – and an obvious reason that large fossil fuel interests, including associated lending agencies and governments, work behind the scenes to retain such subsidies.

Producer subsidies create perverse incentives that will tend to maintain the market position of otherwise uneconomic fossil fuel sources. Subsidies help keep frackers alive and producing rather than filing for bankruptcy. Subsidies help finance the huge upfront costs of bringing new tar sands extraction projects on line, and then with the “sunk costs” already invested these projects are incentivized to keep pumping out oil even when they are selling it at a loss. Subsidy-enabled production can contribute to overproduction, lowering the costs of fossil fuels and making it more difficult for renewable energy technologies to compete. And subsidy-enabled production increases the “carbon entanglement” of financial services which are invested in such projects and thus have strong incentive to keep extraction going rather than leaving fossil fuel in the ground.

Carbon-entangled governments tend to be just as closely tied to big banks as they are to fossil fuel companies. Sadly, it comes as no surprise that in 2018 the G7 Fossil Fuels Subsidy Scorecard noted that “not a single G7 government has ended fiscal support or public finance to oil and gas production, with Canada providing the highest levels of support (per unit of GDP).”10

Fossil fuel producer subsidies and the Green New Deal

Major international climate change conferences have long agreed that fossil fuel subsidies must be phased out, ASAP, but little progress has been made.

The first step in getting out of a deep hole is to stop digging, and at this point in our climate crisis it seems crazy or criminal to keep digging the hole of fossil fuel lock-in by subsidizing new extraction projects.

Many major fossil fuel corporations have expressed their support for carbon taxes as a preferred method of addressing the climate change challenge. I am not aware, however, of such corporate leaders advocating the simpler and more obvious approach of removing all fossil fuel subsidies.

Perhaps this is because they know that carbon taxes almost always start out too small to make much difference, and that every attempt to raise them will stir intense opposition from lower- and middle-income consumers who feel the bite of such taxes most directly.

The costs of producer subsidies, on the other hand, are spread across the entire population, while the benefits are concentrated very effectively among fossil fuel corporations and their financial backers. And by boosting the supply of fossil fuels, especially oil, to a level that could not be maintained under “free market” requirements for profitability, these subsidies maintain the hope of continuous economic growth based on supposedly cheap energy.

The sudden popularity of “Green New Deal” ideas in several countries raises essential questions about political strategy. There is no single silver bullet, and a range of political and economic changes will need to be made. Though one major goal – eliminate most fossil fuel use by about 2030 and the rest by 2050 – is simple and clear, there are many means to move towards that goal, not all of them equally effective or equally feasible.

A swift elimination of producer subsidies, and a redirection of those funds to employment retraining and rehiring in renewable energy projects, strikes me as a potential political winner. Major fossil fuel interests, including big investment firms, can be counted on to oppose such a shift, of course – but they have shown themselves to be determined lobbyists for the preservation of the fossil fuel economy anyway.

Among the overwhelming majority of voters without big financial portfolios, the cessation of handouts to corporations strikes me as an easier sell than carbon taxes levied directly and regressively on consumers.


Photo at top: port of IJmuiden, Netherlands, September 2018.

Footnotes

1 Empty Promises: G20 subsidies to oil, gas and coal production, published by Overseas Development Institute and Oilchange International, 2015, page 11

2 “Into the Mire: A closer look at fossil fuel subsidies”, by Radoslav Stefanski, 2014.

3 Peter Erickson, Adrian Down, Michael Lazarus and Doug Koplow, “Effect of subsidies to fossil fuel companies on United States crude oil production”, Nature Energy 2, pages 891-898 (2017).

4 Empty Promises: G20 subsidies to oil, gas and coal production, published by Overseas Development Institute and Oilchange International, 2015, page 17

5 The same hurdles to unsubsidized profitability apparently apply outside of North America. See, for example, this article detailing how major fracking ventures in Argentina are likely to stall or fail due to declining subsidies: “IEEFA report: Argentina’s Vaca Muerta Patagonia fracking plan is financially risky, fiscally perilous”, March 21, 2019

6  Saudi America: The Truth About Fracking and How It’s Changing the World, by Bethany McLean. Columbia Global Reports, 2018.

7 McLean’s reading echoes the analysis in the 2017 book Oil and the Western Economic Crisis, by Cambridge University economist Helen Thompson.

8 Peter Erickson, Adrian Down, Michael Lazarus and Doug Koplow, “Effect of subsidies to fossil fuel companies on United States crude oil production”, Nature Energy 2, pages 891-898 (2017).

9 Michael Lazarus and Harro van Asselt, “Fossil fuel supply and climate policy: exploring the road less taken,” Climatic Change, August 2018, page 1

10 G7 Fossil Fuels Subsidy Scorecard, Overseas Development Institute, Oilchange International, NRDC, IISD, June 2018, page 9

The clean green pipeline machine – a free-market fairy tale

A review of Donald Gutstein’s The Big Stall

Also published at Resilience.org

In late 2016 Canadian Prime Minister Justin Trudeau was ready to spell out his government’s “Pan-Canadian Framework on Clean Growth and Climate Change”. His pitch to Canadians went along these lines:

We recognize that climate change is a serious challenge and that we must transition to a new economy which dramatically cuts carbon emissions. To make this transition we need a strong economy and a united country. To have a strong economy we must allow our fossil fuel sector to continue to grow. And to keep our country united while we impose a modest price on carbon, we must also build new pipelines so that oil sands extraction can grow. That is why my government is proud to lead the way in reducing carbon emissions, by ensuring that the oil sands sector emits more carbon.

If you think that sounds absurd, then you’re likely not part of Canada’s financial, industrial, political or media elite, who for the most part applauded both the minimal carbon tax and the substantial oil sands expansions being pushed by Trudeau and by Alberta Premier Rachel Notley.

How did we get to a point where oil companies and governments are accepted as partners in devising climate action plans? And why did these climate action plans, decade after decade, permit fossil fuel companies to continue with business as usual, while carbon emissions grew steadily?

This is the subject of Donald Gutstein’s new book The Big Stall: How Big Oil and Think Tanks are Blocking Action on Climate Change in Canada. (James Lorimer & Co., Toronto, October 2018)

Though Gutstein takes a deep dive into Canadian politics, industry and academia, much of his story also concerns the series of international conferences which attempted, with very little success, to come up with strong international solutions for a climate crisis that knows no borders. Thus The Big Stall has relevance to climate change campaigners in many countries.

By the early 1990s, Gutstein says, the pervasive influence of neoliberal economic theory was leading to “a silent corporate takeover of the United Nations Framework Convention on Climate Change”.

Neoliberal theory said that the “free market”, not government, should be relied on to solve the problem of climate change. That suited the oil industry, because the one thing they feared most was a hard-and-fast regulatory limit on carbon emissions.

An ad for tourism in the Canadian Rockies, perhaps? Not so – this is a still from the Alberta government’s tv ad series with the tagline “The TransMountain Pipeline is on  Canada’s side.” At keepcanadaworking.ca.

Lessons from Big Tobacco

In common with many other historians, Gutstein pays close attention to the strong links between public relations campaigns used by the tobacco industry and the similar strategies employed by Big Oil, particularly in sowing public confusion about the scientific consensus.

But as Gutstein’s book makes clear, the mainstream environmental movement failed to absorb a key lesson from the decades-long struggle to combat tobacco addiction: the industry whose products are the root of the problem should not be relied on to devise solutions.

Corporate participation in COP21 [Paris 2015] and in the conferences and talks leading up to and following it stands in stark contrast with the corporate role in the World Health Organization’s Framework Convention on Tobacco Control. There, tobacco interests are excluded, a fact which helps explain that treaty’s rapid progress in curtailing tobacco use. … At the climate talks, in sharp contrast, there is no conflict between Big Oil’s interests and public health and environmental interests. The corporate sector succeeded in making itself integral to the process.” (The Big Stall, page 158-159)

Fossil fuel interests assured their seat at the table in part by sponsoring the negotiations. In Paris in 2015, Gutstein writes,

Big Oil even partly financed the talks. France could have easily paid the C$255-million cost, but by allowing corporations to contribute 20 per cent, the host country encouraged the private sector to be part of the inner circle that was planning and organizing the event.” (The Big Stall, page 160)

The result was that in spite of inspiring rhetoric and lofty goals, the Paris Agreement contained no binding emissions reduction requirements. Instead countries were free to make their own reduction “pledges” with no penalties for missing their targets. This result was perfectly predictable, Gutstein says: “Paris was guided to its inevitable conclusion by the veiled hand of Big Oil and its corporate and political allies.” (The Big Stall, page 155)

He traces the pattern of corporate influence over climate negotiations back to the role of Canadian businessman Maurice Strong at the 1992 Rio Summit, and former Norwegian Prime Minister Gro Brundtland at the eponymous Brundtland Commission in the 1980s.

Brundtland helped popularize the phrase “sustainable development” – a phrase which Gutstein says has come to mean little beyond sustaining the profits and asset values of major corporations. Thus fossil fuel interests can forge ahead with plans to extract even more nonrenewable resources while forestalling international action to reduce carbon emissions – and then sign declarations of support for “sustainable development”.

An ad for Wind Turbines? Flowers? Puppies? Kites? None of the above – this is a still from an Alberta government tv spot promoting the TransMountain Pipeline expansion, which is intended to double the amount of bitumen exported through the Port of Vancouver.

To tax or not to tax carbon

The story gets complicated, of course, because corporate figures do not always agree on the best ways to protect their bottom lines, and sometimes they respond to changing political winds in different ways.

Gutstein covers these shifts in corporate spin in great detail. Put simply, major fossil fuel interests went from denying that there was any scientific consensus on the reality or cause of global warming, to support for carbon-emissions trading markets, to support for a modest carbon tax.

In Canada in particular, a carbon tax was seen as a necessary concession to strong public concern that Canada wasn’t doing its part to mitigate global warming. Recognizing that the oil sands had a terrible reputation around the globe, oil interests hoped they could earn public favour by supporting a carbon tax. And politicians including Justin Trudeau pitched the carbon tax as an integral part of an indivisible package: we need to tax carbon to reduce emissions, while at the same time building new pipelines to ensure that oil sands extraction continues to grow.1

The common element in all of these fossil fuel corporation strategies is that there must not be any strict regulatory limit on carbon emissions – we must trust “the market”, in all its infinite wisdom, to arrive at emissions reductions. (When fossil fuel interests want subsidies, or need government help to get their products to market, then of course it is quite alright to deviate from free market principles.)

Gutstein makes clear that the level of carbon taxes advocated by fossil fuel interests is far too low to have a significant impact either on their profits or on national carbon emissions. Likewise, he says, the imposition of carbon taxes alone cannot substitute for the wide range of regulatory measures and incentives needed to make a rapid transition away from a fossil fuel economy. But he leaves unanswered another question: does he think carbon taxes could play an important role if they were set high enough to be effective, and were part of an appropriate package of other rules and incentives? In other words, if our political parties move beyond their fealty to neoliberal free-market ideology, should they enact effective carbon taxes?

The final corporate PR strategy that Gutstein discusses is the trend for fossil fuel companies to embrace the “market opportunity” of leading the transition to new energy systems. By publicizing their corporate efforts to buy wind turbines, study battery technology, or build heavily-subsidized prototypes of carbon-capture-and-sequestration plants, fossil fuel companies would like us to believe they are leading the way into a clean green future. But the important action happens behind the scenes, as fossil fuel companies continue to fight against any effective and compulsory limits on carbon emissions.

A clean green future? Major graphics in this article are stills from an Alberta-government funded tv ad series promoting the TransMountain Pipeline expansion. The ads do not show images of pipelines, tar sands open-pit mines, tailings ponds or refineries – just prosperous people and unspoiled environments. (At keepcanadaworking.ca.) Since the ads are paid for by a provincial government, and the TransMountain Pipeline is now owned by the federal government, fossil fuel industry adherence to “free market” principles can be flexible indeed.

FOOTNOTES

1 By the time The Big Stall was published, Trudeau’s grand bargain was in danger of failing on both fronts. Court cases and business decisions had delayed or cancelled most of the pending pipelines that would facilitate oil sands expansion. In the meantime the minimal carbon tax Trudeau has promised has been dubbed the “job-killing carbon tax” by the new Premier of Ontario and the federal Conservative Party, and the scheduled tax is now vehemently opposed by provincial leaders in about half of the country.

Quantifying climate hypocrisy – the Canada file

Also published at Resilience.org

Which nation shows greater hypocrisy in the struggle to limit climate change – the United States or Canada?

The US President, of course, misses no opportunity to dismiss scientific consensus, downplay the dangers of climate change, and promote fossil fuel use.

Canada’s Prime Minister, on the other hand, has been consistent in stating that the scientific consensus is undeniable, the danger is clear, and Canada must step up to the challenge of drastic carbon emissions reductions.

It was within the first few weeks of the Justin Trudeau administration that Canada surprised most observers by backing a call from island nations to hold global warming to 1.5°C, as opposed to the 2°C warming threshold that had been a more widely accepted official goal.1

Yet according to a new peer-reviewed study2 of countries’ pledged emissions reduction commitments following the Paris Agreement, Canada’s level of commitment would result in 5.1°C of global warming if all countries followed the same approach to carbon emissions. In this tally of the potential effects of national climate commitments, Canada ranks with the worst of the worst, a select club that also includes Russia, China, New Zealand and Argentina.

The actual carbon emissions policies of the US would result in a lesser degree of total calamity –  4°C of warming – if followed by all countries.

Behind this discrepancy between Canada’s professed goals and its actual policy is the lack of a global agreement on a fair method for allocating the remaining carbon emissions budget.

The Paris Agreement set a target for the limitation of global warming, and it was (relatively) straightforward to calculate how much more carbon can be emitted without blowing through that warming target. But countries remained free to decide for themselves what principles to follow in determining their fare share of emissions reductions.

The result?

Developed countries who committed to take the lead in reducing emissions and mobilizing finance for developing countries often submitted NDCs [Nationally Determined Contributions] that do not match the concepts of equity that they publicly supported.” (du Pont and Meinshausen, “Warming assessment of the bottom-up Paris Agreement emissions pledges”, Nature Communications.)

A fair way to count to 10

An old joke provides a good analogy for the slipperiness inherent in divvying up the global carbon budget. (My apologies to accountants everywhere, especially the one who first told me this joke.)

You ask a mathematician, “how much is 3 + 3 + 4?” She punches the numbers into her calculator, and tells you “3 + 3 + 4 is 10”.

But when you ask an accountant “how much is 3 + 3 + 4?” he sidles up and whispers in your ear, “How much do you want it to be?”

Though climate scientists can provide a simple number for how much additional carbon can be emitted globally before we hit our agreed-on warming threshold, each country’s ruling party decides for themselves how much they want their share of that carbon budget to be.

And the radically different circumstances of countries has resulted in radically different positions on what is fair.

A 2016 study published in Nature gives us insight into Canada’s position.

Entitled “Global mismatch between greenhouse gas emissions and the burden of climate change”, the study categorizes countries into how drastically and immediately they are hit by the effects of climate change. While all countries are already being impacted, the study found that Canada is among the 20% of countries who are suffering least from climate change.

Countries are also categorized according to their responsibility for climate change, and Canada is among the 20% who have contributed the most (on a per capita basis) in causing climate change.

In economic terms, those who do most to cause climate change while suffering the least damage from climate change are “free riders”. Those who do the least to cause climate change, but suffer the most from it, are “forced riders”.

The study shows that Canada is among the 20 “free riders” now, and will still be one of 16 “free riders” in 2030. The “forced riders” in both 2010 and 2030 include many African countries and small island nations. (Yes, that would be the same island nations that Canada claimed to be backing in 2015 in the call to adopt a 1.5°C warming threshold.)

“Figure 1. Global inequity in the responsibility for climate change and the burden of its impacts” in “Global mismatch between greenhouse gas emissions and the burden of climate change”, by Glenn Althor, James E. M. Watson and Richard A. Fuller, Nature, 5 February 2016. Countries shown in dark brown are in the highest quintile in emissions and in the lowest quintile of vulnerability to climate change. Countries in dark green are in the lowest quintile of emissions, but in the highest quintile of vulnerability. The top map shows this mismatch in 2010, the bottom map the projected mismatch in 2030.

Is there evidence that the “free riders” are trying to maintain their free-riding status as long as possible? According to du Pont, Meinshausen and their research colleagues, the answer is yes: most countries have set carbon emissions commitments that reflect their immediate self-interests. In the case of the major fossil fuel producers and consumers, that means the sum of their commitments adds up to a woefully inadequate global carbon emissions reduction.

An equity framework that dares not speak its name

In their discussion of the emissions reductions pledges made by nations following the Paris Agreement, du Pont and Meinshausen try to match these pledges with various approaches to equity. They note that the Intergovernmental Panel on Climate Change (IPCC) has listed five major equity frameworks. These frameworks are summarized in this table from an earlier paper:

Source: “Equitable mitigation to achieve the Paris Agreement goals”, by Yann Robiou du Pont, M. Louise Jeffery, Johannes Gütschow, Joeri Rogelj, Peter Christoff, and Malte Meinshausen, Nature, 19 December 2016

Of particular interest for our purposes is the final entry, CER or “Constant emissions ratio”. This has been defined as

[maintaining] current emissions ratios (‘constant emissions ratio’, or CER), so that each country continues to emit the same share of global emissions as it does at the moment, even as the total volume is cranked down.”3

In other words, those who have emitted an outsize share of carbon in the past get to preserve an outsize share of a shrinking pie in future, while those who have emitted very little carbon to date are restricted even more drastically in future.

If that sounds anything but fair to you, you are not alone. Du Pont and Meinshausen say the Constant Emissions Ratio “is considered unfair and not openly supported by any country.”

Yet when they looked at the Nationally Determined Contributions following the Paris Agreement, they found that the Constant Emissions Ratio “implicitly matches many developed countries’ targets”.

The Constant Emissions Ratio framework for these countries would be the least stringent of the IPCC’s equity frameworks – that is, it would impose the smallest and slowest cuts in carbon emissions.

In the case of Canada and other members of the climate rogues gallery, their post-Paris commitments turn out to be even weaker than commitments calculated by the Constant Emissions Ratio method.

Former ExxonMobil CEO and US Secretary of State Rex Tillerson with Canadian Prime Minister Justin Trudeau.

Follow the money

Let’s take a closer look at some of the Nationally Determined Contributions – individual nations’ commitments towards the global goal of rapid decarbonization.

“Selected Country Pledges Under the Paris Agreement and GHG Emissions”, from “The Paris Agreement on Climate Change”, by Radoslav Dimitrov, published by University of Western Ontario, March 2018.

Canada’s commitment ranks among the weakest of this lot for three reasons. First, the Reduction Target of 30% is near the low end of the scale, with several other industrial economies pledged to Reduction Targets of 40% or more. Second, the Target Year for achievement of the Reduction, 2030, is five years beyond the US and Brazil Target Dates of 2025. This matters, because every year that we continue to emit high amounts of carbon makes it that much more difficult to forestall catastrophic climate change.

Third, the Base Year is also very significant, and on this measure Canada also ranks with the poorest commitments. The European Union, for example, pledges to reduce from a Base Year of 1990, while Canada will work from a Base Year of 2005.

Between 1990 and 2005, Canada’s greenhouse-gas emissions rose 25%,4 and so if Canada’s emissions in 2030 are 30% lower than in 2005, that is only about a 12% reduction compared to 1990.

Canada’s national government claims to understand that swift and dramatic action must be taken to reduce carbon emissions. So why would this government then commit to only a 12% emissions reduction, compared to 1990, as a target for 2030? Let’s follow the money, with a quick look at the relative influence of the fossil fuel industry in Canada.

Radoslav Dimitrov writes

the energy sector (oil, gas and electricity) is important to the Canadian economy, accounting for approximately 10% of national GDP in 2016, more than a quarter of public and private investment, and approximately 29% of exports.”5

Notably absent in the above paragraph is employment. Natural Resources Canada says that in 2017, only 5% of employment was either directly or indirectly within the energy sector, and that includes the electricity sector.6

Both of Canada’s traditional ruling parties like to talk about their commitment to “good middle-class jobs”. But given the scale of the environmental crisis we face, how big a challenge would it be to fund an immediate job retraining and investment program to start replacing fossil fuel jobs with renewable energy jobs? Couldn’t a committed government-and-industry program find new “middle-class jobs” for 3% or 4% of the working-age population?

I think the answer is yes … but as for capital investment, that’s another story. The fossil fuel industry accounts for closer to 25% of Canadian investment, and an immediate and sustained push to reduce the output of carbon-intensive fuels would result in a dramatic and immediate drop in the stock-market value of fossil-fuel corporations.  Those stocks are a big part of the portfolios of most people in Canada’s stock-owning class.

Alberta Premier Rachel Notley and Canadian Prime Minister Justin Trudeau

A two-pronged strategy which starts with “dig the hole deeper”

Since before his election as national leader, Canadian Prime Minister Justin Trudeau has proclaimed the need to “balance the environment and the economy”. What has this meant in practice?

As the industry-friendly Financial Post put it in 2015,

The encouraging news — at least from the perspective of the energy sector — is that Mr. Trudeau seems onside with continued oil industry expansion and that his climate change program aims to support it rather than contain it.”7

Part of Trudeau’s program was a commitment to establishing a modest national price on carbon. He found a prominent early ally in an unlikely location, Alberta. There the NDP Premier Rachel Notley not only implemented a carbon price, but also announced a cap on carbon emissions from Alberta’s oil and gas sector.

Notably, however, that cap will start to reduce tar sands emissions only in 2030, and in the meantime emissions from that sector are projected to rise 50%, from 66 megatonnes/year to 100 megatonnes.

The Alberta plan thus mirrors Trudeau’s national policy. While championing a modest carbon tax, the Prime Minister has consistently pushed for the construction of major new pipelines – and the business case for these pipelines is that they are essential in the expansion of tar sands extraction.

On this front, at least, Trudeau is willing to put our money where his mouth is. Last summer, the Trudeau government invested $4.5 billion to buy the TransMountain Pipeline, with the prospect of spending at least several billion more in a much delayed project designed to almost triple the line’s bitumen-carrying capacity.

Meanwhile a national price on carbon emissions of $20/tonne is scheduled to be implemented in January 2019, rising to $50/tonne in 2022. While most environmentalists see this as a positive step, they also believe the price needs to be much higher if it is to result in dramatic emission reductions.

Setting a low bar and failing to clear it

As we have seen, the Nationally Determined Contribution that Canada has offered in response to the Paris Agreement is one of the world’s weakest.

The evidence to date suggests that Canada is on track to miss its own low target. Canada’s Environment Commissioner Julie Gelfand concluded in March 2018 that Canada is making little progress and will miss its 2030 targets unless both the federal and provincial governments step up the pace.8 And just this week, the UN Environment Program said that Canada is on track to miss its emissions targets for both 2020 and 2030.9

That should come as no surprise: it’s hard to cut national emissions by 30%, when you’re also fully committed to the continued rapid expansion of the country’s most carbon-intensive industrial sector – tar sands extraction.

Photo credits: all photos are publicity photos released by the Prime Minister’s Office, Canada, taken by Adam Scotti, accessed at https://pm.gc.ca/eng/photos.

References

1  “Catherine McKenna pushes for 1.5 C target in Paris climate talks”, Globe & Mail, December 6, 2015

2  “Warming assessment of the bottom-up Paris Agreement emissions pledges”, by Yann Roubiou du Pont and Malte Meinshausen, Nature Communications, accessed at https://www.nature.com/articles/s41467-018-07223-9.pdf

3  In “US trying harder on climate change than ‘unambitious’ China, says study”, CarbonBrief, 20 December 2016

4  “Canada’s greenhouse-gas emissions rose sharply between 1990 and 2005: study”, April 22, 2008, accessed at CBC News.

5  “Selected Country Pledges Under the Paris Agreement and GHG Emissions”, from “The Paris Agreement on Climate Change”, by Radoslav Dimitrov, published by University of Western Ontario, March 2018.

6  “Energy and the economy”, on the Natural Resources Canada website, accessed Nov 28 2018.

7  “Justin Trudeau aims to strike balance between environment, economy with carbon policy”, Financial Post, February 6, 2015

8  “Canada, provinces lack clear plan to adapt to climate change, auditors say”, by Mia Rabson, Canadian Press, 27 March 2018

9  “Canada set to miss C02 emissions target, UN says,” in Toronto Star, 28 November 2018, accessed in Pressreader.

Energy: A Human History – a slim slice of history and science

Also published at Resilience.org and BiophysEco.

“The population of the earth has increased more than sevenfold since 1850 – from one billion to seven and a half billion – primarily because of science and technology,” Richard Rhodes concludes at the end of his new book Energy: A Human History. “Far from threatening civilization, science, technology, and the prosperity they create will sustain us as well in the centuries to come.”1

Rhodes tells an engaging tale of energy transitions over some 500 years. Yet the limitations in his field of view become critical in the book’s concluding chapter, when he reveals which particular axe he is especially eager to grind.

Both the title of the book and its timing invite comparison with Vaclav Smil’s 2017 work Energy and Civilization: A History (reviewed here). There is a significant overlap, most notably in both author’s views that major energy transitions – from wood to coal, from coal to petroleum – have been multi-generational processes.

But Rhodes’ scope is far narrower, both in time and in geography.

Rhodes begins his story in sixteenth-century England. His cast of characters is overwhelmingly Anglo-American and male, with a sprinkling of western Europeans, and only a brief excursion outside of “western civilization” to discuss oil exploration in Saudi Arabia.

Smil, by contrast, starts his book in pre-history, with an erudite discussion of the energy implications of human evolution. He follows with more than 200 pages on developments in energy usage from ancient times to the Middle Ages, in Africa, India, China, Europe, and Mesoamerica.

Smil’s readers, then, arrive at his discussion of the industrial revolution and the fossil fuel era with an understanding that millennia of progressive developments, around the world, had gone into the technologies and social organizations available to sixteenth-century Englishmen.

The unspoken implication in Rhodes’ tale is that the men of the Royal Society of London started with a blank slate, and all our current technological marvels are due wholly to the magnificence of their particular current in science.

One question that never arises in Rhodes’ book is, how did it happen that a class of educated men had the time and resources to ponder theories, conduct long series of experiments, and write and discuss their essays? There is no mention that during these same centuries, the countries of western Europe were drawing vast quantities of basic resources from Africa and the Americas, at the cost of millions of lives.

In short, this is a woefully incomplete history of energy. But within those limitations, Rhodes writes engagingly and with admirable clarity.

A thermodynamic page-turner

For anyone interested in basic issues of physics and technology, the progression from scattered awareness of curious phenomena, to testable theories, to technologies that were applied on a mass scale and changed everyday life, makes a fascinating story. For example, observations of static electricity from a cat’s hair, frightening strikes of lightning, and the effects of magnets eventually grew into a comprehensive theory of electromagnetism. Rhodes ably outlines how this led through development of crude batteries, then to simple generators, and eventually to the construction of a massive generator harnessing some of the power of Niagara Falls for a new phase of the Industrial Revolution.

Likewise, his discussion of the long gestation of the coal-fired steam engine – which depended on an understanding of basic issues of thermodynamics as well as refinements in metal-working needed for the construction of high-quality boilers – illuminates important factors in the birth of the fossil-fuel era.

An excellent section on early oil drilling and refining processes leads to a fascinating aside: the profitable introduction of lead as a performance-enhancing additive to gasoline, notwithstanding severe health effects which were noticed and decried at the earliest stages of the leaded gas era.

Credit where credit is due

The social effects of these developments in basic and applied science have been sweeping and many of them have been salutary. It would be foolish to deny that science has played a major role in increasing life expectancy and making rapid population growth possible.

Yet many historians would argue that social and political factors such as labour rights and the push for universal education have been equally important.

Of most direct importance to Rhodes’ subject, it is clear that science was critical in helping us understand principles of thermodynamics and helping us harness the power in both fossil fuels and and renewable resources. But science has not decreed that, once having learned to extract and consume fossil fuels, we should use up these resources as fast as humanly possible. That trend, rather, is due to an economic system that requires profits to increase continuously and exponentially.

Likewise, science taught us how to use the fossil fuel resources which have helped boost our population seven-fold in the past 170 years. But science did not create those resources, which were cooking in the earth’s cavities for millions of years before the first protohuman scientist conducted the first experiment.

If, following Rhodes’ thinking, we give science the whole credit for making a population explosion possible, we should also credit science with blowing through millions of years of accumulated energy resources in just a few hundred years. We should give science credit for the fact that billions of people live in areas already being severely impacted by climate change caused by fossil fuel emissions (even though those people typically have used minimal quantities of fossil fuel themselves.) And we should ask, why can’t science come up with a cost- and time-effective way of replacing all those fossil fuels, so that all 7 billion of us plus our more numerous descendants can keep on living the high-energy lifestyle to which (some of) us are accustomed?

Ah, but science has already found a big part of the next answer, Rhodes might answer: nuclear power.

The questions raised by Rhodes’ concluding sections on nuclear power are complex, and we’ll dive into those issues in the next installment.

Illustration at top: “Bridge over the Mongahela River, Pittsburg, Penn.” from the Feb 21, 1857 edition of Ballou’s Pictorial, accessed via Wikimedia Commons

1Energy: A Human History, page 343

The climate revolution: a manual for head, hands and heart

Also published at Resilience.org.

How many people in North America and Europe have known for at least 15 years that climate change is dangerous, that it is caused mostly by our burning of fossil fuels, and that we must drastically reduce our fossil fuel consumption?

That would be most of us.

And how many of us have drastically reduced our fossil fuel consumption?

Not so many of us.

Mostly, our actions proclaim “We’ll cut back our fossil fuel use when everybody else does … or when the government forces us … or when hell freezes over – whichever comes last!”

Physicist and climatologist Peter Kalmus found the gulf between his beliefs and his lifestyle to be deeply unsatisfying, and he set out to heal that rift.

The result, he says, has been a dramatically richer life for him and his family.

His book Being The Change (New Society Publishers, 2017) outlines the ‘why’ and ‘how’ of his family’s reduction of their fossil fuel consumption by 90% in just a few years. His discussion ranges from climate science to economics, from bicycling to beekeeping, from community networks to meditation, in a deeply inspiring narrative.

Waves of gravity

Kalmus didn’t begin his scientific career in climatology. With a PhD in astrophysics, his speciality was gravitational waves and his day job was working through the data that would, in 2016, confirm Einstein’s prediction of gravitational waves.

But he was also learning about the onrushing catastrophe of climate change, and as a young parent he was deeply worried for the world his children would inherit. Motivated by a desire to work on problems closer to home, he switched his professional focus, taking a new job at NASA studying the role of clouds in global warming.

Kalmus describes Being the Change as a book for the head, the hands and the heart. Wearing his scientist hat, he lucidly lays out the science of climate change. These chapters don’t require more than a high-school science background to understand, but even those who have read many books and articles on the subject are likely to learn something. For those who have read little or nothing on this subject, a good beginning would be to read Kalmus’ chapters on climate science three or four times over – he packs a lot of information into 50 pages.

His sobering conclusion is that we have already stalled too long to have any reasonable chance of keeping global warming below 2°C. Within two or three decades, the mean global temperature will be higher than in any record-warmth year in human experience so far. That new climate era will last centuries, challenging the resiliency of not only human civilization but global biodiversity.

The key uncertainty, he says, is the temperature at which global warming will peak. None of us alive today will be here to experience that peak, but our actions this generation will have a major influence on that peak. A higher peak will cause a spike in the rate of species extinctions, and if and when global warming slows or stops, it will take far longer for biodiversity to recover.

“A good overarching goal for today’s civilization would be to minimize global warming and its concomitant biodiversity loss for the sake of the next few hundred thousand human generations.” (Being the Change, page 69)

Fear of not flying

Climate science gives us clear warning of the disaster we are bequeathing our descendants if we don’t change our way of life, fast. Kalmus concludes, “it’s critical we begin saying that burning fossil fuels is causing real harm and needs to stop. It’s even more important to begin living this message.” (Being the Change, page 120 – italics mine)

A second major focus of the book is “hands-on” – the many ways people can change their own lives to join the movement away from fossil fuels. Kalmus relates his personal experiences here, but he also provides valuable suggestions to help others estimate their consumption of fossil fuels and reduce that consumption in meaningful ways.

Kalmus found that one category of fossil fuel consumption outweighed all others in his life: long-distance travel by air. Much of this consumption happened in traveling to distant conferences where delegates would warn of the dangers of climate change. Kalmus’ decision to stop taking these flights led to a more satisfying life, he says – though this was a rejection of one of the signature privileges of a global elite.

“The act of flying is an exercise of privilege. Globally, only about 5% of humans have ever flown.” (Being the Change, page 151)

Even the average American spends relatively little time in the air. Kalmus writes that “The average American emits about 1,000 kg CO2 per year from flying, which is roughly equivalent to one 4,000-mile round-trip between Los Angeles and Chicago.” But in 2010, Kalmus’ carbon emissions due to flying were 16 times that average – and so it was obvious where he had to make the first change to align his lifestyle with his knowledge.

Kalmus’ graph of his greenhouse gas emissions for 2010 – 2014. Source: Being the Change, page 144. (click graph for larger view)

For the average American, Kalmus says, the “largest climate impact is from driving.” He largely eliminated those CO2 emissions from his life too, through routine bicycling, driving a car that he converted to run on used vegetable oil, and taking a bus or trains for occasional long-distance trips.

Each person’s CO2 emission profile, and therefore their opportunities for emission reductions, will be different.

But Kalmus hopes others will share his experience in one key respect – a greater peace with their own lives and their own surroundings.

“I think most people are afraid of a low-energy lifestyle because we equate quality of life with quantity of energy use,” he says. “My experience has been the opposite: low-energy living is more fun and satisfying.”

Reading about his new-found love of gardening and beekeeping, and the strength of the local community bonds he and his family have developed, it’s easy to understand the richness of this low-energy lifestyle.

He also makes clear that he doesn’t believe that purely individual actions are sufficient to halt the fossil-fuel juggernaut. In the realm of public policy, he pens an excellent advocacy for his preferred fiscal approach to reducing national and international CO2 emissions – Carbon Fee And Dividend (CFAD). He also discusses his work with one group working on the CFAD option, the Citizens’ Climate Lobby.

Finding a lifestyle that matches his principles brings joy and a significant measure of peace of mind. At the same time, finding peace of mind is key in giving him the energy to embark on all those personal changes. That brings us to a third major focus of Being the Change: meditation.

“As part of my daily work, I look directly at the truth of global warming, and what it’s doing to the inhabitants of the Earth. Meditation gives me the strength and the courage to keep interacting with this truth, as it is – not only to cope, but to be happy and as effective as possible in enacting positive change.” (Being the Change, page 203)

As one who has never been attracted to the practice of meditation, Kalmus’ story here left me with mixed feelings. On the one hand, his discussions of dissolving the ego and escaping all wants were, for this reader, just about the only parts of the book that weren’t wholly convincing. On the other hand his life story so far is truly moving, and if he says meditation has been central to that journey then I can only celebrate the strength and peace that meditation gives him. More than that, his book has made me ask whether I want to introduce meditation into my own life in a concerted way; better late, perhaps, than never.

Science and love

Peter Kalmus has written a profound book about the science of global warming, and a profound book about love:

“These two seemingly disparate things – reducing my own fossil fuel use and increasing my ability to love – are actually intimately interconnected.”

In the process he grapples with three of the most troublesome questions facing the environmental movement. Can we convince people it’s essential to eliminate fossil fuel use, when our own lifestyles say that fossil fuel use is no problem? Can we convince people that a high-energy lifestyle is unnecessary and destructive, when we act as if our lives depend on that lifestyle? Can we be happily productive agents of change, while we are caught up in the high-energy whirl of consumptive capitalism? It’s hard to answer those questions except with “No, no and no.” And yet Kalmus’ personal message is deeply positive and deeply hopeful:

“On my own path, as I continue to reduce, I’m actually experiencing increasing abundance. It’s a good path.”

 

Photo at top: Peter Kalmus, photo by Alice Goldsmith, courtesy of New Society Publishers

When boom is bust: the shale oil bonanza as a symptom of economic crisis

Also published at Resilience.org.

The gradual climb in oil prices in recent weeks has revived hopes that US shale oil producers will return to profitability, while also renewing fevered dreams of the US becoming a fossil fuel superpower once again.

Thus a few days ago my daily newspaper ran a Bloomberg article by Grant Smith which lead with this sweeping claim:

“The U.S. shale revolution is on course to be the greatest oil and gas boom in history, turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.”

I might have simply chuckled and turned the page, had I not just finished reading Oil and the Western Economic Crisis, by Cambridge University economist Helen Thompson. (Palgrave Macmillan, 2017)

Thompson looks at the same  shale oil revolution and draws strikingly different conclusions, both about the future of the oil economy and about the effects on US relations with OPEC, Saudi Arabia, and Russia.

Before diving into Thompson’s analysis, let’s first look at the idea that the shale revolution may be “the greatest oil and gas boom in history”. As backing for this claim, Grant Smith cites a report earlier in November by the International Energy Agency, predicting that US shale oil output will soar to about 8 million barrels/day by 2025.

Accordingly, “ ‘The United States will be the undisputed leader of global oil and gas markets for decades to come,’ IEA Executive Director Fatih Birol said … in an interview with Bloomberg television.”

Let’s leave this prediction unchallenged for the moment. (Though skeptics could start with David Hughes detailed look at the IEA’s 2016 forecasts here, or with a recent MIT report that confirms a key aspect of Hughes’ analysis.) Suppose the IEA turns out to be right. How will the shale bonanza rank among the great oil booms in history?

Grant Smith uses the following chart to bolster his claim that the fracking boom will equal Saudi Arabia’s expansion in the 1960s and 1970s.

 

Chart by Bloomberg

 

OK, so if US shale oil rises to 8 million barrels by 2025, that production will be about the same as Saudi oil production in 1981. Would that make these two booms roughly equivalent?

First, world oil consumption in the early 1980s was only about two-thirds what it is now. So 8 billion barrels/day represented a bigger proportion of the world’s oil needs in 1980 that it does today.

Second, Saudi Arabia used very little of its oil domestically in 1980, leaving most of it for sale abroad, and that gave it a huge impact on the world market. The US, by contrast, still burns more oil domestically than it produces – and in the best case scenario, its potential oil exports in 2025 would be a small percentage of global supply.

Third, Saudi Arabia has been able to keep roughly 8 million barrels/day flowing for the past 40 years, while even the IEA’s optimistic forecast shows US shale oil output starting to drop within ten years of a 2025 peak.

And last but not least, Saudi Arabia’s 8 million barrels/day have come with some of the world’s lowest production costs, while US shale oil comes from some of the world’s costliest wells.

All these factors come into play in Helen Thompson’s thorough analysis.

No more Mr. NICE Guy

In an October 2005 speech, Bank of England governor Mervyn King “argued that the rising price of oil was ending what he termed ‘NICE’ – a period of ‘non-inflationary consistently expansionary economic growth’ that began in 1992.” (Thompson, Oil and the Western Economic Crisis, page 28-29)

In spite of their best efforts in the first decade of this millennium, Western governments were not able to maintain steady economic growth, nor keep the price of oil in check, nor significantly increase the supply of oil, nor prevent the onslaught of a serious recession. Thompson traces the interplay of several major economic factors, both before and after this recession.

By the beginning of the George W. Bush administration, there was widespread concern that world oil production would not keep up with growing demand. The booming economies of China and India added to this fear.

“Of the increase of 17.9 million bpd in oil consumption that materialised between 1994 and 2008,” Thompson writes, “only 960,000 of the total came from the G7 economies.” Nearly all of the growth in demand came from China and India – and that growth in demand was forecast to continue.

The GW Bush administration appointed oilman and defense hawk Dick Cheney to lead a task force on the impending supply crunch. But “ultimately, for all the aspiration of the Cheney report, the Bush Jr administration’s energy strategy did little to increase the supply of oil over the first eight years of the twenty-first century.” (Thompson, page 20)

In fact, the only significant supply growth in the decade up to 2008 came from Russia. This boosted Putin’s power while fracturing Western economic interests, as “the western states divided between those who were significant importers of Russian oil and gas and those that were not.” (Thompson, page 23)

Meanwhile oil prices shot up dramatically until Western economies dropped into recession in 2007 as a precursor to the 2008 financial crash. Shouldn’t those high oil prices have spurred high investment in new wells, with consequent rises in production? It didn’t work out that way.

Between 2003 and the first half of 2008 the costs of the construction of production facilities, oil equipment and services, and energy soared in good part in response to the overall commodity boom produced by China’s economic rise. Consequently, whilst future oil supply was becoming ever more dependent on large-scale capital investment both to extract more from declining fields and to open up high-cost non-conventional production, the capital available was also required by 2008 simply to cover rising existing costs.” (Thompson, page 23)

Thus oil prices rose to the point where western economies could no longer maintain consumption levels, but these high prices still couldn’t finance the kind of new drilling needed to boost production.

Oddly enough, the right conditions for a boom in US oil production wouldn’t occur until well after the crash of 2008, when monetary policy-makers were struggling with little success to revive economic growth.

Zero Interest Rate Policy

In western Europe and the US, recovery from the financial crisis of 2008 has been sluggish and incomplete. But the growth in demand for oil by India and China continued, with the result that after a brief price drop in 2009 oil quickly rebounded to $100/barrel and stayed there for the next few years.

As in the years leading up to the crash, $100 oil proved too expensive for western economies, accustomed as they had been to running on cheap energy for decades. Consumer confidence, and consumer spending, remained low.

Simply pumping the markets with cash – Quantitative Easing – had little effect on the real economy (though it afforded bank execs huge bonuses and boosted the prices of stocks and other financial assets). But as interest rates dropped to historic lows, the flood of nearly-free money finally revived the US energy-production sector.

QE and ZIRP hugely increased the availability of credit to the energy sector. ZIRP allowed oil companies to borrow from banks at extremely low interest rates, with the worth of syndicated loans to the oil and gas sectors rising from $600 billion in 2006 to $1.6 trillion in 2014. Meanwhile, in raising the price and depressing the yield of the relatively safe assets central banks purchased, QE created incentives for investors to buy assets with a higher yield, including significantly riskier corporate bonds and equities. …” (Thompson, page 50)

Without this extraordinary monetary expansion “the rise of non-conventional oil production would not have been possible”, Thompson concludes.

And while a huge boost in shale oil production might be counted as a “win” for the economic growth team, the downsides have been equally serious. The Zero Interest Rate Policy has almost eliminated interest earnings for cautious middle-income savers, which depresses consumer spending in the short term and threatens the security of millions in the long term. The inflation in asset prices has boosted the profits of large corporations, while weak consumer confidence has removed corporate incentive to invest in greater production of most consumer goods.

The situation would be more stable if non-conventional oil producers had the ability to weather prolonged periods of low oil prices. But as the price drop of 2015 showed, that would be wishful thinking. “By the second quarter of 2015 more than half of all distressed bonds across investment and high-yield bond markets were issued by energy companies. Under these financial strains a wave of shale bankruptcies began in the first quarter of 2015” – a bankruptcy wave that grew three times as high in 2016.

Finally, financial markets with their high exposure to risky non-conventional oil production have been easily spooked by mere rumours of the end of quantitative easing or any significant rise in interest rates. So central bankers have good reason to fear they may go into the next recession with no tools left in their monetary policy toolbox.

Far from representing a way out of economic crisis, then, the shale oil and related tar sands booms are a symptom of an ongoing economic crisis, the end of which is nowhere in sight.

Energy and power

Thompson also discusses the geo-political effects of the changing global oil market. She notes that the shale oil boom created serious tensions in the US-Saudi relationship. The Saudis wanted oil prices to be moderately high, perhaps in the $50-60/barrel range, because that would afford the Saudis substantial profits without driving down demand for oil. The Americans, with their billions sunk into high-cost shale oil wells, now had a need for oil prices in the $70/barrel and up range, simply to make the fracked oil minimally profitable.

There was no way for both the Saudis and the Americans to win in this struggle, though they could both lose.

At the peak (to date) of the shale oil boom, there was only one significant geo-political development in which the Americans were able to flex some muscle specifically because of the big increase in US oil production, Thompson says. She attributes the nuclear treaty with Iran in part to the surge of new oil production in Texas and North Dakota. In her reading, world oil markets at the time needn’t fear the sudden loss of Iran’s oil output, and that gave European governments a comfort level in agreeing to impose sanctions on Iran. These sanctions, in turn, helped convince Iran to make a deal (a diplomatic success which the Trump administration is determined to undo).

But in 2014 OPEC still produced about three times as much oil as the US produced – with important implications:

“even at the height of the shale boom the obvious limits to any claim of geo-political transformation were also evident. The US remained a significant net importer of oil and, consequently, lacked the capacity to act as a swing producer capable of immediately and directly influencing the price.” (Thompson, page 56)

“Most consequentially, when the Obama administration turned towards sanctions against Russia after the onset of the Ukrainian crisis in the spring of 2014, it was not willing to contemplate significant action against Russian oil production.” (Thompson, page 57)

Thompson wraps up with a look at the oil shock of the 1970s, concluding that “There are striking similarities between aspects of the West’s current predicaments around oil and the problems western governments faced in the 1970s. … However, in a number of ways the present version of these problems is worse than those that were manifest in the 1970s.” (Thompson, page 57)

A much higher world oil demand today, the fact that new oil reserves in western countries are very high-cost, plus the explosion of oil-related financial derivatives, make the international monetary order highly unstable.

Has the US returned to the ranks of “fossil fuel superpowers”? Not as Thompson sees it:

Now the US has nothing like the power it had in the post-war period in providing other states access to oil. Shale oil … cannot change the fact that the largest reserves of cheaply accessible oil lie in the Middle East and Russia, or that China and others’ rise has fundamentally changed the volume of demand for oil in the world.” (Thompson, page 111)

Guns, energy, and the coin of the realm

Also published at Resilience.org.

While US debt climbs to incomprehensible heights, US banking authorities continue to pump new money into the economy. How can they do it? David Graeber sees a  simple explanation:

There’s a reason why the wizard has such a strange capacity to create money out of nothing. Behind him, there’s a man with a gun.” (Debt: The First 5,000 Years, Melville House, 2013, pg 364)

In part one of this series, we looked at the extent of violence in the “American Century” – the period since World War II in which the US has been the number one superpower, and in which US garrisons have ringed the world. In part two we looked at the role of energy supplies in propelling the US to power, the rapid drawdown of energy supplies in the US post-WWII, and the more recent explosion of US debt.

In this concluding installment we’ll look at the links between military power and financial power.

A new set of financial institutions arose at the end of World War II, and for obvious reasons the US was ‘first among equals’ in setting the rules. Not only was the US in military occupation of Germany and Japan, but the US also had the financial capital to help shattered countries –whether on the war’s winning or losing sides – in reconstructing their infrastructures and restarting their economies.

The US was also able to offer military protection to many countries including previous mortal enemies. This meant that these countries could avoid large military outlays – but also that their elites were in no position to challenge US supremacy.

That being said, there were challenges both large and small in dozens of nations, particularly from the grass roots. The US exercised political power, both soft and hard, in attempts to influence the directions of scores of countries around the world. Planting of media reports, surreptitious aid to favoured electoral candidates, dirty tricks to discredit candidates seen as threatening, military aid and training to dictatorships and police forces who could put down movements for social justice, planning and helping to implement coups, and full-fledged military invasion – this range of intervention techniques resulted in hundreds of thousands, if not millions, of deaths. Cataloguing the bloody side of US “leadership of the free world” is the task taken on so ably by John Dower in The Violent American Century.

Dollars for oil

One of the rules of the game grew in importance with each passing decade. In Timothy Mitchell’s words,

Under the arrangements that governed the international oil trade, the commodity was sold in the currency not of the country where it was produced, nor of the place where it was consumed, but of the international companies that controlled production. ‘Sterling oil’, as it was known (principally oil from Iran), was traded in British pounds, but the bulk of global sales were in ‘dollar oil’.” (Carbon Democracy, Verso, 2013, pg 111)

As David Graeber’s Debt explains in detail, the ability to force people to acquire and use the ruler’s currency has, throughout history, been a key mechanism for extracting tribute from subject populations.

In today’s global economy, that is why the pricing of oil in dollars has been so important for the US. Again in Timothy Mitchell’s words:

Europe and other regions had to accumulate dollars, hold them and then return them to the United States in payment for oil. Inflation in the United States slowly eroded the value of the dollar, so that when these countries purchased oil, the dollars they used were worth less than their value when they acquired them. These seigniorage privileges, as they are called, enabled Washington to extract a tax from every other country in the world …. (Carbon Democracy, pg 120)

As Greg Grandin explains, the oil-US dollar relationship grew in importance even as OPEC countries were able to force big price increases:

With every rise in the price of oil, oil-importing countries had to borrow more to meet their energy needs. With every petrodollar placed in New York banks, the value of the US currency increased, and with it the value of the dollar-denominated debt that poor countries owed to those banks.” (“Down From The Mountain”, London Review of Books, June 19, 2017)

But the process did take on another important twist after US domestic oil production peaked and imports from Saudi Arabia soared in the 1970s. Although the oil trade continued to support the value of the US dollar, the US was now sending a lot more of those dollars to oil exporting countries. The Saudis, in particular, accumulated US dollars so fast there wasn’t a productive way for them to circulate these dollars back into the US by purchasing US-made goods. The burgeoning US exports of munitions provided a solution. Mitchell explains:

As the producer states gradually forced the major oil companies to share with them more of the profits from oil, increasing quantities of sterling and dollars flowed to the Middle East. To maintain the balance of payments and the viability of the international financial system, Britain and the United States needed a mechanism for these currency flows to be returned. … Arms were particularly suited to this task of financial recycling, for their acquisition was not limited by their usefulness. The dovetailing of the production of petroleum and the manufacture of arms made oil and militarism increasingly interdependent.” (Carbon Democracy, pg 155-156)

He adds, “The real value of US arms exports more than doubled between 1967 and 1975, with most of the new market in the Middle East.”

An F-15 Eagle aircraft of the Royal Saudi Air Force takes off during Operation Desert Shield, 1991. (Source: Wikimedia Commons)

Fast forward to today. Imported oil is a critical factor in the US economy, in spite of a supply blip from fracking. US industry leads the world in the export of weapons; the top three buyers, and five of the top ten buyers, are in the Middle East. (Source: CNN, May 25, 2016) Yet US arms sales are dwarfed by US military expenditures, which are roughly double in real terms what they were in the 1960s. (Source: Time, July 16, 2013)

Finally, US national debt, in 1983 dollars, is about 10 times as high as it was from 1950 to 1980. In other words the US government, along with its banking and military complexes, has been living far beyond its means (making bankruptcy king Donald Trump a fitting figurehead). (Source: Stephen Bloch, Adelphi University)

Yet the game goes on. As David Graeber sees it,

American imperial power is based on a debt that will never – can never – be repaid. Its national debt has become a promise, not just to its own people, but to the nations of the entire world, that everyone knows will not be kept.

At the same time, U.S. policy was to insist that those countries relying on U.S. treasury bonds as their reserve currency behaved in exactly the opposite way: observing tight money policies and scrupulously repaying their debts ….” (Debt, pg 367)

We’ll close with two speculations on how the “American century” may come to an end.

US supremacy rests on interrelated dominance in military power, financial power, and influence over fossil fuel energy markets. At present the US financial system can create ever larger sums of money, and the rest of the world may have no immediately preferable options than to continue buying US debt. But just as you can’t eat money, you can’t burn it in an electricity generator, a diesel truck, or a bomber flying sorties to a distant land. So no amount of financial wizardry will sustain the current outsized industrial economy or its military subsection, once prime fossil fuel sources have been tapped out.

On the other hand, suppose low-carbon renewable energy technologies improve so rapidly that they can replace fossil fuels within a few decades. This would be a momentous energy transition, and might also lead to a momentous transition in geopolitics.

In recent years, and especially under the Trump administration, the US is ceding renewable energy technology leadership to other countries, especially China. If many countries free themselves from fossil-fuel dependence, and they no longer need US dollars to purchase their energy needs, a pillar of US supremacy will fall.

Top photo: Commemorative silver dollar sold by the US Mint, 2012.

Fossil fuel empire: a world of vulnerability

Also published at Resilience.org.

“It’s all about the oil,” many commentators said about the US assault on Iraq in 2003.

Attributing a war to a single cause is almost always an oversimplification, but protecting access to the 20th century’s most important energy source has been a priority of US foreign policy since World War II.

In part one of this series we considered the effects of the US military complex which has ringed the world for the past 75 years. This complex has depended on vast amounts of fossil fuel energy to move troops and munitions, and the US became a world power in significant part because of its endowment of oil.

As Daniel Yergin recounts in The Prize: The Epic Quest for Oil, Money & Power

Petroleum was central to the course and outcome of World War II in both the Far East and Europe. The Japanese attacked Pearl Harbor to protect their flank as they grabbed for the petroleum resources of the East Indies. Among Hitler’s most important strategic objectives in the invasion of the Soviet Union was the capture of the oil fields in the Caucasus. But America’s predominance in oil proved decisive, and by the end of the war German and Japanese fuel tanks were empty.” (The Prize, Simon & Schuster, 1990, pg 13)

At the end of World War II the US was not only the world’s preeminent military force, but its industrial capacity was undamaged by war and it was running on seemingly abundant supplies of cheap domestic oil.

Spurred on by oil and car companies who had the most to gain from a high-energy way of life, the US embarked on a building spree of far-flung suburbs, interstate highways, and airports that allowed long-distance flight to become a routine activity.

This hyper-consumption was bolstered by a new economic orthodoxy which saw no need to factor in energy depletion when accounting for national wealth, and which portrayed exponential economic growth as a phenomenon that could and should continue decade after decade.

It took barely a generation, of course, for the US economy to suck up the bulk of its cheap domestic oil – conventional oil production peaked in the US in 1971. Did Americans then conclude they should change the basis of their economy, and make peace with reduced energy consumption? Far from it. Dependence on imported oil has now been a central feature of the US economy for fifty years.

Gap between US oil consumption and production. Chart by An Outside Chance for the post Alternative Geologies: Trump’s “America First Energy Plan”, from stats on ycharts.com

 

A world of vulnerability

The huge military complex which protects essential oil supply routes is sometimes seen as a sign of US strength, but it can just as accurately be seen as a sign of US weakness.

In a 2009 report entitled “Powering America’s Defense: Energy and the Risks to National Security”, a panel of twelve retired generals and admirals notes that “The U.S. consumes 25 percent of the world’s oil production, yet controls less than 3 percent of an increasingly tight supply.” This voracious appetite for oil, they say, is a dangerous vulnerability:

As we consider America’s current energy posture, we do so from a singular perspective: We gauge our energy choices solely by their impact on America’s national security. Our dependence on foreign oil reduces our international leverage, places our troops in dangerous global regions, funds nations and individuals who wish us harm, and weakens our economy; our dependency and inefficient use of oil also puts our troops at risk.” (Introduction to Powering America’s Defense)

One source of imported oil has outranked all others for the US and its western European allies. The US was already consolidating its “special relationship” with Saudi Arabia in the 1930s, in the first years of that country’s existence. As Timothy Mitchell describes this relationship,

Aramco [Arabian-American Oil Company] paid the oil royalty not to a national government but to a single household, that of Ibn Saud, who now called himself king and renamed the country … the ‘Kingdom of Saudi Arabia’. … This ‘privatisation’ of oil money was locally unpopular, and required outside help to keep it in place. In 1945 the US government established its military base at Dhahran, and later began to train and arm Ibn Saud’s security forces …. The religious establishment, on the other hand, created the moral and legal order of the new state, imposing the strict social regime that maintained discipline in the subject population and suppressed political dissent.” (Timothy Mitchell, Carbon Democracy, Verso, 2013, pg 210-211)

The alliance between a self-styled liberal democracy and an theocratic autocracy has not been a marriage made in heaven. But in spite of many points of tension the relationship has benefited powerful forces in both countries and has endured for most of the age of oil.

The need to protect US access to the world’s largest sources of conventional oil was formally recognized in the Carter Doctrine:

An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” (US President Jimmy Carter in his State of the Union Address, January 1980)

Ironically, this doctrine led the US to begin supporting the mujahideen, Islamic fundamentalists who were fighting the Soviet Union in Afghanistan. And ironically, after the Soviet-Afghan war ended one of the major irritants for the formerly lauded “freedom fighters” was the heavy military presence of the infidel United States in Saudi Arabia. The result has been almost 20 years of continuous warfare between the US and various offshoots of the mujahideen, with no prospect of victory for the US.

The costs of these wars, merely in dollar terms, have been staggering. While US military expenditures have remained high ever since World War II, these costs have recently gone through the roof. An analysis of military spending by Time in 2013 found that inflation-adjusted military spending in the 2000s was approximately twice as high as military spending in the 1960s, during the nuclear face-off with Russia and the massive deployment in Indochina.

In sum, the US has been importing increasing quantities of increasingly expensive oil for decades. During the same years US military spending has soared. Does this sound like a recipe for solvency? You might well wonder if it’s just coincidence that US national debt has soared during these years.

US national debt converted to 1983 dollars and plotted on logarithmic scale – each step up the ladder is 10 times as high as the previous step – by Stephen Bloch of Adelphi University.

 

Recall the curious formulation by John Dower cited in the first installment of this series:

Creating a capacity for violence greater than the world has ever seen is costly – and remunerative.” (The Violent American Century, pg 12, emphasis mine)

How is this world-wide military occupation remunerative? In our next installment we’ll look at the tie-in between the power that grows out of the barrel of a gun, and the power that comes with control of currency.

Part Three of this series

 

Top photo: well head at the Big Hill, Texas site of the US Strategic Petroleum Reserve. The Big Hill facility stores up to 160 million barrels of oil. The four sites of the Strategic Petroleum Reserve were developed in the 1970s, amid fears that a disruption in global supply lines could leave the US dangerously vulnerable. Photo from US Office of Fossil Energy.

Energy And Civilization: a review

Also published at Resilience.org and BiophysEco.

If you were to find yourself huddled with a small group of people in a post-crash, post-internet world, hoping to recreate some of the comforts of civilization, you’d do well to have saved a printed copy of Vaclav Smil’s Energy and Civilization: A History.

Smil’s new 550-page magnum opus would help you understand why for most applications a draft horse is a more efficient engine than an ox – but only if you utilize an effective harness, which is well illustrated. He could help you decide whether building a canal or a hard-topped road would be a more productive use of your energies. When you were ready to build capstans or block-and-tackle mechanisms for accomplishing heavy tasks, his discussion and his illustrations would be invaluable.

But hold those thoughts of apocalypse for a moment. Smil’s book is not written as a doomer’s handbook, but as a thorough guide to the role of energy conversions in human history to date. Based on his 1994 book Energy in World History, the new book is about 60% longer and includes 40% more illustrations.

Though the initial chapters on prehistory are understandably brief, Smil lays the groundwork with his discussion of the dependency of all living organisms on their ability to acquire enough energy in usable forms.

The earliest humanoids had some distinct advantages and liabilities in this regard. Unlike other primates, humans evolved to walk on two feet all the time, not just occasionally. Ungainly though this “sequence of arrested falls” may be, “human walking costs about 75% less energy than both quadrupedal and bipedal walking in chimpanzees.” (Energy and Civilization, pg 22)

What to do with all that saved energy? Just think:

The human brain claims 20–25% of resting metabolic energy, compared to 8–10% in other primates and just 3–5% in other mammals.” (Energy and Civilization, pg 23)

In his discussion of the earliest agricultures, a recurring theme is brought forward: energy availability is always a limiting factor, but other social factors also come into play throughout history. In one sense, Smil explains, the move from foraging to farming was a step backwards:

Net energy returns of early farming were often inferior to those of earlier or concurrent foraging activities. Compared to foraging, early farming usually required higher human energy inputs – but it could support higher population densities and provide a more reliable food supply.” (Energy and Civilization, pg 42)

The higher population densities allowed a significant number of people to work at tasks not immediately connected to securing daily energy requirements. The result, over many millennia, was the development of new materials, tools and processes.

Smil gives succinct explanations of why the smelting of brass and bronze was less energy-intensive than production of pure copper. Likewise he illustrates why the iron age, with its much higher energy requirements, resulted in widespread deforestation, and iron production was necessarily very limited until humans learned to exploit coal deposits in the most recent centuries.

Cooking snails in a pot over an open fire. In Energy and Civilization, Smil covers topics as diverse as the importance of learning to use fire to supply the energy-rich foods humans need; the gradual deployment of better sails which allowed mariners to sail closer to the wind; and the huge boost in information consumption that occurred a century ago due to a sudden drop in the energy cost of printing. This file comes from Wellcome Images, a website operated by Wellcome Trust, a global charitable foundation based in the United Kingdom, via Wikimedia Commons.

Energy explosion

The past two hundred years of fossil-fuel-powered civilization takes up the biggest chunk of the book. But the effective use of fossil fuels had to be preceded by many centuries of development in metallurgy, chemistry, understanding of electromagnetism, and a wide array of associated technologies.

While making clear how drastically human civilizations have changed in the last several generations, Smil also takes care to point out that even the most recent energy transitions didn’t take place all at once.

While the railways were taking over long-distance shipments and travel, the horse-drawn transport of goods and people dominated in all rapidly growing cities of Europe and North America.” (Energy and Civilization, pg 185)

Likewise the switches from wood to coal or from coal to oil happened only with long overlaps:

The two common impressions – that the twentieth century was dominated by oil, much as the nineteenth century was dominated by coal – are both wrong: wood was the most important fuel before 1900 and, taken as a whole, the twentieth century was still dominated by coal. My best calculations show coal about 15% ahead of crude oil …” (Energy and Civilization, pg 275)

Smil draws an important lesson for the future from his careful examination of the past:

Every transition to a new form of energy supply has to be powered by the intensive deployment of existing energies and prime movers: the transition from wood to coal had to be energized by human muscles, coal combustion powered the development of oil, and … today’s solar photovoltaic cells and wind turbines are embodiments of fossil energies required to smelt the requisite metals, synthesize the needed plastics, and process other materials requiring high energy inputs.” (Energy and Civilization, pg 230)

A missing chapter

Energy and Civilization is a very ambitious book, covering a wide spread of history and science with clarity. But a significant omission is any discussion of the role of slavery or colonialism in the rise of western Europe.

Smil does note the extensive exploitation of slave energy in ancient construction works, and slave energy in rowing the war ships of the democratic cities in ancient Greece. He carefully calculates the power output needed for these projects, whether supplied by slaves, peasants, or animals.

In his look at recent European economies, Smil also notes the extensive use of physical and child labour that occurred simultaneously with the growth of fossil-fueled industry. For example, he describes the brutal work conditions endured by women and girls who carried coal up long ladders from Scottish coal mines, in the period before effective machinery was developed for this purpose.

But what of the 20 million or more slaves taken from Africa to work in the European colonies of the “New World”? Did the collected energies of all these unwilling participants play no notable role in the progress of European economies?

Likewise, vast quantities of resources in the Americas, including oil-rich marine mammals and old-growth forests, were exploited by the colonies for the benefit of European nations which had run short of these important energy commodities. Did this sudden influx of energy wealth play a role in European supremacy over the past few centuries? Attention to such questions would have made Energy and Civilization a more complete look at our history.

An uncertain future

Smil closes the book with a well-composed rumination on our current predicaments and the energy constraints on our future.

While the timing of transition is uncertain, Smil leaves little doubt that a shift away from fossil fuels is necessary, inevitable, and very difficult. Necessary, because fossil fuel consumption is rapidly destabilizing our climate. Inevitable, because fossil fuel reserves are being depleted and will not regenerate in any relevant timeframe. Difficult, both because our industrial economies are based on a steady growth in consumption, and because much of the global population still doesn’t have access to a sufficient quantity of energy to provide even the basic necessities for a healthy life.

The change, then, should be led by those who are now consuming quantities of energy far beyond the level where this consumption furthers human development.

Average per capita energy consumption and the human development index in 2010. Smil, Energy and Civilization, pg 363

 

Smil notes that energy consumption rises in correlation with the Human Development Index up to a point. But increases in energy use beyond, roughly the level of present-day Turkey or Italy, provide no significant boost in Human Development. Some of the ways we consume a lot of energy, he argues, are pointless, wasteful and ineffective.

In affluent countries, he concludes,

Growing energy use cannot be equated with effective adaptations and we should be able to stop and even to reverse that trend …. Indeed, high energy use by itself does not guarantee anything except greater environmental burdens.

Opportunities for a grand transition to less energy-intensive society can be found primarily among the world’s preeminent abusers of energy and materials in Western Europe, North America, and Japan. Many of these savings could be surprisingly easy to realize.” (Energy and Civilization, pg 439)

Smil’s book would indeed be a helpful post-crash guide – but it would be much better if we heed the lessons, and save the valuable aspects of civilization, before apocalypse overtakes us.

 

Top photo: Common factory produced brass olive oil lamp from Italy, c. late 19th century, adapted from photo on Wikimedia Commons.

The Carbon Code – imperfect answers to impossible questions

Also published at Resilience.org.

“How can we reconcile our desire to save the planet from the worst effects of climate change with our dependence on the systems that cause it? How can we demand that industry and governments reduce their pollution, when ultimately we are the ones buying the polluting products and contributing to the emissions that harm our shared biosphere?”

These thorny questions are at the heart of Brett Favaro’s new book The Carbon Code (Johns Hopkins University Press, 2017). While he  readily concedes there can be no perfect answers, his book provides a helpful framework for working towards the immediate, ongoing carbon emission reductions that most of us already know are necessary.

Favaro’s proposals may sound modest, but his carbon code could play an important role if it is widely adopted by individuals, by civil organizations – churches, labour unions, universities – and by governments.

As a marine biologist at Newfoundland’s Memorial University, Favaro is keenly aware of the urgency of the problem. “Conservation is a frankly devastating field to be in,” he writes. “Much of what we do deals in quantifying how many species are declining or going extinct  ….”

He recognizes that it is too late to prevent climate catastrophe, but that doesn’t lessen the impetus to action:

There’s no getting around the prospect of droughts and resource wars, and the creation of climate refugees is certain. But there’s a big difference between a world afflicted by 2-degree warming and one warmed by 3, 4, or even more degrees.”

In other words, we can act now to prevent climate chaos going from worse to worst.

The code of conduct that Favaro presents is designed to help us be conscious of the carbon impacts of our own lives, and work steadily toward the goal of a nearly-complete cessation of carbon emissions.

The carbon code of conduct consists of four “R” principles that must be applied to one’s carbon usage:

1. Reduce your use of carbon as much as possible.

2. Replace carbon-intensive activities with those that use less carbon to achieve the same outcome.

3. Refine the activity to get the most benefit for each unit of carbon emitted.

4. Finally, Rehabilitate the atmosphere by offsetting carbon usage.”

There’s a good bit of wiggle room in each of those four ’R’s, and Favaro presents that flexibility not as a bug but as a feature. “Codes of conduct are not the same thing as laws – laws are dichotomous, and you are either following them or you’re not,” he says. “Codes of conduct are interpretable and general and are designed to shape expectations.”

Street level

The bulk of the book is given to discussion of how we can apply the carbon code to home energy use, day-to-day transportation, a lower-carbon diet, and long distance travel.

There is a heavy emphasis on a transition to electric cars – an emphasis that I’d say is one of the book’s weaker points. For one thing, Favaro overstates the energy efficiency of electric vehicles.

EVs are far more efficient. Whereas only around 20% of the potential energy stored in a liter of gasoline actually goes to making an ICE [Internal Combustion Engine] car move, EVs convert about 60% of their stored energy into motion ….”

In a narrow sense this is true, but it ignores the conversion costs in common methods of producing the electricity that charges the batteries. A typical fossil-fueled generating plant operates in the range of 35% energy efficiency. So the actual efficiency of an electric vehicle is likely to be closer to 35% X 60%, or 21% – in other words, not significantly better than the internal combustion engine.

By the same token, if a large proportion of new renewable energy capacity over the next 15 years must be devoted to charging electric cars, it will be extremely challenging to simultaneously switch home heating, lighting and cooling processes away from fossil fuel reliance.

Yet if the principles of Favaro’s carbon code were followed, we would not only stop building internal combustion cars, we would also make the new electric cars smaller and lighter, provide strong incentives to reduce the number of miles they travel (especially miles with only one passenger), and rapidly improve bicycling networks and public transit facilities to get people out of cars for most of their ordinary transportation. To his credit, Favaro recognizes the importance of all these steps.

Flight paths

As a researcher invited to many international conferences, and a person who lives in Newfoundland but whose family is based in far-away British Columbia, Favaro has given a lot of thought to the conundrum of air travel. He notes that most of the readers of his book will be members of a particular global elite: the small percentage of the world’s population who board a plane more than a few times in their lives.

We members of that elite group have a disproportionate carbon footprint, and therefore we bear particular responsibility for carbon emission reductions.

The Air Transport Action Group, a UK-based industry association, estimated that the airline industry accounts for about 2% of global CO2 emissions. That may sound small, but given the tiny percentage of the world population that flies regularly, it represents a massive outlier in terms of carbon-intensive behaviors. In the United States, air travel is responsible for about 8% of the country’s emissions ….”

Favaro is keenly aware that if the Carbon Code were read as “never get on an airplane again for the rest of your life”, hardly anyone would adopt the code (and those few who did would be ostracized from professional activities and in many cases cut off from family). Yet the four principles of the Carbon Code can be very helpful in deciding when, where and how often to use the most carbon-intensive means of transportation.

Remember that ultimately all of humanity needs to mostly stop using fossil fuels to achieve climate stability. Therefore, just like with your personal travel, your default assumption should be that no flights are necessary, and then from there you make the case for each flight you take.”

The Carbon Code is a wise, carefully optimistic book. Let’s hope it is widely read and that individuals and organizations take the Carbon Code to heart.

 

Top photo: temporary parking garage in vacant lot in Manhattan, July 2013.