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

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

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

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

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).

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

Designing Climate Solutions – a big-picture view that doesn’t skimp on details

Also published at Resilience.org

Let us pause for a moment of thanks to the policy wonks, who work within the limitations of whatever is currently politically permissible and take important steps forward in their branches of bureaucracy.

Let us also give thanks to those who cannot work within those limitations, and who are determined to transform what is and is not politically permissible.

Designing Climate Solutions: A Policy Guide for Low-Carbon Energy is published by Island Press, November 2018.

An excellent new book from Island Press makes clear that both approaches to the challenge of climate disruption are necessary, though it deals almost exclusively with the work of policy design and implementation.

Designing Climate Solutions, by Hal Harvey with Robbie Orvis and Jeffrey Rissman, is a thoughtful and thorough discussion of policy options aimed at reducing greenhouse gas emissions.

Harvey is particularly focused on discovering which specific policies are likely to have the biggest – and equally important, the quickest – impact on our cumulative greenhouse gas emissions. But he also pays close attention to the fine details of policy design which, if ignored, can cause the best-intentioned policies to miss their potentials.

One of the many strengths of the book is the wealth of graphics which present complex information in visually effective formats.

A political acceptable baseline

Though political wrangling is barely discussed, Harvey notes that “It goes without saying that a key consideration of any climate policy is whether it stands a chance of being enacted. A highly abating and perfectly designed policy is not worth pursuing if there is no chance it can be implemented.”

He takes as a starting point the target of the Paris Agreement of 2015, which has received agreement in principle from nearly all countries: to reduce emissions enough by 2050 to give us at least a 50% chance of avoiding more than 2°C global warming. (We’ll return later to the question of the reasonableness of that goal.)

Throughout the book, then, different aspects of climate policy are evaluated for their relative contributions to the 2°C goal.

Working with a climate policy computer model which is discussed in detail in an appendix and which is available online, Harvey presents this framework: a “business as usual” scenario would result in emissions of 2,253 Gigatons of CO2-equivalent from 2020 to 2050, but that must be reduced by 1,185 Gigatons.

The following chart presents what Harvey’s team believes is the realistic contribution of various sectors to the emission-reduction goal.

“Figure 3.4 – Policy contributions to meeting the 2°C global warming target.” (From Hal Harvey et. al., Designing Climate Solutions, Island Press, page 67)

The key point from this chart is that about 70% of the reductions are projected to come in three broad areas: changes to industrial production, conversion of electrical generation (“power sector”) to renewable energy, and cross-sector pricing of carbon emissions in line with their true social costs.

(The way things are categorized makes a big difference. For example, agriculture is slotted as a subset of the industrial sector, which boosts the relative importance of this sector for emissions-reduction potential.)

Harvey buttresses the argument by looking at the costs – or in many cases, cost-savings – of emissions-reduction policies. The following chart shows the relative costs of policies on the vertical dimension, and their relative contribution to emissions reduction on the horizontal dimension.

“Figure 3.2 – The policy cost curve shows the cost-effectiveness and emission reduction potential of different policies.” (From Hal Harvey et. al., Designing Climate Solutions, Island Press, page 59)

 

The data portrayed in this chart can guide policy in two important ways: policy-makers can focus on the areas which make the most difference in emissions, while also being mindful of the cost issues that can be so important in getting political buy-in.

It may come as a surprise that the transportation and building sectors, in this framework, are responsible for only small slices of overall emission reductions.

Building Codes and Appliance Standards are pegged to contribute about 5% of the emission reductions, while a suite of transportation policies could together contribute about 7% of emission reductions.

A clear view of the overriding importance of reducing cumulative emissions by 2050 helps explain these seemingly small contributions – and why it would nevertheless be a mistake to neglect these sectors.

To achieve climate policy goals it’s critical to reduce emissions quickly – and that’s hard to do in the building and transportation sectors. Building stock tends to last for generations, and major appliances typically last 10 years or more. Likewise car, truck and bus fleets tend to stay on the road for ten years or more. Thus the best building codes and the best standards for vehicle efficiency will have a very limited impact on carbon emissions over the next 15 years. By the same token, even the most rapid electrification possible of car and truck fleets won’t have full impact on emissions until the electric grid is generally decarbonized.

These are among the reasons that decarbonizing the electric grid, along with cross-sector pricing of carbon emissions, are so important to emissions reduction in the short term.

Meanwhile, though, it is also essential to get on with the slower work of upgrading buildings, appliances, transportation systems, and decarbonized agricultural and industrial processes. In the longer term, especially after 2050 when it will be essential to achieve zero net carbon emissions, even (relatively) minor contributions to emissions will be important. But as Harvey puts it, “There is no mopping up the last 10 percent of carbon emissions if we don’t eliminate the first 90 percent!”

International case studies

Harvey gets deep into the nuances of policy with an excellent discussion of the differences between carbon taxes and carbon caps. This helps readers to understand the value of hybrid approaches, and the importance in some countries of policies to limit “leakage”, whereby major industries simply shift production to jurisdictions without carbon prices or caps.

The many case studies – from the US, Germany, China, Japan, and other countries – illustrate policy designs that work especially well, or conversely, policies that have resulted in unintentional consequences which reduce their effectiveness.

These case studies also provide a reminder of the amount of hard work and dedication that mostly unsung bureaucrats have put in to the cause of mitigating climate disruption. As much as we may mourn that political leadership has been sorely lacking and that we appear to be losing the battle to forestall climate disaster, it seems undeniable that we would be considerably worse off if it weren’t for the accomplishments of civil servants who have eked out small gains in their own sectors.

For example, the hard-won feed-in tariffs and other policies promoting renewable energies for electric generation haven’t yet resulted in a wholesale transformation of the grid – but they’ve resulted in an exponential drop in the cost per kilowatt of solar- and wind-generated power. Performance standards for many types of engines have resulted in significant improvements in energy efficiency. These improvements have so far mostly been offset by our economy’s furious push to sell more and bigger products – but these efficiency gains could nevertheless play a key role in a sane economic system of the future.

The 2° gamble

Although most of the book is devoted to details of particular policies, Harvey’s admirably lucid discussion of the urgency of the climate challenge makes clear that we need far greater commitment from the highest levels of political leadership.

He notes that the reality of climate action has been far less impressive than the high-minded rhetoric. With few exceptions the nations responsible for most of the carbon emissions have been woefully slow to act, which makes the challenge both more urgent and more difficult.

Harvey illustrates this point with the chart below. The black solid and dotted lines represent the necessary progress with emissions, if we had been smart enough to ensure emissions peaked in 2015. The red lines show what may now be the best-case scenario – an emissions peak in 2030 – and the much more drastic reductions that will then be required to have a 50% chance of keeping global warming to 2°C or less.

“Figure I-7. The longer the delay in peaking emissions, the harder it becomes to meet the same carbon budget.” (From Hal Harvey et. al., Designing Climate Solutions, Island Press, page 9)

We might well ask if a 50% likelihood of worldwide climate catastrophe is a prudent and reasonable policy aim, or certifiably bonkers. Still, a 50/50 chance of disaster is somewhat better than assured civilizational collapse, which is the destination of “business as usual.”

In any case, the political climate has changed considerably in the short time since Harvey and colleagues prepared Designing Climate Solutions. With the challenge to the political status quo embodied in the Green New Deal movement, it now seems plausible that some major carbon-emitting countries will enact more appropriate greenhouse-gas emission targets in the next few years. If that comes to pass, these new goals will need to be translated into effective policy, and the many lessons in Designing Climate Solutions will remain important.

What about fossil fuel subsidies?

In a book of such wide and ambitious scope, it is inevitable that some important facets are omitted or given short shrift.

The issues of deforestation and forest degradation are duly noted, but Harvey declines to delve into this subject by explaining that “The science, the policies, and the actors for reducing emissions from land use are very different from those for energy and industrial processes, and they deserve separate treatment from experts in land use policy.”

The issue of embodied carbon does not come up in the text. In assessing the replacement of fossil-powered vehicle fleets by electric vehicles, for example, is the embodied carbon inherent in current manufacturing processes a significant factor? Readers will need to search elsewhere for that answer.

Also noteworthy is the absence of any acknowledgement that economic growth itself may be a problem. For all the discussion of ways to transform industrial processes, there is no discussion of whether the scale of industrial output should also be reduced. In most countries today, of course, a civil servant who tries to promote degrowth will soon become an expert in unemployment, but that highlights the need for a wider and deeper look at economic fundamentals than is currently politically permissible.

The missing subject that seems most germane to the book’s central purpose, though, is the issue of subsidies for fossil fuels. Harvey does state in passing that “for many sectors and technologies, pricing is the key. Removing subsidies for fossil fuels is the first step – though still widely ignored.” Indeed, many countries have paid lip service to the need to stop subsidizing fossil fuels, but few have taken action along these lines.

But throughout Harvey’s extensive examination of pricing signals – e.g., feed-in tariffs, carbon taxes, carbon caps, low-interest loans to renewable energy projects – there is no discussion of the degree to which existing fossil fuel subsidies continue to undercut the goals of climate policy and retard the transition to a low-carbon economy.

In my next post I’ll take up this subject with a look at how some governments, while tepidly supporting the transformation envisioned in the Paris Agreements, continue to safeguard their fossil fuel sectors through generous subsidies.


Illustration at top adapted from Designing Climate Solutions cover by David Ter Avanesyan.

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.

Can nuclear power extend the economic expansion?

Also published at Resilience.org and BiophysEco.

Richard Rhodes’ new book Energy: A Human History does an excellent job of describing the scientific and technological hurdles that had to be cleared in the development of, for example, an internal combustion engine which can convert refined petroleum into forward motion.

But he gives short shrift to the social and political forces that have been equally important in determining how technological advances shape our world. That internal combustion engine might be a wonder of ingenuity, but was there any scientific reason we should make multi-tonne vehicles the primary mode of transportation for single passengers in cities, drastically reconfiguring urban landscapes in the process? When assiduous research resulted in more efficient engines, did science also dictate that we should use those engines to drive bigger and heavier SUV’s, and then four-wheel-drive, four-door pick-up trucks, to our suburban grocery superstores?

Unfortunately, Rhodes presents the benefits of modern science as if they are all inextricably wrapped up in our current high-energy-consumption economy, implying that human prosperity must end unless we find ways to maintain this high-energy system.

In this second part of a look at Energy (first installment here), we’ll delve into these questions as they relate to Rhodes’ strident defense of nuclear power.

To set the context, Rhodes argues that the only realistic – and the most ethical – way forward is a gradual progression on the path we are already taking, and that means an “all energy sources except coal and oil” strategy:

“Every energy system has its advantages and disadvantages …. And given the scale of global warming and human development, we will need them all if we are to finish the centuries-long process of decarbonizing our energy supply – wind, solar, hydro, nuclear, natural gas.”1

Three key points here: First, Rhodes recognizes the severity and urgency of the climate problem.

Second, he believes we have been “decarbonizing our energy supply” for centuries. That is true with respect to intensity: we now release fewer units of carbon for each unit of energy than we did in the 19th century.2 But in an overall sense, we emit vastly more carbon cumulatively (and vastly more carbon per capita) than we used to. It is the overall carbon emissions, not the carbon/energy intensity ratio, that matters to the climate.

Third, while energy production via natural gas has relatively low carbon emissions at the point of combustion, there is wide recognition that methane leaks throughout the production/transmission chain are major sources of greenhouse gas emissions, which may counteract the benefits of switching from coal to gas. Rhodes makes only an oblique reference to this critical problem in current natural gas usage.

It’s the issue of nuclear power, though, that really brings out Rhodes’ rhetorical heat. Consider this ad hominem attack:

“Antinuclear activists, whose agendas originated in a misinformed neo-Malthusian foreboding of overpopulation (and a willingness at the margin to condemn millions of their fellow human beings to death from disease and starvation), may fairly be accused of disingenuousness in their successive arguments against the safest, least polluting, least warming, and most reliable energy source humanity has yet devised.3

If someone warns that a social or technological development is likely to result in mass death, does that logically mean they want mass death, or that they are indifferent to it? Obviously not. They may well be sincerely motivated by a desire to save lives – just as those who promote the same social or technological development might sincerely believe that is the best way to save lives and promote prosperity.

So I think it is Rhodes who is being disingenuous with his ad hominem argument – even though I happen to agree with some of his substantive points on the relative safety of nuclear power.

What could go wrong?

As one who has lived for fifteen years just downwind of major nuclear facilities – first a uranium processing plant, more recently a nuclear power generator – I’ve had lots of incentive to study the potential safety hazards of the nuclear power industry. And on the issue of the relative operating safety of nuclear power generation, my conclusions have been much the same as those Rhodes puts forth.

I frequently take a short bike ride along the Lake Ontario Waterfront Trail through the buffer zone around the Darlington Nuclear Generating Station. Is this a significant hazard to my health? Yes it is, but only because this route also requires me to share the road with trucks and cars for a few kilometers, and to ride right beside a stream of pollution-emitting traffic on Ontario’s busiest expressway.

As a close neighbour of nuclear facilities, my risk of death due to sudden catastrophic nuclear power accident is several orders of magnitude lower than my risk of death due to sudden catastrophic traffic accident. (Worldwide, well over a million people are killed in traffic accidents per year.4)

As for the health risk due to chronic exposure to the amounts of radiation that are emitted by a current Canadian nuclear generating plant, I fully concur with Rhodes’ more general conclusion: “Low doses of radiation are not only low risk; they’re also lost in the noise of other sources of environmental insult.”5

Likewise, I share Rhodes’ conclusion that shutting down our existing nuclear power plants for environmental reasons, while continuing to rely on coal for a significant part of electricity generation, is daft6 – we should replace carbon-emitting generating systems first.

In my region, I would be sorry to see Darlington Nuclear Station shut down if Ontario were still significantly reliant on gas-powered peaker plants, as it is now. And given that we have a very long way to go in electrifying personal transportation and home heating, our electricity demand may increase significantly, making the transition to a fully renewable electricity generation system that much farther down the road. In that context, I think our existing nuclear power plants are a better option environmentally than continued or increasing use of any fossil fuel, natural gas included, for generation of electricity.

But should we commission and build new nuclear power plants? That is a very different question. Rhodes recognizes that the economic viability of the nuclear power industry is very much in question, but he makes no significant attempt in Energy to resolve the economic question.

To adequately answer the economic viability question, we would need a much wider conception of science than the one that comes through in Rhodes’ book.7

Beyond physics and chemistry

The science Rhodes celebrates in Energy: A Human History falls almost entirely within very basic physics and chemistry. The discoveries and developments Rhodes discusses are highly significant, and they will always remain foundational – but they are not sufficient for a clear understanding of technological systems, which are also social phenomena.

A more recent scientific advance is essential in coming to grips with our current energy challenges. This is the concept of Energy Return on Investment (EROI). Over his long and distinguished career, ecologist Charles A.S. Hall posited that organisms, ecological communities, and human societies must derive more usable energy from their activities than the energy they invest in those activities. With this simple insight8, Hall gave economics a foundation in the very principles of thermodynamics that Rhodes reveres.

The resulting field of biophysical economics provides a deeper understanding of the socio-technological revolutions that Rhodes simply ascribes to “science”. After studying the Energy Return on Investment of major energy sources over the past 200 years, we can understand how the rapid exploitation of fossil fuels provided a huge boost in the the energy available to society, while simultaneously freeing the great majority of people from energy-procuring activities so that they could work instead at a wide variety of new activities and industries. We can understand that if any society is to use a high quantity of energy per person, while employing only a small number of people in its energy sector, then its energy sector needs a high rate of Energy Return on Investment.

With readily accessible supplies of coal, oil and natural gas, industrial civilization in the past 200 years has benefitted from a very high Energy Return on Investment. But with “sweet spots” exhausted or in depletion phases, the EROI of the fossil fuel economy has been in marked decline for the past few decades.

Thus one of the key questions about a supposed nuclear renaissance is, can the nuclear power industry achieve an EROI comparable to that of the fossil fuel economy we have known to date? Most published analyses say no9 – from an Energy Return On Investment standpoint, nuclear power generation is (at worst) not worth doing at all, or (at best) worth doing even though it will produce much more expensive energy than the energy we came to depend on during the twentieth century.

If nuclear power generation has a low EROI, in sum, it cannot and will not fuel a continued economic expansion.

Rhodes argues that nuclear power is vitally important because we really need it to extend our current model of prosperity to billions more people now and in coming generations, and he claims the mantle of science for this position. But a broader and deeper application of scientific analysis can deal with the economic viability questions about nuclear power that he simply sidesteps.

Illustration at top: high-voltage transmission lines on grounds of Darlington Nuclear Station, on north shore of Lake Ontario east of Toronto

 


NOTES

1Energy: A Human History, page 337 (return to text)

2This is a point explained in more detail by Vaclav Smil, who also gives a perspective on the relative degree of decarbonization. From 1900 to 2000, he says, “the average carbon intensity of the world’s fossil fuel supply kept on declining: when expressed in terms of carbon per unit of the global total primary energy supply, it fell from nearly 28 kg C/GJ [GigaJoule] in 1900 to just below 25 in 1950 and to just over 19 in 2010, roughly a 30% decrease; subsequently, as a result of China’s rapidly rising coal output, it rose a bit during the first decade of the twenty-first century.” Smil, Energy and Civilization: A History, page 270. (return to text)

3Energy: A Human History, page 336 (return to text)

4World Health Organization says there were 1.25 million traffic deaths in 2013. (return to text)

5Energy: A Human History, page 324 (return to text)

6This general statement must be qualified, of course, by noting that some particular nuclear plants should be shut down because their designs were inherently flawed to begin with, or because they have aged beyond the point where they can be maintained and operated safely. (return to text)

7Even if one accepts that the operating safety record of nuclear power stations is exemplary, there are the major issues of nuclear weapons proliferation, and the long-term storage of highly radioactive wastes. Rhodes doesn’t mention weapons proliferation, and he cavalierly dismisses the long-term disposal issue: “The notion that such waste must be successfully protected from exposure for hundreds of thousands of years is counter to how humans handle every other kind of toxic material we produce. We usually bury it, but we also discount its future risk, on the reasonable grounds that we owe concern to one or, at best, two generations beyond our own …” (Energy: A Human History, page 337, emphasis mine). Yes, that’s what we usually do, but in what sense is that “reasonable”? (return to text)

8Though the basic insight is simple, measuring and calculating EROI can be anything but simple. A key issue is deciding how far out to draw the boundaries of an analysis. As Hall, Lambert and Balogh noted in “EROI of different fuels and the implications for society” in 2014, “Societal EROI is the overall EROI that might be derived for all of a nation’s or society’s fuels by summing all gains from fuels and all costs of obtaining them. To our knowledge this calculation has yet to be undertaken because it is difficult, if not impossible, to include all the variables necessary to generate an all-encompassing societal EROI value”. (return to text)

9In Scientific American (April 2013) Mason Inman cited an EROI of 5 for nuclear electricity generation – lower than photovoltaic or wind generators, and only a small fraction of the EROI of 69 that Inman cited for global conventional oil production in 2011. In 2014 a meta-review of studies, EROI of different fuels and the implications for society, gave a mean EROI of 14 for nuclear power. A paper by the World Nuclear Association cites outliers among the published studies, highlighting a conclusion that nuclear generation of electricity has a higher average EROI than hydro or fossil fuel generating systems, and is “one order of magnitude more effective than photovoltaics and wind power”. (return to text)

A measured response to surveillance capitalism

Also published at Resilience.org.

A flood of recent analysis discusses the abuse of personal information by internet giants such as Facebook and Google. Some of these articles zero in on the basic business models of Facebook, and occasionally Google, as inherently deceptive and unethical.

But I have yet to see a proposal for any type of regulation that seems proportional to the social problem created by these new enterprises.

So here’s my modest proposal for a legislative response to surveillance capitalism1:

No company which operates an internet social network, or an internet search engine, shall be allowed to sell advertising, nor allowed to sell data collected about the service’s users.

We should also consider an additional regulation:

No company which operates an internet social network, or an internet search engine, shall be allowed to provide this service free of charge to its users.

It may not be easy to craft an appropriate legal definition of “social network” or “search engine”, and I’m not suggesting that this proposal would address all of the surveillance issues inherent in our digitally networked societies. But regulation of companies like Facebook and Google will remain ineffectual unless their current business models are prohibited.

Core competency

The myth of “free services” is widespread in our society, of course, and most people have been willing to play along with the fantasy. Yet we can now see that when it comes to search engines and social networks, this game of pretend has dangerous consequences.

In a piece from September, 2017 entitled “Why there’s nothing to like about Facebook’s ethically-challenged, troublesome business model,” Financial Post columnist Diane Francis clearly described the trick at the root of Facebook’s success:

“Facebook’s underlying business model itself is troublesome: offer free services, collect user’s private information, then monetize that information by selling it to advertisers or other entities.”

Writing in The Guardian a few days ago, John Naughton concisely summarized the corporate histories of both Facebook and Google:

“In the beginning, Facebook didn’t really have a business model. But because providing free services costs money, it urgently needed one. This necessity became the mother of invention: although in the beginning Zuckerberg (like the two Google co-founders, incidentally) despised advertising, in the end – like them – he faced up to sordid reality and Facebook became an advertising company.”

So while Facebook has grandly phrased its mission as “to make the world more open and connected”, and Google long proclaimed its mission “to organize the world’s information”, those goals had to take a back seat to the real business: helping other companies sell us more stuff.

In Facebook’s case, it has been obvious for years that providing a valuable social networking service was a secondary focus. Over and over, Facebook introduced major changes in how the service worked, to widespread complaints from users. But as long as these changes didn’t drive too many users away, and as long as the changes made Facebook a more effective partner to advertisers, the company earned more profit and its stock price soared.

Likewise, Google found a “sweet spot” with the number of ads that could appear above and beside search results without overly annoying users – while also packaging the search data for use by advertisers across the web.

A bad combination

The sale of advertising, of course, has subsidized news and entertainment media for more than a century. In recent decades, even before online publishing became dominant, some media switched to wholly-advertising-supported “free” distribution. While that fiction had many negative consequences, I believe, the danger to society was taken to another level with search engines and social networks.

A “free” print magazine or newspaper, after all, collects no data while being read.2 No computer records if and when you turn the page, how long you linger over an article, or even whether you clip an ad and stick it to your refrigerator.

Today’s “free” online services are different. Search engines collate every search by every user, so they know what people are curious about – the closest version of mass mind-reading we have yet seen. Social media not only register every click and every “Like”, but all our digital interactions with all of our “friends”.

This surveillance-for-profit is wonderfully useful for the purpose of selling us more stuff – or, more recently, for manipulating our opinions and our votes. But we should not be surprised when they abuse our confidence, since their business model drives them to betray our trust as efficiently as possible.

Effective regulation

In the flood of commentary about Facebook following the Cambridge Analytica revelations, two themes predominate. First, there is a frequently-stated wish that Facebook “respect our privacy”. Second, there are somewhat more specific calls for regulation of Facebook’s privacy settings, terms of sale of data, or policing of “bot” accounts.

Both themes strike me as naïve. Facebook may allow users a measure of privacy in that they can be permitted to hide some posts from some other users. But it is the very essence of Facebook’s business model that no user can have any privacy from Facebook itself, and Facebook can and will use everything it learns about us to help manipulate our desires in the interests of paying customers. Likewise, it is naïve to imagine that what we post on Facebook remains “our data”, since we have given it to Facebook in exchange for a service for which we pay no monetary fee.

But regulating the terms under which Facebook acquires our consent to monetize our information? This strikes me as an endlessly complicated game of whack-a-mole. The features of computerized social networks have changed and will continue to change as fast as a coder can come up with a clever new bit of software. Regulating these internal methods and operations would be a bureaucratic boondoggle.

Much simpler and more effective, I think, would be to abolish the fiction of “free” services that forms the façade of Facebook and Google. When these companies as well as new competitors3 charge an honest fee to users of social networks and search engines, because they can no longer earn money by selling ads or our data, much of the impetus to surveillance capitalism will be gone.

It costs real money to provide a platform for billions of people to share our cat videos, pictures of grandchildren, and photos of avocado toast. It also costs real money to build a data-mining machine – to sift and sort that data to reveal useful patterns for advertisers who want to manipulate our desires and opinions.

If social networks and search engines make their money honestly through user fees, they will obviously collect data that helps them improve their service and retain or gain users. But they will have no incentive to throw financial resources at data mining for other purposes.

Under such a regulation, would we still have good social network and search engine services? I have little doubt that we would.

People willingly pay for services they truly value – look back at how quickly people adopted the costly use of cell phones. But when someone pretends to offer us a valued service “free”, we endure a host of consequences as we eagerly participate in the con.
Photos at top: Sergey Brin, co-founder of Google (left) and Mark Zuckerberg, Facebook CEO. Left photo, “A surprise guest at TED 2010, Sergey spoke openly about Google’s new posture with China,” by Steve Jurvetson, via Wikimedia Commons. Right photo, “Mark Zuckerberg, Founder and Chief Executive Officer, Facebook, USA, captured during the session ‘The Next Digital Experience’ at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 30, 2009”, by World Economic Forum, via Wikimedia Commons.

 


NOTES

1 The term “surveillance capitalism” was introduced by John Bellamy Foster and Robert W. McChesney in a perceptive article in Monthly Review, July 2014.

2 Thanks to Toronto photographer and writer Diane Boyer for this insight.

3 There would be a downside to stipulating that social networks or search engines do not provide their services to users free of charge, in that it would be difficult for a new service to break into the market. One option might be a size-based exemption, allowing, for example, a company to offer such services free until it reaches 10 million users.

Speeding down a dead end road

Also published at Resilience.org.

Since the birth of car culture more than a century ago, lavish consumption of energy has not been a bug but a feature. That’s now a feature we can ill afford, as we attempt the difficult and urgent task of transition to renewable energies.

Notwithstanding all the superlatives lavished on Elon Musk by mass media, one of his great achievements has gone unsung: his ingeniously simple contribution to the Search for ExtraTerrestrial Intelligence (SETI).

I refer, of course, to his donation of a used automobile to the possible inhabitants of outer space. If there is intelligent life out there, they will recognize Musk’s Tesla Roadster as a typically energy-guzzling death trap of the genus known as “car”, and they’ll promptly return it to sender, COD.

Wait a minute, Musk’s Roadster is not a typical car, some might protest – it’s electric! True enough, but the Roadster, like its newer sibling the Model 3, was designed to seamlessly fit into and extend our current car culture. And one of the key features of car culture is that it was structured, from the beginning, to consume energy with careless abandon.

That giddy attitude to energy was understandable in the early days of the age of oil, but it will make our current transition to a clean-energy economy far more difficult if not impossible.

The invention of car culture

Americans did not invent the car, but they quickly came to dominate both car production and car consumption – and more than any other country, they put car culture at the centre of a way of life.

In his excellent book Consuming Power, David E. Nye notes that

“[By 1929] there was roughly one car for every five Americans, and an astonishing 78 percent of the cars in the world were in the United States. In France or Great Britain there was only one car for every 30 people, and in Germany only one for every 102. The automobile had become the central American consumer good and the engine of the American economy, stimulating a wide range of subsidiary industries and suppliers.”[1]

The pattern continued after World War II. “Americans drove 75 percent of the world’s automobiles in 1950,” Nye says. “Moreover, they wanted big automobiles.”[2]

The taste for big, fast cars was cultivated long before most Americans could hope to buy a car. Tom McCarthy’s Auto Mania shows how a small coterie of wealthy young men, hyped by the new mass media, captured public imagination with their expensive quest for speed – starting in 1900. That was the year when an heir to the Vanderbilt shipping fortune set tongues wagging with his powerful new toy.

“In June 1900, Vanderbilt bought a Daimler Phoenix, his first Daimler and his first racing car for which he had to pay the impressive price of 10,000 dollars. This car – nicknamed “White Ghost” and powered by a 23 hp engine which accelerated the car to a top speed of just under 100 km/h – was at last completely to Vanderbilt’s liking.”[3]

At least, the Daimler car was completely to Vanderbilt’s liking for two years. By 1902, he needed a more powerful car – a 60 hp Mors Z – to set a new speed record of 122 km.[4]

Other wealthy Americans got into the racing game too, and it was essential not just to go fast, but to go fast uphill. In each city with an expensive auto dealership, McCarthy notes, the steepest hill was the standard place for a test drive. “By 1904, when vehicles such as Vanderbilt’s 90-hp Mercedes proved too powerful for the annual hill climb at Eagle Rock, New Jersey, the hill climbs had made their point.”[5]

There was no practical use for this speed at the time – there were very few stretches of road smooth enough or straight enough to be driven at 50 km/hr, let alone 120 km/hr. But in America, unlike in Western Europe, the love of overpowered cars quickly became not just an elite hobby but a mass movement – with effects that remain strong today.

To suburbia and beyond

As one component of car culture, Americans developed a new way of living that was simultaneously industrialized and decentralized – with residences, office complexes and factories all moving out of central cities to the edges of urban areas.

As Nye explains, “This post-urban society was based on a historically anomalous situation: multiple sources of energy were all in oversupply.”[6]

Timothy Mitchell also takes up this theme. In the US in the first half of the twentieth century, he writes, oil gushed out of the ground so readily that it was hard for major oil companies to keep control of the market, and over-supply often threatened their profits. Regulation of domestic competitors was one prong in their strategy, while purposeful restrictions on the flow of abundant Middle East oil, prior to the 1950s, was another prong.

Another “method of preventing energy abundance,” Mitchell writes “involved the rapid construction of lifestyles in the United States organised around the consumption of extraordinary quantities of energy.”[7]

This American project began in the early 1900s and eventually became self-driving.

Overcoming performance anxiety

At the beginning of the 20th century, “The speeding millionaire sportsmen so effectively demonstrated and publicized the speed and power of the automobile that its introduction had an ‘in-your-face’ quality,” McCarthy writes. “Their behavior aroused strong emotions in other Americans, provoking a bitter reaction while also stoking the desire of millions to own an automobile, too.”[8]

Thus was set in motion a habit exhibited by Americans ever since: buying cars that can reach top speeds well in excess of the limitations of most driving conditions and most laws.

That would have been of little consequence, unless someone started building cars that could be sold to working-class Americans, and paying workers enough that they could afford cars. That was the role of Henry Ford. His Model T hit a sweet spot of size, speed, and affordability:

“Ford made the Model T inexpensive enough, well-made enough, and, most important, just large, powerful and fast enough that buyers could close most of the status gap between themselves and the wealthy without hypocritically aping them or leaving themselves open to ridicule for choosing a cheap, slow, poorly made car.”[9]

With its 26 horsepower engine and a top speed of 55–65 kilometers/hour, the Model T was more  than fast enough for the typically rough, rutted roads of rural America in 1910 (and 64% of the first million Model Ts went to farm and small town markets).[10]

The market for cars, of course, would have been very limited without the right legal and physical infrastructure, and government readily offered an essential helping hand. As Nye notes,

“Automobiles are not isolated objects; they are only the most salient parts of a complex energy-consuming system that includes production lines, roads, parking lots, oil wells, pipelines, service stations, and the redesign of urban spaces to accommodate drivers.”[11]

He further explains,

“As much as half of a city’s land area was dedicated to roads, driveways, parking lots, service stations, and so on. … This reshaping of the environment was not caused by the automobile itself. Americans were extremely active in defining their landscapes by means of zoning boards, park commissions, and city councils.”[12]

By mid-century, the US was systematically decommissioning public transit infrastructure – intra- and inter-city trains, streetcars and buses – in favor of the private car. This change happens to have been in the financial interests of both the car companies and the oil companies, the most powerful corporate interests in the country.

In energy consumption terms, the consequence was simple: “The largest growth in energy use began in the late 1930s and lasted until the early 1970s. In these 35 years energy consumption grew by 350 percent.”[13]

The comparison to comparably-industrialized western Europe is illuminating. By the early 1970s, “Compared with equally affluent Europeans, Americans used roughly twice as much energy per capita. Half of the difference was directly attributable to their transportation system ….”[14] In the first 70 years of the 20th century, western Europe had no significant domestic sources of oil, and thus no powerful corporate interests to make a case that it was in the “national interest” to consume as much energy as possible.

Car culture in the US, however, had acquired seemingly unstoppable momentum. In the early 1970s the US reached its peak of conventional oil production, and the country had already become dependent on steady supplies of imported oil. Yet the blip of the 1970s “energy crisis” made little difference to a high-energy way of life.

“Between 1969 (just before the crisis) and 1983 (just after), the number of miles driven by the average American household rose 29 percent. There were 39 percent more shopping trips, and the distances traveled on these trips increased by 20 percent.”[15]

Fighting for space

At the heart of car culture is a contradiction. The essential allure of speed can be reliably achieved only on sparsely travelled roads. But the increasing profits of oil companies and auto manufacturers alike depend on selling more cars to more people – and most people live and/or work in densely populated areas.

As noted by Nye, when half of a city’s land area was devoted to roads and parking lots, that pushed residents further apart and further from urban centres. By design, the new suburbs had insufficient density to support good public transit – which further locked suburbanites into car dependency. Traffic congestion, once a phenomenon of urban centres, became a regular rush-hour phenomenon on essential arteries 30, then 40, then 50 km or more from urban cores.

The stressed-out commuters on these routes might indeed be able to drive part way to work at high speed. But in spite of (because of?) the fact that they drive increasingly powerful vehicles, they also, on average, spend more and more time commuting.[16] So what good is that speed and power?

The promise of cars was that speed would conquer space. But the reality of car culture is that space triumphs over speed.

A specific example illustrates how this dynamic has played out across North America. Consider the collection of bridges and ramps now under construction at this site:

(Photos taken Friday March 16, 2018)

What vast complex of engineering wizardry is this? Actually, it’s an intersection. An  intersection of two rural highways, about 70 km from downtown Toronto, Ontario, Canada.[17] And nothing so complex as a four-way intersection, just a three-way T-junction.

Why is it deemed necessary to invest so much in one T-junction out here? Well, as North America’s busiest road,[18] Highway 401 regularly stalls to stop-and-go traffic anywhere along a 100-km stretch. And as the ripples of auto-dependent sprawl spread ever wider, there is a perceived need to build even more traffic-facilitating infrastructure. (Meanwhile, as in jurisdictions across North America, it’s almost impossible to find money to fix the crumbling auto infrastructure built decades or generations ago.)

In Ontario, the quest for congestion relief has taken the form of a new privately-operated toll road, taking a wide swing around the northern edges of the Toronto megalopolis. On Highway 401 a single careless driver can at any time cause a traffic-snarling accident that delays thousands of other drivers, often for hours. But on the new toll expressway, tolls are set so high that traffic nearly always moves at standard “highway speeds”.

And that’s a good thing, since at these far edges of exurbia, there are a high proportion of “extreme commuters”.[19] A lot of drivers at the new Highway 401/418 t-junction will be commuting a long distance, so it’s very important to them that they can drive these entry and exit ramps at full highway speed. (Too bad for those who can’t afford the tolls – they’ll have to stay on the low-class public highway. And even the toll-payers will at some point have to exit onto slow-moving, congested arterials.)

The method to Musk’s madness

When Elon Musk decided to sell electric cars to Americans, he followed a century-old playbook. First, put out an exclusive product endowed with marvelous powers of acceleration and speed. (Never mind that the buyers will be subject to the same speed limits and traffic congestion as everyone else – you can accelerate from 0 – 97 km in less than 4 seconds!) Then, having cleansed his electric-car brand of any taint of performance anxiety, he began marketing the later Model 3 at a price point that average American motorists could afford.

But an individual car is of no value. It only functions as part of an elaborate system of laws, roads, parking lots, and energy production and distribution – car culture, in other words. And car culture has proven to be a colossal waste of space, time and energy.

So if there are indeed intelligent aliens, they won’t be taken in by Musk’s unsolicited offer of a used car.

If there is extraterrestrial intelligence, that stray Roadster will be marked “Return to Sender.”

 

Top photo: composite by An Outside Chance from StarMan in Space video.


References

[1] David E. Nye, Consuming Power, MIT Press, 1997, page 178

[2] Nye, Consuming Power, page 205

[3] quoted from “Willie K.’s Cars #1: The 1900 23-HP Daimler “White Ghost

[4] Greg Wapling, “Land Speed Racing History

[5] Tom McCarthy, Auto Mania, Yale University Press, 2007, page 2

[6] Nye, Consuming Power, page 196

[7] Timothy Mitchell, Carbon Democracy, Verso, 2013, page 41

[8] McCarthy, Auto Mania, page 7

[9] McCarthy, Auto Mania, page 39

[10] McCarthy, Auto Mania, page 37

[11] Nye, Consuming Power, page 177

[12] Nye, Consuming Power, page 180

[13] Nye, Consuming Power, page 187

[14] Nye, Consuming Power, page 223

[15] Nye, Consuming Power, page 221

[16] Washington Post, February 22, 2017, “The American commute is worse today than it’s ever been

[17] While both Consuming Power and Auto Mania restrict their focuses to the United States, car culture in Canada closely mirrors that in the US. Not only does the manufacturing chain function as if there is no border, but the pattern of car-dependent suburban development is pretty much the same in Canada as in the US as well.

[18] From many sources, including Business Insider, Aug 29, 2012

[19] See chart “Extreme commutes are the fastest growing” in Washington Post, Feb 22, 2017

 

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

The unbearable cheapness of capitalism

Also published at Resilience.org.

René Descartes, Christopher Columbus and Jeff Bezos walk into a bar and the bartender asks, “What can I get for you thirsty gentlemen?”

“We’ll take everything you’ve got,” they answer, “just make it cheap!”

That’s a somewhat shorter version of the story served up by Raj Patel and Jason W. Moore. Their new book, A History of the World in Seven Cheap Things, illuminates many aspects of our present moment. While Jeff Bezos doesn’t make it into the index, René Descartes and Christopher Columbus both play prominent roles.

In just over 200 pages plus notes, the book promises “A Guide to Capitalism, Nature and the Future of the Planet.”

Patel and Moore present a provocative and highly readable guide to the early centuries of capitalism, showing how its then radically new way of relating to Nature remains at the root of world political economy today. As for a guide to the future, however, the authors do little beyond posing a few big questions.

The long shadow of the Enlightenment

Philosopher René Descartes, known in Western intellectual history as one of the fathers of the Enlightenment, helped codify a key idea for capitalism: separation between Society and Nature. In 1641,

“Descartes distinguished between mind and body, using the Latin res cogitans and res extensa to refer to them. Reality, in this view, is composed of discrete “thinking things” and “extended things.” Humans (but not all humans) were thinking things, Nature was full of extended things. The era’s ruling classes saw most human beings – women, peoples of color, Indigenous Peoples – as extended, not thinking, beings. This means that Descartes’s philosophical abstractions were practical instruments of domination ….”

From the time that Portuguese proto-capitalists were converting the inhabitants of Madeira into slaves on sugar plantations, and Spanish colonialists first turned New World natives into cogs in their brutal silver mines, there had been pushback against the idea of some humans owning and using others. But one current in Western thought was particularly attractive to the profit-takers.

In this view, Nature was there for the use and profit of thinking beings, which meant white male property owners. Patel and Moore quote English philosopher and statesman Francis Bacon, who expressed the new ethos with ugly simplicity: “science should as it were torture nature’s secrets out of her,” and the “empire of man” should penetrate and dominate the “womb of nature.”

The patriarchal character of capitalism, then, is centuries old:

“The invention of Nature and Society was gendered at every turn. The binaries of Man and Woman, Nature and Society, drank from the same cup. … Through this radically new mode of organizing life and thought, Nature became not a thing but a strategy that allowed for the ethical and economic cheapening of life.”

Armored with this convenient set of blinders, a colonialist could gaze at a new (to him) landscape filled with wondrous plants, animals, and complex societies, and without being hindered by awe, respect or humility he could see mere Resources. Commodities. Labour Power. A Work Force. In short, he could see Cheap Things which could be taken, used, and sold for a profit.

Patel and Moore’s framework is most convincing in their chapters on Cheap Nature, Cheap Work, and Cheap Care. Their narrative begins with the enclosure movement, in which land previously respected as Commons for the use of – and care by – all, was turned into private property which could be exploited for short-term gain.

Enclosure in turn led to proletarianization, resulting in landless populations whose only method of fending off starvation was to sell their labour for a pittance. The gendered nature of capitalism, meanwhile, meant that the essential role of bringing new generations of workers into life, and caring for them until they could be marched into the fields or factories, was typically not entered into the economic ledger at all. The worldwide legacy remains to this day, with care work most often done by women either egregiously under-paid or not paid at all.

Yet as the book goes on, the notion of “cheap” grows ever fuzzier. First of all, what’s cheap to one party in a transaction might be very dear to the other. While a capitalist gains cheap labour, others lose their cultures, their dignity, often their very lives.

Other essential components in the system often don’t come cheap even for capitalists. In their chapter on Cheap Money, Patel and Moore note that the European powers sunk tremendous resources into the military budgets needed to extend colonial domination around the world. The chapter “Cheap Lives” notes that “Keeping things cheap is expensive. The forces of law and order, domestic and international, are a costly part of the management of capitalism’s ecology.” The vaunted Free Market, in other words, has never come free.

A strategic definition

How can the single word “cheap” be made a meaningful characterization of Nature, Money, Work, Care, Food, Energy and Lives? The authors promise at the outset to tell us “precisely” what they mean by “cheap.” When the definition arrives, it is this:

“We come, then, to what we mean by cheapness: it’s a set of strategies to manage relations between capitalism and the web of life by  temporarily fixing capitalism’s crises. Cheap is not the same as low cost – though that’s part of it. Cheap is a strategy, a practice, a violence that mobilizes all kinds of work – human and animal, botanical and geological – with as little compensation as possible. … Cheapening marks the transition from uncounted relations of life making to the lowest possible dollar value. It’s always a short-term strategy.”

Circular reasoning, perhaps. Capitalism means the Strategies of getting things Cheap. And Cheap means those Strategies used by Capitalism. Yet Moore and Patel use this rhetorical flexibility, for the most part, to great effect.

Their historical narrative sticks mostly to the early centuries of capitalism, but their portrayals of sugar plantations, peasant evictions and the pre-petroleum frenzies of charcoal-making in England and peat extraction in the Netherlands are vivid and closely linked.

Particularly helpful is their concept of frontiers, which extends beyond the merely geographic to include any new sphere of exploitation – and capitalism is an incessant search for such new frontiers. As a result, it’s easy to see the strategies of “cheapening” in the latest business stories.

Jeff Bezos, for example, has become the world’s richest man through a new model of industrial organization – thousands of minimum-wage workers frantically running through massive windowless warehouses to package orders, with the latest electronic monitoring equipment used to speed up the treadmill at regular intervals. Life-destroying stress for employees, but Cheap Work for Bezos. Or take the frontier of the “sharing economy”, in which clever capitalists find a way to profit from legions of drivers and hotel-keepers, without the expense of investment in taxis or real estate.

Patel and Moore note that periods of financialization have occurred before, when there was a temporary surplus of capital looking for returns and a temporary shortage of frontiers. But

“there’s something very different about the era of financialization that began in the 1980s. Previous financial expansions could all count on imperialism to extend profit-making opportunities into significant new frontiers of cheap nature. … Today, those frontiers are smaller than ever before, and the volume of capital looking for new investment is greater than ever before.”

Thus the latest episode of financialization is just one of many indicators of a turbulent future. And that leads us to perhaps the most glaring weakness of Seven Cheap Things.

The subtitle makes a promise of a guide to “the future of the planet”. (In fairness, it’s possible that the subtitle was chosen not by the authors but the publishers.) The Conclusion offers suggestions of “a way to think beyond a world of cheap things ….” But in spite of the potentially intriguing headings Recognition, Reparation, Redistribution, Reimagination, and Recreation, their suggestions are so sketchy that they end a solid story on a very thin note.


Top photo: “The boiling house”, from Ten Views in the Island of Antigua, 1823, by William Clark, illustrates a step in the production of sugar. Image from the British Library via Wikimedia Commons.

Super-size that commodity

Also published at Resilience.org.

A review of ‘A Foodie’s Guide to Capitalism’

Don’t expect a whole lot of taste when you sit down to a plateful of commodities.

That might be a fitting but unintended lesson for foodies who work through the new book by Eric Holt-Giménez. A Foodie’s Guide to Capitalism will reward a careful reader with lots of insights – but it won’t do much for the taste buds.

While A Foodie’s Guide is lacking in recipes or menu ideas, it shines in helping us to understand the struggles of the men and women who work in the farms and packing plants. Likewise, it explains why major capitalists have typically shown little interest in direct involvement in agriculture – preferring to make their money selling farm inputs, trading farm commodities, or turning farm products into the thousands of refined products that fill supermarket shelves.

Fictitious commodities

Karl Polanyi famously described land, labour and money as “fictitious commodities”. Land and labour in particular come in for lengthy discussion in A Foodie’s Guide to Capitalism. In the process, Holt-Giménez also effectively unmasks the myth of the free market.

“Markets have been around a long time,” he writes, “but before the nineteenth century did not organize society as they do today.” He shows how capitalism in England arose concurrently with vigorous state intervention which drove people off their small farms and into the industrial labour pool. Meanwhile overseas both the slave trade and settler colonialism were opening critical parts of global markets, which were anything but “free”.

Nevertheless the takeover of food production by capitalism has been far from complete.

“Today, despite centuries of capitalism, large-scale capitalist agriculture produces less than a third of the world’s food supply, made possible in large part by multibillion-dollar subsidies and insurance programs. Peasants and smallholders still feed most people in the world, though they cultivate less than a quarter of the arable land.” (Holt-Giménez, A Foodie’s Guide To Capitalism, Monthly Review Press and FoodFirst Books, citing a report in GRAIN, May 2014)

There are a lot of reasons for this incomplete transition, but many are related to two of the “fictitious commodities”. Let’s start with land.

While land is the most important “means of production” in agriculture, land is of course much more than that. For people throughout history, land has been home, land has been the base of culture, land has been sacred. Even today, people go to great lengths to avoid having their lands swallowed up by capitalist agriculture – especially since this transition typically results in widespread consolidation of farms, leaving most former farmers to try to earn a living as landless labourers.

Autumn colours in the Northumberland Hills north of Lake Ontario, Canada

Likewise labour is much more than a commodity. An hour of labour is a handy abstraction that can be fed into an economist’s formula, but the labourer is a flesh-and-blood human being with complex motivations and aspirations. Holt-Giménez offers a good primer in Marxist theory here, showing why it has always been difficult for capitalists to extract surplus value directly from the labour of farmers. He also builds on the concept of the “cost of reproduction” in explaining why, in those sectors of farming that do depend on wage labour, most of the wage labourers are immigrants.

Before people can be hired at wages, they need to be born, cared for as infants, fed through childhood, provided with some level of education. These “costs of reproduction” are substantial and unavoidable. A capitalist cannot draw surplus value from labour unless some segment of society pays those “costs of reproduction”, but it is in the narrow economic self-interest of capitalists to ensure that someone else pays. Consider, for example, the many Walmart employees who rely on food stamps to feed their families. Since Walmart doesn’t want to pay a high enough wage to cover the “cost of reproduction” for the next generation of workers, a big chunk of that bill goes to taxpayers.

In industrialized countries, the farm workers who pick fruit and vegetables or work in packing plants tend to be immigrants on temporary work permits. This allows the capitalist food system to pass off the costs of reproduction, not to domestic taxpayers, but to the immigrants’ countries of origin:

“the cost of what it takes to feed, raise, care for and educate a worker from birth to working age (the costs of reproduction) are assumed by the immigrants’ countries of origin and is free to their employers in the rich nations, such as the United States and the nations of Western Europe. The low cost of immigrant labor works like a tremendous subsidy, imparting value to crops and agricultural land. This value is captured by capitalists across the food chain, but not by the worker.” (Holt-Giménez, A Foodie’s Guide to Capitalism)

Farmstead in the Black Hills, South Dakota, USA

The persistence of the family farm

In the US a large majority of farms, including massive farms which raise monoculture crops using huge machinery, are run by individual families rather than corporations. Although they own much of their land, these farmers typically work long hours at what amounts to less than minimum wage, and many depend on at least some non-farm salary or wage income to pay the bills. Again, there are clear limitations in a capitalist food system’s ability to extract surplus value directly from these hours of labour.

But in addition to selling “upstream” inputs like hybrid and GMO seeds, fertilizers, pesticides and machinery, the capitalist food system dominates the “downstream” process of trading commodities, processing foods, and distributing them via supermarket shelves. An important recent development in this regard is contract farming, which Holt-Giménez refers to as “a modern version of sharecropping and tenant farming”.

A large corporation contracts to buy, for example, a chicken farmer’s entire output of chickens, at a fixed price:

“Through a market-specification contract, the firm guarantees the producer a buyer, based on agreements regarding price and quality, and with a resource-providing contract the firm also provides production inputs (like fertilizer, hatchlings, or technical assistance). If the firm provides all the inputs and buys all of the product, it essentially controls the production process while the farmer basically provides land and labor ….”

The corporation buying the chickens gets the chance to dominate the chicken market, without the heavy investment of buying land and buildings and hiring the workforce. Meanwhile farmers with purchase contracts in hand can go to the bank for operating loans, but they lose control over most decisions about production on their own land. And they bear the risk of losing their entire investment – which often means losing their home as well – if the corporation decides the next year to cancel the contract, drop the price paid for chicken, or raise the price of chicken feed.

Contract farming dominates the poultry industry in the US and the pork market is now rapidly undergoing “chickenization”. Holt–Giménez adds that “The World Bank considers contract farming to be the primary means for linking peasant farmers to the global market and promotes it widely in Asia, Latin America, and Africa.”

Farm field in springtime, western North Dakota, USA

Feeding a hungry world

In North America the conventional wisdom holds that only industrial capitalist agriculture has the ability to provide food for the billions of people in today’s world. Yet on a per hectare basis, monoculture agribusiness has been far less productive than many traditional intensive agricultures.

“Because peasant-style farming usually takes place on smaller farms, the total output is less than capitalist or entrepreneurial farms. However, their total output per unit of land (tons/hectare; bushels/acre) tends to be higher. This is why, as capitalist agriculture converts peasant-style farms to entrepreneurial and capitalist farms, there is often a drop in productivity ….”

Marxist political-economic theory provides a useful basis for Holt-Giménez’ explorations of many aspects of global food systems. Among the topics he covers are the great benefits of the Green Revolution to companies marketing seeds and fertilizers, along with the great costs to peasants who were driven off their lands, and potentially catastrophic damages to the ecological web.

But an over-reliance on this theory, in my opinion, leads to an oversimplification of some of our current challenges. This is most significant in Holt-Giménez’s discussions of the overlapping issues of food waste and the failure to distribute farm outputs fairly.

In recent decades there has been a constant surplus of food available on world markets, while hundreds of millions of people have suffered serious malnutrition. At the same time we are often told that approximately 40% of the world’s food goes to waste. Surely there should be an easy way to distribute food more justly, avoid waste, and solve chronic hunger, no?

Yet it is not clear what proportion of food waste is unavoidable, given the vagaries of weather that may cause a bumper crop one year in one area, or rapid increases in harvest-destroying pests in response to ecological changes. It is easy to think that 40% waste is far too high – but could we reasonably expect to cut food waste to 5%, 10% or 20%? That’s a question that Holt-Giménez doesn’t delve into.

On the other hand he does pin food waste very directly on capitalist modes of production. “The defining characteristic of capitalism is its tendency to overproduce. The food system is no exception.” He adds, “The key to ending food waste is to end overproduction.”

Yet if food waste is cut back through a lowering of production, that in itself is of no help to those who are going hungry.

Holt-Giménez writes “Farmers are nutrient-deficient because they don’t have enough land to grow a balanced diet. These are political, not technical problems.” Yes, access to land is a critical political issue – but can we be sure that the answers are only political, and not in part technical as well? After all, famines predated capitalism, and have occurred in widely varying economic contexts even in the past century.

Particularly for the coming generations, climatic shifts may create enormous food insecurities even for those with access to (formerly sufficient) land. As George Monbiot notes in The Guardian this week, rapid loss of topsoil on a world scale, combined with water scarcity and rising temperatures, is likely to have serious impacts on agricultural production. Facing these challenges, farming knowledge and techniques that used to work very well may require serious adaptation. So the answers are not likely to be political or technical, but political and technical.

These critiques aside, Holt-Giménez has produced an excellent guidebook for the loose collection of interests often called “the food movement”. With a good grasp of the way capitalism distorts food production, plus an understanding of the class struggles that permeate the global food business, foodies stand a chance of turning the food movement into an effective force for change.

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)