The End of Growth: Adapting to Our New Economic Reality (27 page)
Read The End of Growth: Adapting to Our New Economic Reality Online
Authors: Richard Heinberg
Tags: #BUS072000
Declining oxygen levels, acidifying oceans, disappearing species, threatened oceanic food chains, changing climate — when considering planetary changes of this magnitude, it may seem that the end of economic growth is hardly the worst of humanity’s current problems. However, it is important to remember that we are counting on growth to enable us to solve or respond to environmental crises. With economic growth, we have surplus money with which to protect rainforests, save endangered species, and clean up after industrial accidents. Without economic growth, we are increasingly defenseless against environmental disasters — many of which paradoxically result from growth itself.
Unfortunately, in the case of climate change, there may be a time lag involved (even if we stop carbon emissions today, climate will continue changing for some time due to carbon already in the atmosphere), so that the end of economic growth cannot be counted on to solve the environmental problems that growth has previously generated.
In the Introduction to this book we began with a simple premise: humanity cannot grow consumption and waste streams forever on a finite planet. There are limits. The evidence is clear: We are reaching those limits. It is no longer a matter of saying, “
If
we don’t voluntarily bring growth in consumption to an end,
then
we will run into problems.” That was a message appropriate to the 1970s or ’80s. We didn’t change direction then, and now we are nearing or at the point of declining energy, declining freshwater, declining minerals, declining biodiversity...and a declining economy.
Perhaps the meteoric rise of the finance economy in the past couple of decades resulted from a semi-conscious strategy on the part of society’s managerial elites to leverage the last possible increments of growth from a physical, resource-based economy that was nearing its capacity. In any case, the implications of the current economic crisis cannot be captured by unemployment statistics and real estate prices. Attempts to restart growth will inevitably collide with natural limits that simply don’t respond to stimulus packages or bailouts.
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Burgeoning environmental problems require rapidly increasing amounts of effort to fix them. In addition to facing limits on the amount of debt that can be accumulated in order to keep those problems at bay, we also face limits to the amounts of energy and materials we can devote to those purposes. Until now the dynamism of growth has enabled us to stay ahead of accumulating environmental costs. As growth ends, the environmental bills for our last two centuries of manic expansion may come due just as our bank account empties.
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BOX 3.13
Atlantic Cod: A Story of
Renewable Resource Depletion
In 1988, Canadian newspaper and magazine articles (exemplified in a prominent Canadian Geographic story, “Almighty Cod”) celebrated the extraordinary success of the Atlantic Fishery. The fishing industry, including the practice of dragging-trawling, was presented in glowing terms, and it was suggesting that the cod fishery could lift eastern Canada out of its economic doldrums.
Just two years later, scientific reports showed that the fishery was in serious trouble, and fishermen reported their catches were declining rapidly (Canadian Geographic ran a new story by the same author titled, “Net Losses: The Sorry State of our Atlantic Fishery”). The turnaround was abrupt and catastrophic.
Canadian media began detailing the horrendous environmental costs of dragging-trawling. And scientists admitted that they really knew very little about cod.
Government quotas (special Company Allotments) succeeded in keeping prices stable, and fishing continued at levels that were still much too high, until it was obvious that cod populations had collapsed.
In 1992, a cod fishing moratorium was declared.
Nearly twenty years have passed since then, and despite the moratorium, fish stocks have not recovered. Indeed there is not much hope that they will at this point. There are still cod out there, but only a few fishermen go after them. The price is still good, but there is simply not enough cod to support the livelihoods of fishermen, let alone an entire industry. So now the industry has shifted its focus to shellfish, shrimp, and lobster.
WON’T INNOVATION,
SUBSTITUTION,
AND EFFICIENCY
KEEP US GROWING?
I want to believe in innovation and its possibilities, but I am
more thoroughly convinced of entropy. Most of what we do
merely creates local upticks in organization in an overall downward
sloping curve. In that regard, technology is a bag of tricks
that allows us to slow and even reverse the trend, sometimes
globally, sometimes only locally, but always only temporarily
and at increasing aggregate energy cost.
— Paul Kedrosky (entrepreneur, editor of the econoblog Infectious Greed)
In the course of researching and writing this book, I discussed its central thesis — that world economic growth has come to an end — with several economists, various businesspeople, a former hedge fund manager, a topflight business consultant, and the former managing director of one of Wall Street’s largest investment banks, as well as several ecologists and environmental activists. The most common reaction (heard as often from the environmentalists as the bankers) was along the lines of: “But capitalism has a few more tricks up its sleeve. It’s infinitely creative. Even if we’ve hit environmental limits to energy or water, the mega-rich will find ways to amass yet more capital on the way down the depletion slope. It’ll still look like growth to them.”
Most economists would probably agree with the view that environmental constraints and a crisis in the financial world don’t add up to the
end
of growth — just a speed bump in the highway of progress. That’s because smart people will always be thinking of new technologies and of new ways to do more with less. And these will in turn be the basis of new commercial products and business models.
Talk of limits typically elicits dismissive references to the failed warnings of Thomas Malthus — the 18th-century economist who reasoned that population growth would inevitably (and soon) outpace food production, leading to a general famine. Malthus was obviously wrong, at least in the short run: food production expanded throughout the 19th and 20th centuries to feed a fast-growing population. He failed to foresee the introduction of new hybrid crop varieties, chemical fertilizers, and the development of industrial farm machinery. The implication, whenever Malthus’s ghost is summoned, is that
all
claims that environmental limits will overtake growth are likewise wrong, and for similar reasons. New inventions and greater efficiency will always trump looming limit.
1
In this chapter, we will examine the factors of efficiency, substitution, and innovation critically and see why — while these are key to our efforts to adapt to resource limits — they are incapable of removing those limits, and are themselves subject to the law of diminishing returns. And returns on investments in these strategies are in many instances already quickly diminishing.
Substitutes Forever
It is often said that “the Stone Age didn’t end for lack of stones, and the oil age won’t end for lack of oil; rather, it will end when we find a cheaper, better source of energy.” Variations on that maxim have appeared in ads from ExxonMobil, statements from the Saudi Arabian government, and blogs from pro-growth think tanks — all arguing that the world faces no energy shortages, only energy opportunities.
It’s true: the Stone Age ended when our ancient ancestors invented metal tools and found them to be superior to stone tools for certain purposes, not because rocks became scarce. Similarly, in the late-19th century early industrial economies shifted from using whale oil for lubrication and lamp fuel to petroleum, or “rock oil.” Whale oil was getting expensive because whales were being hunted to the point that their numbers were dropping precipitously. Petroleum proved not only cheaper and more abundant, it also turned out to have a greater variety of uses. It was a superior substitute for whale oil in almost every respect.
Fast forward to the early 21st century. Now the cheap rock oil is gone. It’s time for the next substitute to appear — a magic elixir that will make nasty old petroleum look as obsolete and impractical as whale oil. But what exactly is this “new oil”?
Economic theory is adamant on the point: as a resource becomes scarce, its price will rise until some other resource that can serve the same need becomes cheaper by comparison. That the replacement will prove superior is not required by theory.
Well, there certainly are substitutes for oil, but it’s difficult to see any of them as superior — or even equivalent — from a practical, economic point of view.
2
Just a few years ago, ethanol made from corn was hailed as the answer to our dependence on depleting, climate-changing petroleum. Massive amounts of private and public investment capital were steered toward the ethanol industry. Government mandates to blend ethanol into gasoline further supported the industry’s development. But that experiment hasn’t turned out well. The corn ethanol industry went through a classic boom-and-bust cycle, and expanding production of the fuel hit barriers that were foreseeable from the very beginning. It takes an enormous land area to produce substantial amounts of ethanol, and this reduces the amount of cropland available for growing food; it increases soil erosion and fertilizer pollution while forcing food prices higher. By 2008, soil scientists and food system analysts were united in opposing further ethanol expansion.
3
For the market, ethanol proved too expensive to compete with gasoline. But from an energy point of view the biggest problem with corn ethanol was that the amount of energy required to grow the crop, harvest and collect it, and distill it into nearly pure alcohol was perilously close to the amount of energy that the fuel itself would yield when burned in an engine. This meant that ethanol wasn’t really much of an energy source at all; making it was just a way of taking existing fuels (petroleum and natural gas) and using them (in the forms of tractor fuel, fertilizer, and fuel for distillation plants) to produce a different fuel that could be used for the same purposes as gasoline. Experts argued back and forth: one critic said the energy balance of corn ethanol was actually negative (less than 1:1) — meaning that ethanol was a losing proposition on a net energy basis.
4
But then a USDA study claimed a positive energy balance of 1.34:1.
5
Other studies yielded slightly varying numbers (the differences had to do with deciding which energy inputs should be included in the analysis).
6
From a broader perspective, this bickering over decimal-place accuracy was pointless: in its heyday, oil had enjoyed an EROEI of 100:1 or more, and it is clear that for an industrial society to function it needs primary energy sources with a minimum EROEI of between 5:1 and 10:1.
7
With an overall societal EROEI of 3:1, for example, roughly a third of all of that society’s effort would have to be devoted just to obtaining the energy with which to accomplish all the other things that a society must do (such as manufacture products, carry on trade, transport people and goods, provide education, engage in scientific research, and maintain basic infrastructure). Since even the most optimistic EROEI figure for corn ethanol is significantly below that figure, it is clear that this fuel cannot serve as a primary energy source for an industrial society like the United States.
The problem remains for so-called second- and third-generation bio-fuels — cellulosic ethanol made from forest and crop wastes and biodiesel squeezed from algae. Extraordinary preliminary claims are being made for the potential scalability and energy balance of these fuels, which so far are still in the experimental stages, but there is a basic reason for skepticism about such claims. With all biofuels we are trying to do something inherently very difficult — replace one fuel, which nature collected and concentrated, with another fuel whose manufacture requires substantial effort on our part to achieve the same result. Oil was produced over the course of tens of millions of years without need for any human work. Ancient sunlight energy was chemically gathered and stored by vast numbers of microscopic aquatic plants, which fell to the bottoms of seas and were buried under sediment and slowly transformed into energy-dense hydrocarbons. All we have had to do was drill down to the oil-bearing rock strata, where the oil itself was often under great pressure so that it flowed easily up to the surface. To make biofuels, we must engage in a variety of activities that require large energy expenditures for growing and fertilizing crops, gathering crops or crop residues, pressing algae to release oils, maintaining and cleaning algae bioreactors, or distilling alcohol to a high level of purity (this is only a partial list). Even with substantial technical advances in each of these areas, it will be impossible to compete with the high level of energy payback that oil enjoyed in its heyday.
This is not to say that biofuels have no future. As petroleum becomes more scarce and expensive we may find it essential to have modest quantities of alternative fuels available for certain purposes even if those alternatives are themselves expensive, in both monetary and energy terms. We will need operational emergency vehicles, agricultural machinery, and some aircraft, even if we have to subsidize them with energy we might ordinarily use for other purposes. In this case, biofuels will not serve as one of our society’s primary energy sources — the status that petroleum enjoys today. Indeed, they will not comprise much of an energy
source
at all in the true sense, but will merely serve as a means to transform energy that is already available into fuels that can be used in existing engines in order to accomplish selected essential goals. In other words, biofuels will substitute for oil on an emergency basis, but not in a systemic way.
