EurActiv - Letters to the Editor

Limits to growth? Hush!

Sir,

Regarding ‘G8 energy chiefs worried by oil prices, eye nuclear’:

You say that the International Energy Agency (IEA) is calling for a major boost in clean technologies to address the world’s soaring demand for energy (“‘Nuclear, along with carbon capture and storage (CCS), renewable energies and energy efficiency, all must play a much more important role,’ the IEA said in a 6 June press statement”).

But who can believe that such energies will be able, when global annual fossil fuel extraction (oil, gas and coal all together) will have peaked and then begun to decline, to satisfy an ever-increasing energy demand?

Fast growth feeds itself from energy produced at low cost, so that a substantial part of the energy return (EROEI) can be used to increase the annual energy production feeding economic growth. And most of today’s energy is still produced at low cost. But why, then, do we have to pay so much when we buy it?

Answer: Simply because we have recently passed the threshold beyond which energy production (still growing) can no longer satisfy demand (growing faster).

In this new conjuncture, a substantial proportion of the profits gathered from high selling prices supports the numerical growth of the populations living in the producing countries and the ones they provide assistance to, allowing those populations to buy consumer goods and in doing so, sustain world economic growth.

Another proportion allows the wealthy elites ruling those countries – and also many speculators – to acquire profitable capital, part of it concerning the development of alternative energies (nuclear, renewables) needed to sustain economic growth.

But it is now becoming ever clearer that the average energy production cost will substantially increase in the course of the decades ahead. Therefore, the energy investment returns needed to feed energy-production growth will slow to such an extent that finally global annual energy production will come to a standstill and reverse into decline.

Improving energy efficiency may provide some delay but its limits will soon be revealed. At some point (within the next decades) the ultimate limits to growth will be reached and expansion will then reverse into contraction. Many of us expect that such an event will bring about economic collapse, as the exchange mechanisms between our world economic system’s components rest on the existence of a financial bubble kept under pressure as long as markets in expansion allow investors to make profits re-injected into the bubble.

But even though they know, most people remain primarily concerned with everyday life and do not want to hear or talk about that. Only crazy people (like me), dubbed ‘doommongers’, dare…but hush! Let’s talk about something else…doommongering is insane.

André Sautou

France

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Comments

  1. Dear Sir,

    This is typical New World Order/Club of Rome Talk.
    The oil reserves are twice as large as we are told – according to insiders: http://www.independent.co.uk/environment/climate-change/oil-shortage-a-myth-
    says-industry-insider-842778.html

    Now, however more and more voice the real fact behind the skyrocketing oil prices: Speculation on a large scale by hedge funds and pension funds.

    I can recommend interested readers to read der Spiegel Online 13.06.2008:
    http://www.spiegel.de/international/world/0,1518,559550,00.html

    Regardless of whether prices go up or down, speculation results in preposterous exaggerations, with real consequences for the economy.

    “Once again, it is the excesses of modern financial markets that are sending the world economy into convulsions. Indeed, German President Horst Köhler may have been right when he recently said, in an interview with the German magazine Stern, that the financial markets have developed into a “monster” that needs to be tamed.

    “The financial industry,” says Heinrich Haasis, president of the German Federation of Savings Banks, “has disconnected itself from the real economy.

    there is still plenty of speculative capital searching for high-yield investments. While subprime mortgage loans may have been all the rage yesterday, today’s hot investments include gold and tin, wheat and soybeans. All of this means that the next crisis is already taking shape before the last one has even been weathered — a bubble following on the heels of a bubble.

    They are all back at the table, the hedge funds and the major investors, the ones who will place their bets on anything that promises to yield a profit. But they’re not the only ones. American pension funds, such as the fund that manages the retirement pensions for Californian teachers, have also joined the fray. And then there are the countless small investors putting their money into commodities funds, into index funds that simulate commodities prices, or into certificates, that modern investment instrument that even allows the most ordinary of investors to get a tiny piece of the action.

    They all speculate that commodities prices will continue to rise”

  2. Investing in decoys will bring faster collapse.

    As an independent sustainability analyst my role is to look at what’s going on and then look beyond. I’ll try to do that now with this debate. Anders Bruun Laursen appears to set himself against the Club of Rome and André Sautou’s letter but this conclusion is not supported by his data. The Club of Rome make a careful distinction between stocks and flows. The underlying problem with oil is not the reserves (stocks) but the supply (flows). The quality and location of reserves affects supply more than the total quantity. As André Sautou explains, supply cannot keep up with demand, triggering unstable markets and a foreseeable end-point for growth in today’s energy-hungry growth game. Anders Bruun Laursen’s point about commodity speculation actually supports this view. Speculation is one of a set of active world-wide responses which are bringing forward the date when global growth collapses. We are investing in making things worse. Nobody should count on the likelihood that we really have ‘decades’ to sort out this muddle.

    The original article (proposing ‘clean’ nuclear energy) and the other letter to the editor (proposing that CCS should happen ‘quickly’) are offered in a spirit of seeking solutions but they actually say more about the human talent for self-deception. Recent decades are testament to our shared ability to mentally shrink the scope of the problems we cause whilst mentally expanding the power of any token efforts. We’ve fooled ourselves getting into this mess and now people propose to get out of it by continuing to fool ourselves. ‘If only we write enough cheques with enough zeros on the end then we can have nuclear power and CCS in a decade or two. Then everything will be fine and life as we know it can go on.’ It’s time to wake up.

    The reality is that every Euro spent perpetuating the doomed high-energy high-waste growth game is lost to any action which could create its successor. As a society we must choose; do we prefer to invest in decoy solutions which starve productive solutions of hope, or do we choose to define and run a new game in which the economy thrives by efficiently meeting people’s needs, rebuilding nature and creating no net ecological accumulation of wastes, whether carbon, radioactive or any other rubbish. This choice is the hard part; if people can overcome the inertia of humanity’s headlong rush to global collapse then the tools to make the shift are not difficult to design or use.

    Anders Bruun Laursen’s observation of speculation points the way forward. Investors firstly need hope for the future, in order to put their money down and leave it to work. This could be provided by policy-makers’ announcement of a new growth game which abandons the decoys, as demonstrated by Germany on nuclear and China on ‘circular economic’ policy, Then investors need stable financial platforms for playing the game, with the security that their money will be used in efficient and productive ways, meeting needs, rebuilding nature, restoring communities and turning yesterday’s resources into tomorrow’s. All this could power tomorrow’s profits and growth. For those investors stuck in old habits, a third signal would also help – an internationally agreed transaction tax on speculation such as the Tobin Tax.

  3. I assume my “typical New World Order/club of Rome talk”, as Anders Bruun Laursen puts it, and I do not think recent events have proved that such “typical talk” was wrong.

    After having discovered that our world could no longer produce energy at low cost and sell it at low price while at the same time being able to increase year after year its annual energy production, we have quite recently observed that fast growth could not be sustained for a very long period with energy sold at very high price.

    The present financial crisis is not something to be surprised about. In the course of the last five years, a lot of new projects have created new capital book-kept with high initial value (building in this way financial bubbles) without taking into account the unknown many new risks that could surge unexpectedly if the selling price of energy became too high (bankruptcies because of skyrocketing costs, over-indebtedness of buyers, collapse of returns and of reselling value of capital, etc.).

    And that precisely happened : the high selling price of energy became unsustainable, the financial bubbles burst, energy demand slackened and oil prices got lower …

    What will happen now ? At best our world has entered into a recession, that is low-pace growth. As the cost of producing and distributing energy becomes higher and higher, our investment capabilities will diminish until we finally reach Peak Energy and then begin our energy production decline, triggering economic contraction. When ? I believe nobody can tell, as our world is so complicated. I just believe it will happen, sooner or later …

    At worst, we have now reached Peak Energy and will begin our contraction in the course of the years or decades ahead …

    And what will happen with the present financial system then ? Born with the industrial civilization with the help of economic expansion (fed by annual energy production increasing year after year), creating money on the credit side of bankers while creating debts on the liability side of investors, such a system could only work as long as markets in a state of fast expansion allowed those investors not only to reimburse their debts but also to make profits and reinvest part of them so that such a fast expansion could go on …

    (Illustration of this comment : Energy and Population curve, http://energypopulation.blogspot.com/ )

  4. According to International Energy Agency the techologies should be removed. However, author, there ways, where technologies can be used in effective way with minimum of energy supply. See cnn news about techlogy. Everyone knows about scarcity of resources, but the methods should go far away then just to removing techs. How do you think?

  5. The IEA report does not say that technologies should be removed. On the contrary, it says that barriers which hamper a swift expansion and increase the costs of accelerating renewables transition into the mainstream have to be removed so as to allow the great potential of renewables to be exploited much more rapidly and to a much larger extent.

    (Source : Agence Internationale de l’Energie: Objectif 50% de l’électricité mondiale en provenance des énergies renouvelable à horizon 2050)

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