ENERGY WATCH #1 - September 25, 2018
Can climate change be addressed through existing institutions or do we need a political revolution to do so?
Environmentalism is often associated with socialism or a centrally planned political system, which is not entirely nonsense: there are radical environmentalists whose motivation is more ideological than, well, environmental.
Even more pragmatical environmentally conscious people are probably to be found more on “left”than the “right”wing of the political spectrum. I believe this is a pity, since this makes it more difficult to reach political consensus over climate change policy.
Conservative and libertarian groups often oppose climate change policies because they believe that they pose a threat to individual freedom and the free market. The strength of this type of opposition should not be underestimated. Climate change activists don’t engage much with these critics which they in turn often dismiss as ideologically motivated. But then they are surprised to discover that a lot of people don’t wish to follow their prescriptions….
The reason I am mentioning this is that I came across a U.N. report that’s been the subject of heated debate in the blogosphere. The Independent newspaper started it off with a long article with a headline that sums up the gist of it very well: “This is how UN scientists are preparing for the end of capitalism”!
Let’s follow the Independent article, written by Nafeez Ahmed:
Capitalism as we know it is over. So suggests a new report commissioned by a group of scientists appointed by the UN secretary general. The main reason? We’re transitioning rapidly to a radically different global economy, due to our increasingly unsustainable exploitation of the planet’s environmental resources and the shift to less efficient energy sources.
Climate change and species extinctions are accelerating even as societies are experiencing rising inequality, unemployment, slow economic growth, rising debt levels, and impotent governments. Contrary to the way policymakers usually think about these problems these are not really separate crises at all.
These crises are part of the same fundamental transition. The new era is characterised by inefficient fossil fuel productionand escalating costs of climate change. Conventional capitalist economic thinking can no longer explain, predict or solve the workings of the global economy in this new age.
Those are the implications of a new background paper prepared by a team of Finnish biophysicists who were asked to provide research that would feed into the drafting of the UN Global Sustainable Development Report (GSDR),which will be released in 2019.
For the “first time in human history”, the paper says, capitalist economies are “shifting to energy sources that are less energy efficient.”Producing usable energy (“exergy”) to keep powering “both basic and non-basic human activities”in industrial civilisation “will require more, not less, effort”.
At the same time, our hunger for energy is driving what the paper refers to as “sink costs.”The greater our energy and material use, the more waste we generate, and so the greater the environmental costs. Though they can be ignored for a while, eventually those environmental costs translate directly into economic costs as it becomes more and more difficult to ignore their impacts on our societies.
And the biggest “sink cost”, of course, is climate change: “Sink costs are also rising; economies have used up the capacity of planetary ecosystems to handle the waste generated by energy and material use. Climate change is the most pronounced sink cost.”
Overall, the amount of energy we can extract, compared to the energy we are using to extract it, is decreasing “across the spectrum –unconventional oils, nuclear and renewables return less energy in generation than conventional oils, whose production has peaked–and societies need to abandon fossil fuels because of their impact on the climate.”
The paper, whose lead author is Dr Paavo Järvensivu, “a ‘biophysical economist’, can be found on the website of the BIOS Research Unit in Finland.
I don’t want to go into this into too much detail, but let me just note a couple of things. The idea that we are turning that “the era of cheap energy is coming to an end”has been around for ages and it has been disproven time and time again. Such reasoning ignores that human beings are inventive and keep on coming up with new ways of generating useful energy.
But the real problem with the Finnish report is that it politicizes the issue of climate change in a completely unscientific manner. It ties fossil fuel production and CO2 emissions to “rising inequality, unemployment, slow economic growth, rising debt levels, and impotent governments”, which is nonsensical, and then to the “capitalist”system, which is also contradicted by the facts. Or don’t non-capitalist societies use fossil fuels and emit greenhouse gases?
You can imagine that a report like this is a feast for right-wing critics of climate change policy. Here is how it is demolished on a right-wing website, the Daily Maverick:
A tiny and hitherto unknown Finnish research outfit is advising the UN on transforming the global economy. It wants to collectivise the economy, revoke economic freedom, give us guaranteed, state-funded, low-skilled jobs so we don’t go around destroying the environment, and pay for this socialist utopia with magic monopoly money. (…)
“The era of cheap energy is coming to an end,”they write, based on old peak oil theories that stubbornly refuse to come true, and theories about declining energy return on investment that are contradicted by the global oil price.
Neither electricity not oil prices have shown any indication of an irreversible upward swing. The electricity price (in the US) is lower than it was in the early 1960s and throughout the 1980s. In the last three years, crude oil has traded at its lowest level in 15 years, well below half of its peaks in 1980 and 2008.
Their belief about the end of cheap energy, combined with the fact that “economies have used up the capacity of planetary ecosystems to handle the waste generated by energy and material use”, leads them to declare that existing economic theories are incapable of meeting the needs of the future, and that we need an “economic transition”, away from neoclassical economics and market capitalism.
They wish to replace globalisation with localisation, limit international trade to urgent needs such as food security instead of general free trade, substitute private enterprise with strong government control over the factors of production, and enforce limits on all economic production in line with what they believe the limits on resources, energy and ecosystems to be.
“Economic activity will gain meaning not by achieving economic growth but by rebuilding infrastructure and practices toward a post-fossil fuel world with a radically smaller burden on natural ecosystems,”they fantasise.
“In rich countries, citizens would have less purchasing power than now, but it would be distributed more equally. Citizens in all countries would have access to meaningful jobs and they could trust that a desirable future is being constructed on the collective level.
So they propose a collectivist, centrally-planned, government-run economy. If their report is included in the UN’s Global Sustainable Development Report, it would betray the UN’s objective to not merely protect a threatened environment, but to achieve a global economic transition to socialism.
I confess I sympathise with the critic here!
There is another, non-ideological way of looking at the climate change issue. It is possible to acknowledge that markets, industrialism and fossil fuels have promoted prosperity around the world, but that, unfortunately, fossil fuels have byproducts, not only in the form of pollutants, but also in the form of CO2. As it happens, CO2 causes warming, which is not something that fossil fuel producers or anyone else (let’s not forget the responsibility of us consumers!) could have foreseen. Nevertheless, it happens to be the case, so we have to find ways of dealing with it.
Yes, this could have consequences for “our”way of living, but “our”in this case means humanity in general, since people everywhere –not just in “capitalist”–societies aspire to material well-being. Ideally, we need to find ways of meeting these aspirations (i.e. maintaining and improving people’s standard of living) while reducing greenhouse gas emissions. Difficult, but not impossible.
If we treat greenhouse gases as a form of non-ideological pollution, rather than a byproduct of “capitalism”, it becomes possible to conceive of solutions that do not necessarily require the end of “capitalist industrial civilization”.
None of this implies that there is anything wrong with also tackling “rising inequality, unemployment, slow economic growth, rising debt levels, and impotent governments”–it just has nothing to do with fighting climate change.
Incidentally, note the peculiar bias in this little list, which links various evils to impotent government. Why not incompetentgovernments? Corruptgovernments? Murderous governments? Is it because, in their view, only corporations and the evil free market is to blame for all our woes? Your guess is good as mine.
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While we are on the subject of ideological controversy, let me mention that the Washington DC-based Institute for Energy Research (IER),which describes itself as a “free-market”organization –it has received money from ExxonMobil and other fossil fuel companies –has issued a report, Big Green, Inc.,which puts the spotlight on a group of “liberal”(progressive) foundations “that spend billions of dollars supporting aggressive climate litigation, the promotion of uneconomic renewable energy sources, and overburdening regulations.”
“This money has helped foment the anti-market sentiment that dominates energy policy in the United States and has played a major role in limiting economic growth in recent years”, IER claims.
What the report asserts is that ten liberal foundations gave $3.7 billion to environmental groups and causes over eight years. According to the IER this “shatters the notion that environmentalists are locked in a David versus Goliath-like struggle against energy companies”.
Here is another ideological fight over climate change that gets in the way of real solutions. I would think there is nothing wrong with foundations sponsoring environmentalist groups, just as it is acceptable for energy companies to sponsor websites like the Institute for Energy Research.
It does matter that the public is aware of who is sponsoring whom. The IER does have a point that people are often unaware of the large amounts of money that environmental groups receive to spread their message. Like Big Energy, Big Green has in many ways become institutionalized and should be followed critically.
But what really matters in the end is not how much money groups have to spend, but whether or not what they are saying is true and what they are doing is right. Fighting greenhouse gas emissions seems like the right thing to do, although it should be done not in order to change the world but, indeed, to tackle climate change.
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Did the Finnish scientists who oppose capitalism notice that not only do some communist institutions emit greenhouse gases, but some capitalist institutions are actually taking notice and are trying to do something about climate change?
The latest initiative, as reported by Joshua S. Hill on Cleantechnica: “Nearly 400 investors with assets worth $32 trillion announced The Investor Agenda last week, a first-of-its-kind global agenda aimed at demonstrating and supporting investors in accelerating and scaling-up actions critical to meeting the goals of the Paris Agreement.”
Hill notes that The Investor Agenda was launched at the Global Climate Action Summit held in San Francisco recently by a group of partner organizations including Asia Investor Group on Climate Change, CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change, Principles for Responsible Investment, and UNEP Finance Initiative.
“The self-proclaimed aim of the Agenda is to call global investors to accelerate and scale-up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement.”
“Specifically, the Agenda provides a way for investors to directly report actions they are taking, and a means to scale-up their commitment to act across four key areas —Investment, Corporate Engagement, Investor Disclosure, and Policy Advocacy.”
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But whatever investors and citizens do, ultimately it is the policymakers (capitalist or otherwise) getting together in Katowice, Poland, for the 24th edition of the Conference of the Parties (COP24) in December, who will have to decide on the policies that are needed to tackle climate change. If they don’t assume that responsibility, it is going to be very difficult to solve the problem.
One policy measure that will no doubt be discussed is to put a significant price on carbon emissions. Thus far, although many countries have established forms of carbon pricing, prices have been “too low to cut greenhouse gas emissions and stave off the worst effects of climate change”, according to a new study from the Organization for Economic Co-operation and Development (OECD), reports Reuters.
The OECD examined carbon pricing between 2012, 2015 and 2018 in 42 OECD and G20 economies, which represent around 80 percent of global carbon emissions.
“It found the average pricing level across the countries in 2018 was 76.5 percent lower than the benchmark 30 euros ($35) a tonne it said is needed.”
“The pricing gap had narrowed, from 79.5 percent in 2015, but ‘carbon prices need to increase considerably more quickly than they have done in recent years in order to ensure a cost-effective low-carbon transition’, the report said.”
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Another policy issue that will be on the table in Kawotice is what is known as “the carbon loophole”, which refers to “the embodied carbon in traded products”.
According to a recent report from KGM, Global Efficiency Intelligence and ClimateWorks Foundation, “These emissions are a growing issue for global efforts to decarbonise the world economy. Embodied emissions in trade are not accounted for in current greenhouse gas accounting systems. If they were, many promising climate trends would be negated or reversed. For example, many achievements of reducing emissions by developed countries under the Kyoto Protocol would actually appear as emissions outsourced to developing countries.”
This report provides “a newly updated analysis of the carbon loophole …”. It confirms “earlier reports that around one quarter of global CO2 emissions are embodied in imported goods, thus escaping attribution in the consuming country (the end user) and instead being debited at the producer side.”
What is more, “the proportion of embodied emissions has been growing. Since carbon intensity varies between countries, as new climate policies emerge, the loophole could be widened further”.
They note that “The shifting of air pollution provides a worrying example: despite strong, successful air quality legislation in the U.S. and EU starting in the 1970s, global air pollution in total has continued to grow. The carbon loophole could permit the same to occur with GHG emissions.”
The authors say that “Better regular monitoring of trade in embodied carbon is needed …Unless consumption-based accounting is used, countries may continue to export their emissions to meet their Paris Agreement targets, as occurred with the Kyoto Protocol.”
