The events of the last few days, weeks, and months on Wall Street are, I think, sadly germane to this blog. Of all the characteristics that quintessentially define what it means to be a modern American today, “living beyond our means” would certainly be at the top of the list.
We are seeing a massive and ultimately unsustainable transfer of wealth from Americans to other countries, particularly China and the oil producing nations. The inevitable result is a long-term decline in the value of the dollar and hence a long-term decline in our standard of living relative to the rest of the world — all in the name of overconsumption and, ultimately, self-destruction. It almost makes you want to shout, “Drill baby, drill.” Almost.
So it’s hardly a surprise that our entire financial system appears to be a house of cards. I’m not sure anyone should shed a tear for the Masters of the Universe at Lehman, but they had started to do some good work in the carbon/climate arena, which I had previously blogged on. In memorium I’ll repost the highlights.
Last year, they released a terrific report, The Business of Climate Change II, which I blogged on here: Must Read Climate Report from Lehman Brother. Among other things, Lehman backed up the Stern Review on the Economics of Climate Change, and agreed with many others that Stern chose a reasonable discount rate:
Our conclusion now, after reading further into the issue [of discount rates], and reporting on it below, is that while neither Stern, nor economists, nor philosophers more generally have had the last word on this issue, Stern’s cost estimates arguably were not biased upwards and hence warrant continued serious consideration.
Also last year, they presented in detail analysis that the European Union Emissions Trading Scheme was not the failure that so many people thought:
Whatever the decision beyond 2012, we judge that the EU ETS provides a credible first framework from which governments are gaining significant experience.
Lehman was in a tiny way becoming a credible source of useful financial and economic analysis in the climate arena. But greed is ultimately unsustainable, a fact that will become all too painfully clear to most Americans, indeed most of humanity in the coming years (see “Is 450 ppm politically possible? Part 0: The alternative is humanity’s self-destruction“).
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Over at gristmill there’s a report that the carbon desk is one of the operations Lehman already shut down, and some speculation on why, given that they said normal operations would continue for the time being.
The answer seems to be that in the general chaos they’re shutting down the smaller things.
Our entire civilisation is based around the consumtption of finite resources (oil, gas, coal, Phosphorus, copper, etc). It clearly cannot last, yet we have developed this amazing ability to ignore this simple fact.
There is roughly 1 cubic mile of oil left in the world. Not much really, when you consider it is being drained out at the rate of 85 million barrels a day to keep all the cars, trucks, ships and airplanes in the world running.
I struggle with the concept of “wealth”. I suspect that all the assets that make up our wealth (cars, houses, roads, airports, complex financial institutions, etc) may suddenly become worthless as fossil fuel drains away.
Robert, even if by some miracle we stopped using finite resources, at the rate we’re going, we’re going to run out of renewables before too long, due to the mathematical certainty of the collision of exponential growth with the fixed.
Let’s say population stabilizes in 2050 (it had better) at 11 billion, and the rest of the world rises to meet the first world at an energy consumption of 11kW per capita in 2050. That is 121 TW, or 3816 EJ/year. Suppose from then on our standard of living is proportional to our energy usage, and energy usage goes up at 2% per year to advance our standard of living. In just 350 years (2400) we reach the renewable energy on Earth, assuming we can use it at 100% efficiency.
Simple mathematics says exponential growth will stop. Some century humanity will figure this out, but probably the hard way.
pain is in the pipeline…there is no way that we are going to escape hard times in either scenario.
We keep using fossil fuels – we roast and run out.
We switch to alternative energy some how in time – we can not support our current population and consumption.
How practical are renewables in the absence of fossil fuels? The last time wind and water power were dominant was before the era of fossil fuel and the devices (windmills, water mills) were made of locally sourced materials and crafted by hand.
It is by no means certain that the complex infrastructure needed to support a network of wind turbines (manufacture, maintenance, provision of raw materials to make them out of), electrical distribution grid, education and training of staff, etc. would survive without fossil fuel inputs.
Earl, paulm:
This of course is why efficiency gains are so important. That in fact is one of Joe’s fundamental tenets for this blog (and the one that attracted me here, from a recent salon.com article of his). And it’s incredible how much potential there is in this area.
For example, switching from a gas to electric car inherently moves you from 10-20% energy efficiency to above 80%; reducing the weight of the cars along with it adds another multiple.
If instead of raising our energy consumption 2% a year or whatever, it’s quite possible that we decrease the global demand steadily, even as the new world powers rise up. It just takes enough people paying attention (i.e. “political will”). Fortunately, efficiency measures generally pay you back very quickly and handsomely, so there will be clear “business reasons” for companies to pursue them.
Doug, I know. I was pointing out the problems with exponential growth in anything. To illustrate your efficiency point, see a chart I prepared that illustrates what could be accomplished with negawatts (electricity saved through efficiency improvements):
http://www.killian.com/ earl/ climate/ ElectricityScenario.gif
Note that power generation could decline until approximately 2027 despite the increasing population and the transition from gasoline to electricity as transportation fuel.