Nafeez Ahmed — Inside the new economic science of capitalism’s slow-burn energy collapse

Game-changer?

INSURGE intelligence - Medium
Inside the new economic science of capitalism’s slow-burn energy collapse
Nafeez Ahmed

Jeremy Grantham — The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose)

Good summary of the basics of energy economics, with shout-outs to Hyman Minsky and Kenneth Boulding, and high praise for Jamie Galbraith.

GMO Quarterly Letter Third Quarter 2014
The Beginning of the End of the Fossil Fuel Revolution (From Golden Goose to Cooked Goose) 
Jeremy Grantham

John Aziz — Get ready for a massive renewable energy boom

Renewables are projected to be the fastest growing source of energy over the next 30 years. And that's a conservative estimate.

The Week
Get ready for a massive renewable energy boom
John Aziz

Nafeez Ahmed — Imminent peak oil could burst global economic bubble: study

A new multi-disciplinary study led by the University of Maryland calls for immediate action by government, private and commercial sectors to reduce vulnerability to the imminent threat of global peak oil, which could put the entire US economy and other major industrial economies at risk.

The peer-reviewed study contradicts the recent claims within the oil industry that peak oil has been indefinitely offset by shale gas and other unconventional oil and gas resources. A report by the World Energy Council (WEC) last month, for instance, stated that peak oil was unlikely to be realised within the next forty years at least. This is due to global reserves being 25 per cent higher than in 1993. According to the WEC report, 80% of global energy is currently produced by either oil, gas or coal, a situation which is likely to continue for the foreseeable future.

The new University of Maryland study, in contrast, conducts a review of the scientific literature on global oil production and argues that the bulk of independent, credible studies indicate that a “production peak for conventional oil [is] likely before 2030″, with a “significant risk” it could occur “before 2020.” Unconventional oil such as Canadian tar sands is “unlikely to expand enough to fill the gap”, and this also applies to “shale oil and gas.” Shale wells, the study argues, “reach their maximum production levels (peaks) much earlier than conventional ones and are therefore difficult to operate profitably.”

The Raw Story
Imminent peak oil could burst global economic bubble: study
Nafeez Ahmed, The Guardian

Larry Elliott — Saving the planet from short-term thinking will take ‘man on the moon’ commitment

Instead of dealing with the global challenges emerging from increasing complexity, the argument is over "affordability" in a fiat system and pursuing maximum utility as individuals and nations. Myopic in the extreme.

Pascal Lamy had a stab at tackling some of these difficult issues last week when he presented the findings of the Oxford Martin Commission for Future Generations, which the former World Trade Organisation chief has been chairing for the past year.

The commission’s report, Now for the Long Term, looks at some of so-called megatrends that will shape the world in the decades to come, and lists the challenges under five headings: society; resources; health; geopolitics and governance.

Change will be difficult, the study suggests, because problems are complex, institutions are inadequate, faith in politicians is low, and short-termism is well-entrenched....

Lamy expressed concern that the ability to address challenges is being undermined by the absence of a “collective vision for society”. The purpose of the report, he said, was to build “a chain from knowledge to awareness to mobilising political energy to action”. 

The Raw Story
Saving the planet from short-term thinking will take ‘man on the moon’ commitment
Larry Elliott, The Guardian

Tara Lohan — The Coming Crash: Our Addiction to Endless Growth on a Finite Planet

Tara Lohan: How did this book project come about? I know it started out as a book about tar sands, but then it evolved into so much more.

Richard Heinberg: The economy is all about energy. Almost all of our environmental issues relate to energy in one way or another. Certainly, climate change does. War and peace, it's all about energy. Upping the energy literacy of the American people and thought leaders is a pretty high priority....

...over the course of the next few years, we're going to be making absolutely critical decisions about our energy future, our environmental future and our economic future. Unless we have these basic elements of energy literacy, unless more of us understand the criteria by which to evaluate these different sources of energy, we're going to get a lot of things wrong. We think energy literacy is really important. 

AlterNet
The Coming Crash: Our Addiction to Endless Growth on a Finite Planet [With Photo Slideshow]
Tara Lohan

Jeff Spross — In Australia, Wind Power Is Already Cheaper Than Fossil Fuels, And Solar Is Right Behind

According to the latest research from Bloomberg New Energy Finance, electricity from wind power can now be supplied more cheaply in Australia than power from either coal or natural gas — and solar and other forms of renewable energy aren’t far behind.
Older coal-fired power plants from the 70s and 80s still compete at lower prices than renewables — but only because their construction costs have depreciated. For the deployment of any new power generation in Australia, renewables now appear to be the way to go.

Australia currently charges polluters $23 in Australian dollars per metric ton of carbon they emit, but the study concluded that wind power would still undercut fossil fuels even without that correction of the market’s failure to properly build in the costs of carbon pollution....

Climate Progress
In Australia, Wind Power Is Already Cheaper Than Fossil Fuels, And Solar Is Right Behind
Jeff Spross

Gail Tverberg — Why World Coal Consumption Keeps Rising; What Economists Missed

What did Economists Miss? 

Unfortunately, the list is rather long.

Our Finite World
Why World Coal Consumption Keeps Rising; What Economists Missed
Gail Tverberg | Actuary

Jeff Spross — Report: Humanity Has Overshot The Earth’s Biocapacity

In 2008, the Earth’s total biocapacity was 12.0 billion gha, or 1.8 gha per person, while humanity’s Ecological Footprint was 18.2 billion gha, or 2.7 gha per person. This discrepancy means it would take 1.5 years for the Earth to fully regenerate the renewable resources that people used in one year, or in other words, we used the equivalent of 1.5 Earths to support our consumption.

Climate Progress
Report: Humanity Has Overshot The Earth’s Biocapacity
Jeff Spross

Clonal Antibody — The Decline of American Industry in one maybe two graphs

UPDATE: This post contains a mistake. See corrected post here.

I was intrigued by Art Shipman using an apparent decline in capacity utilization to point out the possibility of a coming recession. It is quite clear that every recession is accompanied by a sharp decline in capacity utilization. However, not every decline (even fairly large declines) in capacity utilization results in an "official" recession. Capacity utilization as a measure relies upon "capacity" to produce, and the "utilization" of that capacity. But folklore would have it that the Industrial capacity of the US has been declining. Is that really so?

So I looked at the time series on Fred for US Industrial Production. This is posted below.

This does not look like declining industrial production to me. So what gives? If one digs deeper, one finds out that this is an index based on the dollar value of the US industrial production. So now if we were to divide this series by the CPI, we get a more interesting graph shown below

This however, does not take into account the rise in the US population. So if we divide the series by the population index, we get the following very interesting graph

This shows very clearly, that US industrial capacity peaked in 1968, went back up till 1973, declined sharply till 1975, rose a bit till 1978, declined sharply till 1982 and then remained declining at a slow rate ever since.

1968, likely is the end of the continental US oil production, 1973, the OPEC oil shock, and 1978 the Iran oil crisis. An interesting set of likely causation to the end of US industrial might?


The Decline of American Industry in one maybe two graphs

Submitted by Clonal Antibody via email

Chris Cook — Introducing the E-3

TEHRAN - How many barrels has the Group of Seven (G-7) leading industrialized nations? This neatly sums up the way in which the institutions of global governance are skewed towards the centers of finance capital in developed nations rather than the resource rich, but less developed, countries upon which they depend.

Here in Tehran, now entirely cut off from the global financial system and with the rial falling like a stone, that question has never been more relevant....

...some of the smartest people on the planet have made possibly one of the dumbest, and certainly one of the greatest, strategic errors in history. The smart people at the US State Department and Treasury have prevailed upon the craven Belgian-based SWIFT bank messaging system to entirely cut off Iran from the dollar system.

So Iran has to look outside dollar economics for solutions, and I am here to advocate an approach that addresses both problems by literally re-basing Iran's economy on the absolute value of energy rather than a black hole of debt.

Read it at Asia Times Online

Introducing the E-3
By Chris Cook — a former director of the International Petroleum Exchange.

(h/t Kevin Fathi via email)

This will rattle your teeth. Hope someone has Mr. Cook's back.

Book review: "Energy and the Wealth of Nations"

The book is based on the premise that the capture of excess energy supports all the functions of life....

Human civilization began when agriculture led to enough excess storable food (derived from solar energy, via plant life) to support non-producing groups of priests, soldiers, royalty, artists and others. Technology gradually allowed the capture of wind and water power (other forms of solar energy) for trading, simple manufacture and other purposes....

Something remarkable happened late in the 18th century – people discovered how to obtain and use vast new forms of stored solar energy, such that they were no longer dependent on the energy received in a single season or a few years. Those new energy sources – fossil fuels – came from vast new supplies of concentrated and portable energy – first coal, then oil, then natural gas. The challenge was on, both to find and extract more of these energy stores and to find new ways to use them....

Conventional economics and history texts rarely notice the essential role of cheap and plentiful resources on the massive changes of the past two centuries, preferring to focus on inventions, political changes, and new economic forms. While these were all important, it all started with energy.

Hall and Klitgaard show that the correlation between energy use and economic activity (and population levels) has been very high throughout this period. Most academic economics considers production to be a function of capital and labor alone, but including energy makes the analysis work much better. Cheap energy, more than anything else, has facilitated new technologies and fostered the creation of a true global economy.

This would be merely an interesting observation were it not for a nagging problem – energy (starting with oil, soon to be followed by coal and natural gas) has started becoming more expensive, harder to find, and absolutely scarce in many parts of the world. The authors say that the amount of net energy (the amount left after the energy cost of production) available has stopped growing, or is about to. Since economic growth depends on growing amounts of net energy (especially at the global level), flat energy supplies will lead to the end of economic growth and that will come sooner, not later. 

This is something for which no one is prepared.

The key analytic concept, which Hall developed over the last 40 years, is EROI – the energy return on energy invested – the best measure of net energy.....

Stated differently, it used to take 1% of the ultimate output to extract our energy supplies, but now it can take 6% to 20%. EROI is independent of the monetary cost or price of energy-- due to subsidies, something can make investment sense but not energy sense. Most EROI estimates for corn-based ethanol, for instance, are between 0.9 and 1.9, so energetically this supposedly renewable fuel barely breaks even. Since the economy is ultimately grounded in energy, not finance, Hall and Klitgaard argue, the energy return is more important than the financial return on an energy project and energy system....

That’s a brief overview of the book’s first theme: We have not paid adequate attention to the real drivers of economic activity and change, or to their future availability. The second theme explains why – the bankruptcy of economics....

These are handy assumptions for creating mathematical models, but not for creating something that reflects reality....

We are not surprised when answers in biology, geology, and physics turn out to be very complicated. But we expect economics, which combines the biophysical aspects of all three with the equally complicated issues of human behavior and intention to be easily explained by a few straightforward equations and understood by politicians when presented between market updates on CNBC. Hall and Klitgaard argue that, far from this forced simplicity, what economics needs is to be consistent with the real world, both in physical and behavioral terms. The book includes chapters on the science and mathematics needed to proceed with this work.

Read it at Energy Bulletin
Book review: "Energy and the Wealth of Nations"
by Richard Vodra, J.D., CFP® | President of Worldview Two Planning of McLean, VA

The Solar Envelope: How to Heat and Cool Cities Without Fossil Fuels

For weekend reading: this is a long but fascinating post about passive solar that is a must read for anyone interested in alternative energy, environmentalism, energy economics, environmental economics and ecological economics. I suggest reading it in conjunction with the Tom Murphy post on economics and physics that just went up. The post looks at passive solar historically and how it can not only be adapted today, but also scaled up.

Read it at The Oil Drum
The Solar Envelope: How to Heat and Cool Cities Without Fossil Fuels
Posted by Rembrandt

Tom Murphy — Exponential Economist Meets Finite Physicist

Humorous as well as informative as physicist Tom Murphy proves that unlimited growth indefinitely over time is physically impossible.

Read it at Do the Math
Exponential Economist Meets Finite Physicist
by Tom Murphy | Associate Professor of Physics, University of California, San Diego

Fouling the nest with fracking?

A former staffer at a state government agency responsible for regulating hydraulic fracturing, or fracking, has warned that allowing the controversial gas drilling method in New York would lead to contamination of the state's aquifers and would poison its drinking water.

These stark warnings, issued by Paul Hetzler in a letter to an upstate newspaper, came as a current employee and union representative at the Department for Environmental Conservation (DEC) sounded alarm bells over the under-staffed agency's ability to monitor the industry and to deal with any emergencies if the plan goes ahead.

Read it at The Guardian (UK)

Fracking will poison New York's drinking water, critics warn

by Karen McVeigh

Peter Cooper — Will MMT become part of the problem instead of the solution

If we needed evidence that Modern Monetary Theory (MMT) is open to different political viewpoints, it has been forthcoming lately in the blogosphere. In itself, this is a good thing. To be a useful framework for debate over policy and political alternatives, there needs to be an openness to different perspectives. From my vantage point, one effect of the emerging debates has been to reveal a seemingly large group who want to do less with MMT than the academic developers envisaged, while another (probably much smaller group) want to do more. Needless to say, I fall into the latter category. My concern is that MMT is at risk of becoming just another tool for those who wish to preserve the status quo.

Lately, I find myself somewhat distant from the world view many (though certainly not all) MMTers seem to espouse. The debate over the job guarantee (JG) can serve as one illustration of what I have in mind. There are other examples I could have selected, but this one seems topical....

Read it at hetecnomist.com

Will MMT Become Part of the Problem?
by Peter Cooper

I've had these thoughts from the beginning of my encounter with MMT. However, I don't think that attempting to improve the existing system from within excludes the larger intention of overhauling the system. 

Generally, overhauls only occur at the point of breakdown, and we aren't quite there yet. I'm OK with MMT putting off the breakdown for some time, since I am not a liquidationist. I don't see the gain in destroying existing structures, even though they may be dysfunctional, with the hope that they can be replaced with something better without a clear plan. Societal change is much safer when it is incremental and in response to current needs felt by a large number of people. I believe that this is in the process of unfolding.

I would like to see an alternative development, or wing, of MMT that aims to replace replace dysfunctional institutions with functional ones suitable for the challenges of this century instead of remaining stuck in the last century, even though that is better than returning to the 19th century as some seem to want. 

Institutions generally become dysfunctional as they become obsolete. In my view, the present configuration of "capitalism," was is not really capitalism anyway, is in its late stages if it hasn't already entered obsolescence. We need to be thinking forwardly rather than trying to preserve a system that has served its purpose. It's time to move on. 

MMT is a tool for showing the way to create a material life-support system for a global meta-economy of the 21st century that recognizes that business and finance are now predominantly transnational. The challenge is preserving democracy in this transition to new economic forms that threaten to centralize power and decision-making in the hands of a few.