Updating the Limits to Growth
I was slightly puzzled to see this piece stating that the Club of Rome's predictions about the Limits to Growth have been updated. Further, guess what, civilisation is still going to fall over around 2030. For, you see, we're going to run out of everything just like they said and billions will die, empires tumble into the sea and Gaia will be displeased.
So, I thought I'd have a look around and see if I could find the original paper. I think it's this one: right bloke, right subject anyway even if it might not be the most up to date edition.
The basic contention is that we're going to run out of resources and thus won't have any resources to have an economy with. Rather to my surprise, they manage to get the point about metals and minerals correct: there's no shortage of them on any reasonable (ie, centuries) timescale even with current extraction technology. Then I'm afraid that they make a rather large mistake:
To account for substitutability between resources a simple and robust position has been taken. First, it is assumed here that metals and minerals will not substitute for bulk energy resources such as fossil fuels.
Well, that is interesting, isn't it? First we've got the ignoring of the economists' mantra that absolutely everything is substitutable. But more important than that we've got someone supposedly interested and informed in these matters claiming that we're not going to replace fossil fuels with minerals: when, of course, it is the stated intention of every government on the planet to do exactly that.
Nuclear is replacing fossil fuels with fissile (and possibly at some point fusionable) minerals. Windmills are replacing fossil fuels with aluminium, steel, a bit of copper and some rare earths for the magnets. Solar power replaces fossil fuels with silicon, gallium, germanium, indium and possibly cadmium and tellurium.
Which is something of a problem for the basic thesis that the planet goes to hell and damnation in 18 years time really: insisting that we'll not substitute what we're already substituting.
Agreed, current substitutions aren't very efficient as yet, there's a lot more work to be done, but basing your predictions of doom and gloom on the impossibility of something we're already doing seems, well, incomplete somehow, as if there's a hole in your argument.
Privatize the sea
Could there be a better example of the incompetence of government management than the current state of the world’s fisheries? A combination of subsidies, quotas and the tragedy of the commons all play their part in the depletion of what should be one of the worlds most easily renewable resources namely the billions of fish that swim in our oceans.
We have seen the ludicrous, sad prospect of North Atlantic cod becoming extinct. Of course it has been claimed that the depletion of fish stocks is not due to the failure of government but the rapid increase in technology, which allow fisherman to increase their catch. This was the verdict of Scientific American in 1995. However, what the scientists should remember is that technology and innovation is not limited to our ability to harvest, but also to our ability to conserve. There is no zero sum game here.
Many governments' solution to the tragedy of the commons has been some market reform such individual fishing quotas where the total catch is decided usually by the government. Fishermen and other private companies then manage and trade their part of the quota. This is the situation that currently prevails in New Zealand and has proved to be fairly successful in conserving fish stocks.
However, a much more radical and effective approach can be taken. By introducing full scale property rights to bodies of water and large schools of fish, we can move from our current primitive hunter-gatherer method of fishing to fish husbandry and homesteading of the oceans. This is not as unrealistic as it may sound. Technologies such as Integrated Undersea Surveillance Systems and Advanced Very High Resolution Radiometry allow for close to virtual fencing of bodies of water and surveillance of fish movements, which can be harnessed to prevent poaching.
The use of Autonomous Underwater Vehicles can manage fisheries and pollution, as well as allowing the herding schools of fish toward optimal feeding grounds. A Japanese company is experimenting in fertilizing phytoplankton to increase fish stocks, and, on the increases observed, has estimated that a mere 100,000 square miles of ocean could produce the equivalent of what the entire world now produces in terms of tonnage of fish.
The potential for large-scale aquaculture is huge. Between the years 1984-1995, even with government restrictions, aquaculture (fish farms, etc) grew in production from 6.5 million tons to 21 million tons. Success has been seen not just in quantity, but also in quality. Through dietary control, aquaculturists can produce fish with higher or lower fat contents and adjust strength of flavour.
Property rights in oceans provide a huge opportunity for large scale sustainable aquaculture. Not only this, but ownership of the ocean floor would significantly encourage private investment into resource exploration and set clear lines in terms of the responsibility of those who mine oceans, should accidents and large scale pollution occur. The evolution of private property on land ended the tragedy of the commons, helping to move humanity from cyclical starvation to prosperity and growth. Ending the tragedy of the ocean commons in the world’s oceans may yet prove an equally revolutionary force in providing wealth, prosperity and alleviating the suffering of mankind.
Drill Baby Drill
This shale gas thing: drill or not drill? There are reasonable arguments all around the question and the final answer will depend slightly upon what you think particularly important and mostly on how strong or important each of the arguments are.
On the one side we've the various economic arguments: lots of cheap gas right here at home would be a nice thing to have. Keeping the lights and the heating on on those cold winter days when there's no wind would be nice too. On the other hand we've all those environmental arguments. Will we be polluting the groundwater? What about earthquakes?
Now it is possible for each of us to try and wade through each and every of these different arguments and try to come to some sort of conclusion. Or we could make use of those nice people called scientists to wade through them all for us. We'd need to read and consider their conclusions, sure, but we don't have to do all the digging ourselves.
And we're in luck for here is just such a report. OK, so it's about the US but the gas is the same, the basic geology is the same and the techniques are all the same. The conclusion is that yes, of course, there are possible environmental dangers. But given that they're easily controllable by basic safety measures we should get on with the drill baby drill bit.
The benefits of large amounts of locally available and relatively low carbon, and above all cheap, energy are simply so much higher than the risks that it's pretty much a no brainer.
And we in the UK have a further consideration of course. If it all goes wrong in the test case, well, it's only Lancashire, isn't it?
Even Obama gets it
Recognising a great opportunity when he sees it, US President Obama has announced a series of measures to boost the demand for natural gas whose price there has recently plunged on surging supply due to ever improving extraction technology and rapid development of shale gas reserves.
Now, Obama’s proposals may not quite meet classic market strictures for policy initiatives: he wants tax breaks for trucks powered by gas and grants to communities who have ideas for encouraging the use of natural gas.
But contrast that with the hemming and hawing over here about going after our own shale gas reserves. Not for us any cheap’n’cheerful solutions to high energy prices or a partial solution to any climate change agenda. No, we remain intent on crucifying ourselves to uneconomic windmills, leaving us twisting in the wind - when it blows but not when it blows too much.
We’re all fretting about the need for a growth agenda to get us out of the current doldrums and this is an industry with huge potential for domestic investment and export opportunities, not to mention a welcome relief in the cost of living. Growth, jobs, exports, higher disposable income – what’s not to like?
Natural gas may not be the ultimate solution to any climate change worries but it’s better than the alternative – coal, petrol or fuel oil. However, we seem intent on making the perfect the enemy of the good. There’s only two ways to effectively reduce carbon emissions: shut down the economy or spur its growth to generate sufficient funds for the required investment. Natural gas is a golden opportunity to accomplish the latter.
Forward to the Middle Ages!
It is really quite marvellous how all of these various things we're supposed to be doing to save the planet are exactly the things we used to do which damaged the planet so badly. As Matt Ridley points out when talking about what we're supposed to do to keep warm when we can't burn coal or oil:
To replace coal, the government projects that by 2020 Britain will be generating electricity from burning up to 60m tonnes of biomass, mainly wood, about five times the timber harvest that Britain could conceivably produce.
Now "five times the harvest we could possibly produce" means that we would be over using that resouce. Denuding these islands of trees in fact. Which is what we actually did do all those centuries ago and what impelled us to go and conquer a quarter of the world in order to gain resources (no, really, we did things like go to war against Denmark so that we could have access to the Baltic timber to replace what we'd burnt) and also to start digging up coal in the first place.
Because there was no wood left, see?
It may well be that out there somewhere is the technology that can wean us off coal but it's almost certainly not going to be the one that we abandoned to embrace coal in the first place , is it? For the clear and obvious reason that the last time we did it there wasn't any wood left which is why we stopped doing it.
Guys, you know, "Forward to the Middle Ages" is meant to be a joke about the more extreme greenies, not a blueprint for the government to follow.
Renewable energy: Vision or mirage?
- As renewable energy sources produce power intermittently, they cannot replace gas, coal and nuclear generation, even with further development.
- Solar and wind energy have no prospect of becoming economically competitive in an unrigged market. Government intervention will lead to higher energy costs and jeopardize energy security.
- Increased investment in wind turbines will do little to reduce carbon emissions and fossil fuel consumption.
The report ‘Renewable Energy: Vision or Mirage?’, released today by the Adam Smith Institute and Scientific Alliance, reveals that the government’s focus on renewable energy sources is misguided. The UK’s plans for renewables are unrealistic, and these technologies cannot provide the secure energy supply the country needs. Present policies will lead to an energy crisis by the middle of this decade. The key points from the report are detailed below:
- Wind and solar power do little to reduce carbon emissions, as they need large-scale back up generating capacity to compensate for their intermittency.
- With the decommissioning of many of the UK’s coal-fired stations – and nearly all existing nuclear reactors – over the coming decade, energy security is now a priority for policymakers alongside the drive to reduce carbon dioxide emissions. However, even ignoring cost issues, problems of intermittency mean that renewable technologies are incapable of making a major contribution to energy security.
- The Renewable Energy Roadmap for 2020 is hugely overambitious. Renewable energy generation is currently 28% below its already reduced target. Subsidising renewable energy also comes at a cost to consumers who pay for it through higher electricity prices. Nuclear and gas are the most viable energy sources to avoid a capacity crisis in the near future.
Wind turbines are not the solution
- To achieve current targets for wind turbines for 2020, almost 5 wind turbines must be installed every working day, with the majority of them offshore. This is unrealistic.
- No matter how much wind capacity is added, there is no way of storing the energy long enough to avoid the need for backup generators. It cannot ensure the lights stay on, so there can be little reliance on it.
- Experience in other countries shows that a large investment in wind turbines must be matched by large-scale conventional back up generating capacity, which makes any reductions in CO2 emissions quite modest.
- Wind farms in the UK have a capacity factor of only 25%; investment in these farms would not be a commercial proposition without subsidies, even ignoring the intermittency problem.
- Wind power operators in the UK get a higher subsidy per MWh than in other countries in the EU and yet many approved wind farms never get built due to problems connecting to the Grid. Onshore wind turbines face much opposition from the public and off-shore turbines are more expensive to install.
- The operational life for wind turbines is just 20 years. This is much shorter than for coal, gas or nuclear and is another factor making wind power an expensive option.
- Planned high investment in wind power up to 2020 will preclude the possibility of investment in diversified and efficient generating capacity. Wind power is an inefficient of use of taxpayers’ money, is not as green as commonly perceived, and will not provide for the energy needs of the UK.
Solar power
- This is high cost and inefficient at our high latitude.
- The focus of subsidies has been on small scale, domestic installations which are intrinsically less cost effective.
- As there is no technology for long-term, high capacity storage of electricity, this technology cannot help to meet Britain’s energy needs.
- Large solar farms are difficult to build as they need a large land area. This acts as a financial disincentive – nuclear and coal-fired power stations need much less land.
It is difficult not to conclude that the official enthusiasm for renewables has more to do with the power of the green lobby than economics and energy security. Martin Livermore, joint author of the report, adds:
“For too long, we have been told that heavy investment in uneconomic renewable energy was not only necessary but would provide a secure future electricity supply. The facts actually show that current renewables technologies are incapable of making a major contribution to energy security and – despite claims to the contrary – have only limited potential to reduce carbon dioxide emissions.”
“Consumers have a right to expect government to place high priority on a secure, affordable energy supply. It seems that ministers have not yet realised the need to invest in more nuclear and gas generating capacity if the electorate is not to be badly let down.”
Wind turbines increase carbon!
Now here's an interesting mini-point. We all know that wind turbines don't work when the wind isn't blowing, which can be pretty annoying if you want to cook your Christmas dinner and the country is beset by an eery calm. So you need to maintain other methods of generating electricity to step in when the blades aren't turning. Right now, that generally means fossil-fuel generation – gas or coal. You turn it on when the wind isn't blowing, and off when the turbines are making juice. Simple and efficient, eh?
Not quite. Bentek Energy, an energy market analytics and data company in Colorado, points out that you can't just turn a fossil-fuel power station on and off. If you do, you find that the emissions caused by the thermal inefficiencies when you are warming up and cooling down outweigh the reductions in emissions from the wind generators themselves. You would be better to run the coal-fire stations at their efficient level all the time.
So you might think that wind turbines are a good way to reduce carbon emissions. Actually, they are a good way to increase carbon emissions!
Private property is the solution
What to do about certain environmental problems is the great question of our age. It's obvious that, steering clear of contentious matters like the atmosphere, that we're driving some ecosystems entirely into extinction. How to stop this, how to solve these sorts of problems, is something we really ought to be concentrating on. And as it turns out, private property rights are indeed, for some subset of these problems, that very answer.
Take fishing for example: we're vacuuming everything edible out of the seas at present and we're really not going to be able to do that much longer. The current bureaucratic methods of trying to control this aren't working: we're still vacuuming just about everything edible out of the oceans. Which is what makes this story so interesting.
Chesapeake Bay is that huge squiggle on the map, running some 200 miles south from Washington DC in between Maryland and Virginia. It's also long been the source of bounteous harvests of oysters (my own immediately post-school teenage years were spent opening such delights for restaurant patrons in the area). However, the legal regimes on each side have been completely different. On the Maryland side, only the "hunting" of wild stock was allowed, on the Virginia the leasing of seabed and planting then harvesting.
It shouldn't come as much of a surprise to find out that Virginia produces vast numbers of fat oysters and has similarly vast numbers still in the water. Maryland has been pretty much fished out.
We really do need to take note of where fisheries are abundant and where they're not and then copy the management methods of the abundant ones: the Alaskan halibut fishery, the Icelandic and Faroese general fisheries, the New Zealand Orange Roughy. These are the places which have granted private property rights to fishermen and which as a result have waters still teeming with fish.
In effect, we've got to stop fisheries operating on hunter gatherer economics and move them over to working on farming such.
If solar's so great why isn't.....
An interesting question being asked. If solar power is so great, if it's all just on he verge of becoming economic to use without subsidy, then why can't we see this in the prices and valuations of the companies that make solar power?
Last week, Tyler Cowen asked a good question: if solar energy is really close to dropping below the cost of conventional energy, why isn't it showing up in markets? How come solar companies (and not just thin film firms like Solyndra) getting hammered, while things at good old fossil fuels are getting better?
There are two possible answers as far as I can see. The first is of course that solar isn't about to make some great big price breakthrough, we're not all about to start using it without subsidy and essentially the whole story is a crock.
Or there's the other answer which is the one that I believe. Solar is getting better, it will cross that "profitable to use without subsidy" line pretty soon. However, the reason that the share prices of solar manufacturing companies are not soaring in anticipation is because share prices don't in fact measure sales. Or consumers' use of the company's products, not boiling Gaia or even prices falling into viability. What share prices measure is future profits.
And I'm deeply suspicious that anyone is going to make large profits by manufacturing solar cells. There's just too many people in the business: and it's not even that complicated a business either. We're actually seeing something approaching a properly competitive market in fact.
In order to make solar cells more cheaply a producer has to get cheaper sand, cheaper energy, use less energy in the process (it is essentially baking beach sand in order to get the silicon), slice the ingots more thinly or finally, just be better at the boring manufacturing stuff. Fewer faults, less labour being used, all that sort of stuff. And the problem from the manufacturer's point of view is that there's no particular point at which they can claim unique intellectual property, a patent, or any real protection for their ideas or processes. It's not like a computer chip where you can copyright (at the least) the coding in or anything.
Solar cell manufacturing is, for all its newness and gadgetry, really just mass manufacturing of entirely interchangeable parts. As such we really wouldn't expect those doing it to make good or large profits over the long term: we'd expect profits to be competed away down to the average return on capital in fact.
As, in fact, we can see is happening as the things get 4 to 5% cheaper every quarter. So the reason we don't see solar stocks soaring as a result of the price competition bringing them closer to economic viability is, umm, the price competition bringing them closer to economic viability.
The hidden solar panel tax
Yet another solar panel has sprung up on a roof in my street. I wonder how anyone who wants to improve the environment could contemplate disfiguring their elegant Edwardian house with one of those.
The answer, of course, is that people only pollute their visual environment like this because there is money in it. Or specifically, because there is a subsidy in it. Middle-class householders who can afford the £10,000 or so to install solar panels get a hand-out, called the 'feed-in tariff', of 43.3p for each kilowatt hour (kWh) they generate, plus a further 3.1p for each kWh fed back into the National Grid. That gives each household that installs the kit an average income of £1,190 a year. A much better return, you have to agree, than putting your £10,000 in the bank, or anywhere else for that matter.
There are even companies who make a business out of it: you can basically rent out your roof to them in return for free electricity, while they pocket the rest of the subsidy. It is no wonder that so many people have despoiled the very places they live in.
Naturally, it is the rest of us who have to pay. Not just the environmental cost of being assaulted by rooftop eyesores. But hard cash too. The gamut of green levies (which also bring you wind turbines atop every scenic hillside) adds an average £42 to our electricity bills, with gas customers paying an additional £25 (plus £13 more towards the EU Emissions Trading Scheme). It means we are paying nearly £100 a year extra for the energy we use.
But there is some sign of relief. The government has pledged to cap our hidden solar panel tax, so it is having to cut the subsidy it pays out too. The average payback for a solar household is reckoned to fall from £1,190 a year to £640 a year – definitely not such a good investment for solar subsidy farmers. Let's hope that spares our local environment any more damage.