I am pleased to announce that I have a new gig, writing for a family of investing newsletters. Their support will enable me to continue my efforts, beyond this blog, and with a much wider readership. They’re totally hip to peak oil (in fact, they’ve built several of the newsletters around it), they’re young and smart and insightful, and I’m honored to join their crack team of investors and pundits.
The company, Angel Publishing, publishes seven free “e-letters” on investing in various niches, and eight premium subscription letters, packed with stock tips and valuable insights. See their whole list of newsletters and prices here.
I am currently writing for two of the free e-letters, Wealth Daily and Energy and Capital, as well as a premium e-letter, Green Chip Stocks. I am writing two or three pieces a week, and I will repost some of that material to the blog, as time and permission allows.
Here is the first piece I wrote for them. It’s a high-level view of everything that this blog is about, and much of what I’m about, and will probably serve as a guide to topics I will be exploring in depth for the newsletters. It’s long, but hopefully, worth your while. Print it out, check it out, pass around to your friends, and most importantly, send me your feedback.
Stay tuned to this space, and to the abovementioned sites, for much, much more!
The Great Awakening (or, Slouching Toward Sustainability)
By Chris Nelder
Nov. 11, 2006
This is the way the world ends
Not with a bang but a whimper
– T.S. Eliot
Earlier this week the Cambridge Research Energy Association (CERA) and its high priest Daniel Yergin put out a press release taking Peak Oil theory and its believers to task.
In a nutshell, CERA believes that technology will save the day….that it will find oil where it can’t be found today, and produce oil that can’t be produced today. And all at a rate that we haven’t seen for decades! Essentially, they see technology magically producing exactly as much oil as our economic projections require.
This exemplifies why trying to understand the global energy situation is so difficult. Not only is there a vast amount of industry propaganda and deliberate misinformation being foisted on the public, but there is also a dearth of reliable data about actual supplies. Or, for that matter, a common methodology for comparing resources and opinions.
We are beginning to learn about the major aspects of this tangled web—peak oil, climate change, resource overuse, environmental destruction, terrorism—but few people are able to view them all at once, as a coherent whole. And this is our tragic flaw. For all our advancement, for all our technology, all our history, our modern achievement of global, liquid, and trusted markets, and our ever-deepening knowledge about the world, we remain mostly ignorant of how all the parts fit together. We are specialists, not holists.
We’re content to tinker with the controls, but don’t bother us with all the “externalities,” like the cost of extracting resources from the environment, the emissions from manufacturing, the environmental impact of using oil or the cost of disposing of it. Indeed, to even suggest that we should worry about these things smells of environmentalist dogma to your average capitalist.
But, as we shall see, we have now reached a “great moment” in human history, a crucial turning point where this whole great experiment in industrial civilization seems poised either to explode into a new heights of technological advances, burgeoning population, and an unprecedented level of global prosperity, or keel over of its own sheer bulk.
Who are the harbingers of this change?
This week, in its biannual Living Planet Report, the World Wildlife Fund said the natural world was being degraded “at a rate unprecedented in human history,” that since 1970 the population of some 1,313 separate species of fish, amphibians, reptiles, birds and mammals from around the world has declined by 30%. Humanity’s “ecological footprint,” our demand for food, timber, shelter, and ecosystem services (such absorbing pollution) exceeded the earth’s biocapacity by 25% in 2003, they said, and if demand continues at the current rate, two more planets would be needed to meet global demand by 2050.
Also this week, a new study published in the journal Science said that given current trends, 100%—that’s right, all—of the ocean’s species will collapse by 2048. The study found that ocean fish, seafood and plant species that have already “collapsed” reached 29 percent in 2003, up from about 13 percent in 1980.
Severn Suzuki, daughter of famed environmentalist and author Dr. David Suzuki, launched this scathing indictment of modern society at the U.N. 1992 Earth Summit:
In my life, I have dreamt of seeing the great herds of wild animals, jungles and rainforests full of birds and butterflies, but now I wonder if they will even exist for my children to see.
Did you have to worry about these little things when you were my age?
All this is happening before our eyes and yet we act as if we have all the time we want and all the solutions. I’m only a child and I don’t have all the solutions, but I want you to realize, neither do you!
You don’t know how to fix the holes in our ozone layer.
You don’t know how to bring salmon back up a dead stream.
You don’t know how to bring back an animal now extinct.
And you can’t bring back forests that once grew where there is now desert.
If you don’t know how to fix it, please stop breaking it!
She was 12 years old at the time.
At a luncheon in Portland last month, John Hofmeister, president of Shell Oil Co., made this unequivocal statement: “The ease with which we all lived in the last 50 years, with cheap energy, is coming to a close. The next 50 years cannot be like the last 50 years [. . .] The oil demand-and-supply equation now constantly flirts with crisis. Americans need to develop a sense of privilege rather than entitlement when it comes to energy use.”
Matthew Simmons, the world’s top investment banker in the oil industry and a top energy advisor to President Bush, recently said this: “There is just no way—with the limitation we have of oil rigs compared to projects—to keep supply growing: That’s an impossibility.” Further, he called for an “end to globalization.”
Think about that for a minute. The top oil investment banker in the world, a man who is deeply committed to business and to global oil commerce, has called for an end to globalization. Even while the rest of the world’s business and political leaders are pouring their energies into promoting it.
Last year, Chevron spent an estimated $40 million on an ad campaign proclaiming that “the era of easy oil is over.” It acknowledged that while it took 125 years to burn through the first trillion barrels of oil, we’ll burn through the next trillion in 30—a surprisingly candid statement.
In 2004, a leaked Pentagon report predicted that rapid climate change may well set off global competition for food and water supplies and, in the worst scenarios, spark nuclear war. We need not revisit here all the numbers and models for climate change; we all know what a very serious threat it is. But consider this: It is estimated that if we were to cease all greenhouse gas emissions today, completely, worldwide, the emissions that are already in the atmosphere will continue to change the global weather patterns for some 100 years or more. Yet we do not even have an elementary framework for understanding and predicting global weather patterns, as meteorology is still very much an infant science. We have already had an impact on the planet that we have no way to understand, let alone control.
And again this week, in a rare concession to reality, the International Energy Agency (IEA) has admitted that the world will need to spend an extra $3 trillion on energy by 2030, and even then there is “no guarantee” the effort would succeed in meeting demand. (If that cost were distributed proportionately to consumption, the U.S., being the consumer of 25% of the world’s energy, would have to spend $200 billion a year for the next 25 years). “The energy future we are facing today is dirty, insecure and expensive” they warned, and called Big Oil’s increased capex “to a large extent illusory” because it’s “blunted” by rising costs for labor and equipment. They also projected that the world’s demand for oil will increase by 1.7% next year. Meanwhile, the drain on OPEC will increase in Q4 of this year by 1.6 million barrels a day over Q3, because non-OPEC producers aren’t keeping up. These statements are in stark contrast to the relatively sunny projections to which we have become accustomed from the IEA.
The world’s foremost authority on peak oil, the Association for the Study of Peak Oil, has modeled all the known and anticipated oil fields in the world and determined that the peak in global production will likely occur around 2010–2012, at which point it will begin a terminal, remorseless decline, tailing off to negligible amounts about 50 years later. We do not know how the supply gap can be filled.
In public statements, Saudi Arabia assures the world that they can increase their production to 13.5 million b/d by 2012, but their actual output appears to be dropping, and the “water cut” from their fields is approaching the point where it will no longer be economical to harvest the field. The Saudis, along with the rest of OPEC, are where the world must turn for more oil, again because the non-OPEC producers are either past their peaks or unable to bring any significant new supply to market—mostly for intractable geopolitical reasons.
U.S. Rep. Roscoe Bartlett, in his 2005 Energy Conference, puts the problem in good perspective: “Eighty-five percent of the energy we use comes from fossil fuels. That will wind down and by and by, we’re going to have to live on that 15 percent and hopefully we can grow it above the 15 percent that it is now. But that is the dimensions of the challenge that we face. “
An incisive paper published last month by the Energy and Resources Group at U.C. Berkeley titled “Risks of the oil transition” demonstrates that the economic, security, and environmental problems that come with oil depletion must be solved in concert. If they are not, then the loser will be the environment, for the simple reason that immediate economic and security concerns will trump long-term concerns about climate change, resulting in a vast increase in greenhouse gas emissions. “Because of the large environmental and security externalities involved, markets alone will not respond to this problem, so government policies to manage all three risks of the oil transition are needed now.” Or, perhaps more accurately, because of our inability to recognize the externalities involved, human self-interest cannot be trusted to solve these interrelated issues.
As we all know, these are but a few of the warning signals we have received. Energy, food, species extinction, and global warming are just the most prominent issues. We are also seeing a host of other warnings, from every corner of the globe: wars erupting over water; infectious diseases that spread around the world like wildfire; actual wildfires that burn out of control because the forests are unhealthy; entire ecosystems and coral reefs on the verge of collapse due to pollution and destruction; huge “dead zones” developing in the ocean; the stunningly rapid retreat of the glaciers and the polar ice packs; the hole in the ozone layer; and a nauseating litany of other planetary plagues that we all know all too well.
All this, despite our best efforts to increase our harvests of natural resources. Despite more intensive drilling for oil than ever before, with the best exploration technology ever developed, we are finding fewer prospects, drilling more dry holes, and working harder for less oil every year. Likewise, despite the enormous advances of the Green Revolution, and harvests increased by orders of magnitude through the heavy use of modern fertilizers and pesticides (made from natural gas and petroleum), the world will grow less food this year than it eats, for the sixth time in the past seven years. The world’s food stocks have shrunk to about 57 days’ worth, about the same duration of stocks as there are in the world’s oil reserves.
Now, let’s step back from these trees. What do they have in common? It is a dawning realization that, simply put, what we’ve been doing so far is leading us to ruin, and that we must take a different course. When people with a deep vested interest in the way things are, like Matthew Simmons and the president of Shell, are suddenly getting religion about energy depletion, we know that a very significant change is happening.
Most prognosticators about energy, food supplies, global warming, and other related issues use about a 50-year window, and within that window, they see Big Trouble. Why? Because in 50 years, we’ll have 9 billion people on the planet, 50% more than we have today. And that is the bottom line. That is the fundamental driving force behind all of these interrelated problems. It’s nothing more, and nothing less, than a classic case of ecological overshoot.
Are Humans Smarter than Yeast?
In circles where peak oil and “petrocollapse” are discussed, one often comes across the basic question, are humans smarter than yeast? This refers to the classic study of bacteria populations in a Petri dish. (For more on the subject, see also Jared Diamond’s Collapse: How Societies Choose to Fail or Succeed.)
Dr. Albert Bartlett, of the University of Colorado at Boulder, has spent a lifetime lecturing about the mathematics of population growth and energy supplies. Both are examples of exponential growth rates, but he complains that very few people understand the implications of this “simple arithmetic” for even modest growth rates. By way of example, he notes that if our current 1.3% per year rate of population growth “could continue, the world population would grow to a density of one person per square meter on the dry land surface of the earth in just 780 years, and then the mass of people would equal the mass of the earth in just 2400 years.”
Here is Dr. Bartlett’s classic example about the bacteria populations:
Bacteria grow by doubling. One bacterium divides to become two, the two divide to become 4, become 8, 16 and so on. Suppose we had bacteria that doubled in number this way every minute. Suppose we put one of these bacterium into an empty bottle at eleven in the morning, and then observe that the bottle is full at twelve noon. There’s our case of just ordinary steady growth, it has a doubling time of one minute, and it’s in the finite environment of one bottle. I want to ask you three questions.
Number one; at which time was the bottle half full? Well, would you believe 11:59, one minute before 12, because they double in number every minute.
Second Question; if you were an average bacterium in that bottle at what time would you first realize that you were running of space? Well let’s just look at the last minute in the bottle. At 12 noon it’s full, one minute before it’s half full, 2 minutes before its ¼ full, then 1/8th, then a 1/16th. Let me ask you: at 5 minutes before 12, when the bottle is only 3% full, and 97% is open space just yearning for development, how many of you would realize there’s a problem?
If the name of the game is sustainability, then, what are we trying to sustain? Putting a finer point on it, Bartlett defines the first law of sustainability thusly: “Population growth and/or growth in the rates of consumption of resources cannot be sustained. That’s simple arithmetic. It’s intellectually dishonest to talk about saving the environment, which is sustainability, without stressing the obvious facts that stopping population growth is a necessary condition for saving the environment and for sustainability.”
Assessing the Alternatives
For the last five years, recognizing the enormity of the threat that peak oil poses to life as we know it, I have made an intensive study of the options. What mitigation measures might work, and to what extent? How much additional energy might we hope to produce, from any and all sources? What new technologies might come to our rescue?
What I have found is this: as long as current population trends persist, and as long as all of the world’s major economies depend on constant growth, then all the energy alternatives, together, add up to about fifty cents on a one-dollar tab. It just isn’t there. First and foremost, our immediate problem is a shortage of liquid fuels, but most renewable energy technologies produce electricity. (And converting our existing liquid fuel-based infrastructure to one that runs on electricity just isn’t feasible—there isn’t even enough energy, let alone raw materials, available to remanufacture all that stuff and still provide for daily needs!) In my wildest dreams—and I say this as one who has made my living in retail solar for several years now—I don’t see solar and wind together achieving more than perhaps 15% of our total global energy mix in the next 30 years.
Biofuels are promising, but as soon as we start producing them at scale, we run straight up against food supply. Consider this statistic: to produce enough ethanol to fill the tank on a big 4WD SUV, you would need enough grain to feed one person for an entire year. Nowhere in the world is there enough unneeded, arable land and water to grow the requisite feedstock for the immense volume of biofuels we will need, no matter which feedstock you choose, and the energy returned on energy invested (EROI) is so low that in most cases, it’s simply not worth doing. As Dr. Tad Patzek of U.C. Berkeley, one of the top experts on the feasibility of biofuels, has said:
[The] vision is to capture in real time most of net growth of all biomass in the US, while at the same time mining soil, water, and air over 72 percent of our land area, including Alaska, Hawaii, and Puerto Rico. This biomass would then be devoured to feed our inefficient cars. We would have little food production, as well as little wood for paper and construction. In effect, the new brave US economy would be dedicated to feeding cars, not people. This vision has been enthusiastically embraced by some in the US science and industrial establishment.
According to Patzek, the EROI figures in the oft-cited DOE/USDA report of 2005 are “laughable,” requiring impossible crop yields and impossible levels of residue recovery, adding sardonically, “To utilize all residues, I suggest to also process fresh corpses into biofuels.”
Another trenchant commentator, Robert Hirsch (more about him later), has famously quipped that making ethanol from corn is a process by which a certain amount of energy in the forms of natural gas and diesel fuel are used to create an equivalent amount of energy in the form of ethanol, with the primary output being money from government subsidies.
The well-known alternative ways of producing liquid fuels, such as coal-to-liquids and gas-to-liquids, are neither ready to scale to the huge volumes we need, nor likely to attract the immense capital needed for such an undertaking, in the time frame we need it, due to the uncertainties and risks of the global commodities trade. (“The ability and willingness of major oil and gas producers to step up investment in order to meet rising global demand are particularly uncertain,” according to the IEA report.)
Further, even if those problems could be addressed somehow, there would remain the problems of how to keep all that additional carbon out of the air, and how to mitigate the horrific environmental cost of massively upscaled coal mining. And don’t think that the carbon sequestration technologies are going to solve those problems. “Clean coal” is strictly for sound bites; don’t expect to see it happen in real life. If making our coal plants clean today is deemed too expensive, when the economy is healthy and energy prices are high, what will make it seem affordable tomorrow?
More recent and exotic alternatives for producing liquid fuels include recovering usable hydrocarbons from oil shale and tar sands. Unfortunately, there are immense hurdles to making either resource accessible in any real volumes. Oil shale is still very much in the research and testing phase, but it is clear that the energy invested will be very high, and there are many technical challenges that remain to be solved. The tar sands of Alberta are currently producing about 1 of the world’s 85 million (b/d) of oil production, but “as North America runs short on natural gas to cook the tar out of the sands and water to move the mess to processing plants, very large increases in production from the tar sands seems less and less likely no matter what the price of oil.” And this assumes that Canadians will continue to tolerate the enormous environmental destruction that tar sands operations entails. Suffice to say that it’s unlikely that either of these lesser quality sources of hydrocarbons will ever achieve more than a few percent of the global mix.
Nuclear energy, likewise, is neither the right solution for the problem, because it doesn’t create liquid fuels, nor is it feasible. Nuclear power has earned the support of environmentalists who recognize the benefits of its lack of greenhouse gas emissions, but it has been estimated that if we were to meet our anticipated electrical needs over the next 30 years with nuclear power, we would have to build some ten new plants each year in the U.S. alone—a highly unrealistic outcome. And in the same way that we are about to pass peak oil, we are past peak uranium.
All the other approaches to our energy dilemma, from tidal energy to biofuels from algae, are either so far off in the future that they don’t matter, or just not scalable enough.
In short, there are no supply-side solutions that will allow us to continue with our way of life. The solutions, such as they are, are all on the demand side: increasing efficiency, to stretch out the remaining fossil fuels we’ve got, and reducing overall demand, both through reducing consumption per capita (e.g., growing local food instead of shipping it halfway around the world), and through reducing our population.
No Magic Bullets
One of the most persuasive and holistic studies about mitigating peak oil was done by Robert Hirsch and Roger Bezdek, in a now-infamous paper with the wonky title “Peaking of World Oil Production: Impacts, Mitigation & Risk Management” but known in peak oil circles simply as “the Hirsch Report.” The study was commissioned by the Department of Energy, and the authors are highly respected researchers with decades each of experience, working for the likes of RAND Corp. and SAIC. Their conclusion? If we start intensive mitigation scenarios—and by that they mean the likes of the Apollo Project plus the Manhattan Project multiplied by 10—twenty years before the peak, then we have a chance of averting serious pain, because we’ll have some time to switch to alternatives and invest in efficiency. If we start at the peak, then we have a definite, unavoidable shortfall of energy for about 20 years, with a lot of chaos. And if we start 20 years after the peak, well…nobody wants to think about that. Let’s just say it’s ugly. As Bezdek puts it, “There are no magic bullets, only poison pills.”
But what of the cornucopians? What of the reports issued by the USGS and EIA that show ample energy supplies for hundreds of years in the future? What of the predictions of the likes of CERA, who claim that the market will sort everything out? What of the abiotic oil theory? Isn’t there over 150 years’ worth of oil locked in the vast oil shale deposits of the American West? What about the even more vast supply of methane clathrates deep under the ocean? What of the assurances of Saudi Arabia, that it can meet the world’s needs for oil for at least 100 years to come?
We need not get too deeply into the details for the purpose of the present analysis, but generally speaking, the cornucopian case comes down to everything but solid, credible numbers. Most cornucopians refuse to address the hard scientific work that has been done by the geologists of the ASPO. Those who are willing to go toe-to-toe on the numbers rely on extremely optimistic and unrealistic assumptions. (For example, this week Exxon asserted that “we are not peak oil people” because, according to them, we have only consumed 1 trillion barrels and there are still 4 trillion barrels left. However, such assertions are based on data known to be flawed and on assumptions that have long been regarded as impossibly unrealistic.)
And then there are the non-technical economists, who don’t even attempt to do any math about actual energy supplies. Instead they simply point backward to the successful application of neoclassical economic theory, and assert a priori that our economic science will continue to work as it has in the past. For such prognosticators, it really comes down to an article of faith that the market will sort everything out.
In short, I have yet to find a single cornucopian whose projections are based on science, and whose science bears up to regular scientific peer review. Most are merely apologists for business as usual. And none have even attempted to describe how they think all this can be sustained for another 100 years, let alone 1000, or what life might look like if it could.
With all of the available good scientific knowledge firmly in hand, then, where are we now? How much time have we got? For that matter, what time is it?
By Bartlett’s watch, it’s one minute to twelve. By ASPO’s, it’s about five years till peak. By Hirsch’s, it’s 15 years too late to avoid several decades’ worth of serious pain and upheaval. And by the environment’s, it’s do or die: either Gaia shrugs off her parasite, or it kills her. Once we can see the forest and not just the trees, the promises of future abundance made by the likes of Aramco, Exxon and ADM start to sound pretty hollow.
So let’s rise to Bartlett’s challenge, and try a little intellectual honesty instead. Let’s admit that we simply cannot continue to increase our numbers and still expect to enjoy food, shelter, and the sort of resource-intensive lifestyles to which we have become accustomed. Let’s admit that we will, without a doubt, willingly or unwillingly, experience zero or negative growth in both our populations and our economies, and that both will happen starting in the next decade. Instead of quibbling about the exact date of the peak, let’s realize that we’re headed into a whole new reality in which today’s “business as usual” can no longer exist.
There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things.
– Niccolo Machiavelli, The Prince, 1532
For most people who have a vested interest in business as usual, this is a very difficult pill to swallow. Their knee-jerk response is to try to argue the problems away, one by one: we can increase our crop yields, increase the efficiency of our oil harvesting, deploy more green power generation, sequester all our carbon, cut back on our ocean harvests, and so on. But this is just dissembling, a vain attempt to explain away each problem individually, so that we don’t have to admit that we have a serious, structural, and systemic problem. There are no piecemeal solutions to wholesale overshoot! Nor can we hold out hope for a techno-fix. The only solution, in the long run, is to reduce our ecological footprint, by changing our habits, and reducing our numbers.
Before you object, consider this: there is no guarantee, and there never was, that the way the man-made world was when we were growing up would continue. We all tend to assume so, for there has been little to make us think otherwise, but it’s really an unexamined assumption. The fact is, these 150 years of industrialization and immense economic growth have been made possible only, and entirely, by our harnessing of the fossil fuels that are about to peak. It is little more than a grand experiment, and it’s about to enter its final act. Even in the paltry, 10,000-year history of civilized man, 150 years is nothing. A mere blink. An off-the-hook party, but now the punch is gone and most of the guests are getting a headache.
This is the Great Awakening. This is the time when humanity starts to realize, in a very concrete and immediate, unintellectual way, that everything is in fact connected. That there are no “externalities,” and we can’t throw anything away, because there is no “away.”
We realize that, along with the Biblical promise of dominion over the Earth, we also bear the burden of stewardship. We realize that having a child is more than a personal choice, it is a global act. We start to enlarge the time frames of our thinking and our decisions, far beyond our current decision horizons. We start to truly care for future generations, rather than just paying them lip service and getting ours while the getting is good.
Only we’re not having this awakening because we stood at the dawning of the Age of Aquarius with open arms; it’s being imposed on us by the hard and fast limits of our spaceship Earth, much as sensitivity to others increases the minute one is crammed into a train full of people.
It’s time to tell the unmentionable truth, to acknowledge the pink elephant in the room: terrorism is all about energy, global warming is all about energy, energy is all about population, and population is all of us. It’s all of a piece, and there is no honest way to separate oneself from any of it, no matter what selfish rationalizations you want to dream up. I fill up my tank with petroleum; I support terrorism. I buy cheap Chinese goods; I support exploitation and erode the value of the dollar just a little more. Just as there is no “away,” there is no “out.” We’re all in.
And don’t even get me started about that colonizing space crap. I won’t hear a word of it until we demonstrate that we can manage one planet without destroying it. Steven Hawking has been thinking about space far too long, and home for far too little.
Let’s take a minute to set some more facts straight, about the so-called “global war on terror.” Most intelligent folks know that it’s just a sound bite, and a bad one at that, because you can no more have a war on terror, which is a tactic, than you can on, say, flanking maneuvers.
The actual war we’re in is a war for resources. If you take a map of where the world’s energy supplies are located, and you overlay a map of where the U.S.’s troops are deployed, you’ll find they’re substantially the same. And the stated reason that al Qaeda has given for attacking the U.S. is not because we’re free, or because they hate us for our way of life, or any of that other nonsense.
Osama bin Laden has said, very clearly and on more than one occasion, that his struggle is all about trying to rid Mecca of U.S. military forces, forces that are there for one main reason: because that’s where the oil is. And under the Carter Doctrine, we have pledged to protect it as our vital national security interest. The war on terror is a war for resources; it’s not about ideology. And unless we admit that, and take strong action to reduce our need for those resources, we can expect the conflicts to intensify.
The Way Forward
What, then, can business do? What are the investment opportunities, in this future? Where can we apply ourselves to the best effect?
One key principle to bear in mind is that the right solutions going forward will be a multiplicity of small solutions. With 150 years of industrialization at our backs, we instinctively imagine big projects: massive farms for biofuels, hundreds of new nuclear plants, hundreds of new coal plants, new oil fields in the deep ocean and at the poles; massive tar sands operations, and so on. And all of these approaches will be wrong.
A key part of changing our consciousness will be realizing that, as EF Schumacher famously titled his series of books, “Small Is Beautiful.”
In first chapter of ‘Small Is Beautiful’, The Problem of Production, Schumacher points out that our economy is unsustainable. The natural resources (especially fossil fuels), are treated as expendable income, when in fact they should be treated as capital, since they are not renewable and thus subject to eventual depletion.
So, instead of thinking about hundreds of megaprojects, we should be thinking about millions of small ones. Back in the early days of America’s farming history, many farms had wood-fired generators that also provided heat. That’s the right idea. Generation capacity—solar, wind, gasified wood, whatever the local resource is—should be located as close as possible to every user and fuel source.
Instead of one giant solar plant in Nevada and one giant wind farm in North Dakota providing our power, it should be millions of small plants. Instead of giant agribusiness farms in Iowa trying to figure out how to convert its abundant corn into biofuels and then ship it to the Gulf for blending and distribution (transport is a major cost barrier for biofuel), we should be looking at each region’s own resources, and producing as much of that region’s needs as possible locally.
So the first, and most obvious trend, will be toward relocalization. That is the path toward robustness, sustainability, and security. All manner of food production, energy production, material goods manufacturing, and nearly everything else needed for daily life will have to be produced locally, as the ability to outsource manufacturing to the cheapest labor markets in the world is completely overshadowed by the cost and diminishing availability of fuel. Once again, we may look forward to seeing not only “Made in the USA” stamped on our widgets, but “Made in California, by Californians, and for Californians” or even better, made by Mr. Smith down at the shop in town, who makes everybody’s stuff around these parts. (An excellent resource for those interested in joining local efforts toward relocalization is the Post Carbon Institute, www.postcarbon.org)
But relocalization extends well beyond manufacturing and commodities. We will also need local banking, local scrip programs, and local services of every kind. Local, micro-financing will slowly eat up market share formerly held by the big centralized banks, particularly in financing small businesses and individuals.
We will need to reconfigure our communities, so that they are a manageable and sustainable size. The nearly abandoned small towns of rural America will need to be rebuilt repopulated, and the giant megacities of the coasts will have to be depopulated. In time, the nameless, endless wasteland of cookie-cutter mall suburbia will be transformed into something more like the network of ancient farming hamlets of Europe.
Imagine the dust bowl migration of the 30s, only in reverse. Large, global, mega-corporations will fail, and a million small businesses will take their place. The huge corporate farms of today will be once again replaced by small family farms (ideally; instead, we might well see a whole new generation of sharecroppers in a thrall of debt to corporate farm owners). The concrete jungles of LA will be abandoned, the asphalt and concrete that has stifled the earth ripped up, and the verdant abundance of Orange County will be restored. (And the guy who figures out how to bust up and reuse several cities’ worth of unwanted concrete will become insanely wealthy.)
In order to enable these transformations, we will have to reinvent our economic systems. We will leave the neoclassic economics of Adam Smith behind, and replace it with a new economics, one based on natural capital. We will learn to mimic nature by reforming our markets and our accounting principles, so that there are no externalities, and our markets receive unimpeded feedback, both positive and negative. When emissions go into the air, and soil and water is fouled, it will incur a real monetary cost, and when businesses reduce waste and pollution, it will improve their bottom lines.
Reforming our economic theory will make it possible to reform the markets, and put market forces to work in addressing our myriad challenges. An improved and restructured market in carbon credit trading, for example, could actually reduce emissions, not just greenwash company images. It could naturally, and without the distortion of subsidies, intelligently select the best and greenest power generation technologies. And, as has been done very successfully in countries like New Zealand and Sweden, waste can be largely eliminated, by requiring companies to assume complete responsibility for their products, not from cradle to grave, but from cradle to cradle.
Third, we will embark on a serious and deliberate program to reduce our consumption of oil and our production of greenhouse gases, the “powerdown” strategy described by Richard Heinberg, because there is no serious alternative. One laudable proposal for a practical way down, originally proposed by ASPO founder Colin Campbell, is the Oil Depletion Protocol, a simple formula by which oil producing nations can gradually reduce their output in accordance with the depletion rate of their oil fields, and that oil consuming nations can likewise scale down their demand in accordance with availability.
We will also embark on many projects to increase energy supplies, to be sure, and we’ll need all of them. Solar, wind, biofuel, geothermal, nuclear, coal, tar sands, exotic and heavy oil, methane hydrates, you name it, we’ll do them all. But it’s crucially important to realize that these projects will not be the first of many on a continuing path of growth, but rather, a final push, to buy ourselves just a bit more time to adjust to a future of declining energy availability. (For this reason, among others, I do not believe that we will ever see a large scale “hydrogen economy.”)
These efforts will enable us to reduce our greenhouse gas emissions to acceptable levels. The Kyoto Protocol? Pfft! Child’s play, and it hasn’t worked anyway. We need to set our sights much, much higher, and eliminate somewhere around 70% of our current emissions, to get back down to the point where the environment can absorb and reprocess it.
And finally, we will reimagine ourselves, and our destiny. We’ll set the Marshall Plan aside as a source of inspiration, and focus instead on how we can coexist peacefully with others who don’t think like we do. Instead of aspiring to ever-greater empire—which has proved repeatedly that continual growth eventually leads to depleting oneself to the point of terminal decline—our new models will be those civilizations who have learned sustainable practices, like the Native Americans and the Amish.
We will come to see that, since we are indeed citizens of one shared world, that none of us can have peace until all of us have justice. We will make these serious objectives. We will support the effort now under way to create a Department of Peace, and expect it to work hard to bring peace. We will remove the unfair burdens placed upon the developing world by entities like the World Bank and the IMF, and work toward each nation’s self-sufficiency, for in a shared world, the stronger each of us is, the stronger we all are.
We will leave behind the individualistic, hero-warrior mythos, and reinvent our cultures around sustainable values. We’ll swing away from the stern father model, and back toward the nurturing parent model. We’ll stop marching in a straight line, and start dancing in a circle, just like the rest of the natural order does.
If we hold out any hope for our future, it is in making these kinds of serious, structural reforms. We can, and will, do all of the above, and we’ll deploy every kind of clean tech we can muster. But it will probably be a long, and messy, transition, marked by chaos and disruption, martial law, even large scale dieoffs. Nearly every sober and dispassionate expert, in every field, can tell you that while all is not yet lost, it is very unlikely that we will manage any sort of soft landing, or a smooth transition. All see a great deal of pain and suffering along the way. Perhaps that is why Hawking believes that going off-planet is humanity’s only hope.
Well, I’m not going to give up on Spaceship Earth that easily. I believe that we can clean up this mess, learn the error of our ways, and learn to live in a sustainable fashion (hopefully with a lot fewer of us, and enough discipline to keep it that way).
But we have a lot of work to do. It is nothing less than the wholesale revision of our culture, a reforming of our religious beliefs, a reimagining of our identity and our destiny as a species, and a remaking of our entire economies and our way of life. A very tall order.
Which is why I like to look at the bright side. As I’m fond of saying, I’m not apocalyptic, I’m epoch elliptic. That is, I recognize that we are in a moment of time in a much larger cycle of human development, which is about to turn from its Apollonian extreme back toward the Dionysian. From the lofty heights of our technological achievement, we’re about to get refocused on the basic elements of life: earth, air, fire, and water. I doubt very much that I’ll be around to see it, but I think that at the end of this sea-change, after this awakening, we may find ourselves with a far more beautiful, fair, just, and balanced world, one that I would be pleased, not ashamed, to pass on to the ones who come after me. We have a daunting challenge, but they are inspiration enough.
 “Proponents of peak oil argue that the world has already tapped most of the easy-to-find deposits and that the drop in supplies combined with ever-growing demand point toward inevitably higher prices that will eventually hamper global economic growth.” http://www.fcnp.com/index.php?option=com_content&task=view&id=482&Itemid=33
 “Risks of the oil transition”
Environ. Res. Lett. 1 (October–December 2006) 014004 doi: 10.1088/1748–9326/1/1/014004
Risks of the oil transition
A E Farrell and A R Brandt
Energy and Resources Group, University of California, Berkeley, CA 94720–3050, USA
Published 30 October 2006
 By Gwynne Dyer
October 28, 2006
 Dr. Albert Bartlett: Arithmetic, Population and Energy (transcript), 6 February 2006
 Address to the ASPO-USA conference in Denver, Nov. 2005. http://www.getreallist.com/article.php?story=20060829200211917
 “The Peak Oil Crisis: Exxon & Peak Oil” By Tom Whipple
Thursday, 09 November 2006
The article goes on to say:
Of course, based on what we currently know about he earth’s oil resources, the “4 trillion barrels left” is really a stretch bordering on irresponsible. The first 2 trillion are supposed to be reserves of conventional oil. This number is based on a badly flawed US Geologic Survey study produced a few years back that attempted to estimate the world’s remaining conventional oil resources.
The major flaw was the authors’ assumption that existing and not-yet-discovered fields would eventually turn out to contain much more oil than originally estimated. While it was true many decades ago that the ultimate size of newly discovered oil fields was often seriously underestimated, modern geologic techniques have markedly reduced initial overestimates.
 Two excellent books on natural capitalism are Natural Capitalism by Paul Hawken, Amory Lovins and Hunter Lovins, and the soon-to-be published Making World Development Work – Scientific Alternatives to Neoclassical Economic Theory by Charles Hall and Grégoire Leclerc