#213. A moment of truth

THE ARRIVAL OF ECONOMIC CONSTRAINT

Some of us have long understood that the economy is an energy system, and is not – as orthodox economics insists – wholly a financial one.

We’ve identified credit and monetary adventurism as futile efforts to deny this reality, efforts which, whilst not ‘fixing’ low and reversing “growth”, have exacerbated financial risk by driving a wedge between the ‘real’ economy of goods and services and the ‘financial’ economy of money and credit.

We’ve highlighted relentless rises in ECoEs (the Energy Costs of Energy) as the process by which expansion in economic output peters out, and prior growth in prosperity goes into reverse.

Recent sharp rises in the price of energy might look like just one aspect of the current worsening economic predicament, a predicament which is ‘a crisis in all but name’. Other adverse factors can be cited, but all of them, ultimately, are traceable to a fading energy dynamic.

We’ve built a large, complex and increasingly inter-dependent economy on the predicate that money can drive ‘growth in perpetuity’.

We’re now in the process of discovering that this predicate is false.

From here on, prosperity will continue to deteriorate, whilst rises in the real cost of essentials will leverage this decline into a more rapid erosion of discretionary prosperity.

The good news is that these processes can be understood and modelled, projected and managed.

The bad is that, so far at least, this reality is not being grasped.    

It has to be said that no ideology is more rooted than ‘neoliberalism’ in the doctrine that the economy is a financial system, with limitless capability for growth.

This is why those economies most wedded to the ultra-liberal ‘super-fallacy’ are being hardest hit by the harsh reality that neither ‘demand’ nor ‘incentive’ can create low-cost resources.       

A new model crisis

Despite the most lacklustre of recoveries from the pandemic-induced downturn, the global economy has collided with the reality of energy constraint.

Natural gas, in particular, is in short supply, but the effects of supply shortages are rippling, too, across the markets in electricity, oil and coal. Almost unthinkably, China – widely regarded as the powerhouse of the world economy – is having to ration supplies of energy to its industrial sectors, whilst grappling with the fall-out from exuberant financial expansion.

Consumer energy and fuel prices are surging, a process as adverse for industry as it’s uncomfortable for households. Though the rise in domestic energy costs is the most conspicuous aspect of energy price escalation, deeper consequences will be felt through sharp increases in the costs of supply to businesses.

All inputs, from minerals and chemicals to food and water, are functions of the energy used to extract and process them. If the supply of energy tightens, and its costs rise, the same happens across the entirety of economic activity.  

This, in short, looks like the moment when the reality of energy and broader resource constraint makes itself felt, and the conceit of perpetual growth on a finite planet is revealed as fallacy.

We need to be clear that, insofar as this is an “energy crisis”, it has nothing in common with previous such crises. Neither can it be blamed on after-effects of the pandemic crisis, on gamesmanship (by Russia, or anyone else), on ‘little local difficulties’ (like “Brexit”), or even on the distorting effects of gargantuan financial stimulus, harmful though that has been. Least of all can it be ascribed to ‘brisk economic growth’, since the global economy is unlikely to be any larger in 2021 than it was in 2019.

Rather, what we are experiencing is a predictable – though, in general, not a predictedcollision between resource limitations and a desire for never-ending “growth”.  

The economy has hitherto experienced two energy crises (or three, if we include the oil price spike experienced in the American Civil War), but what’s happening now is profoundly different.

During the 1973-74 embargo crisis, and the 1978-79 Iranian revolution, there was no physical shortage of oil, or of energy more generally. These were crises of management, and of trade imbalances and international relations, not of supply fundamentals. Fossil fuel ECoEs remained below 2% in the 1970s, but are nearly 10% now. Even if renewable energy sources (REs) can take over fully from fossil fuels in the future (and this is unlikely), they certainly can’t do so now.

A moment of truth

From an economic perspective, this is a watershed. What we are witnessing is decisive proof that the economy is indeed an energy system, and is not – as orthodox opinion has so long insisted – wholly a matter of money. Pouring yet more money – in econo-speak, demand – into the system isn’t going to create huge new supplies of oil, gas, coal or any other form of primary energy. 

All of the world’s decision-making processes – most obviously in government, business and finance – are predicated on an assumption which is turning out to have been fallacious. The economy isn’t, after all, a ‘perpetual growth machine, powered and shaped by money’.

Rather, it’s an energy system, in which material prosperity is a function of the availability, value and ECoE-cost of energy.

With its emphasis on incentive, and its disdain both for government planning and for non-financial motivation, the ideology sometimes called ‘neoliberalism’ is most exposed to the discovery that the economy cannot, after all, be managed in purely financial terms.

This helps explain why those countries most wedded to the idea of ‘leave it to the market’ – and, with it, of accepting inequality as ‘the price of efficiency’ – face the toughest futures. Britain, most conspicuously, is experiencing the consequences of the liberal ‘super-fallacy’ now, but the United States, in particular, won’t be far behind.

Of course, hype – no less than hope – “springs eternal”. But surges in the direct household costs of energy and fuel are now impacting economies, and indirect, second-order effects (traceable to the rising cost of energy to industry) are already making themselves felt in supply shortages and inflation.

For those countries worst affected by energy supply strains, pious promises to “build back better” and to “level up” won’t remove the need to make tough, unpopular decisions. “Green growth” is going to have to transition into “green resilience”. Decades of denial – enacted through monetary gimmickry, and backed up by excessive faith in the alchemy of technology – threaten severe financial and broader consequences.

A rocky road

As the energy interpretation of the economy moves from left-field theory to demonstrable reality, theories and models based on the contrary assumption are breaking down. The economy is moving in directions not anticipated by orthodox theory, invalidating much, and arguably most, of the projections, methodologies, models and policies hitherto accepted as valid.    

Those of us who understand the economy as an energy system can predict some, at least, of the consequences of present trends.

First, material prosperity will deteriorate. Properly understood, this has long been an established trajectory in the West, glossed over – but not changed – by increasingly desperate, illogical and hazardous exercises in credit and monetary adventurism. SEEDS analysis makes it clear that the average person in almost all Western economies has been getting poorer since well before the 2008-09 GFC (global financial crisis), and that an increasing number of EM (emerging market) economies, too, are reaching the climacteric at which rises in ECoEs put prior growth in prosperity into reverse. 

The rates of decline in top-line prosperity itself look manageable. But rising ECoEs are set to drive up the real costs of essentials (including household necessities and public services). Together, the combined effects of falling prosperity, and the rising cost of essentials, are exerting a tightening squeeze on the scope for discretionary (non-essential) consumption.

This downwards pressure on discretionary prosperity is going to be unpopular, with consumers and with discretionary suppliers alike, and this may prompt efforts to prop up discretionary consumption with yet more reliance on credit expansion.

Denial, for the moment, remains unchallenged. In Britain, for example, households are likely to face further and even larger rises in the cost of gas and electricity, and the price of anything (which means everything) made using energy is going to rise as well. Discretionary consumption cannot continue unchecked through this process.

To be sure, wages might rise to accommodate these cost increases but this, if it happens, will simply fuel an inflationary cycle. The task of repairing the public finances will become harder with each worsening twist in the cost cycle.

Despite this, few yet anticipate contraction in the scope for everything from travel and leisure to the payment of subscriptions and the purchase of the latest gadget. Fewer still have grasped the read-across from deteriorating prosperity to the pricing of property and other assets.  

Around the world, these processes in turn imply, not just that inflation will rise, but that the financial system will come under increasing stress. Together, discretionary sectors, and businesses that rely on the ‘stream of income’ model, are going to be in the eye of the storm.

The ‘basics’ of the situation – deteriorating top-line and discretionary prosperity, rising inflation and worsening financial stress – are simply the first-order effects of the deteriorating energy-prosperity equation. More complex processes can be anticipated, some of them identifiable in a taxonomy which sees businesses simplifying their products and processes, de-layering their supply chains, and trying to work around the challenges of falling utilization rates and the loss of critical mass. Popular priorities can be expected to change, intersecting with a deterioration in the affordable resources of governments.

These are issues on which we can reflect and which, to some extent, we can model and predict.

For now though, the imperative is that the realities of resource (and environmental) constraint are recognized, and that plans and assumptions are re-thought accordingly.       

 

 

326 thoughts on “#213. A moment of truth

  1. Timm,

    Excellent article and it dovetails perfectly with the other theory that I have long subscribed to, Peak Oil, which is really a well-trod subset of your overall thesis.

    All my dipshit buddies with their Amazon jobs and their second homes seem to think that snubbing their nose at the reality of peak energy, which is what you are really talking about, is the new 21st century pose, not unlike the 20th century pose.

    Energy was the once and flourishing American cornucopia, spilling forth constantly, like that gunshot wound in the side of the hill on the only show that summed up America and its easy energy dominance of that past century – the Beverly Hillbillies. We still operate in that mental environment in this country, TV enforced.

    Note that fracking is perhaps the WORST borderline criminal conception in this whole rearguard action trying to avoid the inevitable question – is there a finite amount of energy? And will forcing our drinking water into wells to pull out the last bit of oil, is that not societally suicidal? Everyone fantasizes about going back somehow but if all the water is fatally polluted from fracking (and nuclear fallout) the small tribes of left-over role players will have weeks to live during the collapse.

    What I actually think is that water and energy, especially on the West Coast, are fatally interwined. Since the largest (non-nuclear) projects that benefitted this region were the large dams, for energy, water, and for the nearby wastelands, irrigation, they are going to work catastrophically in reverse.

    As the potential of stored/spilled water is lost as the climate warms, (oh, and for you douchebag deniers, the climate has not just changed here in the PAC NW, its in borderline collapse, with the fires, drought and extreme head crushing the life out of the Salish Sea) the dams will deprive us of BOTH water, power and food.

    Starvation looms.

    • Thanks.

      The central thesis here is that an economic system demonstrably built on fossil fuel energy has encountered two worsening constraints.

      The first constraint is the limits to environmental tolerance of our use of FFs.

      The second constraint is that various factors – most obviously depletion – are driving up the ECoE costs of FFs.

      What this means is that prosperity is heading downwards, and would continue to do so even if we were unwise enough to ignore environmental risk.

      Whilst I can’t comment on the West Coast specifically, the US economy is in very big trouble. Prosperity in general, and discretionary (ex-essentials) prosperity in particular, are heading downwards.

      This, in itself, isn’t unique to the US. But what’s worrying about America (and Britain) is a seeming inability to get to grips with what this means.

      To oversimplify somewhat, the US won’t do anything which would bring down stock markets, and the UK won’t do anything that brings down house prices. Neither is prepared for the reality of redistribution, which is going to happen anyway, irrespective of policy direction.

  2. Are humans capable of transforming from an expansionary economy to one that co-exists with nature?

    That issue will be discussed with Carey King in a couple of weeks. I can’t give you a link, because it is a very small group discussion. But after the fact, I think I can post a synopsis of what was said.

    Don Stewart

  3. Private Equity Funds, Sensing Profit in Tumult, Are Propping Up Oil.

    These secretive investment companies have pumped billions of dollars into fossil fuel projects, buying up offshore platforms, building new pipelines and extending lifelines to coal power plants.

    (No paywall)

    P.s might explain where QE goes!

    • Not all private equity funds are guilty of this, Mr Gwynne. There is a common misconception the all private equity investors are vultures, but that is far from the truth, in my opinion. I find listed private equity funds (structured as closed-ended investment trusts) a useful non-correlated asset class for a modest portion of a long-term portfolio.

      Admittedly, private equity is a specialist area, in which capital is invested in unlisted private companies, or listed companies are taken over in order to take them private. The key differentiating factor in private equity is that the fund manager takes ownership control of companies they invest in, and plays a major role in setting the strategy, appointing and incentivising management, and decides when to sell the business to crystallise investment returns. These transactions are often referred to as ‘buy-outs’.

      Such funds, at the moment (those available to UK retail investors) tend to hold investments in business services, industrial automation, healthcare, communications, waste management services, pet supplies, etc. A simple example might be a company such as Minimax Viking, a leading global provider of fire protection systems, or Leaf Home Solutions, one of the largest home improvement companies in the US, specialising in guttering. Another might be Domusvi, the third largest nursing home operator in Europe, with market-leading positions in France and Spain.

      Interesting area, is private equity.

    • Some high-profile – i.e. newsworthy – PE buy-outs have had a bad press, especially where they are perceived to have bought a company “using its own money” (i.e. with loans secured against the assets of the target company).

      This is, in reality, a function of a system – not designed by PE funds, but by policy-makers – where the cost of debt is lower than returns on assets. Generally, this repression of the cost of money has been a damaging policy, but we can hardly blame it on those who play by the rules set by others. PE funds aren’t responsible for policies conceived in desperation.

      As you say, PE funds can provide useful innovations.

    • While there are many PE firms that are “vulture funds” of the Mitt Romney variety that take over a company that they can extract money from by loading it with debt and restructuring it, leading many times to eventual bankruptcy after the PE company has pulled out all possible cash, there are some PE firms that seek a more long-term form of ownership for a bigger payoff. “Capitalists” like nothing more than to own a chokepoint or to be in a position to gate access to a necessary good or service. It is why, among other things, we occasionally hear about privatizing water rights. Control enough of these nodes, and you control the market and have effective monopoly pricing, being able to charge the most that the market will bear.

      It does not surprise me that, in the light of the perspective that declining fossil fuels are going to present unique profit opportunities for securing access to a dwindling resource, PE firms will be some of the first to secure these advantages. I am sure that the problems Europe is having with nat gas and China with coal are opening PE eyes and causing them to think that the time is now ripe to get in early on this.

      Their biggest risk is eventual nationalization – but even there they would have serious political clout via their lobbyists and political donations. Even if the resources and infrastructure were eventually nationalized, they would be in a position to receive a huge payoff (under the 5th amendment – no taking of property without just compensation) and they would likely receive lucrative long-term contracts to administer and manage the nationalized base.

    • Steve G, please see “Growing through Sabotage – Energizing Hierarchical Power” on the capitalaspower.com website

  4. Strike action by Public and Commercial Services union at DVLA has caused a backlog of 50,000 HGV licences.

    They are now considering further strikes!

    ……

    The critical shortage of HGV drivers is set to get worse, with union members set to vote on further strike action at the Driver and Vehicle Licensing Agency.

    The Road Haulage Association warned on Wednesday night that the possible industrial action “could not come at a worse time” and would aggravate the driver shortage that has led to empty supermarket shelves and a fuel crisis.

    The DVLA said any strike action would hold “millions of drivers to ransom”. The Government agency is currently working through a backlog of a reported 50,000 vocational driving licences stretching back more than two months.

    But the Public and Commercial Services union (PCS) at the DVLA’s offices in Swansea will vote in the coming weeks on further industrial action over fears that 2,500 staff working in its offices are at risk of Covid.

    https://www.telegraph.co.uk/news/2021/10/13/lorry-driver-crisis-could-deepen-amid-threat-new-strike-action/?WT.mc_id=e_DM1505398&WT.tsrc=email&etype=Edi_FAM_New_ES&utmsource=email&utm_medium=Edi_FAM_New_ES20211014&utm_campaign=DM1505398

  5. Reading the numerous postings about Putin caused me to revisit a question I’ve asked myself many times. How long can democratic governance survive, as we progress down the energy descent path? More to the point, what should replace it, if (or more likely when) the current structures start to fall apart?

    A second related question, is how long can the centralised governance model continue?
    Central government in its modern form has a very big mouth to feed, and that simply won’t be affordable as the rising energy cost of energy starts to inflict real pain on society.

    I don’t have a comprehensive answer, but I’m sure it’s inevitable that governance will become more and more localised through necessity. The break-up of large nation states seems very likely at some point in the medium term. Modern Europe emerged out of city states. Maybe that’s what it will revert to.

    Just for the record, I’m not taken in by Mr Putin’s apparent statesmanlike posturing. He’s an intelligent, but totally ruthless political operator, who seems to still be carrying a chip on his shoulder about the demise of the Soviet Union. He appears to continue seeking revenge on those who betrayed the cause. Here in Britain we have been subject to series of attacks on some of these defectors, which has also resulted in death and injury to completely innocent citizens. Technically, the Salisbury attack could be construed as chemical warfare, but I don’t think the government would ever want to use that phrase, for obvious reasons.

  6. UK life expectancy is inexorably declining, on average, said several MSM headlines of late. So, what’s new?

    In my experience, actuarial science – step forward Edmund Halley – has known this for 10-15 years, and this can be seen very simply in the pricing of life insurance products and annuities. For example, if you wish to purchase a guaranteed lifetime income stream via an annuity and happen to live in, say, Blackpool, the insurers have masses of evidence to say that your life expectancy is much less – on average – than if you live in leafy Surrey, for instance. So, an annuitant in Blackpool will likely achieve a higher level of income, by as much as 2.5%-5% per annum, than one in Guildford, simply because he or she is going to be paid for less time. The so-called ‘postcode lottery’ is, in truth, just based on ‘the numbers’. Such annuity pricing determined by postcodes, lifestyle and health disclosures were introduced in the mid-1990s by an actuary called Anderton of The Pension Annuity Friendly Society, long subsumed into what is now a business called ‘Just’.

    However, the Blackpool resident is likely to pay a bit more for income protection, critical illness insurance, and life assurance than our imaginary Guildford resident, as he/she is rather more likely to make a claim.

    Whilst one can become very moralistic about ‘pooling of risk’ and ‘discrimination’, the differences that can be seen with annuities and personal protection insurances, are priced to offer fair returns to policyholders, pay claims that arise (and they certainly do pay claims) and allow the life office to make a profit – otherwise they would simply go out of business.

  7. Yields on Chinese US dollar denominated junk bonds are going ballistic. They are a fraction under 20%, having more than doubled since the start of the year. Chinese property developers look to be in really big trouble. It’s not just the de-facto default of Evergrande, some other big property developers have either defaulted or had shares suspended. The problems in China will surely ripple out. Since the summer, the yield on US junk bonds has also been on an upward trajectory.

    Could this be the snowflake that starts the avalanche?

    • There’s a general problem here, largely unrecognized, but no less serious for that.

      The ‘financial’ economy of money and credit has grown, artificially, whilst the underlying ‘real’, physical or energy economy of goods and services has stopped growing or, in some cases such as China, has decelerated.

      If, in the case of China, we compare 2020 with 2010, we can observe the following real rates of change:

      – GDP – +93%
      – Underlying (credit-adjusted) C-GDP – +47%
      – Prosperity (C-GDP less ECoE) – +42%
      – Total debt – +310%

      This means that financial claims have been growing much faster than the economy which, ultimately, is expected to meet these claims.

      China has decided to act now, rather than kicking the can down the road.

      They’ve identified real estate – plus some other sectors – as areas where ultimately-unmeetable ‘excess claims expansion’ needs to be tackled. Letting some conspicuous failures happen is complementary to this policy.

      My guess is that customer creditors – those who’ve paid for homes not supplied – will be made good (though the homes they get may still be less than they paid for them).

      A logical view is that junk bonds ought to have very high yields – that’s what “junk” implies.

      The question of contamination really comes down to how long can other countries stave off reality?

      If, for instance, we compare property prices with incomes minus essentials, ratios have blown out. This is even more the case when we look at how even these incomes have been inflated by aggregate borrowing.

      As things stand, households are being hit by rising energy and fuel costs, other (though energy-related) cost of living increases, and higher taxes. Rates are likely to start moving upwards as well. Put another way, affordability is being compressed.

      This means that (a) property prices are under downwards pressure, and (b) mortgage debt is exposed. We can read-across to other asset classes, and compound this with the observation that the stocks and bonds of discretionary-sector entities have significant downside.

    • the ratio of; average houseprice to (average income minus essentials) sounds interesting,
      can average rents be substituted for houseprices, are incomes nett, after tax,
      could this also be applied to commercial enterprises i.e. leases of commercial premises,

      ratios are a pretty visual way of seeing how viable working for a living or running an SME has become.

      to get a guide on rents each Local Authority sets an LHA, a local housing allowance, in my authority it’s currently £600 pcm per person and you really have to search to find a single bedroom flat available at that rate,

      thinking about going self employed and launching an SME seems a good idea until you look at commercial leases and it suddenly looks like you’ll be working to support your landlord,
      this is why the supposed boom in self employment turns out to be dog walkers, mobile hairdressers and tradesmen working out of vans.

  8. Thanks TIm, for putting some metrics on the China situation. Your remark about the Chinese authorities letting some conspicuous failures happen is worthy of comment. Isn’t that the very essence of capitalism, to allow failed enterprises to actually… fail? Creative destruction as it’s called. This is happening in a one party communist state, whereas in the USA and the UK, which are supposedly at the forefront of free market capitalism, many failed enterprises have been kept afloat with government bail-outs. The GFC1 seemed to set a precedent for this, and it’s become almost a policy response.

    What a strange world we live in.

  9. “People like you are still living in what we call the reality-based community. You believe that solutions emerge from your judicious study of discernible reality. That’s not the way the world really works anymore. We’re an empire now, and when we act, we create our own reality. And while you are studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors, and you, all of you, will be left to just study what we do.” Karl Rove?? 2002ish

    Dear All
    This site is very much a “reality-based community”. And you seem to think “that solutions emerge from your judicious study of discernible reality”.
    I, for one, think you may all be in very great danger of forgetting that “that’s not the way the world really works anymore”. History’s actors are firmly in charge now, from 11/9 through to this really, really deadly pandemic/sarc.
    I’m a retired Chartered Engineer so I’m good at spotting things that are “engineered”. Personally, I’m preparing for the longest, coldest, darkest winter in living memory which will of course be engineered as well. There will be no wind over W. Europe for several months, all designed to collapse the present paradigm and speed up our return to feudalism.

    • @Paul Downey

      Interesting take on where we’re coming from Paul. There’s always a danger of sub-consciously drifting into an unhealthy amount of “Groupthink”, so it’s refreshing to have some new and different input.

    • Hi Paul,
      I agree being firmly rooted in reality is a pretty Utopian position to take but I’m afraid I can’t afford to occupy Karl Rove’s parallel universe,

      this year I’ve invested in an additional stone or two in body mass as a hedge against winter,
      my central heating thermostat is set at 18*C, it hasn’t kicked in yet and I still feel comfortable so it looks like this investment was worthwhile!

      years ago I took a year out and lived cheap in a caravan on a tumbledown smallholding, during a pretty decent snowfall in the winter I added several of those old woollen hospital blankets to the top of my bedding and it was like an Indian sweat lodge inside when I woke up to discover that the christmas cake made for me by my mother in a tin had frozen solid!

      today it’s like going back to growing up as a kid in the 1970’s, Mum used to boil a kettle and pour it in the bathroom sink so I could wash before going to school, central heating was one of those new fangled things you saw on American tv shows.
      I remember the power cuts in the 70’s, do you expect them to make a comeback?

    • You are almost certainly correct, Paul!

      The elites of the Bio-Digital Military Financial Complex do not need to ‘wake up’ to the over-population, energy and resource crisis of the 21st century. Nor to the end of the current financial system and mass consumerism.

      They did so ages ago.

      Their revolutionary plan to deal with this and still stay on top and in control was put into effect at the end of 2019 with a silent coup d’etat, after at least a decade of careful preparation (see the boards and panels, ‘global leaders’ etc, of the WEF).

      Of course, they are deluded – as so many elites have been – and are doomed to fail, as they are adding immense complexity, depending on 24/7 energy flows, to a failing complex system.

      But not before the gates of their Totalitarian Techno-Dystopia have clanged shut on us, for a few years at least.

      Many are already in the modern Gulag.

      See Lithuania, Italy, France, Australia, New Zealand……

  10. Cooperation, Competition, and Survival
    When we perceived the world as ’empty’ and natural resources as ‘free to be exploited’, Neo-liberalism made a lot of sense. Just as a corporation can dangle money in front of people and get them to do work they don’t want to do, governments could print money which enabled anybody with a reasonable idea to get funding to try it. The fact that most of these ideas failed was of little consequence. Nobody counted the ‘wasted’ effort. Now, we are slowly discovering that Ronald Reagan was wrong, and that it was not really Morning in America. The world is indeed ‘full’, and we exploit shrinking natural resources at our peril.

    Before the Pandemic, the loudest noises were about the perils of CO2 filling the air and ocean. And the promise of governments dangling money in front of corporations to develop CCS (carbon capture and storage) was assumed to be able to generate a solution. But CCS looks more and more like a mirage:
    https://energyskeptic.com/2021/carbon-capture-and-storage/
    “Several papers are summarized below. The most important is by Sekera and Lichtenberger (2020). This is the most complete, up-to-date review of where carbon capture stands today. They shown that the two most popular carbon dioxide removal methods likely to be funded, with taxpayer money, generate more CO2 than they capture. No private investor would spend a penny on this. ”

    The point about cooperation I would like to make is that it does seem to me that nuclear is the only way out of the debacle. I’m not smart enough to crunch the numbers on nuclear, so take the following as speculative.
    *Suppose that nuclear has an ECoE of 20 percent.
    *That means that we cannot continue to operate an economy with the complexity and waste of the current economy. Which spells the death of classical neoliberalism. We will have to substitute a system of global cooperation for one of unbridled competition.
    *What Putin has been promoting the last few years seems like a reasonable way to go about it. We can see how it is playing out in Russia: a national energy policy featuring declining oil, gas, and coal with increasing nuclear and the deployment of small nuclear plants. It is not clear to me what Russia thinks about transportation. In one of their recent presentations, they talked about putting a small nuclear plant at a mine. I would like to know if they foresee large scale electrification of the mining operation.
    *Thousands of little nuclear plants around the globe, in a world full of drones, gives me certain misgivings. Isn’t it easy for some mad engineer (or teenager) working out of his basement to cause an awful lot of damage? If there are risks along those lines, then we need to address them globally.
    *Russia, having achieved what it thinks is mutual assured destruction, has made it clear that the defense budget will shrink rather than expand. The US seems intent on an ever increasing military budget in search of first strike capability. If what I just wrote is true, then the US is the destabilizing force. Again, if we can’t find a way to cooperate, we will continue to circle the drain.

    These are my thoughts about the sea change we need to have in terms of governance. The best thinking (that I have read) from the evolutionary biologists is in Weinstein and Heying’s book A Hunter-Gatherer’s Guide to the 21st Century. They call it the Fourth Frontier. Don’t expect a play by play for how to get there. Similar to what Carey King thinks.

    Don Stewart

    • CCS deserves every bit of ridicule thrown at it,

      but we can still go flat out planting a few trillion trees whilst reclaiming degraded land because in it’ll capture carbon now and in 100 years time we’ll probably be making everything from wood because we won’t have the energy to make much cement or smelt metals,
      here’s a Swedish town built of wood,

      https://www.theguardian.com/artanddesign/2021/oct/14/skelleftea-swedish-plywood-eco-town-20-storey-wooden-skyscraper-worlds-tallest

      and for those banking on the resource extraction industry mining all the stuff needed for their Star Trek future here’s Simon Michaux putting a 15 minute ‘Debbie Downer’ on that idea.

      so how might we end up living?
      maybe somewhat like we did not all that long ago, when we were still ramping up fossil energy production,

      And so they live,
      Film depicts white rural poverty in Kentucky and the quality of children’s education.
      1940

      https://www.loc.gov/item/2018601211/

      life on the downside of the bell curve if we don’t manage the decline well?

    • “energyskeptic says:
      March 24, 2015 at 3:47 pm
      . . . . But that’s not the real issue – the real issue is that transportation depends nearly 100% on oil, and that transport that really matters, freight, runs on diesel fuel and their combustion engines can’t burn anything else, and coal and natural gas are near their peaks as well, and there isn’t enough biomass to make a significant amount of diesel from biomass. The thousands of suppliers for a nuclear generator won’t be able to ship, truck, fly, or send their components by rail to the building site, the workers won’t be able to get there without cars – civilization ends when transportation stops, especially trucks.” ?
      http://energyskeptic.com/about-energyskeptic/

    • @postkey
      No disagreement from me. Think about Steve St. Angelo’s article which detailed how much sand and water have to be transported to a fracking site in the Permian Basin. Talking about using electricity to move that sand and water seems to me to be delusional on its face. We can certainly move some workers who drive battery electric vehicles to the site, but they are probably 0.00001 of the tonnage which has to be moved. Diesel fuel moves the tonnage.
      Don Stewart

  11. Really excellent overview of supply chain problems and inadequate responses of the authorities by Michael Every of Rabobank posted on Zerohedge this morning – “Rabobank: The Problem Is No Central Bank Can Bail Out The Physical Economy From Shortages”

  12. Timm,

    I didn’t mean to simplify your thesis because for the most part, here in America, we live in the Rockefeller duopoly, finance and fossil fuels. But there is a bigger power infrastructure that underlies and enables all the FF burning – hydroelectric power on the West Coast.

    John D viciously stomped out any competition to his Standard Oil. All of the pretenders to the three FFFs have had to come from the State public works. And these things like dams were mostly built during the New Deal. (Wonder if the low-tax regime the billionaires have imposed, save for road-building, isn’t to head off any chance of toppling the three FFFs with public works projects.)

    I think you might want to broaden your energy survey to include the role that hydroelectric power has played in the development of California and now China. Sure, these colossal works are based on the FF extraction to power the machines, mine the quarries etc. but their simple return on Energy is too narrow of an equation to really justify their construction.

    Giant public works projects like dams must function on a half dozen levels to get built in the first place – job creation, flood control, water retention, irrigation, power generation, leisure and recreation (on the giant reservoirs) and even transportation corridors.

    Take the Columbia River, which has several large dams all the way up into Canada. Its now tamed waters gets sea-going barges that can put into ports several hundred miles up stream. The water taken from behind the dams by industrial farmers has made the sage-brush desert bloom with any number of water-thirsty crops, like apples and hay, which goes to the nearby cattle herds.

    Why do I bring up this regional hydropower system, which is fragile and suffering from benign neglect, as most of it was built almost a century ago. Because ALL of the growth in the US over the last forty years has come from the West Coast, and specifically California. In real GDP terms, CA grew at a 10% clip over this timeline, while the rest of the US accounted for just over 1%.

    West Coast electricity does not come from coal-fired power plants, for the most part. FFFs seem like a primary challenge, but it is only a pretty bauble on an exhausted and shrivelling system that would collapse if the dams stop turning out the electricity. (people forget that all gas pumps run on electricity and are stunned during blackouts that there is no gas to be had)

    The loss of water behind those dams may be even more devastating as snow packs wither and the underlying glacial ice disappears. Since it hasn’t snowed in the Sierra Nevadas for more than two years, many rivers in Northern California are running dry. If the Colorado River goes dry, and all the power that is generated for the those big cities in the desert runs out, FFs are going be the last thing to worry about.

  13. An interview was just put up on Youtube “Steve St. Angelo: The World is Heading for an Energy Cliff”. It seems consonant with the themes in this thread. Can anyone point out any areas of disagreement?

    • it’s a brief sprint over a huge amount of ground trying to explain it all in fairly layman terms but it does grasp the gist of the situation,

      the most important thing is he grasps that the only way out of this predicament is degrowth,
      it makes a good speed intro, but you could easily spend months looking into all the different aspects in closer detail.

      probably the real kicker is that the last time we lived off what the planet could provide, on a year by year basis, there were less than a billion humans alive,
      and the planet was in a lot better shape too.

    • Steve quotes some numbers about the increase in tonnage of water and sand that are now being hauled. He suggests that having to buy all that diesel will undercut the stimulative effect of the increase in price. I don’t know whether that is correct or not. What has happened in the last 6 months is a huge increase in the price of energy stocks. Investors are obviously assuming that if the price of WTI increases from 50 dollar to 80 dollars, another 30 dollars is going into earnings. It’s a complicated relationship which I can’t calculate with any accuracy.

      I have also heard that the reason production did not fall as much as Art Berman predicted was because people were completing the DUCs…drilled but uncompleted. The inventory of DUCs should be declining, which will give us a better picture of the current profitability per barrel.

      I am grateful to Steve for pointing to the massive tonnage of sand and water which has to be moved to produce a barrel of oil. We can easily be fooled into thinking that we have disengaged GDP from the necessity to do the dirty work.

      Don Stewart

  14. Thoughts on degrowth:
    From an accounting perspective all assets have an estimated useful life, lack of inputs decreases this useful life, energy is the obvious.
    Educations: if there is not enough energy to cause it to be used, it is less worth less than carried on the personal balance sheet.
    Real assets: same as education, plot decline of energy availability to appreciate asset value after depreciation – need to accelerate in most instances.

    Trick is to find those assets with depreciation rates closest to reality.

    Question of day, what is the depreciation rate for information assets? If the information cannot be used without energy, they the asset is economically useless. Claud Shannon again.

    Dennis L.

    • I know a guy who studied law at Harvard, but he ended up owning a coffee shop in San Francisco and he was really proud of having completed the official training course to operate a Gaggia espresso machine,

      I remember a USMC Colonel commenting that the Saudi Army is ‘the largest static display of military equipment in the world’

      I’m on my 2nd Windows 10 PC, the first thing I do out of the box is download and install a tiny program called Windows Update Blocker, this stops Microsoft from making any changes to my PC and instantly reduces everything they produce and send out to a value of 0% for me.

      I use AdBlock-Plus set to maximum intolerance, permanently, for me the online advertising and marketing industry doesn’t exist,

      I no longer have any social media accounts, from my perspective Facebook shares are worth $0.00

      everything that people don’t know how to use, don’t want to use or can’t afford to use could simply cease to exist without being noticed,

      imagine being the CEO of some corporation which provides a discretionary product or service which is about to become the next Kodak?

      I can remember learning to tie my shoelaces as a kid, it took a while to perfect, but I use that skill every day and it’s not lost any of it’s value in 50 years.

      if house prices are no longer rising faster than inflation does the asset start becoming a liability due to it’s upkeep costs?

    • I like your comment about the Saudi army. I was once told, by a US officer (not USAF), “don’t underestimate the Stealth Bomber – it can get in, find the wrong target, and miss it, before anyone even knows it’s coming”.

      For me, current energy and broader supply shortages are not ‘the after-effects of covid’, or ‘products of rapid recovery’. They are the point of impact between (a) finite resources and infinite ambition, and (b) the financial and the energy interpretations of economics.

      From here, huge changes start happening, not least in an ‘Emperor’s new clothes moment’ about discretionary goods and services. I’m optimistic that, properly managed, economies can carry on providing the essentials for a long time to come. But I find confidence about the continuity (and, indeed, the growth) of discretionaries hard to fathom.

    • “ I’m optimistic that, properly managed, economies can carry on providing the essentials for a long time to come. ”
      A core assumption of things underway.

      We will have to exchange politics for common sense to achieve this goal.

      A common narrative instead of a pushed narrative. That would skip boatloads of useless energy waste. And a few billion people.

    • Fundamental change in politics tends to require equally fundamental change in economic circumstances.

      The public is now experiencing sharp rises in energy and fuel costs, and big increases in broader inflation. Taxes are rising, and some countries may need to push up the cost of borrowing,

      All of this is likely to prompt a new level of voter concentration on economic issues. The affordability of discretionary consumption, and the affordability of homes (whether bought or rented), are subject to severe compression.

    • According to the Telegraph with figures sourced from Ofgem, the average domestic dual fuel bill are

      2012 £1,232

      2013 £1,286

      2014 £1,190

      2015 £1,165

      2016 £1,123

      2017 £1,117

      2018 £1,184

      2019 £1,171

      2020 £1,184

      with the forecast of

      2021 £1,277

      This means a £2 per week increase which is being broadly dubbed by the media as a domestic energy bill crisis, a sharp increase in domestic energy prices or soaring bills.

      Either the media functions with an entirely different set of meanings to our everyday language for the purposes of clickbait or they are deliberately manufacturing/constructing a crisis narrative by which to berate (create sticks and beat) the government.

    • In terms of criticizing the government, I think we can say that the voters chose what they now have.

      They took away Mrs May’s majority, virtually ensuring a ‘hard’ version of “Brexit”. Mr Johnson, far from being an unknown quantity, was one of Britain’s best-known politicians when he was given a big majority in 2019. The voters didn’t ‘buy a pig in a poke’.

      True, nobody knew covid was coming then, but I don’t think that, if they had known, they’d have voted differently. Labour under Mr Starmer offers no credible alternative.

      One can only assume, looking at the UK today, that the public want it like this. ‘No accounting for taste’, as they say.

    • Certainly by most accounts, the Conservative Party is heading in a red tory direction with a greater emphasis on national sustainability, resilience and sufficiency.

      There is a lot of pushback by the libertarian right who are leaking to the liberal democrats but it is also forcing Labour into a blue labour direction with a lot of pushback by the radical left. Labour are trying to steer the country towards a closer relationship with the EU with the probable intention of rejoining.

      In this respect, Labour doesn’t really have any blue labour ideas other than those that would be permissible under EU rules.

      As you previously stated, the state of the economy is becoming important but so is culture and a sense of national solidarity.

      My impression is that growth at all costs isn’t high on people’s list of expectations but economic stability as we enter a different stage of economic development. Similarly, my impression is that many people don’t trust the media much anymore and when they are pushing crisis narrative after crisis narrative with Labour at the helm, many people become even more suspicious of ulterior motives.

      Meanwhile the Saudis have just invested another 200 million in Teesside and Ford is converting Halewood car plant to manufacture electric car transmissions.

      The slack in the economy is in retail, hospitality and tourism and I don’t think there is much economic interest in these sectors so I imagine much of these sectors will be zombified.

      I think overall, in terms of what most accept as a needed transition, the Tories are more favoured because of their optimism and their focus on national sustainability, resilience and sufficiency whereas Labour are largely seen as pessimistic and as disgruntled remainers who are still lost in the EU past.

      Leaving the EU was always expected to be a disruptive process and so in the main, many people are simply riding with that process and getting their heads around national political responsibility. Most I encounter embrace this responsibility and I am personally heartened since Brexit just how much people have taken the time to learn how things work so they can make informed opinions. In my opinion, this can, over time, only deepen the national debate.

    • A lot of things happen through force of circumstances, not political intent. It wouldn’t surprise me at all if the Conservatives had to preside over quite a lot of nationalisation.

      But tough tests lie ahead. For instance, if they’re serious about the ‘high wage economy’, are they going to act on zero-hours contracts?

      Likewise, must the burden of restoring the public finances fall entirely on employers and employees – with the lower-paid worst affected – or will taxes on capital gains and inheritance rise as well? Can the UK continue to exclude (ring-fence) property when assessing contributions (posthumous) towards the social care of the elderly?

      Also, if rates have to rise, and/or if an affordability squeeze starts to bite, are the Conservatives going to unveil yet another gimmick to prop up house prices, to the detriment of the young?

    • Yes there is a lot to balance including the different needs of the supporter base. I’m expecting a capital gains tax at the forthcoming budget review and maybe there will be a windfall tax on companies that did well over the pandemic.

      A chap who I chatted with recently at a sustainability conference works closely with the BEIS and reckons a carbon tax is on the cards.

      Inheritance is certainly a thorny issue, especially as around 65% are home owners. Especially if inheriting a home is seen as a way for the younger generation to get on the housing ladder. Boomers don’t live forever after all.

      Personally, I think the high wage rhetoric is signalling to the market that unlimited immigration is not on the cards anymore and companies will need to change their business models towards an emphasis on productivity gains if they want to remain solvent.

      Similarly, this has intentionally or unintentionally cued the trade unions.

      I can’t see zero hour contracts being banned in the foreseeable future especially in relation to post covid companies struggling to survive and particularly those that are dependent on disrupted just in time supply chains.

      Clearly the economy needs to be dezombified to release the necessary skills to upgrade the economy so time is needed to allow the post furlough dust to settle.

      I think the government’s emphasis will be attracting manufacturing foreign direct investment with government subsidies and seeing how local economies respond to facilitate auxiliary enterprises and supply chains.

      One step at a time. In other words, incrementalism/gradualism.

    • Fundamentally, the issue is: can the economy (a) escape the transition period to REs without contracting, and without going into a financial crash, and (b) grow, using REs to replace the energy value previously obtained from FFs.

      This is the official line, in the UK as elsewhere. I regard it as pure wishful thinking. REs are imperative, on economic as well as environmental grounds. But the chances of REs providing a like-for-like replacement for FFs is – to adapt a phrase – ‘net zero’. FFs are non-intermittent, dense and portable forms of energy. REs cannot replicate those characteristics.

      If we accept the reality of post-FF deterioration in prosperity, we can adapt. If we carry on denying it, what follows is chaotic rather than managed.

    • Where is it stated this is the official line in the UK or elsewhere.

      Net zero doesn’t mean nil fossil fuels, it means balancing fossil fuel use with mitigation strategies and REs and probably nuclear considered zero or low emissions technologies.

      Net zero is a policy goal to signal a transition away from fossil fuel use where it is possible and the deployment of mitigation strategies where possible.

      Contraction is a real possibility and governments will cross that bridge when or if we reach it.

  15. I just did a Google search of the term:
    ECoC
    I suggest you do the same, Read it and weep, Then to increase the pain enter:
    Energy Cost of Energy.
    That’s right, this isn’t even on Google’s radar.

    The chances of you talking to someone about this and not have them look at you like speaking FInnish, or to have them respond with gibberish is about 99%

    • Try EROI. This is the traditional term for ECoE and there are a lot of results. They essentially mean the same thing, but EROI came first and is more widespread. I don’t know why Dr Morgan chose ECoE.

    • EROI, sometimes EROEI, is the original, and quite brilliant, recognition that a proportion of accessed energy is consumed in the energy access process.

      If I remember correctly, I adopted ECoE when I started work on SEEDS, i.e. after Life After Growth.

      From my background in investment banking, ROI means Return on [Capital] Investment. The costs of energy supply aren’t just capital costs, but operating costs as well. I wanted to incorporate “cost” into the terminology.

  16. @Dr. Morgan
    operating costs…
    As breakdowns happen around the world, I am being forcefully reminded that the cost of applying energy to practical goals is an operating cost. Let me illustrate with a simple example:
    *if I want to be warm, all I have to do is go outside and lay in the sunshine. Operating cost is close to zero.
    *If I want a thermostat on the wall to keep me warm, then a vast array of technology and primary energy has to be marshaled to bring that about. A break in the array at any point can bring the whole system down. The distinction between capital and operating costs gets blurred. If I want to rely on a sensor with chips in it, then the US Navy will tell me that they are a part of the essential infrastructure which keeps those chips coming. And since the Navy is part of the US government, I have to keep paying my taxes…otherwise, no chips and no thermostat and I freeze.
    *At an intermediate level, if I want the iron stove to keep me warm, I have to go into the woods with my saw and cut some dead limbs into firewood. The saw and the stove don’t have any moving parts and no chips. If I am really clever, I can start the fire in the stove without matches. Matches are definitely handy…but they don’t have any chips in them. They do involve what is undoubtedly a complicated supply chain.

    These thoughts lead me to suspect that there is really no defense against supply chain problems as things start going downhill. Which implies resetting to the passive solar or the primitive machines level. Are we sharks that have to keep moving forward?

    Don Stewart

  17. Kunstler (see his latest post, Poster Boy, today) seems to think we are near to a real, hard turning point here in America. Not sure about that, but he does live outside the bubble zone in upstate NY, so he may be more right than wrong.

    “The vax mandate is doing a stellar job of wrecking every other public service from sea to shining sea as police, firemen, EMTs, 911 operators, and soldiers in the US military demur from the shots. And, of course, there are all he private companies going along suicidally with the scheme: the airlines, the railroads, the truckers, the retailers, you name it, all shedding employees and the ability of the companies to function. Naturally, the news media is trying to hide the damage, but in another week the net effect will be of the world’s biggest-ever general strike. Every activity in the country will stand still; some activities will just crash-and-burn; and many will not return to their prior states-of-operation.

    This is not just a matter of the kiddies missing their Christmas presents. That’s just a dumb-ass sentimental ruse to divert your attention from the entire armature of American life imploding at warp speed. Christmas presents! How about no food, no gasoline, no heat, no money, and no public safety? That’s where this is taking us, and in the fast lane. And it hardly matters whether the financial markets manage to stay artificially levitated. Reality has already discounted the financial markets because they have forfeited their basic function, which is to signal the true price of everything. The true price of a society lying to itself about everything will be the sickness and death of the society.

    We must be very close to a clear majority of the people in America recognizing the danger we are in and identifying the source of that danger. When that moment arrives, will we be able to do anything about it? It may take extraordinary measures not seen before in our political history.”

    Similarly, Karl Denninger’s site posted an article by “Ishmael” (“Unexpected Allies”) the other day regarding the effect of vaccine mandates causing people to walk or be fired, based on the 80/20 rule – 80% of the key work of an organization is done by 20% of its people. Lose a bunch of the 20%, and the organization is screwed, contrary to management’s assumption that everyone is a replaceable widget.

  18. Grade A1 reading collected by Dave Pollard:
    https://howtosavetheworld.ca

    The current post is Links of the Quarter. Much of it is about dissecting and reassembling our ways of thinking about what is happening. Beginning with a Peak Energy article.

    I’ll philosophize a little about Bill Rees’ argument that Climate Change is not the problem. As a companion piece to Bill’s article, take a look on YouTube for Walter Jehne’s talks about how we can cool the planet, and our city, by restoring the water cycle. We can’t do anything about the accumulated CO2, but we can cool things off with intelligent water cycle management. So why do we throw time, effort, bluster, and money at Climate Change? Why not focus on the water cycle, which we can do something about? The answer to why we persist in bloviating about the wrong problem is a deep mystery for which I can’t really provide any plausible explanation.

    Lots of good stuff here to distract your attention from collapsing supply chains.

    Don Stewart

    • are we obliged by the media to be distressed about ‘collapsing supply chains’?

      I’m heartened by it, surely it’s the onset of reducing complexity and simplification?
      degrowth has started,

      finding Walter Jehne was a ‘watershed’ moment for me, he really gets to the core of the matter and offers a practical and workable plan.

    • or the govt, persisting in pursuing growth at all costs and constantly heralding an imminent recovery that will never come,
      is creating a rod for it’s own back?

    • Growth at all costs is obviously your shtick creation since it is not part of the Conservative manifesto.

      https://www.conservatives.com/our-plan

      Growth within the manifesto is linked to productivity growth through State investment in skills, education, infrastructure and research. It is also linked to geographical disparities.

      The net zero transition will clearly create some growth, especially if renewables supplement the existing energy mix with pseudo climate change fixes like carbon capture, gigabattery factories and the production of electric cars.

      The alternative is to minimise replacement technologies and allow UK carbon energy descent to intentionally contract the UK economy whilst the rest of the world economy intentionally grows.

      Would the political platform of ‘martyr for the cause’ be a vote winning platform. Clearly not, so a party that promises growth will win instead.

      Therefore the great problem for energy economics (the elephant in the room) is how to overcome the national democracy paradox without a unified global consensus on peak energy prosperity which would entail globally distributing national fair shares of available economic development. In other words, some form of global socialism.

      Thus, what presents as a Global Commons Dilemma is being used as a stick to beat governments despite global efforts like COP21.

      In terms of energy efficiency, is it better to use the energy that powers the world wide web to create useless politically motivated sticks or use that energy to brainstorm solutions for the multitude of energy paradoxes that we face.

  19. @Steve Gwynne
    Do you consider Bill Rees’ decades of work ‘creating a stick by which to beat the government’? Do you consider Walter Jehne’s elucidation of the problems in the water cycle and the loss of the fungal networks to be political posturing?
    Don Stewart

    • @Steve Gwynne
      Bill Rees by developing a comprehensive measurement of potential and overshoot. Walter Jehne by showing with science how the current discussion is going nowhere and alternatives which hold promise.
      Don Stewart

    • Bill Rees developed the Ecological Footprint, and is one of the best whole-system analysts around. He was doing this work in the early 90s. Having retired from active university teaching, he has spoke forcefully about the necessity to shrink both population and consumption. The latter seems to be taking place already, and the rate of pop. growth has been slowing faster than demographers expected. The Club of Rome has been working on a “Resolutique” for half a century, and Bill is a member.

    • It would certainly be interesting to see Bill write a paper on the global commons dilemma and how to control for the tyranny of small decisions.

    • As the Quillette article states, scale makes resolution extremely difficult. Bill would say the same. Dunbar’s number (150 adults I think) reflects a limit in a village where anonymity is impossible. Feedback is required for effective governance of deviants. (those regularly breaking the rules) The group is the responsible unit. This is part of the reasoning behind lack of free will of individuals. Those whose total embodied history (heredity + experiences) steers cooperation with peers are the norm in social mammals. But deviants are a %. And group discipline is the evolved adaptive behavior. Too large a group makes this dynamic extremely difficult.

    • And therein lies the paradox at the heart of the global commons dilemma.

      How do distribute national fair shares of economic development in the face of the tyranny of small decisions.

      One could argue this is a free will dilemma.

    • ok, you completely lost me with ‘Global Commons Dilemma’
      I’ve no idea what you’re talking about now.

    • well let’s drop the Garrett Hardin take on ‘the tragedy of the commons’ because he really didn’t know very much about the subject,

      how about looking at what David Fleming has to say;

      https://leanlogic.online/glossary/commons/

      I don’t understand why people are struggling to come up with answers to problems that were solved decades ago.

    • Steve Swynne
      I question the assumption that anything at all can ‘be implemented at the global level’. It seems to me that it would require the imposition of a sort of Stalinism.

      As Dave Pollard observed, what we are seeing right now in the American South is s sort of religious fervor driving Fascism. Neither the Stalinism nor the Fascism of the 1930s was oriented toward dealing with Limits to Growth kinds of issues. John F. Kennedy’s response in the US, which originated at least partially in the Harvard Economics Department, was The New Frontier…the space program and resuscitating Appalachia…big, expensive programs which attempted to mobilize people behind the achievement of some grand goal. Biden’s program has elements of that.

      The way I read the Biophysical tea leaves, we need, instead, something like the Chris Smaje Peasant’s Republic. In a peasant’s republic, commons problems resolve themselves organically through mechanisms such as trading work.

      Don Stewart

    • @Steve Gwynne
      If I knew, I guess I would run for Emperor of the World. In reality, I come up with small movements in the right direction. If you go to Dave Pollard’s site (How to Save the World) and look at the third post in the blogroll, Resenting Our Dependence, you will find in the comments (there are only six) an interchange between me and Joe Clarkson. Joe and I share a common viewpoint on lots of things.
      Don Stewart

  20. UK poised to confirm funding for mini nuclear reactors for carbon-free energy.

    Rolls-Royce-led consortium already has £210m in private backing for plans to build 16 reactors across the country.

    The government is poised to approve funding for a fleet of Rolls-Royce mini nuclear reactors that the prime minister hopes will help the UK reach his target of zero-carbon electricity by 2035.

    https://www.theguardian.com/business/2021/oct/15/uk-poised-to-confirm-funding-for-mini-nuclear-reactors-for-green-energy?utm_term=6616ec7e74b7219341d8155711edb0de&utm_campaign=GuardianTodayUK&utm_source=esp&utm_medium=Email&CMP=GTUK_email

  21. Resurrecting and Old, But Useful, Word
    https://carnegieendowment.org/chinafinancialmarkets/85179

    In a famous passage from his book The Great Crash 1929, John Kenneth Galbraith introduced the term bezzle, an important concept that should be far better known among economists than it is. The word is derived from embezzlement, which Galbraith called “the most interesting of crimes.” As he observed:

    Alone among the various forms of larceny [embezzlement] has a time parameter. Weeks, months or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in—or more precisely not in—the country’s business and banks.

    Don Stewart

    • Don, thank you for nudging my memory of Galbraith’s idea of the bezzle. Re-reading the extract I am struck by a phrase that fits the present era rather well – ‘psychic wealth’.

  22. the saga continues,

    https://www.theguardian.com/uk-news/2021/oct/17/youre-betraying-your-quaker-roots-fury-at-clarks-fire-and-rehire-plan

    it looks like Clarks ceased manufacturing in Britain in 2006, so it’s only a name, not a product,
    now it’s been bought by a private equity firm based in Hong Kong,

    in the article it says that if the workers accept the reduction in wages it would allow the company to raise the wages of half the people at it’s distribution centre to £9.50 per hour,

    well how much less than that can people be being paid if the minimum wage is currently £8.91?

    what happens when businesses are deemed financially unviable when all their employees are on the minimum wage?

  23. @Steve Gwynne
    “Net Zero”
    https://energyskeptic.com/2021/carbon-capture-and-storage/

    If Alice Friedemann is correctly reading the science, and especially the very recent review she recommends, then carbon capture and storage will cost a fortune, use resources we don’t have, and will emit more carbon that it sequesters. Yet we can expect corporations to eagerly compete to get taxpayer money to pursue these dead ends.

    One factor to watch out for is the amount of carbon that needs to come out of the oceans. As I recall, about half the carbon has been going into the ocean. If we remove carbon from the atmosphere, the carbon will come out of the ocean to keep atmospheric carbon and water soluble carbon in balance.

    One potential contributor to carbon drawdown is agriculture. But a lot of work tends to indicate that the amount of carbon we can ‘sequester’ is actually pretty small relative to the carbon in the air and oceans. Much of the carbon needed in agriculture is used cyclically to grow plants. We can see this in the Keeling curve. It is best to think of carbon in the soil as a way to retain water and as a buffer which is built up and drawn down.

    The most important scientific question we need to ask, in my opinion, is:
    Does Walter Jehne’s water cycle theory make any sense?
    It is just a fact that life flourished on this planet with much higher levels of carbon dioxide. The reason usually given as to why it can’t do so now is that the pace of change exceeds the pace of adaptation. Jehne proposes that by repairing the water cycle, we can cool the planet.

    There was a group in the Czech Republic that was using underemployed villagers to build water retention structures which let rainwater soak into the ground, thus restoring groundwater and nourishing tree canopies. They demonstrated that it increased rainfall (like the Amazon) and cooled the cities. But the government stopped funding it. I imagine because it wasn’t a gee whiz high tech venture.

    If Jehne is correct, and if the Czech group was on the right path, then what Boris Johnson needs to promise to do is probably about 180 degrees off what he is promising to do. Choosing the right direction is critical because we don’t have resources to waste.

    Don Stewart

    • what I find admirable about Walter Jehne is his depth of understanding of the subject, he manages to pull every possible thread together and weave it into a grand unified explanation,
      look at California drying out, over exploitation of water sources dropping the water table, excessive deforestation, profusion of commercial agriculture, urban sprawl, the State is being rapidly desertified by human activity, the hydrology has been disrupted, disaster beckons,
      travel directly south and Brazil is experiencing it’s worst drought in 91 years, hydro electric dams are running out of water and the Minister for Mines and Energy has called in a medium to enchant Gaia into delivering rain,

      David R Montgomery can tell you all about soil and erosion, numerous Australian permaculturists can tell you about the reversal possible by holding water run off on land, raising water tables, producing vegetative ground cover,
      Pieter Hoff wanted to plant a trillion trees and had found a way of doing it in deserts with minimal water,
      John D Liu for decades has been documenting reversal of land degredation projects around the world that return productivity, restore hydrology and economic independence for those that live on the land,

      the real driver of climate change is human abuse of the landscape and it’s been going on for 10,000 years,
      the problem with the industrial revolution is it unlocked fossil energy, machinery and unfettered human population expansion allowing humanity to rapidly accelerate it’s abuse of the landscape,
      CO2 emissions are a problem because we’ve mortally damaged the landscapes ability to use photosynthesis to reverse entropy and turn CO2 back into vegetation and soil fertility,
      reducing fossil energy consumption, emissions and material throughput would rectify one side of the balance sheet and is starting to happen now simply due to resource scarcity,
      but we need to rectify the other side of the balance sheet, land mis management, hydrological mis management, deforestation and land degredation,

      we are going to need increased agricultural productivity across the planet as a whole and naturally produced materials delivered on an annual basis by the interaction of the Sun and biosphere because we are rapidly losing the ability to use energy and mineral resources to artificially synthesise the stuff we rely on,

      Steve Gwynne wants to restore the commons, well you empower the people who live on degraded land by granting them stewardship of the commons they live upon by bounding those commons, giving them control of it and assisting and guiding them in restoring the land to full productivity to support themselves in perpetuity, raise their national GDP and do their bit to reverse climate change,

      the deniers are right that CO2 is plant food but we need to generate a lot more growing plants to eat it,
      xenophobes are rightly uncomfortable about immigration, they are the canaries in the coal mine, they notice it first, once millions start arriving we will all become xenophobes,
      people do not emigrate from lush, productive land, they emigrate from barren moonscapes.

      CCS is fabulously expensive and doesn’t work, land restoration is remarkably cheap and works on numerous levels.
      CCS plants need constant tending and produce nothing, organic plants can tend themselves and produce food, materials, biomass and prosperity.

      we could noticeably turn the whole situation around in a decade and then keep building on it,
      it would need minimal investment and start showing a ROI within a few years.
      the biggest input required is knowledge, understanding and willingness to follow a new path.

      this is Pieter Hoffs book he wrote as a proposal,

      https://www.thetreesolution.com/en/

      this is a paper scrutinising his proposal from a scientific and economic perspective,

      Click to access 20170122-TheTreesolution—a-scientific-view.pdf

      it all aligns with Walter Jehnes perspective.

    • Thanks Don.

      I assumed planting trees and making things out of recycled CO2 were probably the most viable ways forward at present. As well as reducing emissions.

      Then of course there is methane to deal with and as you infer, water vapour is also an important greenhouse gas too.

      The government is open to any commercially viable option and any nature based solution to achieve net zero and climate change mitigation. Thus I think their approach is 360° and select out the best ones.

    • Steve
      Just planting trees probably won’t work. What MAY work is Jehne’s analysis of the water cycle and how it cools the planet. Then we have to figure out how we have screwed it up and take remedial action. For example, beaver once constructed a million ponds in North America. We hunted the beaver to near extinction, and so the ponds are gone. The ponds played a critical role in slowing down water runoff and letting water sink into the Earth. Is Britain prepared to bring back the beaver, or to hire people to duplicate what the beaver once did with human labor? The Czech’s were duplicating with human labor.
      Don Stewart

    • Beavers are being reintroduced to counties across the UK after 400 years of extinction. As a keystone species, they will modify the environment around them, support other animals and reduce the risk of floods. Beavers are large, semiaquatic rodents native to the northern hemisphere. 7 Apr 2021

      https://www.nhm.ac.uk › news › april
      Record numbers of beavers are being introduced to the UK

    • good for the UK!
      Around here, homeowners trap them and kill them. They are inconsistent with sterile but nice lawns….Don Stewart

  24. Steve, indeed so. We have relatives living in Yeovil, and visit the area regularly.
    Here in our part of East Lancashire Rolls-Royce has a facility in West Craven that four decades ago employed 3000 people. These jobs were some of the very best – if not THE best – in the borough. Most of the work has been off-shored to Singapore, and there are just 300 employees left at the plant in West Craven. The economic and social impact on the area rather proves the argument made 30 years ago against off-shoring by the late James Goldsmith in his book ‘The Trap’. Goldmsith’s assessment was remarkably prescient.
    Recently, the local district council received a report by external consultants relating to the Economic Recovery and Development and Growth Strategies. The report asserted that prior to COVID-19 the local economy grew at 3% per annum, which was faster than the UK growth rate of 2%.
    I mention this as my immediate thought on reading the statement was to connect with an incident in 2016 during a debate held in Newcastle upon Tyne about the referendum on membership of the European Community. A professor from King’s College, London invoked the likely damage to GDP from exiting the EU, and a woman in the audience shouted back: ‘That’s your bl**dy GDP, not ours’.
    I felt a similar reflexive response when I read the report to the local council. In fact I posed a question to leading and local councillors: ‘If economic growth in Pendle has out-stripped the national average, and at a rate reminiscent from the glory days of post-war golden growth, then how come on many other measures the Borough is in a pretty dreadful state?’ Not one of them bothered to reply.
    Increasingly, I’m coming to the view that GDP stands either for Gross Delusional ‘Proximation – a term used by the late Professor John Hibbs – or Grossly Depleting the Planet.

    • Recently, up the road from you Kevin, we had the “Kendal Futures” initiative, run by a number of external consultants with sponsorship from local government and business stakeholders.

      They suggested we double down on Kendal’s recent post-industrial strategy, where the intent seems to be to try and siphon some spending from the flow of people who are coming to The Lake District.

      I remember raising the point that Kendal’s economic plan is therefore to rely on people having enough discretionary income to afford to go for a holiday in The Lakes and to spend a bit of that as they, hopefully, pass through Kendal. I asked what happens if people, on average, have less discretionary income in the future, as Tim has compellingly argued

      Blank faces.

    • I can see Street and the Clark’s complex in the distance from the top bedroom window in my house. Over the years, I have helped with the paperwork involved in setting up pensions from the long-closed to accrual DB pension scheme operated by the firm. I have neighbours in my village who are ex-Clark’s employees, some senior, but, note, all ex-employees.

      Like many firms, one could say that Clark’s is now a generous pension scheme with a £70m+ deficit that happens to have a shoe design and distribution operation on the side. There are 7,550 pensioners, 3,862 deferred members (i.e. not yet retired) and the fund has entirely disinvested its equity holdings in favour of fixed-income (which is hardly investing in productive assets!). Current employees have membership of a DC arrangement with Aviva. The Quaker founders of Clark’s would no doubt be appalled by the state of the firm today.

    • hi drkevinoneill,

      well done, you illustrated the whole fallacy of building an economy on the back of tourism,
      the long term plan seems to be to offshore all production to China, make the Chinese rich and then try and entice them to fly halfway around the world to visit and spend the money,

      Heath Robinson would be proud of the scheme!

    • Total trade in goods and services (exports plus imports) between the UK and China was £93.0 billion in the four quarters to the end of Q2 2021, an increase of 9.8% or £8.3 billion from the four quarters to the end of Q2 2020.

      Of this £93.0 billion:

      • Total UK exports to China amounted to £25.4 billion in the four quarters to the end of Q2 2021 (a decrease of 30.0% or £10.9 billion compared to the four quarters to the end of Q2 2020);

      • Total UK imports from China amounted to £67.6 billion in the four quarters to the end of Q2 2021 (an increase of 39.5% or £19.2 billion compared to the four quarters to the end of Q2 2020).

      China was the UK’s 3rd largest trading partner in the four quarters to the end of Q1 2021 accounting for 7.5% of total UK trade.1

      In 2019, the outward stock of foreign direct investment (FDI) from the UK in China was £10.7 billion accounting for 0.7% of the total UK outward FDI stock.

      In 2019, the inward stock of foreign direct investment (FDI) in the UK from China was £3.2 billion accounting for 0.2% of the total UK inward FDI stock.2

      https://www.google.com/url?sa=t&source=web&rct=j&url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1022718/china-trade-and-investment-factsheet-2021-10-07.pdf&ved=2ahUKEwjV5YTE89HzAhXTbsAKHUUfBQwQFnoECAUQAQ&usg=AOvVaw0k-7LIH_LeWHY_cpM9lvDe

    • True enough Kevin.

      Similarly there is the danger of the endless loop of either berating prosperity/growth or berating poverty/degrowth depending on which makes the best stick with which to beat others.

    • Apologies for interjecting here with this thought, about the debate around growth and prosperity.

      At what we might regard as the intellectual, theoretical and conceptual level, it seems to me that this debate is all but over. Demand creates supply simply isn’t true where low ECoE energy is concerned, which in turn extends the equation to inputs and, beyond that, into all forms of production. We have pretty good visibility now on where things trend from here.

      I’m not remotely expecting adherents of conventional, money-based economic orthodoxy to throw in the towel any time soon. After all, QE and ZIRP were described as “temporary” back in 2008, just as inflation (and supply shortages) are labelled “transitory” today. Wind-power and the alchemy of technology will still be used to reassure the public that ‘business as usual’ remains intact.

      As I see it, though, we need to move on to implications and practical responses.

  25. Kevin, I’m not wishing to divert discussion into parochial, parish-pump discussions, but the stories that can be recounted at local level – and the situation you describe in Kendal – are illustrative of the hold that the fallacy of infinite growth has upon the body politic, both nationally and locally.
    Here in Pendle there is a genuine belief that all the retailing centres of the borough can prosper, and prosper above the level of local socio-economic demographic. I think that both of those assumptions are wrong.
    Key parts of the masterplan for the future for our ‘little plot’ are framed around boosting tourism, and building ‘executive’ houses. The unspoken assumption is that there is an infinite pool of shoppers, tourists and executives, coupled with an infinite supply of money that has purchasing value!
    My takeaway from Dr. Tim’s work (and others), is that de-growth is ushering in an era of zero-sum games – sadly, the British political class is willingly participating in such games seemingly in complete ignorance of the reality of the situation!

    • Travel, tourism and leisure are high on the list of sectors adversely exposed to the squeeze on discretionary prosperity.

      This in turn has knock-on implications for various regions and sectors.

      It’s interesting to reflect on property prices on holiday destinations, often bought at high prices, using cheap debt, on the assumption of reliable, ever-rising income from holiday letting.

  26. Mark, a relative of ours is a retired ex-Clark’s employee. Dare one be so bold, or naughty, as to suggest that one might consider the BBC is now a pension scheme with an ailing broadcaster attached? Our mini-discussion is showing, I think, that once real growth stops, then absolutely everything completely unravels. My great fear is that it’s going to take complete unravelling for the political class to accept the reality of the situation.

    • I think you are right about the BBC and, in truth, nearly all employers with DB pension liabilities are in difficulties as far as funding and liabilities are concerned. we have ended up (well, nearly) with inexperienced individuals being thrown on the ‘mercy of the stock and bond markets’ for their increasingly insecure retirement income above any meagre state pension.

      That’s why, where possible, I like to see that individuals at least try and have their ‘essential expenditure’ covered on an insured basis (i.e. DB pensions and annuities) to give them at least some peace on mind. There is no doubt, however, that this is an expensive thing to achieve from a capital cost point of view, but consistent with the gross underestimation that most people have about their life expectancy.

  27. I think it should be made clear exactly what government policy generally means by growth.

    “With already high levels of employment, it is increasingly recognised that future growth needs to be achieved through boosting productivity. Yet productivity remains broadly the same as it was 10 years ago and notably lower than the national average.

    In simple terms, productivity figures help us to understand the scope for raising living standards and competitiveness in our economy. Moreover, it has become central to formulating and assessing government policy.”

    https://www.somersettrends.org.uk/topics/growth-productivity/

    Thus perceptions of poverty despite GDP growth is due to flat lining productivity.

    Turning disused shoe making factories into a retail park is land productivity growth in terms of Gross Value Added. Similarly, much of the disused factory buildings within the gateway of Glastonbury has been turned into a retail park. No doubt the old tannery in Glastonbury has already been redeveloped.

    Gentrification I presume is a form of productivity growth.

  28. From the point of view of labour productivity which divides Gross Value Added by the number of hours worked

    https://www.somersettrends.org.uk/topics/growth-productivity/productivity/

    then this measure is at the heart of the problem regarding the economy as an energy system.

    Gross Value Added does not seem to distinguish between higher costs of living across different regions and makes no reference to the energy used so energy productivity and energy efficiency appear to be completely discounted as part of the energy-economic equation.

    I’d assume Gross Value Added and hours worked need to be better related to energy used but I’m no expert on the subject.

    • GVA is one of three methods of compiling GDP. The others are consumption and incomes. They use the same data, so having three versions doesn’t give us ‘belt and braces’ corroboration.

      Productivity assumes that all output is a product of human labour. Nothing to do with energy inputs, then!

      Using enough energy, though, we could produce enormous output using very little labour.

    • I’ve done a lot of work in the the plastics industry, where output per kWh, sales per kWh, value added per kWh, are quite commonly used as key performance indicators.

      It’s often difficult to continuously improve these metrics, because once technical improvements have been achieved, gains can be eroded by market demand for smaller batches of differentiated product. This results in less efficient use of energy and raw materials, due to more frequent change-overs, and their associated issues.

      Product range simplification at the retail level, would tend to allow manufacturers to plan for more efficient production runs and consequently more efficient use of energy. All things being equal, this should reflect in improved GDP figures when it’s all grossed up to that level.

      This kind of simplification might at least help to offset the the relentless increase in ECOE for a period of time. From a productivity and energy efficiency viewpoint, there’s a lot to be said for the old “Ford Model T” approach to product offering and differentiation; “Any colour you like, so long as it’s black”.

    • Interesting. Thanks Neill.

      This fits with my low impact experience. 1/2 litre or 3/4 litre reused glass jars would be ideal for food bottling. Manufactured with standardized lids.

  29. @Matt and Steve Gwynne
    I had not previously read the Tree book. I will read it now. But while the topic is still fresh on our minds. The reason I doubt that simply planting trees on waste land is a total solution is because, like Alice Friedemann, I anticipate a pretty rapid return to Wood World. Which implies that an awful lot of the trees we plant will be coppice: grow quickly, harvest young, burn for energy. which releases CO2. I believe that roughly half the forested land in Britain was in coppice just a few hundred years ago.

    So I agree completely with planting more trees…Sylvo everything. But I also suspect that we are going to have to do some work on restoring terraces (e.g., the Loess Plateau in China), terraforming (e.g., restore the contour plowing once common in the Midwest US), swales in the desert (which were built by the New Deal and which still exist and still work to sink water), beaver dams or the human made equivalent, redesign of cities (Canberra and not the new suburbs), and so forth. In other words, a comprehensive plan based around water and maximized photosynthesis along with ways to use coppice most efficiently (e.g., highly efficient stoves which produce biochar as a side benefit).

    Don Stewart

    • Barry,
      you’ll notice there are no trees on Mars, it has no forest fires, it also has no breathable atmosphere and also no life,
      without the carboniferous era where plants and trees evolved and populated dry land, mammals could never have evolved,

      a person that destroys everything his life depends upon is effectively destroying himself.

    • The current ‘sixth extinction’ differs from the previous five in that this one is self-inflicted.

      In other words, the dinosaurs were unlucky, whereas we’ve been stupid.

      What was that I heard about the dinosaurs having tiny brains?

  30. Tim,
    You have mentioned the Taxonomy of Degrowth on a number of occasions over recent months. Are you planning to publish a full insight at some point in the future?

    • I can do.

      For anyone who hasn’t heard of it, this ‘taxonomy’ has two purposes:

      1. It sets out what businesses will face as prosperity declines.

      2. It examines the compounding processes that may accelerate the rate of decline.

      Point 2 is incorporated, as best one can, into the SEEDS model.

      Point 1 is likely to come as something of a shock, particularly to business models based on mistaken expectations about the future size and shape of the market for goods and services.

  31. Nuclear
    Small nuclear reactors may be a good idea or a bad idea, but we also need to keep our eyes on the annihilation potential of nuclear:
    ‘We have no idea how they did this’: How China’s secret hypersonic launch altered the global arms race
    The nuclear-capable missile circled the entire Earth at low orbit before descending on its target, ultimately missing by 20 miles

    Someone recently posted a Scientific American article which claimed that Russia couldn’t possibly have the capabilities they have talked about. NATO thinks up reasons why war with Russia and China is a really good idea.

    Perhaps the very first priority in terms of surviving Degrowth or the Financial Collapse or just collapse of leverage is to first try to ensure that there are still some of us around to benefit from whatever plan we come up with.

    Don Stewart

    • Don, logically, you are quite correct, but sadly, we do not control the people who can push the nuclear buttons. I have no reason to trust or believe that the top brass at the Pentagon are not completely delusional about our capabilities. I have every reason to believe that their number one concern is to push their budgets and resources, which means creating strife to support the need for new programs. A pretty dangerous tight-rope to walk, if you ask me.

      We do what we can

    • @Matt
      The oil companies in the US changed their stance a couple of years ago, and began to pursue things like subsidized schemes to do carbon capture and storage. A cynic would say that they had concluded that Gail Tverberg was right…prices too high for consumers and too low to allow profitable companies in the oil and gas business. So…next best thing, get some government subsidies. Worked like a charm for Tesla.

      I think News Corp can read the tea leaves. I think that both the companies and the mainstream media believe that being against climate change is the most profitable course of action. If Trump wins in 2024, I believe he will strongly favor subsidies. So we will probably have monetary and tax policies which favor things like shale oil and subsidies for ‘renewables’. Whether the taxpayers can afford it, or foreign countries continue to support it through the reserve currency mechanism, I’m not smart enough to say.
      Don Stewart

    • I’m sure the libertarian right are fully aware that fossil fuel subsidies will continue along with the fossil fuel industry since as we all know very well, fossil fuels and coal in particular are essential for the creation of alternatives.

      Hence

      The report says all 19 G20 member states continue to provide substantial financial support for fossil-fuel production and consumption – the EU bloc is the 20th member. Overall, subsidies fell by 2% a year from 2015 to reach $636bn in 2019, the latest data available.

      But Australia increased its fossil fuel subsidies by 48% over the period, Canada’s support rose by 40% and that from the US by 37%. The UK’s subsidies fell by 18% over that time but still stood at $17bn in 2019, according to the report.

      The biggest subsidies came from China, Saudi Arabia, Russia and India, which together accounted for about half of all the subsidies.

      https://www.theguardian.com/environment/2021/jul/20/g20-states-subsidised-fossil-fuels-2015-coal-oil-gas-cliamte-crisis

      Similarly

      The IMF found the production and burning of coal, oil and gas was subsidised by $5.9tn in 2020, with not a single country pricing all its fuels sufficiently to reflect their full supply and environmental costs.

      https://www.google.com/amp/s/amp.theguardian.com/environment/2021/oct/06/fossil-fuel-industry-subsidies-of-11m-dollars-a-minute-imf-finds

      These reports are sourced from
      https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004

      Which states

      Globally, fossil fuel subsidies were $5.9 trillion in 2020 or about 6.8 percent of GDP, and are expected to rise to 7.4 percent of GDP in 2025.

      ….

      Lastly in the Uk, the pro carbon libertarian right are rallying behind Net Zero Watch. Their strategy appears to be to make the current gradualist approach much much slower by sowing fear and doubt.

      In other words, the politics of net zero is now about the speed of transition.

  32. @Steve Gwynne
    I have frequently pointed out that reading the tea leaves in order to think about what we need to prioritize is necessary, but fraught with difficulty. Not least of the difficulties is in communicating with people who have read the tea leaves differently. Here is Ted Trainer saying that both Chris Smaje and his detractors are worried about problems (such as the Tragedy of the Commons) that simply aren’t going to be problems. The solution is ‘back to the Dunbar number of 150 people who have to know and understand each other and learn to cooperate’…which Ted is quite confident is in our pretty near future.

    Ted points out that the ‘fair share’ of commercial energy for a Westerner is about 10 percent of what we currently consume. What would our society look like at 10 percent? Would any of us survive? Of course, we can have all the passive solar and photosynthesis we can manage, but we can’t count on any of that produced with the assistance of fossil fuels (or nuclear, as I understand Ted). At the current time, about 80 percent of the nitrogen in a Westerner’s body comes from synthetic nitrogen fertilizers. A number of those plants have closed in Europe due to the high price of natural gas. Does that imply that at least 80 percent of Westerners won’t make it through the bottleneck. These and others are all interesting questions, perhaps best discussed when well lubricated with alcohol.

    Don Stewart

    • The operator of the Russia-led Nord Stream 2 gas pipeline on the bed of the Baltic Sea said the first of the project’s two lines has been filled with so-called technical gas, while still awaiting clearance to start sales to Europe.

      https://www.reuters.com/business/energy/nord-stream-2-says-first-line-is-filled-with-technical-gas-2021-10-18/

      I guess it is just a matter of time before Nord Stream 2 is supplying Europe.

      I have some reservations regarding the magic number of 150. If these 150 are highly coordinated and highly cooperative then yes but if this 150 were representative of the typical multicultural pluralistic society, then I feel that number would have to be much lower.

      On my allotment site there are around 300 tenants and unless they faced a mutual crisis, it would be pretty much impossible to get them all on the same page. In my opinion.

      Similarly, whilst equality is a fine egalitarian goal, I personally doubt it could ever be truly realised, especially at global scales.

      For me, it makes more sense to distinguish between low, medium and high impact countries and correlate that with their level of sustainability and resilience. This then identifies the scale of import dependencies and whether these dependencies can be substituted or not.

      I think predation is an operating feature of the system and will persist despite the rhetoric of equality since even Progressives are unwilling to forego their import dependencies and their aspirations for a middle class status. Hence in the UK, much is made of our 2% of global emissions (including our imports) rather than Chinese emissions, since to act on Chinese emissions would mean foregoing much of their technological import dependencies.

      Certainly much of my tealeaves point towards the next level of grernwashing, aka passing the buck with individuals blaming the government or corporations and corporations blaming the government and government blaming the corporations la la la.

      In other words, very little is going to change until we are presented with an economic recession and/or an ecological breakdown. So in my opinion, mitigation, substitution and resilience building are key including creating a system of values that fosters cultural solidarity.

    • I agree with Steve G. about the 150 # being subject to common values, and also add that extended family ties are helpful. It its likely that gradual system breakdown increases receptivity to need for changes. The unknown is how much increased cooperation will kick in vs increased predation. In areas with dense population and different cultures, cooperation will likely be difficult. Recall that rarity adds value (few neighbors) and surplus/glut reduces it. Overshoot has doubled global population in 50 years. Hence my pessimism.

    • @Steve Gwynne
      I think the business about ‘pluralism’ disappears when people have real issues which have to be dealt with on a daily basis. The small farm I worked on had a continuously rotating group of mongrels who got along fine…because we were all focused on producing and selling food. There just wasn’t the time or energy for a lot of B.S.

      This joke is at least 70 years old, because I heard it from an old farmer when I was very young. (Context: back in those days we had an employment office run by the county which matched people with job openings.). An old farmer goes into the employment office and talks to the nice young lady. She says “what sort of workers are you looking for?”. He says “I need some hoe era”. She looks a little flustered and asks if he is trying to hire prostitutes. He says “Lady, I don’t care what their religion is so long as they can chop cotton”. (More context: in rural areas, chopping cotton meant hoeing the weeds.)

      If Trainer is right in his reading of the tea leaves, within a small group of people who are mutually dependent on each other for survival, a lot of modernist concerns simply melt away.

      Don Stewart

  33. Gail Tverberg at Our Finite World
    “European economists should have told European citizens, “There is no way you can get along using renewables alone for many, many years. Treat the countries that are exporting fossil fuels to you very well. Sign long term contracts with them. If they want to use a new pipeline, raise no objection. Your bargaining power is very low.” Instead, European economists talked about saving the planet from carbon dioxide. It is an interesting idea, but the sad truth is that if Europe takes itself out of the contest for energy imports, it mostly leaves more fossil fuels for exporters to sell to others.

    In the next few years, I am afraid that we will find out how collapse actually proceeds in a very interconnected world economy.”
    Should be sobering to many, especially in Europe. I think China gets the message. US a big winner so far.

    • Gail is quite right. As I’ve said in this article we’re discussing here, “Even if renewable energy sources (REs) can take over fully from fossil fuels in the future (and this is unlikely), they certainly can’t do so now.”

      In other words, what we face is – at best – a balancing act, where we maintain access to oil, gas and coal, and maximise the efficiency of their use, through a precursor period to the “transition point” at which REs can take over.

      We also need to accept that, during the period between now and the transition point, the economy can be expected to shrink.

      There are two reasons for promoting renewables, and other alternatives to fossil fuels. The first, widely recognized, is that we’re at (or even beyond) the limits of environmental tolerance of FF use.

      The second, barely recognized at all, is that the rise of FF ECoEs threatens to destroy the basis of any economy which persists in relying on them.

    • “There are signs of some change in the corporate suite as well, even predating the current crisis. McKinsey and Company surveyed supply chain executives last year and found that nearly all respondents believe their supply chains are too vulnerable. According to March 2020’s Thomas Industrial Survey, COVID-19 supply chain disruptions aggravated an appetite for locally sourced materials and services—up to 70 percent of firms surveyed said they were “likely” or “extremely likely” to re-shore in the coming years. Similarly, a UBS study revealed that as many as 50 or 60 percent of firms now producing in China have moved or are planning to move.”

      “A recent survey by the left-leaning Center for American Progress found that far more Americans prioritize protecting US jobs and reducing illegal immigration than progressive goals like combatting climate change and improving relations with allies.”

      https://quillette.com/2021/10/13/confronting-the-supply-chain-crisis/

      A link from the above article.

      Re-shoring to near-shoring to right-shoring

      https://www.kearney.com/operations-performance-transformation/us-reshoring-index

    • In the UK we seem to be ahead of the pack when it comes to ignoring the realities of the energy transition. Even while we are in the midst of a natural gas supply crunch, the energy regulator has recently declined approval for a planned gas field in the North Sea.

      The reality of the energy transition is that it needs to be pragmatic rather than idealistic. If it has to be a bit scruffy and dirty for a few years, then so be it. But it wouldn’t sound good declaring that in a keynote speech at the forthcoming COP26 would it? So instead, we’ll hear the about the Shiny, sparkly, and squeaky clean version of transition instead.

      In any serious debate about green energy, the deleterious effects of climate change must be considered against the very serious and much more immediate risks of prematurely pulling the plug on FF energy flows. Anyone with any sense whatsoever would want the inevitable energy descent to be a smooth stair-step downwards, rather than hurling ourselves headfirst from top to bottom like a deranged madman. But that’s exactly what we will see at Glasgow. Highly emotional pleas to dump fossil fuels immediately, with no explanation as to what life will be like in the wake of that.

      Ultimately, fantasy thinking over the capability of renewables, actually threatens the energy transition. That’s because a serious collapse of FF energy flows in the short term, will hamper the production of renewable energy systems. As discussed on this forum many times, the “ultra’s” in the green energy movement seem blind to the fact that circa 80% of the energy used to produce shiny new solar panels, still comes from fossil fuels.

      UK energy policy has been an absolute mess for at least two decades, and probably longer. Sadly, I don’t see it changing. Our prime minister seems to see the only shiny, sparkly version of the transition. The version that sounds good to environmentally concerned voters.

      Better chop some more logs for the winter I think.

    • From Politico London Playbook

      The big bet: Johnson has given an interview to Bloomberg’s Editor-in-Chief John Micklethwait in which the PM indeed frames his green agenda as a gamble on various relatively uncertain technologies that will pay off when they deliver an affordable net zero. “The U.K. is deciding to make a big bet on green technology so the government is going in, setting the regulatory framework to encourage the private sector to come in, in the way that they are … So we are making a big bet on wind power, on hydrogen, on electric vehicles, on gigafactories, on carbon capture and storage, all those things.”

      When is a ban not a ban? BBC Newsnight’s Ben Chu spots that, despite all the fanfare about new gas boilers being banned after 2035, that’s not what today’s strategy actually delivers. Instead it only “sets an ambition” for no more gas boiler installations after that date. Carbon Brief’s Simon Evans agrees it’s “not a ban” and reckons it’s “constructively ambiguous” language.

    • From Gail’s latest sobering analysis, it looks like our world must re-order now then, into 3 broad categories, the new world order will be those who hold the aces become top dog, having the last remaining viable energy. Next those states which have something so valuable to trade they can swap for some of that energy, in a much simpler world that could be food, medical supplies or weaponry. Finally the many places with no resources useful in a basic world several civilisational levels lower than now. These will be forced off-grid and have severe collapses, with only a single figure percentage of their current populations and those will survive as their ancestors used to. (As in the few relatively untouched areas of the third world today, self-sufficient, low-tech, low population density, largely peasant societies)

  34. @Dr. Morgan
    I am reminded of Churchill’s statement that “the Americans always do the right thing, but only after they have tried everything else”. I wonder if that might be a pretty good description of the floundering around which currently dominates politics and economics and business? Are we completely incapable of dealing with reality, or are we just in the midst of our Churchillian flounder? And, like a Woody Allen movie, to be viewed with a certain detachment in terms of human foibles?

    I’d like to believe in the ‘detachment’ theory, but I fear we are watching juveniles playing with dangerous substances.
    Don Stewart

    • @Don and others
      A YouTube video today of a conference addressed by UKPM and Bill Gates
      illustrates just how juvenile the PTB are. Reality and truth are completely ignored and finance will solve all the green issues . Excruciatingly embarrassing to any UK
      or US resident .

    • Yesterday I heard spokesmen for both main parties – Lord Deben and Ed Miliband – supporting the UK plan, obviously with some political reservations from the latter. I don’t doubt the sincerity of either. I can only assume that they live in some sort of bubble in which all of this really does seem possible. The British authorities are to be credited with taking the climate crisis seriously. Yet the realities seem to elude British and overseas policymakers alike.

      There seem to be two main blind-spots.

      First, far too much uncritical trust is placed in technology, often on the false premise of simple extrapolation.

      Second, there’s an assumption – and an insistence – that economic growth will and must continue.

      But even the most committed believer in transition to renewables must surely realise that this can’t happen now, or for at least 10-20 years.

      I can only conclude that the role of energy is seen as no more than an adjunct of the economy, rather than as the centrality of economic activity. At a time when energy issues are creating widespread disruption, this blindness is remarkable.

    • To be fair, if economies are now mostly onboard with net zero, then scope for technological improvements improve quite dramatically.

      Fossil fuel subsidies are presumably a counterbalance to rising ECoE.

      With alternatives requiring carbon energy (and carbon energy subsidies) then economic growth is a given.

      If net zero 2050 is taken literally, then contraction is inevitable.

      However, politics is nowhere near this literal interpretation. It is largely indexed with the aspirational interpretation with the Left taking a more maximalist State based approach with market intervention and the Right taking a more gradualist Market based approach with state intervention (to subsidise early adopters).

    • Sorry, Steve, but I really must disagree with some of this – viz, technology and subsidy, whilst agreeing wholeheartedly that ‘contraction’ is inevitable’. I must apologise if I seem a little ‘intemperate’ on some of this, but a surfeit of drivel from the authorities can have this effect!

      The scale of official incomprehension over technology and prosperity is such that this is what my next article may be about.

      The scientific maximum efficiency of wind turbines is 59%, and best practice is already at or near 45%. The equivalent maximum for solar is 33%, with best practice now at 26%. No quantum efficiency gains are possible, unless we repeal the laws of physics.

      Intermittency requires system capacity at least 60% greater than averaged annual consumption.

      Storing electricity at grid scale is roughly 200x as costly as storing fossil fuels. Even in the US, power storage is measured in minutes rather than, as with FFs, months of consumption. These costs may come down, but only to a limited extent dictated by the properties of materials.

      Subsidy is possible, indeed inevitable, but at the expense of other sectors and activities. So to some extent we can subsidise industries like steel, and subsidise household essentials. But we need to be clear that this has a cost in terms of other sectors.

      The economic future, even on very much a best case scenario, is that the world’s average person is 13-16% worse off in 2040 vs 2020. The rate of decrease in discretionary prosperity will be at least twice that. Most of these falls will occur between now and 2030.

    • I certainly appreciate current technological constraints Tim but with investment turning towards net zero and away from fossil fuels, then innovation in alternative technologies will surely arise.

      Whether in material science, energy efficiency or new technologies, with the markets refocusing, profit gains will be sought elsewhere.

      Carbon energy subsidies are historical and will continue for some time. Any opportunity costs of carbon energy subsidies are therefore entrenched in fiscal policy. That said, in the UK, carbon energy subsidies have decreased which probably means they’ve been switched to renewables and state aid in other sectors.

      Funding has been approved for big nuclear and small nuclear in order to counterbalance the intermittency problem.

      What we expect to see in the UK is increased electrification. Hydrogen for heavy machinery and hgvs and the increased scale of renewables.

      In the short term this will mean growth if material throughput isn’t constrained which is probably why the UK is trying to get ahead of the game.

      Nothing is certain either way except the long term inevitably of carbon energy depletion. Thus the reason to act now and steer the market towards alternatives.

    • Indeed, but hydrogen is vying with EVs for the title “daftest idea of modern times”.

      To create hydrogen, we have to break out H molecules by passing electricity through water. A large proportion of energy is lost, both through this process and through generating the electricity in the first place.

      As for EVs, we’re already going to have vast battery requirements to tackle intermittency at the grid level. Adding to this requirement by needing yet more batteries for EVs is wilful folly.

      I don’t – or, rather I do – understand why we’re not being given the facts on this. The bounty of cheap fossil fuels is over, on both environmental and ECoE grounds. Whatever comes next, though feasible, leaves us poorer, and the cost of essentials will rise.

      We can adapt to this, so long as we get real about the ending and reversal of growth.

    • I personally don’t see EVs scaled out to everyone. At least to a quantity to supply key workers. Nor do I see hydrogen being scaled out to the domestic sector, only the commercial sector where comparative advantage, think Qatar, will make solar and the necessary electricity more feasible.

      Until there is an actual recession, I don’t see any political space to bravely put forward the proposition that economic growth has ended. At least not in this electoral cycle when the net zero transition has just started.

      In this respect, I find it more politically prudent to track what is going on in terms of policy and see where real time constraints appear and deal with them as necessary.

      I certainly wouldn’t be taking a Labour approach whereby the cost of transition is bourne by the state and increased borrowing. I’d prefer to allow the market to signal how well the transition is proceeding.

      As you say, we need to buffer our systems with as many alternatives/renewables as possible and this is actually what government policy is trying to achieve.

      There is no certainty in terms of overall success, it is simply guiding the direction, especially of the market. Much of politics isn’t literal like science, it is aspirational, dosed with expectation management, rhetoric and reading between the lines.

      You are not going to get a leading politician announcing the end of growth when the opposition can simply say the opposite. This could only be done in a technocracy and even then there would be the risk of revolt.

      At the end of the day, if financial systems and the value of money collapses because fossil fuels have truly had their day, the real economy can still function through deliberative cooperation. As you say, the only thing of real importance is the supply of essential goods and services. Beyond that, we have enough discretionary goods within the existing system to last a few lifetimes if not more. Simplification, decomplexification and delayering will probably be enough to accommodate a contracted energy system. We’ll just become far less diverse in our discretionary goods just like the old times but with a decent degree of technological sophistication in terms of our essentials.

      Why is there so much panic. Personally I feel unfazed. What have you got to lose because I have nothing to lose. I’m already poor.

    • In many respects, what I’m more worried about is this disconnect.

      Scientists are warning that the world is planning to burn twice as much oil, coal and gas as planet can handle, the UN warns.

      https://www.mailplus.co.uk/edition/news/weather/117168/world-planning-to-burn-twice-as-much-oil-coal-and-gas-as-planet-can-handle-un-warns?utm_source=newsletter&utm_medium=email&utm_campaign=MN-MailPlus-Briefings-211020_BR12_Newsletter&signin=auto

      How do scientists think renewables and alternatives are going to be manufactured via the extraction, processing, fabrication and distribution of the necessary materials 🤔

      It is the job of scientists in particular to be telling us the full story but here we are with yet another half story. And then they wonder why people are mistrustful of experts and international organizations 🤔

    • Very interesting. Thanks Martin.

      In the framework of the MEDEAS project, a White Book on policy recommendations was developed with the aim to identify and propose policy recommendations for the transition to a low carbon economy in a way that will safeguard socio-economic competitiveness, protection of the environment, creation of quality jobs and social welfare.

      https://medeas.eu/model/impacts-policies

      The MEDEAS MOOC “Simulation models for the design of transition paths towards a sustainable society” is available at the UNED MOOC platform.

      Topic 3. Energy

      Session 1: Energy resources
      This session explains the great importance of energy in the development of our societies and humanity, in general, the current stagnation in non-renewable energy sources production and the peak oil concept, the EROEI (energy return on energy invested) concept and the challenges of renewable energy sources for filling the gap left by the other energy sources.

      https://medeas.eu/model/mooc-course

    • Steve said:

      “It is the job of scientists in particular to be telling us the full story…”

      That’s what I believed when I started my career as a scientist.

      Then I found myself complicit in the lies we told potential investors to keep our research group/company funded and our rent paid.

      Switching over to doing science in government was no better. Ministers and budget allocators literally think science and innovation is magic. They kept throwing taxpayer money at us to “deliver”, and to dole out to universities and tech start-ups, even when we told them things are not technically feasible, and it would be a misuse of public funds.

      “Innovation” is big business, lots of scientist and engineering jobs are dependent on it. Hardly anyone is interested in rocking the boat.

      Don’t even try to raise the topic of diminishing returns in R&D in general, you’ll be cast out – just like I was 😜

  35. The ‘other Tim’ is really churning out the articles right now, this one pinpoints with laser accuracy how and why the systems that run a country are so broken in britain:

    https://consciousnessofsheep.co.uk/2021/10/19/closer-to-the-edge/

    The extreme case of the UK is a lesson to others what happens when neoliberalism is allowed to run riot, this is the inevitable conclusion. When you attain perfect profit through efficiency, it has to be done by reducing resilience to the point where the slightest gust of wind starts crashing system infrastructure. I see no way this could change either because everyone alive here now has only lived in neoliberal time, they have been utterly brainwashed to believe that there is no alternative.

  36. Goodness! A fleeting reference to the lack of surplus energy in the economy from Justin Rowlat on the ‘Today’ programme this morning.

  37. Here’s one to watch, regarding the emerging issues with energy price spikes and the knock on effects. It’s a supply chain squeeze on silicon, accompanied by a massive price spike for the commodity.

    Two thirds of the stuff comes out of China, but output has been slashed by 90% due to the energy crunch. Silicon production is very energy intensive, being produced in high temperature furnaces.

    This basic material is the flour in the dough for the electronics industry, so it doesn’t bode well for the global shortage of electronic chips. It’s also used as a key ingredient for other basic industries such as glass and concrete manufacture.

    At some point these kind of shocks are going to feed through through into company earnings, and the stock market isn’t going to like it. It’s seems likely that the consumer will also suffer further price inflation on a wide range of products, as manufacturers pass on the escalating increases in input costs.

  38. Another example of how essentials to our lives are linked, in the same way as energy is food or transport, so is water, given that water is extracted, purified and transported using FF in our anthropocene way of life:

    https://theconversation.com/we-are-ignoring-the-true-cost-of-water-guzzling-data-centres-167750

    So if the magical solution in the thinking of those alive today is ‘tech will save us’, then that tech has to be affordable for this theory to even have a chance. If the inputs to create, use and dispose of that tech are too energy-expensive, it aint going to happen no matter how hard you just believe.
    So direct energy used in the production, transport, use, maintenance and disposal of tech + the indirect or hidden energy inputs for all the things like water cooling of servers servicing the tech remotely, all adds up. As you say Dr T., this is the price of complexity, yes it raises what you can do by log scale, but often at the cost of in-built fragility, in that any crucial part not working shuts down the whole system. And there are a lot of crucial parts necessary for the whole machine to be able to do all the wonderful functions that made it worthwhile.

  39. A comment from BTL on The Guardian’s business news: –
    “However, this feels a bit like the lull before the storm”
    First ripples at food bank yesterday. First U/credit cut casualties, those who got paid late Sept. Most around where our food bank’s located get paid mid month, so the main wave will hit us in the next two/three weeks.
    Usual increase in elderly/disabled as heat or eat kicks in. Prepaid meters swallow top ups at the best of times. Some folks said that the energy price hike means they are topping up every day, now.
    Chap in his 40’s came in. Unable to work due to a serious lung condition, he receives U/C, but is excused job search. He lives with his 74 year old mum, who is on basic state pension. Neither had eaten since Sunday evening. I got CAB straight on the case. DWP & Jobcentre are like lightning when it comes to sanctions, but never volunteer info on additional support. Quelle surprise?.
    I’m 69, front of house, and felt utterly drained by closing time. The ladies in the packing room, all in their 70’s, were knackered from packing all the heavy parcels.
    And that’s before the main wave hits, and Winter really kicks in.
    But we high fived, ‘cos we’d fed a lot of peeps & signposted to other help. Felt good, as always.
    Thanks to all who donate.”

    A friend who volunteers in our local food bank in Somerset is having a very similar experience. A hard winter is ahead.

    • “Green sunlit uplands” indeed, sir. Yesterday I hied myself over to the garden to do some gleaning. It was warm enough to work in shirt sleeves, quite sunny and warm. Besides harvesting and cleaning beans for next season’s seed from the trellis, I dug about half a pail of beetroot and two full 5 gallon pails of beautiful, “Pontiac” red potatoes. They keep well, so we may have enough now to last the Winter, with more still to dig. I’ll add them to my Winter-storage Squash and bumper-crop tomatoes that I’m drying.

    • I can really relate to the comment about the DWP & Jobcentre, about 6 years ago I had the misfortune to find myself having to fall back on them, they require you to endlessly jump through hoops that they devise and change at a moments notice, one slip and you’re disqualified from their game and go back to the start line with a black mark against your name,

      I was at a pretty low ebb mentally and physically and at one point sought medication to control the anxiety generated by the bi weekly visit to the Jobcentre,

      I suspect most people that ought to be counted as unemployed find the system so unbearable and intolerable they take a crappy low hour part time job to earn the equivalent of Job Seekers Allowance, £75 a week, still qualify for housing benefit and council tax relief and exist off the radar, so to speak,

      I’m convinced that much of the mental health epidemic that is reported is created by constantly forcing people to try to do what is obviously impossible,

      one of the staff at the Jobcentre confided in me that she was on anti-depressants too!
      Britain, you don’t have to be on drugs to live and work here, but it helps!

      lots of people really enjoyed the covid lockdowns because it allowed them to stop pretending,
      a bit like Sisyphus being given a tea break from rolling his boulder uphill,
      now the lockdowns are over Sisyphus is reluctant to go back to boulder rolling.

  40. Winter of Our Discontents
    Headline: “Despite lackluster demand, jet fuel prices climb 70 percent this year”

    So…are rising prices a good thing because we desperately need to stop using jet fuel?
    Or…the word lackluster indicates problems because airline earning will likely suffer?
    Or…the rising price of crude indicates that, channeling Richard Heinberg, the party really is over?
    Or…the rising price of crude oil opens the door for fabulous technological advances with new fuels and materials and teleportation?
    Or…if people cannot fly off to exotic destinations, then they will stay at home and the delights of domestic life will again thrive?
    Or…if they can’t get away from their bad situation and fly off to a sunny beach, they will kill each other?
    Or…Good…we need to reduce population anyway?
    Don Stewart
    PS. Example of how we all read the tea leaves differently…which keeps us in social, business, and political confusion.

  41. Neill,

    Thanks for pointing out the supply problems with silicon, While supply problems may have initial bad effects on the stock market, the longer term implications are way worse.

    We’re going to lose the ability to make computer chips and motherboards, at least for the masses. It’s not just that computing power will have to be rationed (if only by increased price, initially) if silicon supplies decline. Alice Friedemann has recently identified our ability to make microchips and motherboards as two of the weakest points in modern Western economies/societies. The manufacturing processes are among the most complex in all of industrial society. See energyskepticDOTcom, “How are Microchips are Made,” and “Motherboards: Too Complicated to Make After Oil.” Making computer chips is not consistent with an unreliable electrical grid or, presumably, an unreliable supply of silicon, which will require shutting down and re-starting, apparently not an easy thing for chip manufacture.

    Here’s her executive summary from the microchip article:

    “Computer chip fabrication plants need to run continuously for weeks to accomplish the thousands of steps needed to make microchips. A half-hour power outage at Samsung’s Pyeongtaek chip plant caused losses of over $43 million dollars (Reuters 2019).

    Chip production requires massive amounts of water, but reservoirs in Taiwan are critically low and authorities have already cut supplies to agriculture to support industrial and residential use. Taiwan’s tech manufacturers fear their output is under threat from the island’s worst drought in decades, risking more turmoil for global supply chains already strained by shortages of semiconductors and other key components (Ting-Fang and Li 2021).

    An electric grid depending on intermittent power like wind and solar will be up and down too much to make chips, which takes hundreds of steps over several days. If a grid can come up and down that is — blackstarting is not easy and outages can damage transformers.”

    So, while very shortly we are not going to be able to count on continuous home heating and, eventually, we won’t have continuous, dependable refrigeration of our food, the internet and computing power do not have a long life ahead of them, especially for the masses. But yeah, in techtopia, we’re going to have central bank digital currencies and bitcoin is supposedly a way to “preserve wealth.” Imaging trying to go back to the pre-internet world of cash transactions and bookkeeping and physically passing checks or sending them via mail.

    • Hi Matt,

      Yes, Alice Friedemann is broadly correct in the picture she paints. Although I’ve never worked in an actual microchip production plant, I did spend 15 years working for Philips Electronics, and I’ve witnessed the large scale losses incurred when power outages take place. It doesn’t even have to be a power cut, as such. Just a momentary dip in voltage can trip-out production processes on a wide scale basis. A few milliseconds of unreliability can cause enormous damage. Most manufacturing processes are vulnerable to power supply interruptions, but as per the energyskeptic observation, the production of electronic components is extremely sensitive to it. I think we can agree that complexity breeds fragility.

      In my day, power outages were infrequent and always seemed to be down to one of two reasons. It was either unusually severe weather, or a rogue construction worker had managed to chop through the mains cables with his JCB digger.

      In my posting a couple of weeks ago, I referred to Richard Duncan and his Olduvai theory. One of the key postulates of his theory was that increasing frequencies of electrical blackouts and brownouts would signal the onset of terminal decline for industrial civilisation. This is a trend worth watching.

      Our high dependency on electronic components has another unfortunate aspect to it, with regards to sustainability. Electronic components are somewhere between difficult and impossible to recycle cost effectively, if at all. The very nature of their construction makes the separation of materials a very difficult and very expensive challenge.

      All of the aforementioned points make the rise of cryptocurrencies seem to be a ludicrous proposition in my eyes. Sure, I get the idea behind Crypto, but the practical execution uses vast amounts of electricity (Bitcoin mining =Argentina’s total electrical consumption according to one source), and uses vast amounts of unsustainable electronic systems. By the way, I could cope with going back to the pre-internet way of transacting. That’s the world I was raised in, and I still insist on carrying a lovely “filthy wad of cash” in my pocket.

    • Supporting a cash economy is very energy intensive. Producing, counting and transporting coins and notes requires energy. Think of the all the bank branches that used to be on the High Street, the security trucks ferrying money around not to mention ATMs and the computers that run them.
      Bitcoin looks energy intensive because its energy use is much more transparent than legacy systems.

  42. More generally, Gail Tverberg’s latest over at Our Finite World (already mentioned by others a few times), highlights the very serious problem of intermittency – whether of electricity, supplies or services – for our economy.

    • Indeed so. In the US, inventory backup of FF energy is measured in weeks or months, but backup of electricity is measured in minutes.

      My next article might look the heirarchy of challenges with transition to REs, of which intermittency is one.

      Here’s the list:

      1. Feasibility & timing – can a transition to REs happen (a) in 10-20 years? (b) at all?

      2. Scale. Last year, we consumed 11.2 bn toe of FFs, and only 0.57 bn toe of wind plus solar. Have we the resource inputs to scale these up to, say, 12bn toe of supply (meaning a far larger level of capacity?)

      3. Intermittency – storing power costs roughly 200x what it costs to store FFs. Moreover, FFs can work on something close to JiT, whereas REs absolutely require backup.

      4. Density – the high power/weight ratio of oil is what makes cars and aircraft feasible. Electricity storage cannot come anywhere near that, even if we factor in the greater simplicity and lower weight of electric versus IC motors.

  43. Tim,

    If I might be so bold as to suggest a 5th item in the hierarchy, it would be sustainability.

    I come at this from 2 angles. Firstly, could a full scale RE system actually sustain itself, in terms of maintenance and replacement, and if so, at what cost? Secondly, what about the environmental impact of the scale up, operation, and end of life disposal of the RE system?

    • Renewable energy in the form of wood, water and wind has been proven sustainable for tens of thousands of years. Copper, tin, bronze, iron and steel can be produced with those renewable inputs (mostly wood) and therefore so can electricity. Renewable electricity can be sustainable, but most likely only at a much smaller scale than present uses of electricity (see Dr Morgan’s question number 2, above, for which the answer is almost certainly “no”).

      I also don’t think there is much doubt that semiconductor based solar power equipment and synthetic fiber based wind power equipment can theoretically be produced with electrically powered mining, transportation and manufacturing facilities. The question is again of scale: can enough electricity be produced by these modern renewables to sustain a modern civilization (and all the manufacturing gear that goes with it) using only electricity? My view is that modern energy demands are too great to be transitioned to electricity in a feasible amount of time. I think that Dr Morgan’s question number 1 will also be answered in the negative.

      Given enough electrical energy, the world’s fossil fuel supply could be re-manufactured from atmospheric CO2 and hydrogen from water. This means that intermittency and energy density issues could be overcome by throwing electrical energy at them, but, again, the gigantic scale of the effort needed to provide all our energy needs from electricity means that they won’t be.

      It all comes down to scale. If we had been satisfied with a world population of a few hundred million people and refused to be tempted by fossil fuels, we might very well have created a sustainable civilization that reached the technological level of the late 19th or early 20th century. We weren’t able to resist that temptation and so we will soon starting over with a medieval level of technology (in a much warmer world).

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