COPING WITH THE SHOCK OF THE REAL

As 2023 draws to a close, I’d like to take this opportunity to thank everyone for their informed, constructive and courteous contributions to our debates over the past twelve months, as well as wishing you the very best for the Festive Season and the year ahead.

I don’t know what you’re hoping for in 2024, but I’d settle for a bit of old-fashioned reality. Like Alice in both of her famous adventures, we seem to have stumbled into a parallel world where nothing is quite what it seems.

The economy carries on growing, even though it isn’t. In this Wonderland that we’ve created out of whole cloth, debt doesn’t matter, creating money out of the ether isn’t inflationary, and we can borrow our way to prosperity whilst money-printing our way to financial sustainability.

Technology has abolished the laws of physics, and we can enhance our prosperity by reducing the density of the energy inputs that drive the economy. Carl Benz, Gottlieb Daimler, the Wright Brothers and Frank Whittle got it wrong when they decided to power their cars and aeroplanes with petroleum rather than windmills. W. Heath Robinson and Salvador Dalí painted reality much better than Rembrandt van Rijn and Nicholas Pocock.

Delusion may sometimes be preferable to reality, but reality, when it returns, tends to have sharp edges. In short, I have a nagging feeling that, when Alice steps back Through the Looking-Glass, she’s going to find that somebody has stolen most of the furniture. I don’t know how much longer we can sustain the illusions of the moment, but my sense is that the factual is waiting in the wings.

To solve or to deny?

If there’s a theme to this discussion, it’s the gulf, not so much between the real and the imaginary, but between knowing something and being willing to accept it. After all, a retreat into fantasy usually results from an unwillingness to see the world as it is.

The emergence of this gap between reality and perception isn’t all bad news, of course – it gives realists a competitive edge over fantasists. I’m not going to go into investment decisions, career options or political choices here, except to say that the realists have the odds stacked in their favour. Suffice it to say that challenge and opportunity are the different faces of the same coin.

In the real world that some of us still inhabit, there are proven techniques for problem-solving. First, we find out what the problem actually is. Then, we dismantle the problem into its constituent parts. If we follow this procedure, we usually find two kinds of solution, or a combination of both. One of these is to work around the difficulty and resolve it. The other is to adapt to those bits of the difficulty that we can’t resolve, and learn to live with them.

When these problem-solving techniques go wrong, it’s usually because we don’t like the explanations that we’re finding, and aren’t prepared to accept the solutions that present themselves. If this happens, the likelihood is that we’ll miss-define the problem, and rule out from consideration those solutions that might actually prove successful.

Though there are many other matters of concern in our material world, our two biggest challenges today are a faltering economy and a deteriorating natural environment.

How real are these problems? Well, when we’re taking on anywhere from $3 to $7 of new liabilities for each dollar of “growth”, have no proposed fixes that don’t involve either borrowing or money-printing, have commitments that we can’t possibly honour and an “everything bubble” in asset prices that’s destined to burst, then there’s a prima facie case that the economy is in very big trouble.

When global temperatures are rising, and are being accompanied by worsening floods, droughts, storms, heatwaves and agricultural disruption, then it’s reasonable to conclude that the environment, too, is in trouble.

This needn’t drive us into despair, but should urge us to think.

In search of definition

An objective approach to these conjoined economic and environmental challenges recognises energy as the factor common to both. Even the briefest interruption to the supply of energy would stop the economy in its tracks. Climate science has identified the burning of carbon fuels as a major contributory factor in environmental deterioration.

Energy is where our quest for explanations and solutions must start.

With this point established, the logical next step is to define how these various processes work. On this fundamental basis, the economy functions by using energy to access raw materials and convert them into products and services.

This is a creation-diffusion equation – at the same time that energy is used to convert raw materials into products, energy itself is converted from dense into diffuse forms.

Add in our penchant for the rapid disposal and replacement of products and this becomes a dissipative-landfill economic system. The outputs of the creative process, together with their raw materials and embedded energy, are jettisoned with almost indecent haste. The output of the thermal side of the equation is waste heat and, when fossil fuels are used as the dense inputs to the system, this waste heat contains climate-harming gases.

This tells us that there are two possible solutions to our environmental challenge, not one.

One of these is to change the form of dense energy inputs to the system, moving from climate-harming fossil fuels to less harmful alternatives.

But the other potential solution is to slow the creation-disposal-replacement cycle itself.

A rational society would be addressing both of these possible solutions, not just one of them – we’d be looking at alternatives to fossil fuels, but we’d also be giving constructive thought to behavioural change.

There can be no guarantee that we can effect a wholly successful transition from carbon fuels to cleaner alternatives. In fact, an economy powered by renewables is highly likely to be smaller than the fossil-powered economy of today.

Accordingly, we should at least be investigating the idea of slowing the creation-disposal-replacement cycle, seeking to get more value from the energy and other resources that we consume. Effective solutions to environmental degradation might very well involve doing both.

It’s perfectly possible, should we so choose, for us to put the brakes on the dissipative-landfill cycle of rapid resource extraction, product creation, disposal and replacement, and doing so needn’t, in and of itself, make us poorer.

We could step up our re-use of raw materials by reconfiguring products, with recycling designed into them from the outset. We could demand products that are capable of viable repair, and have longer design-lives. We could subsidise longevity as well as taxing landfill. We could introduce strengthened recycling credits into the tax system. We could further this strategy by marketing it effectively to consumers.

With the appropriate use of incentives as well as regulations, we could make a decelerated resource cycle profitable. Opportunities will undoubtedly exist for those who choose to ‘go with the flow’ of material reality rather than persisting with the easier (but time-limited) conventions of the past and present.

A self-selected blind-spot

Thus far, though, the dissipative-landfill, extraction-creation-disposal economic system has been almost entirely off-limits for debate. Whether our countries are fossil fuel producers or consumers, we’re agreed on not challenging the system itself.

We have opted to fight our very real environmental challenges with one hand tied behind our backs.

Even the most environmentally concerned haven’t spotted the duality of the challenge. In recent times, climate activists have vented their anger on the producers of oil, natural gas and coal. Whatever its merits may or may not be, this approach lets off scot-free businesses whose activities accelerate the disposal cycle. If you produce oil or gas, your head office is likely to become the target of vocal protest. But if you use energy from oil, gas or coal to manufacture throwaway products, there won’t be an angrily-worded placard in sight.

This, it should be stressed, isn’t an anti-corporate argument. Private enterprise is essential to a balanced economy. The opposite extreme, which is state control of everything, is something that no sensible person should desire. “If we’re so awful, we’re so bad”, sang a famous American musician in the 1980s, “go and try the nightlife in Leningrad”.

Rather, what we need is a differently-configured corporate sector, which really means that we need to shift the basis of incentives to favour quality, repairability, reusability and longevity.

I’m not so naïve as to suppose that the corporate sector is going to opt for cycle-slowing processes of its own volition, and neither do I imagine that our leadership cadres are going to undertake the recalibration of incentives that could promote and accelerate such a switch.

In any case, political leaders have been left far behind the curve of environmental and economic evolution, and still see no problems that can’t be fixed with a bucket of greenwash, breezy public optimism and a further recourse to borrowing. There’s something very bizarre about hopping on to a kerosene-powered jet to attend a pow-wow about global warming.

But the economy itself is already pushing us in a different direction. The global economy is in the process of inflecting from growth into contraction. No amount of waffle about the possibility of ‘infinite growth on a finite planet’ can change this reality. We can’t fix energy and resource depletion with money, any more than we can cure an ailing house-plant with a spanner. Energy-intensive necessities are already becoming costlier. Discretionary affordability is under the cosh.

Under these conditions and pressures, it’s perfectly possible that pricing trends, and changing patterns of consumer preference, could drive this constructive evolution.

To understand why this is happening, we need to go back to fundamentals.

Children at play

The development of the industrial economy followed directly from our discovery of the ability to harness the vast quantities of energy contained in fossil fuels.

From that point on we, collectively, started behaving like irresponsible youngsters let loose in a chocolate-factory. The transformative benefits of abundant low-cost energy came without limits or obligations. There were no adults in the room. Nobody stopped us from becoming fixated with the new and shiny. We were free to consume, reject, replace and pollute at will. As well as polluting the land and the seas, we’ve even taken to using space as a backyard dumping-ground.

There was, and remains, little or no likelihood that we would choose to turn aside from this reckless form of behaviour. But material parameters – those conditions which determine the boundaries of possibility within which we have freedom of choice – are already starting to impinge on our capacity for recklessness. The clue to this lies in a matter already noted – the density of available energy.

Fossil fuels are the densest forms of energy yet harnessed by society. We’re not ‘running out of’ fossil fuels, but their costs are rising, and their abundance no longer remains a given. Quite naturally, we’ve used lowest-cost resources first, leaving costlier alternatives for later. The typical new discovery or development is smaller, more remote or more technically challenging – that is to say, more expensive – than the one that it replaces.

As these costs – measured here as the Energy Cost of Energy, or ECoE – carry on rising, the ex-cost value of each unit of fossil fuel energy decreases. This material cost has already risen five-fold since 1980, and there’s no way of putting the genie of rising ECoEs back into the bottle.

If climate campaigners grasped this, they could reinforce their environmental advocacy with powerful economic arguments. Continued reliance on carbon energy might or might not destroy the environment, but relentless rises in the material costs of fossil fuels would certainly destroy the economy.

An awkward legacy

This is where the choice between reality and self-deception becomes critical. Where alternatives to fossil fuels are concerned, renewables seem to be the best options on the table. Scaling them upwards requires vast amounts of everything from steel and concrete to copper, lithium and cobalt. Accessing and processing these materials requires correspondingly vast amounts of energy, and this can only come from legacy fossil sources.

Far from being “stranded” and somehow ‘useless’, fossil fuel assets are the only resource that exists to make energy evolution possible. The question becomes one of the wisdom, or folly, with which we choose to employ this resource.

This energy legacy is finite, meaning that it has limiting characteristics. One of these is the energy value that remains, and the other is the limit set by the envelope of climatic tolerance.

Like any legacy, this comes with choices – we can blow it now, or invest it, in this case in renewables, and in changing the character of the economy. We can’t put the same gallon of petroleum into a vehicle and use it to extract minerals and build wind-turbines. But we can make that energy unit go further if we tame our penchant for disposal.

The snag with all of this, of course, is that the lesser density of wind and solar power means that they are going to provide a smaller net-of-cost input to the creative-dissipative process. To believe that the wonders of technology are going to overcome the handicap of lesser density is to suppose that technology can circumvent the laws of physics.

Because of their lesser energy density, renewables are going to need a proportionately larger infrastructure – that is to say, more input resources, meaning more energy – than fossil fuels in their heyday. The necessity of using legacy energy to develop, operate, maintain and replace renewable capacity is an umbilical link tying the ECoE costs of renewables to those of fossil fuels.

In conclusion

I don’t want to end this article – or 2023 – on a depressing note. Change brings opportunities as well as challenges. There’s a lot that we might like about a society with a decelerated extraction-disposal cycle. A financial crash has become inescapable, but will be the product of delusion, not the consequence of reality.

Where all of this leaves us is, undoubtedly, with hard choices. We can choose to pretend that everything will turn out fine if we whistle a cheerful ditty, ignore the realities of energy and physics, and rely on monetary fixes for material problems.

Alternatively, we can take a hard look at the fundamentals, which is what I’ve been endeavouring to do over the decade since Perfect Storm and Life After Growth were published, this site was created, and work on the SEEDS economic model began.

“Hard choices” sounds gloomy, but that needn’t be our sole conclusion as we head into 2024. The economy is changing, with global material prosperity inflecting and the costs of energy-intensive necessities continuing to rise. Accordingly, the affordability of discretionary (non-essential) products and services faces ongoing compression.

The concept of involuntary economic de-growth has been shifting inexorably from left-field prophecy towards real-world reality.

But spooks imagined in the darkness can become less frightening when we examine them in the light. There’s no reason why we shouldn’t respond constructively to this challenge. Creation and rapid disposal is a choice, not the diktat of Holy Writ, and alternatives can be profitable as well as sustainable – especially for those who get there first.

Tim Morgan