By THOMAS HOMER-DIXON
NY Times
Published: November 29, 2006
Toronto
MAYBE Malthus was on to something, after all.
First, some background: Twenty-six years ago, in one of the most famous
wagers in the history of science, Paul Ehrlich, John Harte and John P.
Holdren bet Julian Simon that the prices of five key metals would rise
in the next decade. Mr. Ehrlich and his colleagues, all environmental
scientists, believed that humankind's growing population and appetite
for natural resources would eventually drive the metals' costs up.
Simon, a professor of business administration, thought that human
innovation would drive costs down.
Ten years later, Mr. Ehrlich and his colleagues sent Simon a check for
$576.07 - an amount representing the decline in the metals' prices after
accounting for inflation. To many, the bet's outcome refuted Malthusian
arguments that human population growth and resource consumption - and
economic growth more generally - would run headlong into the limits of a
finite planet. Human inventiveness, stimulated by modern markets, would
always trump scarcity.
Indeed, the 1990s seemed to confirm this wisdom. Energy and commodity
prices collapsed; ideas (not physical capital or material resources)
were the new source of wealth, and local air and water got cleaner - at
least in rich countries.
But today, it seems, Mr. Ehrlich and his colleagues may have the last
(grim) laugh. The debate about limits to growth is coming back with a
vengeance. The world's supply of cheap energy is tightening, and
humankind's enormous output of greenhouse gases is disrupting the
earth's climate. Together, these two constraints could eventually hobble
global economic growth and cap the size of the global economy.
The most important resource to consider in this situation is energy,
because it is our economy's "master resource" - the one ingredient
essential for every economic activity. Sure, the price of a barrel of
oil has dropped sharply from its peak of $78 last summer, but that's
probably just a fluctuation in a longer upward trend in the cost of oil
- and of energy more generally. In any case, the day-to-day price of oil
isn't a particularly good indicator of changes in energy's underlying
cost, because it's influenced by everything from Middle East politics to
fears of hurricanes.
A better measure of the cost of oil, or any energy source, is the amount
of energy required to produce it. Just as we evaluate a financial
investment by comparing the size of the return with the size of the
original expenditure, we can evaluate any project that generates energy
by dividing the amount of energy the project produces by the amount it
consumes.
Economists and physicists call this quantity the "energy return on
investment" or E.R.O.I. For a modern coal mine, for instance, we divide
the useful energy in the coal that the mine produces by the total of all
the energy needed to dig the coal from the ground and prepare it for
burning - including the energy in the diesel fuel that powers the
jackhammers, shovels and off-road dump trucks, the energy in the
electricity that runs the machines that crush and sort the coal, as well
as all the energy needed to build and maintain these machines.
As the average E.R.O.I. of an economy's energy sources drops toward 1 to
1, an ever-larger fraction of the economy's wealth must go to finding
and producing energy. This means less wealth is left over for everything
else that needs to be done, from building houses to moving around
information to educating children. The energy return on investment for
conventional oil, which provides about 40 percent of the world's
commercial energy and more than 95 percent of America's transportation
energy, has been falling for decades. The trend is most advanced in
United States production, where petroleum resources have been exploited
the longest and drillers have been forced to look for ever-smaller and
ever-deeper pools of oil.
Cutler Cleveland, an energy scientist at Boston University who helped
developed the concept of E.R.O.I. two decades ago, calculates that from
the early 1970s to today the return on investment of oil and natural gas
extraction in the United States fell from about 25 to 1 to about 15 to 1.
This basic trend can be seen around the globe with many energy sources.
We've most likely already found and tapped the biggest, most accessible
and highest-E.R.O.I. oil and gas fields, just as we've already exploited
the best rivers for hydropower. Now, as we're extracting new oil and gas
in more extreme environments - in deep water far offshore, for example -
and as we're turning to energy alternatives like nuclear power and
converting tar sands to gasoline, we're spending steadily more energy to
get energy.
For example, the tar sands of Alberta, likely to be a prime energy
source for the United States in the future, have an E.R.O.I. of around 4
to 1, because a huge amount of energy (mainly from natural gas) is
needed to convert the sands' raw bitumen into useable oil.
Having to search farther and longer for our resources isn't the only new
hurdle we face. Climate change could also constrain growth. A steady
stream of evidence now indicates that the planet is warming quickly and
that the economic impact on agriculture, our built environment,
ecosystems and human health could, in time, be very large. For instance,
a report prepared for the British government by Sir Nicholas Stern, a
former chief economist of the World Bank, calculated that without
restraints on greenhouse gas emissions, by 2100 the annual worldwide
costs of damage from climate change could reach 20 percent of global
economic output.
Humankind's energy and climate problems are intimately connected.
Petroleum's falling energy return on investment will encourage many
economies to burn more coal (which in many parts of the world still has
a relatively good E.R.O.I.), but coal emits far more greenhouse-inducing
carbon dioxide for every unit of useful energy obtained than other
energy sources. Also, many potential solutions to climate change - like
moving water to newly arid regions or building dikes and relocating
communities along vulnerable coastlines - will require huge amounts of
energy.
Without a doubt, mankind can find ways to push back these constraints on
global growth with market-driven innovation on energy supply, efficient
use of energy and pollution cleanup. But we probably can't push them
back indefinitely, because our species' capacity to innovate, and to
deliver the fruits of that innovation when and where they're needed,
isn't infinite.
Sometimes even the best scientific minds can't crack a technical problem
quickly (take, for instance, the painfully slow evolution of battery
technology in recent decades), sometimes market prices give
entrepreneurs poor price signals (gasoline today is still far too cheap
to encourage quick innovation in fuel-efficient vehicles) and, most
important, sometimes there just isn't the political will to back the
institutional and technological changes needed.
We can see glaring examples of such failures of innovation even in the
United States - home to the world's most dynamic economy. Despite
decades of increasingly dire warnings about the risks of dependence on
foreign energy, the country now imports two-thirds of its oil; and
during the last 20 years, despite increasingly clear scientific evidence
regarding the dangers of climate change, the country's output of carbon
dioxide has increased by a fifth.
As the price of energy rises and as the planet gets hotter, we need
significantly higher investment in innovation throughout society, from
governments and corporations to universities. Perhaps the most urgent
step, if humankind is going to return to coal as its major energy
source, is to figure out ways of safely disposing of coal's harmful
carbon dioxide - probably underground.
But in the larger sense, we really need to start thinking hard about how
our societies - especially those that are already very rich - can
maintain their social and political stability, and satisfy the
aspirations of their citizens, when we can no longer count on endless
economic growth.
Thomas Homer-Dixon, director of the Trudeau Center for Peace and
Conflict Studies at the University of Toronto, is the author of "The
Upside of Down: Catastrophe, Creativity and the Renewal of Civilizatio
[permaculture] The End of Ingenuity,
Jim, 01/13/2007