Distilled Pamphlets The Art of the Possible

Energy has become a “hot topic” in recent years. From green energy over climate change and geopolitics, to the unaddressed and growing needs of the emerging countries, it's an issue that has been discussed all over the world. To escape the crash course set out by our (not always wise) activities, we are advised to start looking for alternative patterns of development. We are told that more efficiency and better technology will lead us to a “green society”. Because of that, both the environment and our lifestyle will be saved and can go on indefinitely.

But is it really that easy? Is it really possible that more and better technology can solve these problems?

A History of Constraints

Undoubtedly, what sets us, living in the Western world, apart from our ancestors living hundreds of years ago is the level of affluence. The wealth achievable by pre-modern societies was severely limited by a fluctuating amount of resources. When the standard of living rose there was always a turning point when population outgrew resources. In other words, there was a glass ceiling that constrained development and made human life cyclical. Simple economic laws tell us why this was so. There are three basic factors of production – land, labour and physical capital – which are inputs to the production process. Following his well-known colleague Malthus, the British economist Ricardo wrote that if at least one of these three is fixed then the rising input of any other will ultimately provide diminishing returns. This meant that as population grew food prices also increased, simply because the available land was fixed and supply did not meet demand. This system pulled real wages down, causing fertility to fall. As a result, the population stopped growing and the cycle repeated. For this reason, constrained populations were perceived in a positive way, whereas evolutions that improved living standards were considered harmful. This is an astonishing and counter-intuitive reversal of the modern logic where “more is better”.

What happened during the Industrial Revolution is that these limits were broken. People realized that they could substitute some factors of production by using energy from coal. As a result they started using labour-saving technology to produce more goods. Cheap energy is indispensable in order to multiply the amount of physical capital needed for self-sustaining creation. Modern devices can only be made by other precise machines — which can only function if propelled by energy. We have saved our lands as we do not use animals any longer to produce power, allowing us to produce more food and let populations grow. The mechanization of agriculture has further strengthened this effect. The process of human development in the last two centuries can therefore be seen as the continuous spread of the law of substitution.

Building on this we created the structures of modern, enormously complex societies where the majority of people do not work in the agricultural or industrial professions. The downside of this is that we have become addicted to energy. We do not even realize how far the substitution goes. Everyday millions, if not billions of people commute and work in jobs that would not have been created in pre-modern times. This cannot be sustained without a constant flow of energy. We are able to work in service jobs because fossil fuels do the job that was previously done by human muscle. It is no exaggeration to say that everyone in the developed world has the equivalent of countless slaves at his or her disposal. Energy is embodied in our daily behaviour: working, commuting, living. In effect, the average person in the developed world uses 40,000 times more energy than a pre-historic hunter-gatherer, consuming 230,000 kilocalories a day compared with about 5,000 kilocalories a day 100,000 years ago. The energy addiction can especially be observed in cities where all the critical systems that provide us with essential services — such as transportation, heating, food — are fully dependent on the continuous and uninterrupted access to energy. Just imagine a blackout lasting few days to realize how addicted we are to electricity. As the urban fraction is growing faster than the overall population, the vulnerability of the global population to energy disruptions is severely increasing.

Unlimited Energy?

It is therefore very popular these days today to argue for energy efficiency, which should help us to combat climate change and increase our energy independence. This kind of thinking is delusive. Even though the effectiveness of current energy converters is absolutely incomparable to 18th century machines, high energy efficiency can be a disadvantage as much as an advantage. The problem is that it has helped to spread the substitution law worldwide. The issue was identified around 150 years ago, when the British economist Jevons observed that an increase in efficiency speeds up the spread of innovation, and, finally, the rise of overall consumption rates. Thus, efficiency, conservation, and technological improvement may actually worsen our energy prospects because once the cost of consuming a valued resource decreases, people will respond by increased consumption. Between 1950 and 2005 the energy efficiency of the US economy more than doubled, but the aggregate consumption of commercial energy actually tripled! The more effective our devices are, the more incentives people have to use them, and the more we are locked-in.

More unconventional alternative sources have been developed quite recently. The current shale gas revolution occurring in the US looks very promising, doesn't it? Aside from this example, there are other sources of unconventional fossil fuels like tar sands or deep-sea drillings for conventional oil and gas.

Unfortunately, the problems come in packages with these new energy sources. Their production is technologically and environmentally more challenging compared conventional sources. Its production is in itself also more energy-intensive, which means that a significant portion of the energy gained needs to be reinvested into the extraction of the next unit. This adds to already higher exploration and production costs. Separation of the oil and sand involves large quantities of water and energy for steam injection and refining. Nowadays, oil from the oil sands in the Alberta province of Canada – a land-locked and US-oriented exporter – is already cheaper than that from shale in the US. Yet, as Canada will be severely hit by these low prices, it indicates that its real price should be way higher. Marginal costs of production are higher for unconventional sources and renewables. Finally, the environmental risks involved in such production are various in character and include oil spillages, contamination of ground and freshwater, greenhouse gas emission and the release of toxic materials.

With the expanding global middle class and the increasing use of ever more energy-intensive technologies in homes and workplaces it is getting more and more difficult to satisfy this rapidly increasing demand for energy. Moreover, to do this with respect for the environment is becoming a mission impossible, and this without even mentioning the question of resource depletion. Humanity seems to be locked-in in a certain path of development. Cheap energy certainly provided a share of the global population with a satisfying level of wealth and a good quality of living. Yet, these people have no right to limit the access of the poor aspiring to enhance their way of life. However, the spread of the substitution law, multiplied by rising efficiency, provides strong incentive for increase in energy demand and, in effect, higher overall energy consumption. As we are unable to resign voluntarily from what we have achieved or consciously decrease the level of energy consumption, this seems to be a global vicious circle. Hence, technological solutions will not solve our problems. Rather, by keeping us addicted to cheap energy, they might well make our future even worse.