Energy is fundamental to our economy, and it is vital that we have a good understanding
of how the two things interact. So I went over to Leeds for a double bill event on energy and the bubble economy. Going to Leeds is a good reminder of the neglect of public transport infrastructure in the North, with inefficient and sluggish diesel units chugging slowly across the Pennines. Anyway, the event was organised by the Leeds ‘Enough Group’ – a group of University and non-University people who meet monthly to discuss steady state economic and related issues. It’s good to know that such discussions are going on just over the hills, although their group seems (I may be wrong) more of a talking shop than ours. This month they had 2 international speakers, Tiago Domingo and Robert Ayres. Domingo is from Lisbon and Ayres is a North American affiliated with a French university.
Tiago’s talk was about the prospects for decoupling economic growth from energy consumption (and hence also emissions). Without going into the intricacies of his argument, he used data on the Portuguese economy to show that the ratio between the usable energy input per unit of GDP has stayed largely stable over for the last 50 years. He also showed that increased capital accumulation is not sufficient to explain all economic growth, but that ‘useful work’ – i.e. the energy expended at the end point of the supply chain explains most of the residual proportion. The conclusions are that decoupling theory hits two obstacles, firstly the thermodynamic limits to ever increasing efficiency (this can’t go on for ever) and secondly the continuing constancy of the ratio between ‘useful work’ and GDP implies a limited elasticity between energy input and GDP. Taking the two together this is a further demonstration of the probable impossibility of absolutely decoupling material throughput from economic growth. For a review of the other arguments, see our In Place of Growth.
Following this, Robert’s talk was a bit contradictory. He reviewed the phenomenon of bubbles and included things like fracking in that analysis. He noted the peak oil phenomenon and the rising cost of hydrocarbon energy (one IMF analyst thinks oil will double in price by 2020 – think of the implications of that). Strangely he did not mention the problem of unburnable hydrocarbons (nor did he respond to a question about this). He suggested that at some point in the near future, renewables will be cheaper than oil and this will create waves in the economy. He suggested growth could be sustained through switching to renewable energy. A couple of questioners noted the contradiction between this argument and Tiago’s. He also didn’t say much about the patterns of investment in hydrocarbons and the speculation through futures trading. Indeed he seemed to treat the technology, housing and energy bubbles as separate. Maybe his forthcoming book does this – he only had 20 minutes after all.
The event was disappointing in that there was little sense of urgency communicated by the speakers, although this did come from the audience (to be fair, then acknowledged by the speakers). We can’t wait for growth to slow, nor can we wait for the market to make the switch to low carbon on price grounds, but immediate and rapid reductions in energy use, and hence carbon emissions is required if there is to be any chance of staying within the 2 degrees C possibly safe limit for global warming.
It was also depressing to hear both Ayres and audience members reiterate the argument that renewables can’t supply all our energy needs, they can – as CAT has shown conclusively, with its Zero Carbon Britain 2030 report, that everyone should know about, with proper management down of energy demand. And CAT has at least made a start on exploring the economics of the energy transition we need to survive.