State of the World 2015

Confronting Hidden Threats to Sustainability

The Worldwatch Institute

• Publisher: Island Press
• Year: 2015
• Print ISBN: 9781610916103
• eBook ISBN: 9781610916110
• Subtopic: Environment & Energy Policy

We think we understand environmental damage: pollution, water scarcity, a warming world. But these problems are just the tip of the iceberg. Food insecurity, financial assets drained of value by environmental damage, and a rapid rise in diseases of animal origin are among the underreported consequences of an unsustainable global system.

In State of the World 2015, the flagship publication of The Worldwatch Institute, experts explore hidden threats to sustainability and how to address them. How will nations deal with migration as climate change refugees cross borders in order to escape flooding, drought, or other extreme weather events? What will happen to the price and availability of fossil energy—the foundation of industrial civilization--as these resources oscillate between surplus and scarcity? If perpetual economic growth on a finite planet is impossible, what are the alternatives? Can national governments manage the transition? Eight key issues are addressed in depth, along with the central question of how we can develop resilience to these and other shocks.

For decades, The Worldwatch Institute has been a leader in identifying and analyzing emerging environmental threats. With the latest edition of State of The World, the authorities at Worldwatch bring to light challenges we can no longer afford to ignore.

Emerging Issues

CHAPTER 2

Energy, Credit, and the End of Growth

Nathan John Hagens

Human cultures tell stories over time that come to be believed as truths. A prominent example, “Living the American Dream,” has implied that the United States is special—that Americans’ intelligence and creativity, combined with hard work, initiative, and democracy, largely explain how the country became the world’s leading economy and its citizens enjoyed consumption levels that were among the highest anywhere. This narrative still serves as a beacon to people worldwide who aspire to “live the good life.”

And despite weak (or negative) growth for the past decade, the U.S. Congressional Budget Office continues to forecast that the U.S. economy will grow 3 percent annually for the next 10 years and beyond, as if it were a natural law. The conventional wisdom is that it is only a matter of time before American ingenuity, technology, and “animal spirits” (a term that economist John Maynard Keynes used to describe the human emotion that drives consumer confidence) will restore the growth trajectories and living standards for which Americans are destined. Key policies and institutions, both in the United States and around the globe, are built on these expectations.¹

Yet reality has started to diverge from this cultural narrative. Although nominal statistics, such as gross domestic product (GDP) and stock market indices, still broadly signal that everything is fine, the underlying fundamentals paint a different picture. For 95 percent of Americans, real salaries and wages are lower now than they were in 2002. Over the same period, prices have risen sharply for everyday things like energy (up 59 percent), health care (up 18 percent), and education (up 39 percent). U.S. car ownership and oil consumption peaked in 2005, and miles driven peaked in 2007. Wealth inequality is now higher than at any time since the 1820s. Twenty-eight percent of American families have zero savings, and only 43 percent save enough to cover three months of expenses. Half of all U.S. retirees have less than $25,000 in savings of any kind.²

It seems that the U.S. economy and its future prospects are not what Americans have become accustomed to, and not what the government has been forecasting. Why? Is there a common cause? And can anything be done to reverse this course?

Nathan John Hagens is a former hedge fund manager who teaches human ecology at the University of Minnesota. He cofounded and directs the Bottleneck Foundation, which focuses on the long-run aspirations and potential for human society, and was lead editor of theoildrum.com.

Although analysts blame the U.S. economic malaise on a variety of culprits, viewing the situation through a biophysical lens reveals a primary cause: fossil energy. Fossil fuels underpinned the economic miracle of the last century, yet the increasing costs of extraction, particularly for oil, lie at the root of deteriorating economic fundamentals and the gradual loss of the societal benefits that they once provided. Globally, this reduction in benefits is being masked temporarily by a surge in monetary credit and other financial guarantees, but these have practical limits and are, in turn, creating other risks. In short, the waning of the primary drivers of growth—inexpensive “labor” from fossil carbon and freely available monetary credit—suggests that our expectations for continued global economic growth need to be reexamined. (See also Chapter 3, “The Trouble with Growth.”)

Energy as the Foundation of Human Economies

In nature, everything runs on energy. The sun’s rays combine with nutrients, water, and carbon dioxide to grow plants in a process known as “primary productivity.” Animals eat the plants, other animals eat those animals, and so on up the trophic pyramid, with each stage generating an energy input, an energy payoff, and some waste heat. Humanity and its systems conform just as much to this biophysical process as the rest of nature. We combine energy and natural resources with technology and labor to create real things like tractors, houses, and computers. Although we then rank their values with digital representations of money in its various forms, energy remains the foundation of our human ecosystem.³

Our energy development trajectory—from using sources such as biomass and draft animals, to wind and water power, and finally to fossil carbon and electricity—has enabled large increases in per capita economic output. This is because, even after accounting for the energy required to extract and process those fuels, large quantities of fuels are still available for other activities. From 1850 to 2010, world human population grew 5-fold, but world energy use increased 20-fold, and fossil fuel use rose more than 150-fold. (See Figure 2–1.) Eighty percent of the nitrogen in our bodies and half of the protein comes directly from natural gas via fertilizers and food, thanks to the Haber-Bosch process, which converts atmospheric nitrogen to nutritionally available ammonia. Whereas people living two centuries ago were made largely from sunlight, we are made largely from fossil hydrocarbons.⁴

Low-cost fossil energy is the foundation of our profits, high salaries, and inexpensive goods and services. We have leveraged our own puny muscle power with the labor of, in effect, billions of far-cheaper fossil energy “slaves.” (See Box 2–1.) To the average person, the benefits that we obtain from burning fossil energy may appear as magic: flip a switch and the “slaves” come running—to wash our clothes, cook our meals, heat water, dig building foundations, and perform thousands of other tasks. But the relationship is concrete and straightforward.⁵

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Figure 2–1. Global Energy Consumption and Population, 1830–2010

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Every single good, service, or transaction that contributes to GDP first requires some energy input. Figure 2–2 shows the high correlation of GDP (economic output) to primary energy use, as well as to end-use energy in the form of electricity and transport fuel for ships and trucks. Improvements in efficiency, especially in natural gas plants, complemented energy use as a driver of economic output, but mostly leveled off after the 1990s.⁶

The story of industrialization has been one of applying large amounts of cheap fossil energy to mechanize tasks that humans once performed manually, and to invent many more. We can call this substitution the Big Trade. It was an inefficient trade from the perspective of energy (much more energy was used to accomplish a task), but it was highly profitable from the perspective of human society. Driving a car on a paved road, for example, uses hundreds of times the energy of a human walking, but it moves us 10–20 times faster.

This Trade—replacing human labor with mechanized labor from much-cheaper fossil energy—is largely responsible for the combination of higher wages, higher profits, cheaper goods, and vastly more people that distinguishes the post-industrial world from the rest of human history. And the United States has expended more of this fossil magic than any other country—a subsidy that has been part and parcel of the American Dream. Technology has acted as a vector for increasing overall energy use in the economy, adding energy to tasks that humans previously did manually (plowing, driving, manufacturing) and creating myriad new energy-hungry gadgets (microwaves, iPhones, etc.). Globally, each unit of human labor is supported and leveraged by over 90 units of fossil labor. In the industrialized world, it is four to five times that much. Yet most analysts on Wall Street take for granted this exchanging of fossil/mechanical labor for human work.

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Box 2–1. The Power of Fossil Slaves

The average manual laborer expends about 0.6 kilowatt-hours (kWh) of work energy per day—the equivalent of leaving a 100 watt light bulb on for six hours. For thousands of years, that is what civilizational living standards were based on: the combined muscle power (work per unit of time) of groups of human laborers, augmented by a bit of animal muscle power and wind. Most of this was put toward marshaling solar flows and natural systems (soil, forests, rivers, etc.) to generate societal surplus (mostly food).

Then came the Industrial Revolution, starting in the late 1700s, during which we learned how to extract and use the earth’s enormous stores of fossil energy. The modern human ecosystem was transformed by this windfall in only a couple of centuries. One barrel of crude oil contains the equivalent of 1,700 kWh of thermal energy, which (at the human average of 0.6 kWh per workday) equals more than 10 years of manual labor. In the United States, a manual laborer averages $29,260 per year, so one barrel of light sweet crude oil represents around $300,000 of manual human labor potential.

Put another way, it costs $260 for an average American to generate 1 kWh of work. The equivalent work can be performed for less than 11 cents with gasoline (at $4 per gallon, ...

Table of contents

• Cover
• About Island Press
• Title Page
• Copyright
• Acknowledgments
• Contents
• Introduction
• Emerging Issues
• Conclusion
• Notes
• Island Press | Board of Directors