Spring is Coming for Energy Climate and Economy

By: Andrew_McKillop

In a sure sign that winter is ebbing away, global warming "catastrophe" is starting to ooze back in governmental discourse. Meeting in Bali at the end of February, 130 environment ministers and government delegations signalled the coming end of winter in the northern hemisphere, by describing in coded language that the Copenhagen climate summit's farcical conclusion was "only a tactical defeat". They agreed that low-carbon economic growth and green energy are the only future for the oil-soaked, oil-based economies of the world. They more than hinted that global warming change is real and serious. Despite end of winter snow storms in New York, and especially with WTI oil futures very close to $80 a barrel, the return of climate change business as usual is no surprise.

To be sure a little shell-shocked after the repudiation of climate change hysteria by China and India at December's chaotic climate summit, the OECD delegations at Bali made a courageous pretence that everything was back to normal. Polar bears were again to be seen on prime time television, paddling in slush. Sea levels were again rising on page 2, if not front page, in leading journals.

Climate change dominated the Bali agenda but the lesson of Copenhagen has been learnt. Talk of tsunami-style rises in world sea levels, and the Himalayan glaciers disappearing almost overnight - by 2035 according to Rajendra Pachauri - were as glaringly absent as his apologies for the Himalayan-size gaff were slow to come. Instead, the Bali meeting went back to selling green energy and ecological living not only as our last chance to save the planet, but as a near-term solution to financial and economic crisis. Instead of the negative side, for example James Lovelock's Mayan-style end of the world around 2050 when the world will heat up by 5°C or 6°C, ministers in Bali focused on the consumer friendly positive.

Making economies greener could bring low-carbon prosperity, would tend to prevent oil import bills from ballooning, and will make the revolution of diminishing expectations easier to achieve and more acceptable to the consumer masses, by spreading the word that Austerity is Good. Low-carbon prosperity can however, and rather easily seem an oxymoron even to the imaginary, or mythical earth-conscious consumer citizen and voter. On present trends, given the laughable incompetence of government level "strategists" piloting us erratically towards the low carbon future, the most legitimate fear is that low carbon economic crash is the likely result.

NO GUARANTEES

For nearly 200 years economic growth "as we know it" has been founded on the burning of more and more high carbon fossil fuels. Breaking away from this, to low carbon energy and ecological living, is a leap into the unknown and therefore hard to guarantee, but times press. Major oil corporations like Total Oil SA, and agencies like the OECD's IEA, regularly come out with forecasts that oil prices will quite soon be back above $100 a barrel, and will then go on to attain $150 or $180 a barrel, growing until the economy crashes. To be sure the experts say very little about coal and natural gas - because they are cheap. When or if coal and gas were priced at the same dollars-per-unit energy rate as oil costing $80 a barrel, their price would be about $14 per million BTU for gas, and $400 a ton for energy coal, which to be sure would revolutionize the outlook for green energy.

Simply because oil is already out of the price box, it has an almost mystical impact on political leaders of importer countries, and the battalions of hungry consumers they lead. Without oil and its intrigue, shadowy and mysterious wars in far-off lands, political coups and putsches to install better-performing 'democrats' in exporter countries, and the exciting Madoff-style merry-go-round of oil trading, life would be slower and dimmer. When or if other fossil energy sources, which with oil supply 85% of world energy at this time, cost as much as oil we could fear that coal wars and gas wars would join today's oil wars.

Heading off that somber future needs only one thing: real change. Environment ministers and other government delegates, in Bali, repeated the new orthodoxy that things must change, for example in the transport sector. Transport emissions of CO2 from the millions of new fuel-efficient family saloons adding to the world's 900-million-strong car fleet may start growing slower, rather than faster, they announced. Cars must of course continue being purchased, if only to keep up employment and demand for iron, steel, plastics, glass and rubber, but the consumer masses who so obligingly and patriotically buy more cars are strongly encouraged to not use their cars, and travel by train, bus or bicycle in cities. In a short-term future, perhaps less than 5 years, the obedient masses will be exhorted, or forced to throw away their oil-fuelled cars they use so rationally, and buy electric cars.

Replacing the buses and bicycles with biofuelled horse-driven carts is however not yet on the agenda. The agenda, for the consumer masses, has to remain rigorously high-tech by supplying gimmicks of all kinds.

THE NEW CATASTROPHE

The new spin brought by ecologically conscious jetsetters at their Bali meeting was however a lot more frightening than Lovelock-style armageddon "around 2075". Carefully placed by Bali speakers using the same coded language that signals they will be back to global warming catastrophe talk the second that winter has fully disappeared, economic armageddon in 2010-2020 is replacing the 2075 climate armageddon that bombed in Copenhagen. In Bali today, it was firmly hinted in deniable asides and footnote comments that high-carbon prosperity is unsure to return, and will not last long when or if it returns.

Green-fuelled prosperity is now the only sustainable future, the only alternative. With oil prices on a rising trend and so many heroic oil wars in operation, or planned against Iran, and between Argentina and England in a heartwarming replay of the Falklands War, and many others under way or planned in Africa, it would indeed be catastrophic for "oil fuelled prosperity" to not make a swan song return, to rationalise and legitimise these stirring military adventures and their high costs. Bali talk however rather strongly hinted that the recession-induced dip in everything, in most OECD countries, can or will be followed by another dip. Oil is the weak link and energy security is threatened, exactly like it was during the Oil Shock days of the 1970s fairy story past. Under worst possible scenario conditions as some Bali speakers spelled out, strictly off-record, the next dip could be the last. Civil war would be possible in a rather large number of countries.

Building nuclear reactors fast enough - the Lovelock solution - to head off the terrible prospect of global warming catastrophe will probably not be possible, though of course should be attempted, if only to raise the risk of nuclear stations being destroyed during the civil wars. Using a well-tried and tested slogan pack, several Bali delegations claimed that rising oil prices show that our dependence on a few, often unstable, and dangerous oil exporting parts of the world is growing. Unlike climate catastrophe, which we were told as recently as November 2009 was sure and certain "by about 2060", Bali speakers in

February 2010 loudly let us to know that oil supplies could or might peak within 25 years. Since the consumer public craves the excitation of Crisis Now, certain delegations hinted that terminal oil shock could come before 2020.

The only solution is green, even if economically grey. Bali consensus was that oil demand in some, or all countries should be cut by 20% in the next 10 years. This was exactly the CO2 emissions cut the same environment ministers were whining about in Copenhagen, only to be rudely rebuffed by China and India. Rather than generating climate catastrophe in 60 years, Bali speakers went on to thunder that not acting to cut oil demand will have catastrophic effects on the economies that still rely on oil - about 99.9% of the world's economy - starting from the immediate near term.

CHICKEN AND EGG

Far from the lecterns of kerosene-fuelled jetset environment ministers in Bali, simple questions with difficult answers need to be asked. Does economic growth cause oil prices to rise, or the other way round ? Put another way, will austerity living in the post-industrial ecological society cause economic depression, or result from recession and depression ?

At Bali, the second enticing question provided the unspoken background to the sloganfilled, and mostly mindless debates reported by the world's media. Economic downsizing and endless rises in unemployment make recovery from recession ever harder. The downsized deflating economy and huge numbers of jobless persons not only generated the 1930s original author version of Keynesian deficit spending, but also today's super productions in the same genre. Today, rare are the major OECD countries not running a government spending deficit of 7% to 12% of GNP. Printing money is a well known sport for central bankers, but are there limits to its credibility ?

The spending needed to make a hasty transition to green energy will add to these deficit figures, and the amounts needed are of course the new political football for partisans and foes of saving the planet by printing even more paper cash. Helping them out with a few figures, the world oil and gas industry in 2007-2009 has spent about $ 1000 billion, for a net increase in global energy supply capacity of at most 4.5 million barrels-day energy equivalent. Replacing world total oil and gas supply (over 125 million barrels-day equivalent) can be roughly costed on this basis, and adds up to large, round numbers.

Betting this simply isnt possible, and that reducing energy consumption will be the real world future, is therefore rational. Austerity come out as the bottom line, which returns us to the speeches of the kerosene-fuelled jetsetters in Bali, some of which cautioned that the route to green prosperity could or might need "temporary sacrifice" by consumers.

By Andrew McKillop

gsoassociates.com

Project Director, GSO Consulting Associates

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

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