An Insufficient Decade

We are entering a decade of insufficiency. We’ll at once feel like we’re making insufficient progress on the climate problem and, simultaneously, we’ll have exited the era of plentiful (but destructive) power and entered an era of insufficient electrical power.The evidence is all around us. The consequences are complex.

New York joins California in sunsetting sales of new cars using fossil fuels. The US Federal Government (belatedly) commits to building a nationwide grid of EV charging stations. It seems every week brings further news of large companies building factories to make batteries for homes and vehicles.

The good news, for the world, for the environment, and for innovators, entrepreneurs and investors betting their energy and money on this transition, is that, at last, the switch-off of fossil fuels is starting.

Now the bad news. There will be a decade of insufficient power in many countries. The exit from fossil fuels seems inevitably becoming a mad dash rather than an ordered transition. This is driven by two factors: 

• The growing global understanding that the climate IS being destroyed, and fossil fuels are to blame. Heat waves and droughts; hurricanes and flooding; disappearing ice caps and snow caps; dry river beds and empty reservoirs. All this year, we’ve seen apocalyptic, shocking, utterly-predictable evidence that we’re doomed unless we act fast. 

• The unilateral actions of Putin’s government to invade Ukraine seem to have been bolstered by some idea that Western Europe’s dependence on Russian natural gas would be a factor cushioning it from the most severe reprisals. Instead, Europe - particularly Eastern European countries, from Germany to Macedonia and eastwards - decided to help Ukraine on the bloody battlefields, and to tough it out and do without much of the Russian energy that kept its homes warm and its factories humming. That’s going to be a monster sacrifice, come this winter, but at this time seems inevitable.

• Saudi Arabia and OPEC then dug in their heels, cutting production and boosting oil prices with the apparent aim of hurting governments in the West that aim to wind down use of oil.

Even if - as is currently wildly unlikely - Russia abandons its Ukraine mistakes and somehow returns to the table of international affairs, and even if OPEC moderates its position, the point is made: relying on fossil fuels from autocratic regimes is playing with fire. Major countries will be loath to make that mistake again.

Instead, we’ll enter a period - a decade - during which leading economies will emphasize building the post-fossil fuel future, and will start to wind down their reliance on imported fossil fuels, even before new, nation-scale renewable infrastructures are ready to take their place.

Consider the following as unconnected threads in a common narrative:

• California, struggling with a record-breaking heat wave, beseeched people to lower their power use. That this came days after the State had set a mandate to halt ICE-powered vehicle sales in favor of EVs created a juxtaposition too cute for critics to overlook. However, It’s best seen, surely, as the first of such challenges. 

• A couple of years ago, the list of EVs on sale or, even, in development was short enough that any observer could recite all players and all models. In January of this year, Car and Driver magazine attempted to list, in its words, every electric vehicle in development. It’s a very long list and one that, surely, already is out of date. This list, and the astonishing list of joint ventures between battery makers and car OEMs make it plain: all car makers have now made the decision to wind down or exit ICE. It’s over. Unfortunately, the same cannot be said for power grids and charging infrastructures.

• Pakistan saw an entire ⅓ of the country underwater, as Himalayan glaciers gave way to record melting. It relied before on natural gas from Russia and now … has few options. A request for proposal to fill much of the nation’s power needs received: zero proposals. (Pakistan currently has a population of 236 million people.)

• As European countries saw their supply of inexpensive natural gas from Russia fall away, utilities were forced to buy supplies on open markets. Prices to consumers in many countries have risen 5-fold or more. Even large businesses are not exempt. One massive corporation conceded privately that its major businesses are, in theory protected by long-term contracts. But if their utility vendors cannot afford to deliver energy at the contracted price … Meanwhile, its minor businesses buy energy at spot prices, and have already seen prices soaring, at consumer rates. 

Meanwhile, a brewing crisis: “No policy response will be able to replace the energy previously provided by gas quickly, and this reality will come to a head in the winter.”And so, we enter a decade of insufficiency. We’ll at once feel like we’re making insufficient progress on the climate problem and, simultaneously, we’ll have exited the era of plentiful (but destructive) power and entered an era of insufficient electrical power.

A decade? Politico wrote: “But the next couple of years won't be easy. The invasion caught the EU mid-straddle in its energy transformation. A lot of the groundwork for a greener future is in place, but capacity in everything from training workers to insulate buildings and install wind towers, to cutting red tape for wind and solar permitting, redesigning grids to handle renewables and ramping up hydrogen production, is still a work in progress.” But a couple of years, even with an emergency, wartime footing, won’t get through even the partial list of hurdles the article mentions. Add to its list: ramping up infrastructures for EVs, and replacing gas heaters with heat pumps, enabling green hydrogen for fleets, and more.

The expression “won’t be easy” is, to put it lightly, covering a lot of ground. In old cities in Europe, overheated cities in summer result in deaths, mainly among the elderly. In winter, the inadequate heat already available in some cities is causing deaths. Scarce energy means higher costs for consumers, and that means death. From the Economist: “Our modelling suggests that, in a normal winter, a 10% rise in real energy prices is associated with a 0.6% increase in deaths. Hence the energy crunch this year could cause over 100,000 extra deaths of elderly people across Europe.” The decade of power insufficiency means there will be plenty of pain to go around.

But it underscores the urgency now of moving beyond the dependency on cheap, but not inexpensive, fossil fuels. What does this unplanned, urgent transition mean for investors and inventors and entrepreneurs?

• Much thinking must go into valuing things by the horizons within which they’ll deliver: this winter? Within a year or 18 months. 5 years. A decade: these are the long-term ones that will erase the era of insufficiency.

• Technologies that can reliably deliver efficiencies in the very short term will have high and immediate value. 

  • You’ve a technology that can eke out more watts even in gas-fueled power plants? A technology that’ll get cars to go further on a liter of gasoline?  If the history of past energy crises is any guide, consumers still buying internal-combustion engine vehicles will emphasize efficiency, especially as EVs start to take over the market. Similarly, software that’ll better optimize the balance of consumer solar and grid power. A generation of data center computers that guzzled power is giving way to real concerns about efficiency.

  • Green technology will grow alongside complements to dirty technology - grey technologies that wring more efficiency out of existing fossil fuel use will provide short-term benefits that will be, in some instances, irresistible. Such grey technologies will gain importance, at least in the short term.

• I’m uncertain how to value technologies that, while amazing, guzzle more than an appropriate share of power. 

  • Okay, bitcoin’s relatively easy: even before the era of scarcity, it was possible to calculate that Bitcoin’s price wasn’t far different from its cost, including climate damage. Ethereum’s transition to proof-of-stake seemed prescient and well-timed, resulting in a power savings some estimate as much as 99.95%.

  • What about 5G? 6G? More bandwidth, and lower latency (roundtrip delays)? But at the cost of higher, sometimes far higher power consumption.

• If one believes in a decade of transition, that includes enough time to deploy, for example, a set of step-down transformers that deliver a few percentage points more efficiency to a power grid. That perhaps wasn’t important before: it’s critical now.

• Technologies - wind turbines and solar panels - that are already efficient and widely deployed will receive, um, wind in their sails, via large-scale contracts to increase their use multifold.

• Home uses: so much to be done here. Using the moment to encourage people to watch their power. Use smart plugs  - vampire power consumption of devices that should be idled draws the equivalent of 50 power plants. Move to heat pumps rather than either fossil-fuel heat or standard air conditioning. Computer makers and more need to be more assertive in moving to ‘sleep’ modes.

• Batteries

  • Already, at the end of 2021, battery projects with total output by 2025 in excess of 300 GWh/year were in the works. Subsequent announcements by Honda and Tesla and LG and GM and more have likely doubled that. Strains on supply and knowhow will remain; the challenges associated with clean and ethical supply of raw materials are grave, but this is beyond doubt a focus of a decade of growth, with battery production rising more than 10-fold in the next three years alone.

• Cultural attitudes.

  • Expect to see a wave of “how to” articles and experts and videos, YouTube channels and more: how to save energy; how to stay warm in the face of cold; how to stay cool in the face of heat; how to invest best to deal with these. Some will be corny and some will be silly, but they’ll all be a part of the turning about of culture.

  • One thing that surely must emerge in the decade of insufficiency is a real understanding of the consequences of our actions. We’re faced with cataclysmic risk, and - if we’re at all lucky - one outcome must be that consumers, particularly but not only in the rich world, must learn that their actions always have consequences. No energy source comes without environmental and social cost. Thus, fearmongering should be replaced by, or at least supplemented with, appreciation of the balance of risks. 

And then, politicians. Some, one hopes, will call upon banks and industry and allies and people and get the problem squarely in sight. Tax policies will encourage efficiency and discourage waste. Others, one knows, will use this to monger fears and jealousies. And wars. Ugh. Decades ago, during the OPEC energy crisis of the (decade), president Jimmy Carter urged wearing sweaters to stay warm. He also installed the first set of solar panels on the White House roof. Somehow, these activities led to him being lampooned. The challenge is real: how can political leaders be seen as strong while leading in lower energy consumption.

.(Though, then, there is a new opportunity for treaties and alignments for problem solving.)

What am I to do about Climate Change?

It’s well beyond time to understand that we each have a role in fighting the climate catastrophe. But: what is that role? What can each of us do, realistically, pragmatically?
What’s a pragmatic solution? What do we mean? Let’s start by saying what pragmatic solutions are NOT:

• Tiny and inadequate things. The book “An Inconvenient Truth” does a good job of describing the problems that we, the human race, are creating by destroying our home and our climate. But at the end, there is no recipe for pragmatic action. Instead, a few, feeble solutions are suggested: drive a hybrid car; try meatless Mondays; turn off lights. These fail the test of pragmatic solutions because we all know they’re inadequate. The requested changes occur at the wrong scale; even these small changes will be hard for many, as they require individual commitments counter to common logic, yet remain completely inadequate. Suggestions of inadequate solutions hint at a bleak and undesirable future: the path to avoiding climate catastrophe by leaving us all sitting shivering in the dark.

• Government-only actions. The Paris Accord is at once essential and inadequate. It is essential because it points to the need for mechanisms by which nations hold each other accountable to continuous improvement in bettering our climate. But it is inadequate because it is surely infeasible to expect that government-driven principles will solve, or perhaps even lead in solving, such a tangible problem as death by greenhouse gas. If governments are to play a role in the real fight against climate apocalypse, they will need to produce clear and actionable programs or policies. But we can’t afford to wait for government action. What can we already do?

• Behaviors not changing. Doing nothing and making decisions that go against the needs of concerted solutions embeds us deeper into the track to climate-based catastrophe. Here’s an example. 2020 came along and brought this pandemic virus. Lots of people lost their jobs or worked from home and so the number of vehicles on roads dropped. But the number of new cars sold soared—who’d want to ride a bus, a taxi, an Uber, sitting in the air possibly polluted by virus-vectors, non-masked riders or drivers? And, because of the absence of good leadership on this, the sales favored big SUVs, the evil of whose carbon footprints will linger longer than the virus.

And yet. The fact that the billions of us have already changed the climate—for the worse—shows that the billions of us have the potential to alter it again, for the better. 

“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” What’s your role? What’s your task in inspiring, leading, and organizing? In imagining, innovating, inventing, or investing? That is where pragmatic solutions exist.

Pragmatic solutions: we are capable of building or enabling solutions that scale, that collectively enable us to build the better world. Your role may be just doing the little you can on your own behaviors. But you may also have, or create for yourself, a scalable role, one of force multipliers: inspiring others; inventing technologies; innovating behaviors; investing in solutions.

Pragmatic solutions: derived from data, built on realizable science and engineering, not just aspirations, fear or desires. Practical and scalable—so that they can start small, at proof points, and deliver 10,000-fold scaling results. Investable—so that bankers, funds, venture funds, energy companies and more, can see their way to supporting results that are both earth-friendly and investor-friendly.
Pragmatic solutions: acknowledging that as individuals we have both greater responsibility and greater power than the small solutions we are fed (recycling, etc.). It is up to each of us to determine how we will use our resources, including skills and time, to power the changes we find worth making.

What Trees Can, and Cannot Do for the Climate

We all know that trees (and other green plants) are a huge part of the natural carbon sequestration machinery that maintains the atmosphere at comfortable-for-life levels. It is both true that deforestation has played a significant role in the increased levels of carbon dioxide in the air, and that reforestation can play a significant role in reversing this. But how big of a role can tree planting really play in averting climate disaster?

How many trees would be needed for reforestation to make a difference?

What roles can reforestation play, realistically? We use some pretty big numbers here, millions, billions, trillions (see note 2 at end), but the picture comes clear. Let’s look at summary numbers:

• A mighty oak tree can ... Walk in a forest, surrounded by giant trees—they’d have been growing for decades. A 50-year old oak may weigh 10 to 50 tons (depending on species, environment, etc., see note 3 at end), and that tree can sequester as much as 60 kilograms of atmospheric carbon per year, and keep doing that for decades. We ignore, for the moment, what happens when trees die, but in the long term that also needs to be considered.

• At forest scale ... A healthy section of Amazonian rain forest contains from 400 to 800 mature trees per hectare—, These are large trees, so if each tree sequestered 80kg / year, each hectare could sequester 50,000 kg per year—50 metric tons per hectare. Notes 4 & 5.

• What’s in the air ... The atmosphere has now surpassed 400 ppm (parts per million) of CO2, for a total of 121 million gigatons. That’s up from 320 ppm in the 1960s. And the amount of CO2 in the atmosphere rises by 33 to 40 gigatons per year. Note 6 (Amazingly: that’s nearly 5 tons per person per year.) Suppose, then, that we aimed that forests would draw down that amount—35 GT / yr. How many hectares of forest would that require?

• Forests needed … The answer to that question is:

  • 35 billion tons divided by

  • 50 (tons / hectare)

  • = 700 million hectares (about 1,700 million acres) with about …

  • 500 billion more mature trees.

For comparison:

• The area of the entire USA is about one billion hectares (2,430 million acres) so the increase in forested land would be equivalent to more than half of all the land in the USA. 

• The entire area of all land on earth is 51,000 million hectares, and the amount that is considered to be forested today is 4 billion hectares (a half hectare per person alive, for comparison), so the increase is about 15% of what’s there.

• There are about 3 trillion trees currently on earth. (That’s after humanity cut down at least a half trillion in the past century or so.) Note 7

Pragmatic solutions: what to do with this?

It does seem reasonable to expect to add something like this vast number of trees, but only reasonable to do so in a time scale of multiple decades: that’s how long it takes trees to mature, plus it’d take years to align the governmental and land-ownership and financial issues. And we don’t have that many years available to solve the problem—which will worsen during the intervening decades. Forests can be part, but only part, of solving the problem. (It’s important to note that adding more forests would solve other problems as well, including species diversity, moisture retention and soil enrichment.)

Collectively, we should be thinking about an earth that, by the year 2080 or 2090 has added at least 300 billion new trees. In subsequent explorations, let’s look at how to achieve that, and how to connect that goal to other goals—lower fossil fuel use and other means of carbon sequestration.

Unanswered questions: what to do next?

• How many trees per person: if each adult in Europe and North America (combined total population of 950M, perhaps 700M adults) planted or sponsored planting a tree per day, what difference would it make? That’d total 700M trees * 365 = 255 billion. Fully half of the number of trees required to sequester the annual excess carbon.

• Where can the trees go? There doesn’t seem to be enough room in the US and Europe? That’s partially or mostly true. But we do have the money, and many of the countries that have the space don’t have the money (rural Brazil, DRC, Indonesia, for example, along with other countries suffering rapid deforestation). 

• These two points suggest that this is a matter of political or business will. And technological cost reduction, means of verification, trust. Solvable. Note 8

• Does the type of tree matter? (Yes.) Does it matter where the tree is? (Mostly: no). What happens when the trees die? (This is a major issue, in at least two ways: large areas of forest stands now are entirely dead, because of the consequences of climate change, already; and because rotting trees do return some of their sequestered carbon to the atmosphere.)

Source notes and credits:

1. Image - Greenpeace, John Novis (Congo River basin forest)

2. Millions, billions … A million = a thousand times a thousand. A billion is one thousand times more = 1,000 x a million. A trillion = 1,000 x a billion (and also equals one million x one million). In scientific notation: one thousand is 10^3; a million is 10^6, a billion is 10^9, a trillion is 10^12. (Apologies: SquareSpace, the formatting engine we use, doesn’t easily support superscripts.)

3. Missing, tbd

4. About 600 trees per hectare in the Amazon rain forest. www.tropenbos.org/resources/publications/a+spatial+model+of+tree+alpha-diversity+and+tree+density+for+the+amazon Tree densities in temperate climates tend to be rather lower, with 100 trees / acre, 250 / hectare being considered healthy.

5. Units: One hectare = 10,000 square meters, the area of a square 100 meters on each side. That’s about 2.5 acres; A metric ton is 1,000 kilograms, approximately 2,204 pounds. A standard US or British ton is 2,240 pounds. The similarity of metric and US / UK tons - they differ by less than 2% - makes it easy to use the ton for simple comparisons without specifying which ton you mean. 1 gigaton = 1 billion tons. 1 million gigatons = 1 million, billion tons.

6. www.wri.org/blog/2019/12/co2-emissions-climb-all-time-high-again-2019-6-takeaways-latest-climate-data#

7. https://www.scientificamerican.com/article/how-many-trees-are-there-in-the-world-video/ Some estimates are that the number of trees at the dawn of humanity may have been as high as 6 trillion.

8. https://www.theatlantic.com/science/archive/2017/07/paying-people-to-preserve-their-trees/534351/ and we hope to dig in more on this subject in future notes.

The Green EU Deal: It's A Big Deal

ORIGINALLY POSTED IN THE IMPACT HERE, ON 27 JULY 2021
Somewhat lost in the bedlam of headlines about flooding in Germany and wildfires in the US West, and more, each worsened by the deteriorating climate: the announcement of a European Green Deal. The coverage mentioned pronouncements of accelerated targets for reduced carbon output, and so on. The news cycle moved on.

But, wait. This looks like a big deal.

In fact, this has the hallmarks of a significant, even momentous step forward. First, it shows the EU, accounting for at least 15% of global economic activity, taking a stand in advance of this year’s UN global summit on climate change (COP26, November, Glasgow). The EU now is far more definitive than others in its commitments. For example, the statements by the US Biden administration preparing for taxes on imports from countries that fail carbon footprint outcomes seem less ambitious even while they add pressure on China and others to join in committing to do more.

The EU commits, for all 27 member states, to turn the EU into the first carbon-neutral bloc by 2050.

To get there, they pledged to reduce emissions by at least 55% by 2030, compared to 1990 levels. The details collectively are what the EU is calling “fit for 55”, a reference to the 55% reduction target.

Important, and perhaps lost for many: this is not just a press conference, with uplifting speeches, a handout, and pretty words from PR professionals.  Included in the EU releases are new legislation, directives, and policy proposals. The website that hosts the Green EU deal information offers 18 separate documents of details – in each of many of the languages of the EU – plus press releases, fact sheets and videos. In this piece, we give a summary: subsequent pieces (we hope) will dig into some details.

The EU’s proposals are diverse

The subjects covered are many: Forest renewal; Switching from oil-based transportation; taking care of the poorer parts of the community who might be economically harmed during the transition; with investment in jobs for the post-fossil-fuel economy, and in clean transportation to reduce the impact of having fewer cars (or more expensive fossil fuels).

Can it be that we’re seeing a major economic force taking on the challenge of climate change? Going for the EU: the vast majority of its people seem aligned, with strong support for seeing addressing climate change as a top priority for Europe and for the world.

We’ve already seen Europe lead all other countries toward the adoption of policies on Internet privacy and personal rights (GDPR, the EU standard, which has prompted the adoption of similar legislation protecting individual rights in other countries and in individual US states, including California and New York). In doing so, it led in policy – and in framing the opportunities and challenges for incumbents and startups (and their investors). Now, the EU similarly is taking a position that at once sets its own goals and aims to offer guidance to other countries and regions on how to get carbon footprint reduction done.

The EU wants to achieve a whole-of-economy approach: building a “fair, competitive and green transition”. The overarching objectives of the EU plan are stated as: to transform the EU into a modern, resource-efficient and competitive economy, ensuring:

• no net emissions of greenhouse gases by 2050

• economic growth decoupled from resource use

• no person and no place left behind

Some specific proposals:

• By 2030 (select industry sectors with high energy demand and high fossil fuel footprints) will need to reduce their greenhouse gas emissions by 61%, compared to 2005 levels. Maritime industries (ships are notorious emitters of damaging gases) will join the list of sectors covered by this by 2025.

• To strengthen the financial systems to reduce road-transport emissions, the EU proposes “to start applying emissions trading from 2026 for road transport and buildings. This will be done in a separate system focused on upstream fuel suppliers, putting the responsibility on fuel producers to comply with the system, rather than requiring individual households or road transport users to take part directly. Emissions from road transport and building sectors will be capped, with the cap reduced over time so that total emissions fall.”

• To prevent ‘carbon leakage’, in which production is transferred from the EU to other countries with lower goals for emission reduction, the Commission proposes “a Carbon Border Adjustment Mechanism putting a price on imports of a limited number of high-polluting goods based on their carbon content”. This seems analogous to what the Biden administration has suggested for the USA, and perhaps presages that this will be a major theme for COP26 in Glasgow.

A week in the death of oil

Originally published in The Impact; 2nd June 2021

Change happens gradually, and then suddenly. This week, the endgame for oil companies became a lot closer and a lot more evident, suddenly, discontinuously, a jump.

The world of energy is a vast part of the global economy: perhaps as much as $10,000 billion per year. That’s so much money that the giants that dominate it, particularly the oil behemoths, aren’t giving up easily. Their grasp on that money gusher just got rather less tight. In one week:

• Two climate activists were voted on to Exxon’s board – a coup for a tiny investment advocacy firm.

• 60% of shareholders voted to force Chevron to lower its emissions – in its processes and in the use of its products.

• A Dutch court ruled Shell has to cut its products’ greenhouse gas emissions by 45% by 2030.

A momentous week, summarized

Much has been written on this already (see HERE for example), but let’s review and put into context to see why this is momentous.

• Exxon-Mobil LINK and LINK came into the week as perhaps the oil giant with the most out-of-touch expectations – many years of INCREASED oil output. But that was sharply rebuked when a small activist fund, Engine No. 1 (see below) secured enough institutional support, particularly from BlackRock, to put at least two of its candidates on the giant’s board of directors. Shareholders also approved measures calling for annual analyses of climate impact.

• Chevron LINK. Shareholders voted: 61% in favor of targets to reduce Scope 3 emissions (LINK HERE for definition – basically all downstream uncontrolled uses); 48% for a report on impacts of a 2050 net-zero scenario. There’s no way to look at these numbers and not see that shareholders understand what the executive leaders may not: oil is dying and Chevron doesn’t know what to do.

• Shell: LINK and LINK The Anglo-Dutch oil giant received its order from a Dutch court (a panel of judges) in the outcome of a lawsuit filed by the Netherlands’ Friends of the Earth group; the group alleged that Shell violated human rights by undermining the Paris Accords. Shell, of course, is appealing and it’s hard not to think that the gain against Shell is the most fragile of the week’s trifecta. Money beats well-meaning judges.

• Engine No. 1. Who? LINK and LINK from which: “an investment firm purpose-built to create long-term value by harnessing the power of capitalism. We believe a company’s performance is greatly enhanced by the investments it makes in workers, communities, and the environment. We believe that over time the interests of Main Street and Wall Street align, and we can engage as active owners to create value by focusing on this alignment.” The six-month-old firm doesn’t have a Wikipedia entry as of this writing.

The simple lesson from the week is: changing oil firms’ future by shareholder and investor demand seems to be a winning strategy. Expect more of these. A lot more.

What banks want, they get

The battle for the climate won’t be won until banks are onside. But once that happens, victory for a healthy climate and a new economy is assured. What bankers, investors, shareholders need to see is that these firms fully embrace the inevitable future. That is the mind shift underpinning this week’s news. Oil companies must embrace the transition or become fossils themselves.

They must act soon, for the economics of disruptive technologies never favor incumbents. Newcos, the startups, are valued on the basis of the opportunity they aspire to: billions, tens of billions, more. Oldcos, the incumbent giants, aren’t valued on future prospects: they’re already at scale. Instead, they’re valued on the basis of their cash returns – dividends. Cut the dividends, cut the stock price. Or they’re valued on their assets – but oil fields face declining value as the transition accelerates.

Why the new beats the old, every time

The difference between newco and oldco valuations drives startups, equipped with promising new technologies and underpaid entrepreneurs, to rich valuations compared to incumbents. Computer companies. Hard disk drives. Software companies. Telecom. Netflix. Cars. (Tesla’s market capitalization is a singular, perhaps bizarre, example of this: the valuation of TSLA alone is similar to the combined valuation of all the world’s other car makers. LINK HERE)

Incumbents have only a brief, and early, window to make the transition to a new technology. After that, the narrative becomes one of decreasing asset values, lowering returns to investors, stagnating margins and revenues, declining belief in their ability to adapt, and a diminishing equity value and cash hoard with which to buy other firms. These feed a downward spiral that dooms slow-moving incumbents to economic extinction. Big investors will sell—and then even short—their positions to protect against deepening losses, making those losses more profound. Oil giants will, one by one, fall out of major stock indices (Fortune 100, Dow Jones index, FTSE100, etc.) and then index funds must shed their shares.

Losses beget losses.

That spiral is closer. That two of the world’s largest oil companies in one week received a significant push from institutional shareholders (and the firms that advise them) toward a future without their main product, oil, signals the beginning of the end of their business model—oil extraction—and that major investors will push to make that happen.

And, that will inevitably mean improving opportunities and valuations for new energy alternatives and their investors. Soon, and at scale. Established oil companies should seize the moment to take their diminished but not yet destroyed equity valuation to make at-scale investments in post-fossil-fuel solutions. They should, but—if history is any guide—most won’t.
They should heed the caution expressed in Ernest Hemingway’s “The Sun Also Rises”, whence originates the idea that opened this piece:

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”

Oil execs are talking about life after oil. Should we believe them?

Originally published in The Impact, 18th May, 2021

As the fossil fuel industry sunsets how are oil companies thinking about the transition? (Image: Zbynek

You, surely, are interested in energy solutions that succeed as fossil fuels wind down. I know I am, along with the others at The Impact. But what of oil execs? Don’t you want to know what they’re now saying about the end of oil?

Are they clinging to the past-its-prime idea of fossil fuels as imperative for economic growth? Are they engaged in more greenwashing? Or are they starting to embrace economic growth in post-fossil solutions?

Short answer: at least some oil execs are talking about life after oil. Can we believe them?

So, in early May, I joined a live panel discussion on energy security from a leading Washington think tank, CSIS. The idea of the session was to have energy (= fossil fuel) executives and analysts talk about the next few years, particularly to focus on the question of whether big firms are spending enough money, new capital investment, to keep the USA going?

Many questions focused on whether spending on oil and gas production would be high enough (a shockingly outdated question, surely)?

The fossil fuel executives’ answers mostly spoke to keeping their businesses vibrant in the context of an energy transition away from oil and gas. They described capital spending peaks on oil and gas production. They didn’t push back on the need to transition beyond fossil fuels.

Let’s immediately note: beware greenwashing.

Is this just more of the same? Remember when BP (formerly British Petroleum) put out ads with beautiful green landscapes and clear skies and the nifty slogan “Beyond Petroleum”? It was nice, and all, but BP kept on investing in Canadian tar sands, drilling new wells, and stayed involved in coal mining. It presided over the Deepwater Horizon oil disaster in the Gulf. BP is not the only oil and gas firm to use attractive PR genuflections in front of the need for a cleaner, greener world to deflect attention from an unchanged mission to drill, baby, drill, never mind the consequences – Greenwashing.

Passing a peak?

The assertion that capital spending on oil and gas production has already peaked and won’t ever go back is not as intriguing as it seems: the boom in shale oil production, fracking and so on, a few years ago, rode on the back of a one-time, quick burst in capital spending that has faded.

Nonetheless, “Peak Oil” – the idea that oil will reach a high point and then fade, is here in detail. First, there’s a peak in spending on production assets – and that seems to be already history. Then there’s a peak in demand. And then, finally, a peak followed by a long-term decline in production. The peak in ‘upstream’ spending – capital investment in wells and oil reserves – is, they say, behind us already.

European firms, pushed by governments, seem to be leading in moving into the transition. The CSIS bash featured Gretchen Watkins, head of Shell US and with roles including global leadership in unconventional fuels and renewables. Shell includes liquified natural gas on that list; a fossil fuel with a somewhat lower carbon footprint than oil, but still. Asked specifically about Shell’s capex and cash flow, she ignored the question and spoke about the goal that Shell has announced – to have an entirely carbon-neutral business by 2050. Not only its own operations, but that its business in carbon sequestration and renewables will make its entire energy business carbon-neutral. She said her own compensation is – in part – tied to helping Shell get toward carbon neutral.

Scott Sheffield, CEO of a shale-oil giant, Pioneer Resources, speaking in classic Texan oilman drawl, delivered similar messages: shale oil spending is past its peak; it’s time to return cash to investors and not plow more into capital; oil companies have to work hard to slash methane emissions; Saudi Aramco’s dividends are, in large part, intended to drive the country’s transition from fossil fuels.

Can we believe them, this time?

Here’s a meeting of oil leaders, and they’re talking the talk: the end of oil is on its way. But these are hard-nosed executives, focused on cash from their businesses. Oil and gas companies have a long, long history of lying about climate change (and other environmental and societal damages). Trust, oft broken, returns slowly. Will they walk the walk, this time?

This is where I get very uncomfortable. The arc of the meeting was: CSIS asks oil and gas exec about investment in oil; exec responds about transition to a post-fossil fuel era; CSIS asks no questions about that. There’s no attempt to create a narrative of accountability: how will the USA’s or the world’s energy needs be met in transition? Who is holding anyone’s feet to the fire to make sure both that the transition occurs in a timely manner and that energy supplies are there?

That’s a key omission. CSIS, and the community at large, including us, must do better. Oil companies can – and, as public companies and as vital ingredients of the economy surely must – declare how they intend to transition. Share the models, the assumptions. How much do they think solar power will cost in 10 years? What prices for carbon sequestration are they assuming? How well will these support meeting climate goals?

Why did not the analysts from CSIS (and Boston Consulting Group) push on these? Until we see the spreadsheets, the raw data, and the commitments – to investors and to the world at large – it’s easy to assume that we’re just seeing greenwashing. And until CSIS and BCG get to sharp questions, their credibility and those of fossil fuel firms saying they’ve seen the light, all remain in doubt.

Some details

The host of this meeting was CSIS – the Center for Strategic and International Studies, a large, Washington, D.C., think tank, focused on many issues of strategic importance for the vitality and success of the USA. Yes, it’s got a heavy dose of corporate and big-military thinking and, yes, its affiliates include Henry Kissinger. Expensive suits and silk ties. And ties, of a different sort, to the US Department of Defense and intelligence community. What better place, then, to listen to voices from another side?

You can see the CSIS discussion HERE and read about Shell’s Net Zero assertions HERE

Valuing Avoidance of Climate Tipping Points

This piece originally appeared in The Impact, 4th May, 2021

How to value a climate-normalizing technology, or enterprise?

This is an vast and complex subject. One important approach is this: let’s think about how to value climate-normalizing solutions on the basis of whether they’re deployable rapidly, creating climate benefits in years, not decades. These would be particularly critical if earth is nearing a set of tipping points – points where small increments cause substantial and irreversible alteration to the climate.

Each climate tech solution aims to tackle some niche of the global climate crisis. We value these technologies as substitutes – where we may pay a small price premium for the betterment of society, but little more. Then, there is no way to see one niche, one narrow technology, as more or less vital than the next.

We need to change the calculation for climate tech solutions. The focus needs to be on the impact these solutions have toward reversing us away from tipping points on the scale towards full global meltdown. Thus, we need to rethink how society, governments and groups can view the value of climate technologies, and create prioritized solutions to prioritized problems.

Breaking down climate tipping points

We are moving, seemingly inexorably, toward multiple tipping points, each of which creates a change from which it is hard to come back. There are some well-known examples: Amazon forest dieback is accelerated by deforestation. Methane release from Siberian permafrost is accelerated by increasing temperatures. Disruption of monsoons or of the Atlantic circulation (the warming stream that keeps Europe’s temperatures moderate), among others.

Clearly the probable existence of irreversible points-of-no-return in climate damage would put a tremendous premium on solutions – behavioral, carbon sequestration, and other solutions – to be put in place before the entire climate collapses. Reading the scientific literature on this is breathtaking: sober discussions and thoughtful, quantitative analyses where the unspoken “if we get this wrong” consequences may include the obliteration of humanity.

Reforestation as a means to avoid the Amazonian deforestation tipping point

Understanding the nature of such tipping points, at a quantitative level, is key to assessing how fast we must act and extending on this, to be blunt, how much we should spend. Some of the climate-disrupting actions – combatting Amazon forest dieback on the ground in Brazil and Peru – may be more tractable economically and logistically in relatively short timescales than others – large-scale active carbon sequestration, perhaps.

A short-term, large-scale investment directed at reversing or preventing the fast-onset tipping points might have greater beneficial outcomes than a broader approach. Sounds reasonable? Where to start? Given the current, retrograde stance of Brazil, it might be easier to start elsewhere in the region, aiming to simultaneously get the science and the economics right, and to start building the ability to reverse out of tipping points.

So, it’s interesting to see analyses that start to distinguish between fast-onset tipping mechanisms and slower-acting ones.

A paper in Nature this month moves this forward, with some key conclusions:

• Many tipping points don’t immediately get to an irreversible stage. For many, it will be possible to reverse back out before the climate system is irretrievably in a different state.

• How far away the point-of-no-return is depends on the inherent timescale of the system, and the rate of change of Earth’s surface temperature – thus, how soon we can bring global warming under control.

• The analyses, admitted by the authors as relatively simple, suggest that tipping points can be reversed out of … generally in about the same time scale as it took to trigger one. Some tippings occur in decades, others in centuries and still others in millenia.

How we can value climate normalizing technologies

So, while carbon sequestration (for example) is imperative in steering the climate toward a tolerable future, reversing tippings is also key. And some tipping events can be more easily and more rapidly reversed than others.

And this provides a new way to think about the challenges, particularly the costs, of re-balancing, renormalizing our climate. For each tipping point, we can imagine a complete cost.

The consequences may be different, even wildly different, from a complete cost based only on gross carbon sequestration – for example, a cost to capture carbon dioxide or methane from the atmosphere to bring levels to appropriate levels. But the carbon capture estimates do not take into account the multiple looming tipping points, and the direction described here does.

The nuclear option

We'd better think about the consequences
We'd better think about the global senses
The time went out yeah eh, the time went out

What about Chernobyl?
What about radiation?
We don't know, we don't know

(Time is ticking out, the Cranberries, 2002)

Nuclear power’s (very) uncertain future

Of all of the analytical challenges in pondering the future of clean energy, and the clean economy, the role of nuclear power is particularly vexing. For solar power, wind, associated batteries and other elements, there is not absolute uniformity on cost projections - but the range between the highest and lowest plausible estimates is reasonable - a factor of two or three in the short term, a bit more longer term. There is no such alignment on the long-term cost of nuclear power.

This is true because of the long-term nature of investments (decades, not years), because of the touchy, explosive nature of the fuel, because of the as-yet-unconstrained thoughts on long-term costs of radiation leaks and the ilk, and storage of spent fuel, and potential for creating weapons-grade materials. And it’s because, until very recently, effectively all development occurred either in national laboratories or inside the labs of very large corporations. Only recently have some startups attempted to touch this, the dangerous third rail of clean power.

It’s clear that nuclear power will be an important contributor to the post-fossil-fuel future. What is less clear is under what circumstances; what has to be true for these to emerge; what the long-term costs will look like. Uncertainties notwithstanding: nuclear power should return.

The day nuclear power (nearly) died

Monday, 11th April 2011, I was at work in the high-tech district of Taipei, the capital of Taiwan. I’d installed an app on my phone to monitor earthquakes, since Taiwan has perceptible ‘quakes at about one nearly every week. A cute feature of the app was that it made my phone vibrate more for larger earthquakes. That afternoon, my phone shook. Frequently. Rattling on my desk. Finally, it shook so much that it flew off my desk. Japan had experienced a 9.1 magnitude quake. A 9.1. 

In Taiwan and in Japan, I’d been through several magnitude 6.1 or 6.6 quakes. Some were pretty scary. Living in California, I’ve been through several, including the Loma Prieta quake in 1989 (magnitude 6.9), which killed 63 people, injured thousands, and flattened a freeway in Oakland and houses across part of San Francisco. The 12-storey building I was in started to fall to pieces, which was unfortunate for me, as I was on the 12th floor.

Here’s the thing: each whole number increase in magnitude represents a tenfold increase in the measured amplitude, but 32 times more energy release. From 6.9 (Loma Prieta) to 9.1 (Fukushima) is 200 times more amplitude - the shaking movement up and down. It’s a 10,000 fold increase in energy. A 9.1 is unimaginable.

No wonder the national iconic art piece in Japan is Hiroshige’s depiction of a vast wave, a tsunami.

The night of the Fukushima earthquake and tsunami, our neighbor in Taipei came over. We drank more whiskey than is healthy. He’d been a senior planning engineer at the four-reactor complex north east of Tokyo that was battered by the events of that day. I remember him repeating: “poison the reactors” - pour on salt water, by any means. It was too late. Three of the reactors had gone into full meltdown. (Later, he showed us phone videos taken inside Fukushima after the earthquake and - astonishingly - as the vast waves of the tsunami rushed in.)

A lot ended that night. Japan’s reliance on nuclear power - which had grown alongside its shinkansen bullet trains. Taiwan also subsequently decided to shutter some of its own nuclear power plants (they were very nearly the same as those built at Fukushima, also beside the sea, and also in a seismically active area). A lot of other countries started looking with far more scepticism at their nuclear power plants and plans. France, whose nuclear power plants took that country to the highest reliance on nuclear anywhere and where those plants were key to the growth of high-speed rail there, is considering moving away from nuclear power generation. The biggest firms designing and building nuclear power plants quickly found themselves in dire straits.

How much nuclear power should we use in the future, particularly as we build the fossil fuel-free future? The answer is complex and nuanced, controversial and full of challenges.

The return of Nuclear Power

(work in progress)

Listen to some critics of nuclear power and you’ll hear the arguments that, post-Chernobyl and post-Fukushima, we can never go back to nuclear power. Listen to proponents and you’ll hear assertions as strong as the belief that it is infeasible to build a post-fossil-fuel world without nuclear power. The nuanced point seems to be: we definitely cannot go back to nuclear power as it was implemented in Russia in the 1980s and even to some of the practices inside TEPCO, the Tokyo Electric Power Company responsible for the Fukushima plants. We still must also be wary of global proliferation of Uranium, even enriched “only” to the levels needed for nuclear power plants.

Even the cost and risk models for nuclear power are greatly variant from those for other energy types: the risk model, obviously, because public perceptions are shaped by catastrophes, such as Fukushima, Chernobyl and (less catastrophic) Three Mile Island. Yet, by many measures, even these and the long-term creation of nuclear waste put less radiating materials into the environment than do the by-products of burning coal. There is something odd about how humans deal with risk: we’re transfixed and terrified by rare but horrific events - plane crashes, for example - but tend to be far more casual about persistent, background risks that are statistically more dangerous - car crashes, to pick the most obvious comparison, kill immeasurably more people than plane crashes.

Can the coming decades bring forward innovations in nuclear power that at once enhance safety and lower the operating costs? That seems to be feasible on paper, and a few startups firms and government labs are, indeed, pursuing that approach.

Comparative Costs

A utility CEO is quoted as saying that new nuclear plants in the USA are not economical, because of the low, relative costs of natural gas for new power plants. Even in his careful remarks you can see the incompleteness of the analysis:

• His cost analysis of nuclear power MUST include decades of financing and insurance against the (relatively low, but still non-negligible) risks of nuclear catastrophe. These, for him, for his company, are not external costs.

• His cost analysis of natural gas necessarily excludes as external the costs to the rest of the world for damage caused by the fumes, gases, particulates that the plant would create.

Barrels. Bullets. Bombs.

Generals, and majors
Always seem so unhappy
’less they’ve got a war
XTC “Generals and Majors”, 1980

Oil is a conflict mineral: armies and wars to defend fossil fuel assets - particularly oil fields - have an annual cost of between $200B and $500B.

Liquid energy

As you stand at the gas station, feeling the cool gasoline rushing through the hose into the fuel intake on your car, you’re enjoying the fruits of the great portability and density of liquid fuels. Inside your car, it means the fuel can be pumped from the gas tank and sprayed into the engine’s spark cylinders; outside the car, it means the fuel can be transported from distant refineries in gas tankers, and carried as crude from distant oil fields by goliath boats.

This is liquid energy.

It’s such a remarkable thing, that wars have been, are being, fought over it. The costs of these wars is itself remarkable - surely running into trillions of dollars per decade. It’s mind-boggling.

Liquid energy, oil, is valuable, but quite scarce. Not scarce in the sense that there is not much. Scarce in the sense that it’s spottily distributed around the earth. Consider: there are trees and forests nearly everywhere - except the great deserts, or where there are lakes and seas. Coal mines, similarly, are nearly ubiquitous. The industrial revolution arose on coal mining and the use of coal to melt iron alloys. Coal is found in Britain, France, Germany, Poland, Russia and China and Australia and in many parts of the Americas and in many other places. Coal forms wherever plants were buried in sediments in ancient swamps, but the same is not true for oil or large reserves of natural gas.

Oil, today is found beneath desert sands, in shallow and deep seas, off the northern slope of Alaska. Oil is geographically scarce because the processes that yield it are quirky and unusual-it’s only where there was once a shallow, stagnant sea with lots of vegetation. These shallow seas periodically form and disappear as continents drift apart and move together again over aeons.  Then, several, quite specific conditions must exist for oil and natural gas to form. Key is the build up of a sludge of algae and other microorganisms. Then, river silt must capture the microorganisms: this occurs where rivers empty into the seas. Finally, these layers of dead microorganisms must be subjected to the right conditions—high pressure, temperatures to about 150 degrees, for a few million years. That prolonged pressure-cooking drives the reactions that convert the complex organic compounds of the silt-organism mix into crude oil. At higher temperatures, to about 200 degrees, the result is natural gas.

And thus we get the combination of a highly valuable, easily portable resource, found under unusual geographic circumstances. It’s enough to go to war to defend. It’s enough that defending Middle Eastern oil, and determining who has access to it, has for decades been a central theme in US policy.

The Carter Doctrine

In 1980, President Jimmy Carter and his foreign secretary, Zbigniew Brezinski, made it clear that it would defend USA access to Middle Eastern oil as if it were sovereign to the USA itself:

• “The region which is now threatened by Soviet troops in Afghanistan is of great strategic importance: It contains more than two-thirds of the world's exportable oil. The Soviet effort to dominate Afghanistan has brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Straits of Hormuz, a waterway through which most of the world's oil must flow. The Soviet Union is now attempting to consolidate a strategic position, therefore, that poses a grave threat to the free movement of Middle East oil.

• “This situation demands careful thought, steady nerves, and resolute action, not only for this year but for many years to come. It demands collective efforts to meet this new threat to security in the Persian Gulf and in Southwest Asia. It demands the participation of all those who rely on oil from the Middle East and who are concerned with global peace and stability. And it demands consultation and close cooperation with countries in the area which might be threatened.

• “Meeting this challenge will take national will, diplomatic and political wisdom, economic sacrifice, and, of course, military capability. We must call on the best that is in us to preserve the security of this crucial region.

• “Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

Subsequent USA governments have modified, extended and generally strengthened the Carter Doctrine: it is now a central part of USA foreign policy.

This brings the inevitable and terrible consequence: that when securing oil is seen as a vital security interest of a well-armed country, men and women will suffer and die, bravely in defense of their country and oddly in defense of oil. We can tally the financial costs of wars and armies to defend oil; we can not tally and must respect the lives lost and the lives ruined in the same ways.

There is also a complex, philosophical and financial challenge here, that will be difficult to untangle. The financial challenges include that a large part of the world’s spending on military might is associated with defending oil assets. This, by one remove, means a nation’s ability to secure its own sense of autonomy, is threaded through with oil spending, as an addict cannot distinguish between the drug that destroys him and that which sustains him.

But we cannot escape that the vast scale of use of oil, and the vast sums spent defending or fighting for oil still leave us with the fact: oil is a conflict mineral.

For freedom! For oil!

It’s no easy feat to create a non-controversial estimate for how much armies and wars cost to defend, or win, fossil fuel assets. Countries don’t normally publish detailed tallies of how much their military adventures cost. And they certainly don’t brag about how important oil is in their war-waging: imagine the pre-battle scene, pennants flying, nervous troops being urged on by stirring speeches ending with “For country! For freedom!! For oil!!!” 

No, wars are ostensibly fought over other pretexts - territorial integrity or avenging some slight, or neutralizing some theat. But, really: Oman’s civil war erupted only after the discovery of oil - in the country’s barren sector which had been, previously, set aside as a religious, non-industrial region. The Iran - Iraq war, often considered to have the USA as a sponsor, was fought between two oil states. Iraq’s invasion of Kuwait. The war between the north and the oil-rich south of Sudan. And, of course, the big one: the US - Iraq wars. 

Now, ostensibly the second, largest US-Iraq war was somehow a consequence of the (mostly Saudi-sponsored) 9/11 attacks on the USA, or somehow a preventative against a planned weapons of mass destruction capability (which was not there), or somehow about Iraq’s Muslims endemic hatred of the West’s freedoms. And somehow we’re to overlook the claims that taking Iraq’s oil fields would pay for the war, and the swift actions by the invading forces to secure the oil fields (not the arms of the opposing forces or the key cultural sites). And that US Vice President Cheney had a dog in the fight - as an officer of Halliburton Corp., a major oil field services company, which he rejoined after the war and whose post-war work made it, and Cheney, very wealthy (even as Halliburton moved its corporate headquarters to Dubai, from Texas) and that Cheney urged war against Iraq in the immediate aftermath of the 9/11 attacks, even before anyone had concluded where the attacks originated. Let’s forget these, at least let’s pretend we can forget the emotional and visceral and political aspects of these.

How many trillion dollars?

Two thorough, well-founded analyses frame the estimates of the military and related costs of defending, winning, securing oil fields:

• The 2010 published analysis by Roger Stern of Princeton University: United States cost of military force projection in the Persian Gulf, 1976–2007. This analysis looks at the total cost the USA alone has borne to keep its military presence in the Middle East. The summary conclusion: “For 1976–2007 CPGfp is estimated to be $6.8T and for 2007 $0.5T (2008$)”

• The Costs of War project at Brown University’s Watson institute has built a detailed, long-term analysis of the costs of the US-Iraq war. Its conclusions: the total accrued cost of the USA war on terror, post the al Qaeda-sponsored 9/11 attacks is $6.4Trillion - to which needs to be added a future $8Trillion, over the next 40 years as interest payments on the costs paid so far. 

Some important details:

• The Stern / Princeton estimate excludes costs borne by others, including but not only US Allies (e.g. the UK in the Persian Gulf) and there is no consideration of US-borne costs elsewhere in the world.

• The Watson Institute estimates include costs that are not as reasonably associated with fossil fuel interests - the long war in Afghanistan, and fighting in Syria and other countries.

• Neither estimate considers the costs borne by Iraq itself. Nor do they add costs borne by others. Or look at costs associated with military forces to defend fossil fuel assets elsewhere.

And so:

We can take the Princeton estimates as is, and leave it as is, an annualized $217 billion, for the low estimate (noting that this is annualized over 30 years, including decades before the post-9/11 conflicts), or create a high estimate by assuming that the USA shoulders 80% of the annual cost of Persian Gulf projection, and that the Persian Gulf is itself 80% of the cost basis of worldwide fossil fuel military projection. That higher number is $0.5T / (0.64) = $0.78T. The Princeton study has a single-year estimate of $0.5T for 2007, which is perhaps the best average number.

We can take the Brown / Watson estimate as is - also a current $0.5T, but reduce by 40% to consider only costs outside the Iraq war, to $0.3T, but then add in, again, a similar percentage to consider other wars, costs borne by other actors, etc. So, again $0.5T.

So, a low, low estimate of $220 billion a year, an average perhaps of $500 billion a year.

These costs are almost entirely externalized from the ledgers of the fossil fuel industry, and are borne via taxpayers through increased military and other costs. In particular, the highest part of these costs is borne by US taxpayers.

“Clean energy” conflict minerals

There are some key elements of the new world of clean energy that are spottily available, and where conflicts are possible, or already underway. Some really are conflict minerals, including Uranium, Cobalt and, potentially Lithium. Cobalt, widely used in batteries, is mined (alongside Coltan, the ore for Niobium, also known as Columbium, and Tantalum) under awful circumstances in war-torn eastern regions of the Democratic Republic of the Congo. There is little dispute that the circumstances are dire, and that the high revenues associated with these precious ores are at the heart of the disputes.

Musings on Malthus

“The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race.” Thomas Robert Malthus, An Essay on the Principle of Population Chapter II. Originally published 1798.

The Malthusian prediction: apocalypse, soon

The two-century-old prediction that the growth in population would outstrip production of food, so that the only solutions would be widespread hunger and death or necessary curbs on population, is one of the most famous and most studied of forecasts, particularly because it was so soundly based in logic and knowledge and ended up so wrong. It’s interesting to look back and learn the lessons of how the Malthusian apocalypse never showed up, and why, and how our present predicament — and some of the language describing it — is familiar, and some proposed solutions seem little changed from two centuries ago. And, the failure of Malthus’ predictions also frames the successful paths forward.

Background — the gathering storm

Two hundred and fifty years ago, England was evolving rapidly from a sluggish, agricultural past, with isolated towns, dominated by castles and churches, surrounded by fields worked by humans as beasts of burden. Most people would never leave a small domain of a cluster of villages and a nearby market town. Even as steam engines became commonplace during the 1700s, most households lacked anything we’d recognize as essentials: running water, toilets, decent locks, glass windows, adequate floors or roofs.

By the start of the 19th century, however, massive change was afoot. The industrial revolution was underway. Coal-driven factories (and mines) overtook central England. Then railroads spread like vines. The population grew wildly. Cities were dirty, noisy, and overcrowded. London had about 600,000 people around 1700 and almost a million residents in 1800. Squalor, crime and hunger in decrepit neighborhoods and a polite, genteel aristocracy in beautiful estates.

Against this backdrop, we have teachers and preachers informed by the teachings of Christian philosophers, such as Calvin and Hobbes. The Reverend Thomas Malthus was, principally, a Hobbesian thinker. Hobbes, over 150 years earlier had written that a social contract overseen by an all-powerful monarch was needed to prevent the decay of mankind into horrors:

“(Absent a social contract with an absolute sovereign), there is no place for industry; because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving, and removing, such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.” Cheerful sort.

In the more refined circles of rectories and colleges, intellectuals pondered the gathering storm of human misery. The Reverend Thomas Robert Malthus, armed with both a dour version of Christianity and a full grasp of algebra, put pen to paper, and predicted that demand for food would outgrow its supply, and the inevitable outcome would be famine and misery, alleviated only by curbs on population.

Forgetting invention and innovation

Malthus’ analyses fell short, and his predictions were faulty, because the spirit of human innovation and invention solved the problems he had identified.

In the societies that emerged, entities, people or companies or churches and so on, with solutions COULD execute them, without explicit permissions from a centralized, authoritarian government — a monarchy, for example. They were free to discuss them, to build the underlying science, to trade ideas in public, to find funding, and to succeed or to fail. Innovations made Malthus wrong, and these innovations occurred in all fields: popular behaviors, technology, banking, government and policy.

The Malthusian dilemma

The Reverend Thomas Robert Malthus got his mathematics right, but — clearly — got the overall conclusions wrong. His projections were that only restraints on the size of the human population could prevent widespread starvation and misery. Hunger and poverty still plague the world, but a smaller fraction of the earth’s population starves and lives in misery than was the case in Malthus’ day.

His essays contain what can be expressed as mathematical formulae, as befits Malthus’ Cambridge education, where he excelled at mathematics. However, as was the convention of time, his writings, over decades, weren’t populated with equations. (Sadly, even with a better-educated populace, that remains true today, but that’s another story. We’ll use simple formulae here, but no more than that.) His argument, in simple summary:

Agricultural output rises arithmetically with time. This, in more modern terms is: agricultural output — food — increases linearly with time.

• Equation: Food (proportional to) time

Human consumption rises geometrically with time. This, modernized is: the population of the earth increases exponentially with time.

• Equation: Population (and food consumption) (proportional to) e^t

This is really, really bad news. It imagines food output as increasing by a steady amount per year. Let’s say a county currently produces ten thousand tons of food per year. In Malthus’ depiction, output might rise by a further 500 tons per year. So, this year: 10,000; next — 10,500; the following year — 11,000, etc. It imagines appetite as rising by a steady percentage per year. A person today consumes 1,500 to 2,000 pounds of food per year — nearly a ton. So, a community of 10 thousand individuals will consume (not accounting for wastes) will consume, say, 10,000 tons of food per year.

BUT, if the population grows at 5% per year, the food needed to sustain it will rise to 10,500 one year out; then 11,025; then 11,576 … and soon, agricultural output falls way short of what is needed to sustain the population.

Malthus’ depiction of the inevitability of human hunger was based on the difference between linear and exponential growth, and the idea that food output would only grow linearly, while human population and food needs would grow faster. Why are these valid ideas? And what happened such that Malthus’ analyis went so badly wrong?

Why should food output grow linearly?

Malthus lived from 1766 to 1834. So, as of the time he graduated from Cambridge University, in 1791, he was 25 years old. This was a time before much mathematical, technical, engineering contribution to agriculture.

Farming mostly centered on the fertile soils near rivers, at the bottoms of valleys. (An odd quirk, surely irrational for modern times, is that many great cities of the world are built on the most fertile soil, near great rivers.) Even then, the best fields, with the richest, most fertile soil, was taken. To increase agricultural output, farming had to expand away from river bottoms. Upwards. To hilltops not covered with organic-rich alluvial soil (Malthus described the new soil as ‘barren’). A simple, but perhaps erroneous, way to think of this would be to consider a river as a straight line, with fields close to it. Moving away from the river gets you more area — but not enormously more, if the field area doesn’t greatly increase as you leave the riverbank. But the soils do get worse. So: more fields, but it’s harder work to get them to yield. So: food output increases, but only linearly.

Why should population — and food demand — grow exponentially?

Meanwhile, however, the mathematics of population growth is easier, at first encounter. Human population, he believed, has increases in any period that are proportional to the amount already present. And that amount increases, so the rate of increase itself becomes more rapid in proportion to the increasing total size. In present-day USA, the average American woman in 1800 bore seven or eight children. Many, of course, would not survive to adulthood, and the parents (particularly the women) died earlier than they do now.

An example. Assume a couple has five children survive to adulthood. So: a couple that marries in year one, would be in a family of six or seven people 25 years later. That’s a simple example, that would yield a growth rate of 4.5% per year. This is a highly simplified example — it excludes that older relatives might die during the time. Nonetheless, the estimate is helpful. It’s also indicative of how fast populations were growing 200 years or so ago. In 2020, the world’s highest rates of natural population growth — excluding considerations of immigration and emigration are in a few sub-Saharan countries, where growth is slightly over 3% per year (in Angola, Mali, Malawi, and Burundi). The average growth rate of the world’s population from 10,000 BCE to 1700 was about 0.04% per year. Tiny. The fastest growth occurred in between 1950 and 1987, when the population doubled in 37 years — a rate of about 2% per year.

The population of the world was about 1 billion in 1800, as Malthus wrote. It took 128 years — until 1928 — to reach 2 billion. The next billion came in 1960, 32 years later. And the next took 15 years (1975). 12 years to add the next billion. Actually: each subsequent billion took about 12 years, as population growth has ebbed — the world’s population has been growing approximately linearly — by a constant amount per decade, rather than a constant percentage per decade — since the early 1960s, until recently, when it accelerated again. In general, it’s well established that population growth is ebbing: populations are growing at less than exponential rates. But still, they have normally been growing MUCH faster than linearly, and they’ve been doing so for the two centuries since Malthus’ predictions.

Pulling large numbers of people out of ‘food insecurity’ to a level where they routinely ate enough to be fit and hale would further increase the per-capita food demand, and push upwards the total amount of food needed even beyond that demanded by just the population growth.

The data available to Malthus in the early 1800s did, indeed, suggest that food production would fall short of food needs for the expanding population.

So, what went so right so that Malthus was so wrong?

Malthus’ time and philosophy hindered his analysis, despite his more-than-adequate mathematical background. Instead of arguing:

• Rate of growth of population (and food consumption) > rate of growth of agricultural food production, therefore dire outcomes

Malthus could have argued:

• Unless Rate of growth of agricultural food production now + improvements > rate of growth of population, then dire outcomes

And then the entire argument would have hinged on what would have to be true such that improvements were sufficient. And what were the improvements that showed up such that the inequality in the Malthus equation disappeared? So many, but it’s important to list a few:

Agricultural output improved for some technology-driven reasons, including these:

1. Machines took over from beasts of burden (including men and women): steam-driven ploughs emerged in the 1850s — but static, steam-driven threshers were more important

2. Mass-production of chemicals enabled fertilizers; before the early 1800s, the only fertilizers most farmers could use were manure, ground bones, wood ashes, etc. And there was little scientific basis for their application. Slowly, in successive decades, calcium superphosphate and potassium-based fertilizers were manufactured or mined, and their appropriate application studied.

3. Scientific oversight of cross-breeding generated higher-yielding crops — particularly by the 1890s, John Garton in England, and then his American disciple, Luther Burbank — made large-scale scientific study of crop variation and creation of high-yield crops feasible, and the modern seed industry emerged.

4. Faster transportation — and then refrigeration, and particularly the invention of mechanical chillers — meant fewer crops and meat spoiled between farm (or abattoir) and table: this not only meant more food, it meant better food and more nourished citizenry. The British and Prussian armies that defeated Napoleon in 1815 used horse-drawn trains on steel rails to move their materiel. Subsequent wars in Europe occurred well after steam engines criss-crossed Europe on sturdy railways; the train track beside Walden Pond in Massachusetts was there by the time of Henry David Thoreau’s 1850s book extolling his time there pondering the necessities of life in bucolic isolation. His cabin lay about a third of a mile from the tracks — and the railway line had more frequent and more noisy train service then than it does now. Refrigeration originally used natural ice which had to be carved from northern lakes and shipped — a business that started in the USA as early as 1806, and at its peak, in the late 1800s, employed 90,000 people. By the 1850s, factories were making ice and Willis Carrier’s inventions starting in 1902 made refrigeration increasingly affordable.

Agricultural output also improved for non-technical reasons, including:

1. The creation of crop futures as a financial product — meaning investors could loan money today for crops to be delivered next season. This only makes much sense at a large scale — loaning money to ten farmers in a single area is very high risk as the same adverse factors will affect all. One bad storm and all is lost. However, a large loan, syndicated over a large region, with many farms in different soils and weathers, meant better outcomes for all, including farmers.

2. The spread of literacy and of low-cost publications — newspapers and pamphlets meant that farmers could learn more about technical advances — and markets, and that the populace could learn about, and frequently object to, widespread hunger, empowering movements to oppose hunger and privation.

3. Government policies that moved toward stabilizing agricultural science and finance, including (in the USA) the creation of universities (particularly the land grant, agricultural and mechanical colleges) and departments specifically focused on agricultural support. These had the important effect of giving farmers true technical or financial data for their business decisions. Government policies also enabled companies to independently pursue business opportunities that could increasingly separate business failure due to poor execution or bad luck from flat-out fraud.

Many of these changes further had the effect of moving farms away from tiny, subsistence-level plots, barely providing enough sustenance for a poor family to eke out a living. Instead, the era began of large farms — still not the industrial-scale agriculture of today, but still real businesses, equipped with a growing set of tools to enable their success. And, these in turn, meant that farmers no longer needed more children to populate the farm with involuntary labor. Mules and machines took over.

The role of innovation

Malthus’ predicted apocalypse did not occur because:

• An increasingly literate society knew about the problems, and the opportunities; mass-produced newspapers alerted readers to abominations (such as nearby famines) and to discussion of government policies that affected them.

• An increasingly technical set of agricultural scientists emerged to help farmers (and those trying also to help agriculture)

• An increasingly powerful set of technologies emerged

• Bankers and policymakers (sometimes) stepped forward to enable scaled-up solutions

Nobody planned the response. It emerged across the then-developed or developing world.

In the societies that emerged, entities, people or companies or churches and so on, with solutions COULD execute them, without explicit permissions from a centralized, authoritarian government — a monarchy, for example. They were free to discuss them, to build the underlying science, to trade ideas in public, to find funding, and to succeed or to fail. Innovations made Malthus wrong, and these innovations occurred in all fields: popular behaviors, technology, banking, government and policy.

How hard could this be?

How hard, and how expensive will it be to convert most, nearly all, of the world’s energy consumption from fossil fuels to non-fossil forms? Here are a few, fresh anecdotes to show that, just perhaps, this should not be as complex, difficult or expensive as critics project. And that there lies the problem.

Example one: Washington State is moving (slowly) toward converting its ferries from burning heavy diesel oil to all-electric and hybrids. From coverage: The conversions will lower fuel and maintenance costs by more than $14 million annually …and … The overhaul and hybrid conversion is projected to cost $35 million per vessel, but could go as high as $45 million.

So, even before considering the significant immediate environmental and long-term climate consequences of burning oil, this looks like a decent investment. Yes: spend $40M. But lower costs by $14M/year. Three-year payback. It’s a deal. (And: the environmental consequences are significant — The ferries making the Seattle-to-Bainbridge Island run, for example, use about 5,000 gallons of diesel daily to make 10 round-trip crossings, and the net fuel consumption is about 4.7 million gallons of diesel a year.)

Example two: A rather right-wing acquaintance attacked implementing nation-scale solar implementations because, he estimated, “it would take 251.1 million square miles of solar panel to generate the 13,978 Mtoe consumed annually, and earth’s total surface area is only 196.9 million square miles.” (Mtoe? Million tons of oil equivalent. One of four or so metrics for large-scale energy consumption. Another is the tera-watt-hour. And 1 Mtoe = 11.6 TWh). Anyway, if he’s right, we’re in big trouble.
No, wait. He’s badly wrong.

Solar panels at utility scale produce 425kwh / square meter / year. So the area covered by solar panels required to supply the entire world’s energy appetite would be approximately 386,000 square kilometers: 149,000 square miles.

Sounds like a lot — and it is. It’s also not that big. It’s 1/1000 of earth’s land area. It’s the size of Germany. Or 1/20th of the Sahara desert.

And this is to convert ALL of earth’s energy to solar. And while we do need to get past fossil fuels, getting to 80% clean energy (leaving as a problem to solve later, for things like remote arctic regions, or planes) requires 119,000 square miles.

Example three. A recent article in the MIT Technology Review published the sad news that Electric Vehicles would not any time soon be cost effective replacements for vehicles using internal combustion engines. “EVs may never reach the same sticker price so long as they rely on lithium-ion batteries”. At the core of the MIT researchers’ hypothesis is the projection, in MIT’s “Insights into Future Mobility” study, that projects that Li-ion battery costs will likely fall only to $124 per kilowatt-hour by 2030.

Bad news, if true. And McKinsey’s cost analysis supports the idea that $100 per kwh is important for raw cost parity with internal combustion engine cars, a metric it notes might be met by 2025.

Meanwhile, Germany’s Volkswagen (yes, the same company responsible for fraudulent fudging of diesel emissions data) announced that it had already reached the $100 per kwh cost point. (Its announcement preceded the MIT report by a few weeks.) Cynics will note that the sponsors of the MIT group include several oil companies, including Aramco.

To recap on this one: MIT group says it’ll take more than a decade for EVs to reach cost parity. If VW is to be believed, the fundamental challenge to cost parity just got nailed. Innovation, it’s a thing.

— -

These examples give us several lessons.

• There are many instances where converting from fossil-fuel to renewable energy forms makes easy business sense, even without any consideration of climate disruption or even the immediate environmental consequences of diesel fumes, etc.

• And the scale of conversion is huge — but doable. The business logic and the raw mathematics of conversion needs to be understood. And, as industries and investors start to accelerate the process of moving away from fossil fuels, mis-information will be even more rife.

• Innovation is the lifeblood of humanity. Find a bigger problem; expect bigger, and more exciting solutions.

• The final lesson is that this “doability” is precisely why it’s hard. The entrenched forces of fossil fuel companies and petrostate governments already know that converting from fossil fuels to renewable, clean forms is achievable, and in many cases affordable, profitable and easy: they just don’t want it to happen.

— -

Links cited and more complete footnotes in the Medium version, at https://medium.com/@johnconorryan/how-hard-could-this-be-1a116c9e31b3

Saudi Aramco IPO

Saudi Aramco just filed notice of its Initial Public Offering. On the same day, Archbishop Desmond Tutu, the remaining lion of the fight against Apartheid, called for an international boycott against fossil fuels, akin to that which, long ago, weakened and hastened the end of Apartheid. It would be hard to imagine a more surreal juxtaposition - the amoral against the moral, the forces of finance against the interests of a healthy, sustainable earth.

Longer post at THIS LINK

Pacific fires, again

October 2019: more, massive fires sweeping through Northern California, where I live. Let us count the blames:

1. Climate change - dryer, hotter climate for us

2. Deferred maintenance (that’s putting it very nicely) on PG&E’s grid

3. More homes in more at-risk areas

PG&E gets lots of blame. In a hellish consequence, in October 2019 we see people in the dark - with no power and no phone service, because of a PG&E blackout - fleeing wildfires caused by PG&E equipment. The Wall Street Journal (ARTICLE HERE) reported that the company “knew for years that hundreds of miles of high-voltage power lines could fail and spark fires, yet it repeatedly failed to perform the necessary upgrades.” Some power lines were built in the 1920s - and had an expected life in service that ended decades ago.

It was at fault in major fires in 2017 and 2018 - and it seems as at fault again for the 2019 Kincade fire in Sonoma County in 2019. Yes, it did cut maintenance costs across the board, and push some maintenance staff out - to return as lower-cost contractors - while paying nice C-level bonuses and dividends and stock buybacks. It’s easy to see this as a moral issue, but it’s also, or principally, an issue of financial obligations and corporate incentives. Once PG&E was liberated from its historic tightly-regulated utility origins - an outcome it sought via generous lobbying campaigns - the incentive structures and the ‘fiduciary obligations’ to maximize return to shareholders led to the outcomes we see.

The point: to get different corporate partnerships in solving global problems, such as climate change, we need different corporate incentives.

Lamborghinis in London

Excess corruption from concentrated oil wealth costs the world $US200B per year, an amount sufficient to install 100 gigawatts of wind turbine capacity per year - enough power for 70 million US homes - or to other great causes, instead of to oil prince playboy supercars and the like. How can vast wealth not corrupt when it is in the concentrated, inherited ownership of powerful families or clans? Here’s the analysis to show the costs.

Supercars, capable of 200mph, in a city center where traffic rarely moves much faster than walking pace.  But if money is no object, “why not?” is the question that, it seems, dozens of oil-rich playboys ask themselves. So, off to London they go, with their crazy cars air-shipped in.

These cars exemplify mind-boggling levels of inequality. Of young men with more time and money on their hands than is beneficial. And the indolence of their plutocrat owners - whose great riches come without commensurate work.

My analysis asks: are countries that gain much of their wealth from fossil fuel extraction more corrupt than other nations? The answer is, for the most part, yes. In fact, we provide a rough estimate - that corruption may cost $200 billion per year.

Full analysis is at THIS LINK

The business case for ending use of fossil fuels

The destruction of our world’s climate has to end: this much nearly everyone accepts (and, to be clear, everyone should accept). For most, the tools to turn around the looming catastrophe are: personal behaviors, government policies and public calls for action. Each is important and essential. However, another tool — finance — surely is the most important. Specifically, until bankers starting downgrading or exiting investments in fossil fuels, the problem is not solved. Conversely, when bankers start downgrading these investments (and investors start walking away from fossil fuels), the solution is at hand.

Long note at THIS LINK

A (half-) trillion trees, please

One significant challenge in cleaning up our earth is that of breaking our dirty habits: curbing our habit of pumping greenhouse gases into the atmosphere and littering vast quantities of plastic and noxious chemicals into our waterways and oceans. But another is going to be rebuilding the global ecosystems that might normally aid in cleaning.

One obvious case is: trees.

The role of trees (and other leafy green vegetation) in carbon sequestration is well understood, quantified, documented. The question I wondered about was: how many trees has the human race cut down and not replaced? I tackled this question by two means: First, by looking at how deforestation is ongoing still today and estimating that the number of trees cut down per million inhabitants won’t have changed much since the start of the Industrial Revolution. Secondly, I used estimates of global historic deforestation. The totals come in about the same (give or take a factor of three):

A half trillion trees. 500 billion trees.

Note: I’m redoing the estimates and will provide a link to the spreadsheets and source data soon. My preliminary estimates were used in the 2017 TEDx talk.

Some quick thoughts:

1. That’s a lot of trees - and it will take technical ingenuity and lots of human labor to carry this out. The future of work will include labor to unfilthy the earth.

2. Technical innovations to enable vegetative carbon sequestration at lower and lower costs (or at higher and higher speeds) should include:

   1. GMO - genetically modifying trees, etc., to grow faster and sequester carbon more easily

   2. Other organisms - algae, for instance - adapted and deployed at industrial scale

   3. Innovations and inventions to lower the cost and increase the speed of germination, growing seedlings, preparing the ground, planting seedlings, and nurturing to maturity.

   4. Finance, always finance. More on that soon.

TEDx talk: the world's largest problems

My TEDx talk's theme was - how to get to a point where the big problems facing the world are being solved, because we've turned solving the into exciting business opportunities. Thus, as with solar, once it becomes affordable it becomes profitable, and once it becomes profitable it becomes inevitable.
The video link is HERE, while the slides are HERE.