Sunday, May 24, 2015

Is the slowdown in productivity growth a result of energy costs?

Slowing productivity growth in the United States has been in the news in recent months. It has become a concern to policymakers because they believe it is one of the primary contributors to a middle-class economic squeeze according to the annual report of the White House Council of Economic Advisors.

Simply put, productivity growth refers to the growth in economic output per worker or more precisely, per hour of work. When this growth slows, the potential for real wage increases diminishes since the growth in wages typically reflects the ability of workers to create more output per unit of time.

To the obstensibly naive observer the following idea may seem a plausible explanation: Higher-cost energy inputs into the production of goods and services reduce productivity growth because the economic output per dollar of energy consumed declines. And, though energy inputs aren't the only thing to consider, they are important. The high energy prices of the last decade or so may be, in part, responsible for low productivity growth. (Conversely, low energy costs would imply more output per dollar of energy consumed.)

But strangely, almost all economic models for productivity consider only so-called "tangible" factors, that is, labor and capital. In the bizarro world of modern economics, energy and materials are not considered "tangible."

Now, the way in which that productivity growth which is attributable to "technological advances" is typically calculated is to add up contributions to productivity growth from labor and capital (machines, buildings, vehicles, tools of any kind) and then subtract this sum from the known amount of total productivity growth. What is left is the so-called "residual" which is presumed to result from "technological advances" caused by increases in human knowledge. These advances and the increases in capital per worker are assumed to be the drivers of productivity growth.

Let me explain this from a slightly different angle: Obviously, if you work more hours, you will be more productive. But your output per hour will remain the same, barring some new input such as better, more efficient machines to work with or more efficient techniques, both resulting presumably from an increase in knowledge.

Note that there is no way to measure this "knowledge factor" directly. It is merely assumed that the unknown portion of productivity growth comes from "technological advancement."

But, energy researchers asked long ago whether productivity growth might be affected by changes in the quality and cost of energy inputs. Authors of a paper entitled "Energy and the U.S. Economy: A Biophysical Perspective" which appeared in Science in August 1984 noted the tight correlation between economic growth and energy consumption. They also noted that labor productivity increased with increasing energy consumption per employee. While not dismissing the effects of technological change, they believe that energy has had a central role in the persistent rise in labor productivity witnessed for most of the last century up to the time of publication:

From an energy perspective, productivity gains are facilitated by technical advances that enable laborers to empower their efforts with greater quantities of high-quality fuel embodied in and used by capital structures.

Notice the use of the term "embodied." The researchers recognized the energy necessary to produce the capital equipment used by workers. This is called the "embodied energy." The researchers also noted the following:

We found that in the U.S. manufacturing sector, output per worker-hour is closely related to the quantity of fuel used per worker-hour. A similar relation exists in the U.S. agricultural industry.

The mining sector also fit this pattern. While productivity per worker-hour has increased or, in some cases, merely stayed flat, the energy data showed just how much more energy was needed to achieve stable or growing productivity:

Technical improvements in the extractive sectors have made available previously uneconomic deposits only at the expense of more energy-intensive forms of capital and labor inputs. Physical output per kilocalorie of direct fuel input in the U.S. metal mining industries has declined 60 percent since 1939, although a few exceptions to that trend are known. The energy cost per ton of metal at the mine mouth for industrially important metals such as copper, aluminum, and iron has risen sharply as their average grade declined. For all U.S. mining industries (including fossil fuels), output per unit input of direct fuel declined 30 percent since 1939.

These findings suggest that fuel costs, fuel quality and fuel availability can be limiting factors in productivity across the economy. The idea that energy inputs used in production are central to productivity isn't so counterintuitive after all. And yet, in a sampling of recent coverage of the productivity issue, not one piece mentioned energy. (See here, here, here and here.)

One of the authors of the research cited above, Charles A. S. Hall (now retired), says that the report's findings need to be updated to see whether the relationships his team discovered still hold. It would seem wise to follow up given the exceptionally slow productivity growth associated with the period of rising energy prices before the crash in 2008 and to a certain extent with high average daily oil prices from 2011 through late 2014 (though, as one might expect, this is not even mentioned as a possible explanation in the piece cited.)

Whether such updated research would confirm the original findings can't be known. Whether it would make any difference to mainstream productivity models is known. Such new findings will make no difference whatsoever until the economics profession recognizes the central role of energy in the productivity of the workforce.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 17, 2015

Stephen Toulmin welcomes you to the end of modernity

Historian and philosopher of science Stephen Toulmin welcomes you to the end of modernity, at least modernity as we've imagined it. By modernity, he does not mean modern gadgets. By end he does not mean an end to progress in the natural sciences, nor in human affairs in general. Instead, he is talking about a way of thinking which has held us in thrall since the 17th century, for good and for ill, and is now giving way fitfully to a new (he would say "old"), more flexible worldview.

Toulmin's book Cosmopolis: The Hidden Agenda of Modernity is not new. It was published in 1990. Its argument will be of interest to anyone concerned with issues of sustainability including climate change and resource depletion.

Toulmin offers an historical account of how this view we call modern arose, and he catalogues its tenets. The ones that are of particular interest to me are as follows:

  • Nature is governed by fixed laws set up at the Creation.
  • The material substance of physical nature is essentially inert.
  • Physical objects and processes cannot think.
  • At the Creation, God combined natural objects into stable systems.
  • The essence of humanity is rational thought and action.

Even casual readers will notice the theological content in these statements. But, we must remember that Sir Issac Newton and René Descartes--who are credited with creating most of the intellectual scaffolding of modern thought--were deeply religious men. The theological references may have been stripped away in our own age. But the tenets remain.

And yet, anyone reasonably current in the sciences will say that all of these tenets are either no longer recognized as correct or deserve substantial qualification. The important question here is, "Recognized by whom?" For so much of our thinking in public discourse, in government policy, and in daily practice still rests on these ideas.

In particular, it accounts for the substantial remaining resistance to the idea that humans have a major role in causing climate change. The notion that the Earth is a stable system pervades the denialist outlook. The implication is that while humans have a history, the Earth does not. History implies specific events with specific causes at specific times. History is history precisely because it is not a repeatable cycle.

But to the 17th century mind and to many minds today, the Earth is a stable system with repeated patterns that are the product of predictable natural sequences. There are no sui generis events in Earth's past.

Earth's actual natural history, of course, refutes such a notion. Changes in climate in the past have had various, specific causes that don't necessarily repeat on any discernible schedule: volcanic activity, catastrophic meteor strikes, huge methane burbs from land or sea.

All sorts of other changes have profoundly altered the previous rhythms of the Earth. The Earth is anything but "fixed" in its functioning. The Great Oxygenation Event comes to mind. A leading theory concerning the cause of the Cretaceous–Paleogene extinction event--which wiped out 75 percent of all species--is that a giant meteor impacted near the coast of modern-day Yucatán in Mexico. A shroud of dust created by the impact reduced the sunlight making it to the Earth's surface so much that most animals and plants on land and in the sea could not survive.

While there have been other extinctions, their causes have been various and not separated by repeating intervals, contravening the notion of an Earth stuck in endless, regular, indistinguishable, machine-like cycles.

If the Earth is NOT a stable system and HAS A HISTORY, then the claim that the current warming of the Earth is merely part of a natural cycle is a cop-out. Which specific mechanisms are causing this warming? Of the mechanisms we know about in the past, which ones are operating now? Is there any part of the warming that cannot be accounted for by these mechanisms? Climate science has an answer to these questions, one rooted in an Earth that is a dynamic system with a history of specific, not-particularly-cyclical events. The answer to the last question is yes, and the missing element is human activities which create climate-changing gases, increases in which are responsible for the bulk of the warming.

The climate change deniers are stuck in the theologically tinted presuppositions of the 17th century.

Now we come to the notions that "the material substance of physical nature is essentially inert" and that "physical objects and processes cannot think." We are becoming painfully aware that the substances of physical nature react to what we do in sometimes unexpected ways. In a world of many fewer humans--the world of the 17th century--it was unthinkable that humans could alter Earth processes. But in what former World Bank economist Herman Daly has dubbed the "full world" we live in today, it is becoming manifestly obvious that human actions can and do alter natural processes.

Evidence clearly shows that humans are interfering with the worldwide carbon cycle, the chief effects of which are climate change and the acidification of the oceans; with the nitrogen cycle primarily as a result of the extensive use of nitrogen fertilizers; and with the ozone layer by our careless release of chlorofluorocarbons into the atmosphere which, until they were banned, were eating a hole in that layer. That process, if allowed to progress, would have subjected every living thing on the planet to dangerous levels of UV radiation.

While we cannot say that such systems "think" in the way that we do. They do exhibit a kind of intelligence in that they adjust to insults from human activities. In the case of the carbon cycle, the ocean uptake of carbon dioxide has shielded us from even more extreme climate change (but not enough for us to ignore it).

I do not assign intention to such a result. I only note its intricacy and subtlety. Nature is an agent on the Earth and in the universe as much as we are. As Bruno Latour says, we would be better off thinking of nature as a tiger than as a docile and compliant automaton that can never threaten our survival.

And now, we come to the notion of humans as rational thinkers and actors. No one can doubt that humans are capable of rational thought. But equally, no one can believe that this is the exclusive mode of human thinking and action. By rational I do not mean reasonable. I mean thought which attempts to construct the world through abstract models that are believed to have universal and timeless application.

We have sought for 300 years to find knowledge that is absolute, immutable and universal, that could guide us in every age through every situation. But, we have failed. Our knowledge is of specific things and processes at particular times. We still need and use models. But they are adapted to specific rather than universal purposes.

Albert Einstein sought a theory of everything, something he called a unified field theory. But, no one has succeeded in explaining all known physical phenomena in one equation.

Geneticists sought the code of life in DNA in order to create and alter those forms to their liking--only to find out that we cannot do just one thing to the DNA of an organism. We are always acting on multiple areas at once, some hidden from us or at best, poorly understood. This doesn't even consider the interactions of the modified organism with other species and with the broader physical environment.

We are once again aware of our immersion in a world of particulars. We cannot find certainty and so to demand it (say, with regard to climate change) is to demand the impossible. We are forced to rely on prudence in the face of imperfect knowledge and understanding.

It is uncertainty which should be our guide. The vast uncertainties which confront us with climate change, genetic manipulation (see my piece "Ruin is forever"), nanotechnology and novel chemicals should evoke in our imaginations nature as a tiger rather than an obedient automaton.

This is a seemingly humble outlook, not as bold and self-assured as the modern project to control nature and perfect humanity. But it can be liberating, allowing us to see the world, both human and natural (as if there were actually a difference) in all its multiplicity and diversity--to confront the world as something which deserves our respect and even more, our utmost attention to the particular people, things and substances that are right in front of us.

P.S. Toulmin's thesis has many other profound implications that I was unable to discuss here. I can enthusiastically recommend his book to those who want to understand the mindset that has brought us to our current predicament.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 10, 2015

Terms of debate: Destroying vs altering nature, the fragile vs the resilient Earth

Last week's piece drew responses that throw into relief how much the language we use depends on our most basic assumptions about how the world works. If left unexamined, that language leads to further conclusions that go unchallenged because the underlying assumptions are never scrutinized.

I challenged the Breakthrough Institute's notion that humans are in one category and nature in another. If one views humans as merely a part of nature or the universe or the web of existence--however one chooses to name that which includes everything--then our role becomes distinctly different.

Under my assumption humans are embedded in the natural world. They are not the sole actors or agents in it, only one of countless actors, most of which we probably know nothing about. We cannot get one up on nature. We can only cooperate with its workings.

When we put nature in one category and humans in another, we make humans an outside and preeminent force over nature. We (falsely) imbue ourselves with god-like power to "control" nature. In this case, "control" means we get what we want without self-annihilating effects. For who could say that they are in "control" of a plummeting airliner headed for a crash just because they still have the ability to move the throttle.

Now, if humans are one with nature, then the only thing they can do to it is alter it. They cannot "destroy" nature. Only if we conceive of ourselves as living on a different plane from nature can we "destroy" it. And, only if we conceive of nature as immutable can we "destroy" it. But nature is always in flux including any flux that results from human action. There is no immutable nature to "destroy" or to "restore." We cannot run entropy in reverse and reassemble the universe into exactly a state that existed in the past, not anywhere.

I was characterized by one of the Breakthrough Institute's analysts as someone who believes that nature is "fragile." I'll forgive him for not having time in his busy schedule to read my writings more thoroughly. If he had had time, he would have realized that I think nothing of the sort. Instead, I regard humans as fragile and nature as resilient. Nature, the universe, the everything, will be here long after humans have disappeared.

The upshot is that we humans need to be concerned with how our alterations of the biosphere affect our survivability precisely because we are so fragile and precisely because the biosphere holds no special brief to keep humans alive indefinitely.

The upshot is that we cannot "fix" the planet upon which we live. We cannot roll it back to some status quo ante--before climate change; before deforestation; before the depletion of soil, water, energy and other natural resources; before the population explosion; before the vast loss of biodiversity. The arrow of entropy really does go only in one direction. No technology can reverse the path of that planetary entropy.

That means we must figure out what to do from this moment forward inside this thin membrane of life which clings to the surface of planet Earth. We can, of course, continue to host a daily series of energy-intensive, fossil-fueled blowout parties--the biggest parties ever thrown by humans for humans--until the punch bowl (read: energy and resources) runs low or the air-conditioning blinks off leaving us sweltering in the summer heat (read: climate change)--causing people to say their good-byes in search of the next party (if they can find one).

Or we can choose to adopt a healthier lifestyle that will extend our lives (as a society and as a species) and shrink the daily blowout parties to an occasional bash to celebrate the results of our sensible choices and newfound vigor and health.

The idea that human well-being depends on ever-increasing per-capita consumption of energy and resources is already discredited. The notion that we can alter the biosphere to accommodate such irrational plans without fatal consequences in the long run is sheer folly--one born of mistaken assumptions and aided by confusing language.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, May 03, 2015

'An Ecomodernist Manifesto': Truth and confusion in the same breath

I really do want to applaud the Breakthrough Institute's recently released paper called "An Ecomodernist Manifesto." It speaks with candor about the possible catastrophic consequences of unchecked climate change. It recognizes the large footprint of humankind in the biosphere. It wants to address both, and it wants to do so in a way that offers a positive vision for the human future that will attract support and, above all, action.

But, I can't applaud it because of its underlying assumption: that humans are in one category and nature in another. The key paragraph starts with the key sentence:

Humans will always materially depend on nature to some degree. Even if a fully synthetic world were possible, many of us might still choose to continue to live more coupled with nature than human sustenance and technologies require. What decoupling offers is the possibility that humanity’s material dependence upon nature might be less destructive.

"Humans will always materially depend on nature to some degree." This statement seems reasonable only if humans and nature are in different categories. But, they aren't--a concept that is distressingly NOT clear to most everyone who styles himself or herself as an environmentalist. Humans and their creations are as much a part of nature as everything else. Humans don't "materially depend on nature to some degree." Humans are entirely and completely dependent on nature (of which they are a part) for EVERYTHING. Even every synthetic substance uses feedstocks and energy from the natural world.

It may seem to other readers of this manifesto that it acknowledges these facts in some of its statements such as "humans are completely dependent on the living biosphere." That's where the confusion comes in. Because, while there appears to be such an acknowledgement, the authors' conclusions belie such an understanding.

The distinction I am making is not merely a semantic one. Here's how I know that the authors of "An Ecomodernist Manifesto" will agree. The following is from the introduction:

In this, we affirm one long-standing environmental ideal, that humanity must shrink its impacts on the environment to make more room for nature, while we reject another, that human societies must harmonize with nature to avoid economic and ecological collapse.

Humans actually cannot avoid harmonizing with nature. All our insights about how to extract an ever-increasing material prosperity from the biosphere and the crust of the Earth DEPEND on us harmonizing our thinking with the laws of nature. We exploit our understanding to increase our access to energy and other resources in order to obtain higher levels of what we regard as security and well-being.

The key question is HOW we will harmonize our thinking and actions with the nature that we are a part of. The authors call for "decoupling human development from environmental impacts." By this they mean that we should find ways to do less damage to the environment while seeking the well-being we crave. And, few who are devoted to creating a more sustainable world would argue with this. But it is when we get into the details that confusion arises.

Let us return to the fragment I quoted above concerning our dependence on the living biosphere and provide the complete context:

Given that humans are completely dependent on the living biosphere, how is it possible that people are doing so much damage to natural systems without doing more harm to themselves?
The role that technology plays in reducing humanity’s dependence on nature explains this paradox. Human technologies, from those that first enabled agriculture to replace hunting and gathering, to those that drive today’s globalized economy, have made humans less reliant upon the many ecosystems that once provided their only sustenance, even as those same ecosystems have often been left deeply damaged.

So much confusion here. Let's try to sort it out: Humans are completely dependent on the biosphere--yes, of course. They damage natural systems--yes with an important qualification; the word "damage" should be replaced with "alter." Humans alter natural systems without much harm to themselves--possibly in the short run, but obviously not in the long run since humans are completely dependent on the biosphere. Technology reduces humanity's dependence on nature--completely wrong. It only enables us to exploit nature more efficiently by applying our understanding of nature's recurring patterns.

Everything from agriculture to the global economy has made humans less reliant on many ecosystems--almost completely wrong. We are as dependent on the world's ecosystems as we ever were except perhaps for fuel--which we now extract mostly from deep underground in the form of fossil fuels, the burning of which threatens us with catastrophic climate change--hardly a great tradeoff. But, wait a minute! That very fuel comes from ancient ecosystems, growth from which had been buried and "cooked" under intense pressure to give us carbon fuels. And, we are not free of the hunting and gathering method. That's how we get fossil fuels and mineral resources. But I digress.

Those ecosystems (that we supposedly "formerly" depended on so much) have been deeply damaged--yes with the important qualification noted above, the word "damaged" should be replaced with "altered." So the "damage" which is really "alteration" is really the shifting of entropy upon those ecosystems away from human settlements. Again, wait a minute! There is no "away" because as our ecomodernist authors tell us "humans are completely dependent on the living biosphere."

Our ecomodernists also tell us that any limits to our growth as a species are not in evidence:

Despite frequent assertions starting in the 1970s of fundamental “limits to growth,” there is still
remarkably little evidence that human population and economic expansion will outstrip the capacity
to grow food or procure critical material resources in the foreseeable future.
To the degree to which there are fixed physical boundaries to human consumption, they are so
theoretical as to be functionally irrelevant.

Their reference to the landmark study "Limits to Growth" first published in 1972 and then updated twice, most recently in 2004, betrays a surprising misunderstanding of the premise. What limits growth according to "Limits to Growth" is not resources, but adequate capital. Capital must be spent on maintaining the existing and exponentially expanding productive infrastructure and on mitigating ever-growing pollution of air, water and land (and now the effects of climate change) in order to maintain a livable society. At some point this capital expenditure becomes so large THAT THERE IS NO CAPITAL LEFT OVER TO INVEST IN GROWTH.

The ecomodernist authors view cities in one place as follows:

Cities occupy just one to three percent of the Earth’s surface and yet are home to nearly four billion people. As such, cities both drive and symbolize the decoupling of humanity from nature, performing far better than rural economies in providing efficiently for material needs while reducing environmental impacts.

In another excerpt they recognize that cities are a vast drain on ecosystems:

It is also true that large, increasingly affluent urban populations have placed greater demands upon
ecosystems in distant places — the extraction of natural resources has been globalized. But those same technologies have also made it possible for people to secure food, shelter, heat, light, and mobility through means that are vastly more resource- and land-efficient than at any previous time in human history.

The authors don't actually forget that it is absolute impacts and not per-capita impacts that matter. They say so elsewhere, just not here. But there seems to be only a dim awareness that the entropy created by cities is felt not only in distant ecosystems, but also in rural human-dominated ecosystems which are not "less efficient" than cities, only exploited by them as Howard Odum explains so eloquently in his writings. Cities do not pay the full value of raw materials from rural communities, only the cost of extraction and transport. The value that nature provides for free in trees, plants and minerals is only realized to any extent by those who process them for resale, typically those in the city. This is partly why city dwellers appear to be more efficient and end up more prosperous.

The manifesto adopts the triumphalist rhetoric of the rise of humankind over the centuries. It reminds me of Professor Pangloss who informs young Candide that "all is for the best in the best of all possible worlds." But, there is an environmental twist, of course.

I confess that any narrative about a way forward that does not project an optimistic vision of the future and a path to prosperity for all is probably doomed from the start--at least, doomed not to attract very many supporters. And, we desperately need a narrative that will attract wide support to speed up a transition to carbon-free energy and to help reduce impacts on the biosphere dramatically.

What the ecomodernist narrative misses is that we are dealing with complex systems that support our very existence and that we don't really understand those systems well. When dealing with things that are so complex that they are beyond our comprehension and control--especially if we are entirely dependent on those things--the first rule is not to perturb them. They will react in unpredictable and possibly ruinous ways.

The ecomodernists of the Breakthrough Institute mean well. But their vision lacks the humility which nature demands if it is going to sustain us. They have a vision which has some laudable elements, but they still view humans as the ultimate arbiters of the planet. We are simply not going to "harmonize" ourselves with nature, they say defiantly. And, yet there is no escape.

A friend of mine put it aptly when he said, "We think we are great ships sailing on the sea of the biosphere, able to withstand its storms while drawing whatever sustenance we need from it as we travel. Instead, we are really corks on the ocean bobbing up and down with every wave and only imagining that we are great ships."

The biosphere is our home. We are inhabitants along with countless other species. We humans are limited creatures--clever, yes, but limited, and every one of us as much a part of nature as all other species on the planet. A positive vision of the future which takes this into account is more likely to succeed at extending the life of homo sapiens than one that still considers us as separate from nature, a view that in many ways is the cause of the very environmental challenges we are seeking to address.

Conforming human activities to the dictates of "An Ecomodernist Manifesto" will at best lead to a much more efficient version of business-as-usual. If we are really going to address the problems that threaten the survival of human culture, we're going to have to do better than that.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, April 26, 2015

Chinese energy figures suggest much slower growth than advertised

Last year China reported the slowest economic growth in 24 years, about 7.4 percent. But the true figure may actually be much lower, and the evidence is buried in electricity figures which show just 3.8 percent growth in electricity consumption.

David Fridley, a staff scientist in the China Energy Group at the Lawrence Berkeley National Laboratory, has been a longtime collaborator with the Chinese on energy management, efficiency and policy. Fridley, who has held Chinese energy-related jobs for 35 years, believes that electricity consumption in China is a better indicator of its economic growth.

Historically, electricity consumption and economic growth in China have been very closely linked. "From 2005 to 2013, the average elasticity of electricity demand was 1.09, meaning electricity demand was up about 1.09 percent for every percent rise in GDP," Fridley wrote in an email. "In 2014, that number fell to 0.51, the lowest in this 10-year period. During the economic crisis of 2008, it did fall below the average, to 0.60, but quickly rebounded to above 1."

That tells Fridley that something is up. He's not the only one who thinks the government growth numbers aren't reliable. China's premier, Li Keqiang, has said China's GDP figures are "for reference only." Bloomberg reported that in a declassified U.S. diplomatic cable from 2007 then-U.S. ambassador Clark Randt related a dinner conversation with Li, secretary general of Liaoning Province at the time, in which Li revealed his preferred indicators of Chinese economic activity: rail cargo volume, loan disbursements and--wait for it--electricity consumption. China's leaders don't believe their own government growth numbers.

Fridley notes that electricity consumption figures are considered quite reliable and have suffered only minor revisions over the years. Preliminary numbers for the first quarter of 2015 suggest further slowing of the economy as year-over-year electricity consumption growth decelerated to just 0.8 percent. February data showed a 6.3 percent decline in electricity consumption from the previous month. March saw another decline of 2.2 percent.

Fridley also notes that residential electricity growth registered an extraordinary fall: "From 1980 to 2013, residential electricity grew on average 13.5 percent a year—and last year it fell to 2.2 percent. From 2005 to 2013, elasticity of residential energy demand was 1.11, and fell to 0.30 in 2014. This is unprecedented."

But it wasn't just electricity consumption that seemed out of step with China's reported growth rate. Fridley wrote that diesel and natural gas demand also indicated slowing economic growth:

Diesel demand in 2014 fell slightly, also for the first time, and the growth rate for natural gas was the first time it had been below double digits this century. Diesel demand growth is primarily driven by trucks hauling freight, and although the 2014 numbers for freight by mode aren’t out yet, the 2013 freight numbers went flat after growing by 3 to 4 billion tonnes per year since 2000. Trucking freight actually fell by over a billion tonnes. Rail freight was flat.

Does all of this prove that China's reported economic growth rate was inflated in 2014? Fridley again:

At this point, the data point to an economy that is weaker than what official GDP would say, but there’s not enough complete data available for 2014 to really understand everything that is going on. Others do provide their speculations, and perhaps some of it is spot on, but I just follow the data.

Economist Michael Pettis has been forecasting much lower growth in China for the rest of this decade as China rebalances its economy away from high investment and toward consumption. He says this has happened to every high-growth economy in the past and will almost surely happen to China.

He explains that it will come in one of two ways:

In the best-case orderly adjustment, growth rates will drop every year, more or less smoothly, as credit growth is constrained and investment growth drops with it. As the reforms proposed during the Third Plenum are implemented, ordinary Chinese households will benefit from direct or indirect transfers from the state sector, so that total household wealth will continue to rise more or less in line with the growth in household income during the past decade. In that case, consumption growth will remain in the 5 to 8 percent range.

The second way will not be so pleasant:

A disorderly adjustment will have a different dynamic. It is likely to occur after another two to three years of relatively high (7 to 8 percent) GDP growth rates followed by a very ugly contraction once debt capacity is exhausted--which will occur when new loans cannot grow fast enough both to roll over existing bad loans (by which I mean loans that funded projects whose returns were insufficient to liquidate the loans) and to generate economic activity. Average growth rates in the case of a disorderly adjustment will be well under 3 to 4 percent but the adjustment will be highly discontinuous.

You might have to read Pettis's words twice to get the full import of them. But he's explaining why China will grow more slowly in the future one way or another.

So, the question is: Has China entered this slow-growth phase which Pettis believes it must? Or will the adjustment to slower growth be delayed once again? No one knows for sure. But energy consumption statistics hint that China may have already begun its decent into slower growth and that that growth will be much slower than almost anyone except Pettis has forecast.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, April 19, 2015

Taking a short break--no post this week

I'm taking a short break this week and expect to post again on Sunday, April 26.

Sunday, April 12, 2015

How the climate change debate got hijacked by the wrong standard of proof

Everyone loves a courtroom drama--especially one that pits a feisty, but a determined criminal defense attorney against the awesome power of a prosecutor who has the resources of the state behind him or her. We see such David and Goliath stories every week on television.

We cheer as the defense attorney pokes one hole after another in the case of the prosecutor, raising what the audience now perceives as reasonable doubt. But will the jury see it that way? We'll return after these messages....

This is just the sort of metaphorical setting into which the climate change denial lobby is trying to place the debate over climate change without the public or even most policymakers realizing it. The deniers in the fossil fuel industry and elsewhere are attempting by sleight-of-hand to get both the public and policymakers to abandon the preponderance of evidence standard used primarily in civil trials--and which is similar to evidence-based public policymaking--in favor of another judicial standard designed for criminal trials, namely, beyond a reasonable doubt.

So long as the deniers get to claim the role of defense attorney in this public fight, their task will be much easier. The reason that the deniers want to change the standard of proof, of course, is because climate scientists have already shown through an overwhelming preponderance of evidence that human activities are a major cause of climate change. The deniers have no hope of winning the intellectual argument if this standard of proof is used.

Drawing from tactics permitted to defense attorneys in criminal proceedings, the deniers are freed from the need for consistency, clarity or comprehensiveness. Instead, they pursue several lines of contradictory rebuttal in hopes that one or more will stick since they believe they need only to poke holes in climate science to win. The deniers as defendants are not called upon to offer their own coherent theory of climate change. That's why they simultaneously claim that there is no global warming, that global warming is caused by nonhuman forces, and that global warming is good even if it is caused by human activities.

Some people wrongly treat the fossil fuel industry and carbon dioxide itself as if they are both somehow involved in a quasi-criminal proceeding. They think any one piece of evidence--even in isolation--that might suggest, however tenuously, that neither is implicated in climate change leads to reasonable doubt and a verdict of not guilty.

But, this kind of criminal trial thinking is not relevant to public policy deliberations. It is based on longstanding jurisprudence as expressed by the great English jurist William Blackstone who said: "It is better that ten guilty persons escape than that one innocent suffer." The principle at stake is that the freedom of the innocent is so precious that society should make every effort to ensure that no one is wrongly deprived of his or her personal liberty--even if it means that the courts are skewed toward letting some guilty defendants go free. But neither fossil fuel corporations nor carbon dioxide are actual living individuals, and so no one is going to be deprived of his or her personal liberty--that is, be imprisoned--by greenhouse gas emission regulations.

Probably the single most important question one can ask about this move by the deniers is whether they would accept the role of the prosecution. That would oblige them to offer an internally consistent theory of climate change supported by bona fide scientific evidence which somehow explains away all the evidence for human involvement in climate change.

As defendants in this hypothetical turnabout, climate scientists would only need to poke one or two holes in such a theory to prevail and win the case for the regulation of greenhouse gases. (This would roughly be the equivalent of the precautionary principle in action.) You can be assured the deniers only want to play the role of the defense in this faux courtroom drama. This is because they simply cannot marshal a winning prosecutorial case with the meager evidence they have and a story that is all over the map and riddled with holes.

There are only a tiny number of bona fide climate scientists who still say that the evidence is inconclusive concerning human contributions to climate change. There are none--so far as I know zero--who say that climate science PROVES that humans are NOT causing climate change--which would imply that these skeptics have a comprehensive, evidence-based theory of climate change which does not merely suggest nonhuman causes (which are already accepted by climate science), but which successfully refutes the enormous and growing evidence for human activities as a major cause.

Climate change deniers would like the public to believe that regulating greenhouse gas emissions should only be undertaken when we are 100 percent certain of their role in global warming. But anyone familiar with public policy knows that such regulatory policies are never undertaken with anything approaching 100 percent certainty--though the role of greenhouse gases in causing climate change comes closer to a 100 percent certainty than perhaps any previous scientific finding used to justify public policy action.

Where uncertainty remains concerning the possible consequences of climate change, that uncertainty--far from supporting inertia--actually cries out for significant and aggressive action in an effort to avert possible catastrophe. If the future of climate change meant merely that we all risked getting a hangnail, perhaps waiting would be an option. However, the history of climate change shows that we have consistently underestimated its pace and consequences. The changes already apparent and which climate change models forecast suggest that we are risking nothing short of the stability and even survival of modern civilization if we do not act now. To wait would be akin to a cruise line deciding that lifeboats for its vessels will only be ordered when a ship starts sinking.

And, now back to our program (mentioned at the beginning)....We return to the courtroom, but it turns out to be a courtroom of the future. As the planet burns outside, the prosecution is asking for the imprisonment of scores of defendants who denied the dangers of climate change and delayed effective responses to it. These defendants are charged with crimes against humanity.

In this case the proper standard for a guilty verdict is "beyond a reasonable doubt" because the personal liberty of each defendant is at stake. The prosecution tries to prove that the climate change deniers knew they were lying to the public about climate science and understood that the future consequences of climate change might be severe, even catastrophic, but acted with reckless disregard for the safety of humanity.

The jury is not convinced "beyond a reasonable doubt" and frees all of the defendants. As the now freed defendants leave the courtroom, they thank their lucky stars that the court could not invoke the preponderance of evidence standard--a standard that would likely have landed them all in prison.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.