Four global energy and ecological challenges
- xav031
- Sep 16, 2014
- 6 min read
Few people do realise and understand that the financial and economic crisis that has engulfed the world since 2007 is fundamentally an unprecedented energy crisis and that a stable and durable resolution of the debt challenges and return onto a path that may possibly lead towards prosperity can’t take place without first and foremost addressing the fundamental energy issues of the industrial world. This matter is perhaps best analysed in terms of EROIs.
EROI stands for Energy Return on Energy Investment, that is, the amount of energy returned divided by the total amount of energy invested in order to achieve that return.
Figure 1 – The Global Challenges of Energy Returns on Energy Investments (EROIs)
EROI is about basic accounting, however, carried out in Joules, the main unit of energy, instead of dollars, Euros or any other currency. For example, to get oil we must use energy to drill wells, transport it, refine it, etc... What matters is the net amount of energy gained once the energy cost of getting it has been deducted from the gross amount extracted. It stands to reason that, if to acquire energy one ends up spending more energy than one acquires, trouble is bound to happen fairly rapidly. This is in essence what is in the process of happening globally but has been masked until recently behind thick layers of monetary and derivatives based trade. Understanding declining EROI trends is key to understanding the present crisis, how to emerge from it and the opportunities herein.
Figure 1 summarizes over 40 years of research on global energy dynamics. The key EROIs trends in our globalised world are those concerning oil and gas since the entire global economy vitally depends on these two resources, including for the exploitation of other resources like coal and the development of any alternatives.[1] Analyses of those trends for oil and gas as well as alternative technologies and related resources, combined with analyses of the ecological consequences of the intensive use of fossil fuels and nuclear reveal four major challenges that have remained largely unseen until recently and that radically alter the whole picture for both energy and the future of our global industrialised world. There are three key energy challenges and one ecological challenge. The three energy challenges are: (1) net energy returns from fossils fuels now below the bare viability minimum; (2) lack of viable, sustainable alternatives, (3) consequences for the global monetary and financial systems. The fourth challenge takes the form of a global ecological crisis moving into emergency mode, especially concerning climate change, and drastically worsening the three energy challenges.
First Challenge – returns from Fossil Fuels are passing below the minimum level for an industrialised world to be viable. In the 1960s the EROI for oil and gas at the well-head (EROIp) was generally over 60:1, at least for the few dominating industrialized countries of the time; that is, for each barrel of oil invested in finding and extracting more oil over 60 barrels were returned. Figure 1 shows that by 2000 the EROIp for oil and gas combined was down to around 35:1 in a world that, by then, was globalised and that by 2006 this global EROIp was around 18:1. Globally and in most countries EROIs for oil and gas are presently in the process of passing below the critical 10:1 threshold recognised among many energy analysts as the bare viability limit for our industrialised world. [2]
This situation is not a matter of economics or finance but of thermodynamics. The rapid fall is closely related to the progressive exhaustion of easy-to-exploit resources and the increasing total energy cost of accessing resources that are more and more difficult to exploit and more and more scarce. The decline is thus inexorable. We will explore further the links between EROI decline and so-called in a subsequent post (First Energy Challenge – EROI and Peak Oil). For now let’s simply stress two important points. Firstly, data concerning the accelerated EROIp decline is extremely robust and cuts short all the debates concerning the timing of Peak Oil (was it around 2005 or will it take place well after 2025?). EROI matters have been critically at play since the 1970s and are sorely felt right now. Secondly, the rapid decline of hydrocarbon EROIs below what is viable must be addressed right now, without delay, if only to reach a position from which it may become possible to address matters of Climate Change and all other ecological issues, the Fourth Challenge, which is certainly not the case presently
Second Challenge – Most alternatives to Fossil Fuels are also below the minimum level for an industrialised world to be viable. Figure 1 also highlights that presently none of the main alternatives to conventional fossil fuels (unconventional fossil resources, nuclear, direct solar, indirect solar such as wind or biomass) has EROIs high enough nor shows the prospect of achieving such yields in the foreseeable future fast enough to provide a viable solution to the “First Challenge”, let alone dealing with the Fourth Challenge.[3] In brief, as a consequence of Challenges 1 & 2, humankind is in the process of falling into an energy trap from which there will be no exit once a certain “event horizon” is passed.
At the level of a whole society, and even more so globally, an energy trap functions in ways similar to a black hole. At a certain threshold or the time required to develop and implement evasive actions becomes longer than the time left before reaching the bottom of the trap. It is also around that point in time that the society in question is no longer able to muster the energy required to undertake evasive actions. Past such a threshold the situation is no longer retrievable. It’s down hill all the way to the bottom of the trap, that is, where the entire social and industrial fabric breaks down. For the survivors, it may take many centuries to painfully clamber out of it. This is not a sharp line. It is better thought of as a grey zone that different countries enter into at different points in time. However, the global EROI and GDP data that we will examine in subsequent postings make it clear that the industiralized world taken as a whole has already entered the perilous zone. We will expand on the Second Challenge in Second Energy Challenge – Lack of Alternatives.
Third Challenge – Global Monetary Systems and Finance in limbo. Since President Nixon dropped the Bretton Woods agreement in 1971, the global system has been a fiat one entirely structured on the assumption of future economic growth and viable debt servicing on the part of countries providing the main reserve currencies. In effect, a fiat monetary system functions as a bet on the future being the same or better than the past and present. Without any viable energy supply means ensured for the future such a bet no longer holds. It ensues that the present financial system, and with it the entire industrialized world, have fallen into a state of suspense. The global situation will remain highly volatile, without any prospect of durable long-term economic growth, until sustainable energy solutions have been reliably established that can provide a robust basis for a renewed finance and monetary system. We will explore much further this issue in a subsequent series of postings.
Fourth Challenge – Global Ecological Crisis moving into emergency mode.
Until recently most experts considered that although climate change is already underway right now, the main threats were bound to unfold rather gradually in the long term, with more troublesome impacts beginning to be felt sometime after 2030. New developments make it necessary to completely revise this view. These developments combine to form a global ecological threat that must now be considered as immediate as the other three and that compounds them. Given its critical importance, we focus specifically on this Fourth Challenge and its compounding effects in the next posting.
[1] EROIs concerning coal are also important, however, as highlighted in Patzek et all., 2011, global coal production is presently peaking and consequentially subject to the same relentlessly declining EROI constraints as oil and gas, with the added considerations that coal production is strongly dependent on oil concerning extraction and transport, and is a much worse pollutant with respect to climate change, regional fog, acid rain, and ocean acidification (Patzek Tadeusz W. and Croft, Gregory D., 2011, “A global coal production forecast with multi-Hubbert cycle analysis” in Energy, Volume 35, Issue 8, August 2010, Pages 3109-3122). For these reasons and in order to simplify matters coal EROI matters are not detailed further in the present briefing since oil and gas EROIs are determining of the overall global situation.
[2] See in particular, Hall, Charles A. S., Balogh, Stephen, and Murphy, David J. R., 2009, “What is the Minimum EROI that a Sustainable Society Must Have?” in Energies, 2, 25-47; doi:10.3390/en20100025 ; and Hall Charles A. S. and Klitgaard, Kent A., 2012, Energy and the Wealth of Nations, Springer; Murphy, David J., 2014, “The implications of the declining energy return on investment of oil production” in Philosophical Transaction of the Royal Society A, 372: 20130126, http://dx.doi.org/10.1098/rsta.2013.0126.
[3] Some hydroelectric schemes not generating large amounts of methane emission, typically small run of the water schemes, have very high EROIs. Their potential is presently largely ignored and under exploited.
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