Welcome to the age of diminishing returns

Tuesday, October 8, 2013

Plundering the Planet: a Report to the Club of Rome

This is a text version of a talk I gave at the World Resources forum in Davos on Oct 07, 2013. For a more detailed description of the same subject, see this post on an earlier talk in Dresden.


Ladies and gentlemen, it is a pleasure to be here and my task today is to tell you about something that stands at the basis of everything we do: mineral resources. It it is the subject of a book that is the result of a research program sponsored by the Club of Rome and that has involved me and 16 co-authors. Here is the cover of  "the Plundered Planet."

 
For the time being we have only the German version, we are working at the English one, but that will take some time - a few months. In any case, the title should be clear to you even if you don't speak German and you can notice that we say "The Plundered Planet;" not "The Improved Planet", or "The Developed Planet". No, this is the concept: plundering. We have been acting with mineral resources as if we were pirates looting a captured galleon: grabbing everything we can, as fast as we can. 

Now, of course, there is a problem with the idea of plundering planet Earth. It is how long we can go on plundering. At the basic level, it is a question of common sense: we know that once we have burned oil, it is gone. We know that after we have dispersed copper in tiny bits all over we can't recover it any more. We know that diamonds are forever, perhaps, but also that once we have taken them out of a mine, then there are no more diamonds in there. Mineral resources are not infinite. 

So, there is this nagging question: how long can we go on mining? It is a question that started being asked in the 19th century and the answer is both easy and difficult. It is easy to say "not forever," but it is difficult to say for how long, exactly. So, what form will take depletion? How is it going to be felt on the economy. And, since we see ourselves as very smart, can we find some trick to avoid, or at least delay, the problem?

The first study that attempted to quantify these question was a report that was sponsored by the club of Rome back in 1972. You have surely heard about it: here is the cover of that book.


Now, you have probably also heard that this study was "wrong," that is, that it had made wrong predictions, that it was based on bad data and flawed models, and similar accusations. That was the result of a wave of criticism, a true tsunami I'd say, that engulfed the book and its authors after the study was published. The authors were accused of being not just wrong, but part of a global conspiracy aimed at enslaving humankind and exterminating the colored races (I am not kidding, that was said several times).

However, if there was such a harsh reaction to the book, it was also because it went to the core of some of the basic assumptions of our society, of our deeply held belief that, somehow, not only growth is always good, but that we can keep growing forever. But the book said that it wasn't possible. And it didn't say just that, it said that the limits to growth were to appear in a time span that was not of centuries, but just of decades. Below, you can see the main results of the 1972 study, the run that was called the "base case" (or "standard run"). The calculations were redone in 2004, finding similar results. 



So, you can understand the reasons of the rabid negative reaction to the study. It is the same as what's happening today for Climate Change. We are all human, when we see something we don't like, we tend to seek for ways to think it is wrong. It is normal, but sometimes it becomes pathological, as it was the case for this 1972 study. I described that story in a book of mine "Revisiting the limits to growth".


I am sure that you are comparing, in your minds, these curves with the present economic situation and you may wonder whether these old calculations may be turning out to be incredibly good. But I would also like to say that these curves are not - and never were - to be taken as specific predictions. No, the authors of the study clearly said that they didn't want this to be a prophecy. These curves, production, exploitation, etc..., they said, are the result of human action and we could act - we could have acted - in such a way to avoid the collapse shown by the scenario to become true. Unfortunately, nothing was done and this scenario is dangerously turning out to be a prophecy.

So, how is it that this model described so well the behavior of the world's economy (and may describe its future)? Well, I discussed this in a longer talk of mine, but here I can just tell you that the model was based on reasonable hypotheses, mostly common sense and the idea that people try to maximize their short profits in the short run, which is a typical assumption of most model in economics studies. But, rather than going into the details I'll show here how the model compares with historical data and how it can be considered, within limits, a predictive tool.

First, let me try to summarize the "core" of the results of the model. These results, of course, change depending on the initial assumptions, but there is a basic result that keeps returning. What you get for such parameters as production or capital accumulation, no matter how you arrange their elements, is a bell shaped curve; the one that Hubbert had already proposed in 1956

This curve may be skewed forward or not, it may be irregular, but that changes little on the fact that the downside slope is not as pleasant as the rising side for those who live it.

Now, there are many examples of the tendency of real world systems to follow the bell shape curve, but let me show you just one; a graph recently made by Jean Laherrere.



These are data for the world's oil production. As you can see, there are irregularities and oscillations. But note how, from 2004 to 2013, that is nine years, we have been following the curve: we move on a predictable path. This is a very simple model; its only assumption is that production will follow a bell shaped curve. And it does, of course within some limits. But note how already nine years ago we could have predicted reasonably well today's oil production.

Of course, there are other elements in this system. In the figure on the right, you can see also the appearance of the so-called "non-conventional" oil resources, which are following their own curve and which are keeping the production of combustible liquids (a concept slightly different from that of "crude oil) rather stable or slightly increasing. But, you see, the picture is clear and the predictive ability of these models is reasonably good. We just have to apply them with some care: political factors can change these curve a lot and if you seek for a bell shaped curve in Saudi Arabian production you won't find one. But that simply tells us something that we already know: the Saudi government controls production on the basis of political factors rather than on the basis of the search for immediate profits.

So, the model reveals a tendency. It shows what normally happens in a system where people try to exploit a non-renewable resources obtaining the maximum profit out of it. And there is a reason for this behavior. What people do, obviously, is to exploit first the "easy" resources. The less effort you make to extract and process a resource the higher the profit you can have from it. So, imagine that you find a lump of coal just lying on the ground. You pick it up, you take it home, you burn it. It cost you almost no energy to do that - that's more or less what people would do in the early times of the "coal revolution"; just picking up coal at the ground level. But then, of course, they ran out of this easy coal. They had to dig underground tunnels, and that involved a lot of work. Today, we have arrived to something like this:


This image is from the cover of the book, "Plundering the Planet" and it shows a gigantic wheel used to scrape coal out of the ground. It is somewhere in Germany. Now, think for a moment how much energy it takes to make that wheel. You have to mine iron ore, smelt it, transform it into steel, and finally cast it into that huge thing. And that's not all - it is a lot of energy that you need to operate that wheel, to carry the coal away from the mine, and so on. It is difficult to think that we could be so smart to find ways to extract coal without using this kind of equipment. Think of substituting that giant wheel with an I-Pad!

Here, we have a fundamental point. You are mining coal in order to get energy from coal. But you must spend energy in order to extract coal. So, there is a trade off. You can measure how good your deal is by taking the ratio of the energy obtained to the energy spent (EROI or EROEI). The higher this ratio, the happier you are. That holds for all energy producing minerals, oil, gas and the like, and you wouldn't be surprised to learn that this ratio tends to go down as you keep exploiting your resource. That is, as you deplete your resource, your yield goes down. It is shown in this figure (by David Murphy).

You see that the fraction of "net" energy, that is the energy you gain, goes down as you run out of the "good" resources. For EROEIs under about 20, the problem is significant and below about 10 it becomes serious. And, as you see, there are many energy resources that have this kind of low EROEI.

Now, the problem of diminishing yields exists also for minerals that are not extracted in order to produce energy. You still have to spend energy in order to extract all minerals and, as depletion sets in, you have to use more and more energy. That makes the resource more expensive. And there is no doubt that this process is ongoing. You need huge amounts of energy to mine the amount of mineral commodities that the industrial society needs. Let me just show to you an example:


That's the Morency copper mine in Australia and you can get some idea of the size of the operation if you note that the little white dots on the left are buildings. This is the typical size of modern mining - and the amount of energy that it takes is huge, too. It can be estimated that it is of the order of 10% of the total primary energy produced in the world.

At this point, I think you can understand the reasons of the "bell shaped" curve. Depletion is not an "all or nothing" phenomenon. It is a gradual evolution in which mining becomes more and more expensive; that means both in terms of energy needed and in terms of money. As your profit gradually wane, you are left with less and less resources to invest in further mining. So, you can't keep growing, you arrive to a peak and then decline. Of course, there are many more factors influencing the curve, prices, political interventions, technology, etcetera. But the core of the model, the decline of net energy, remains a powerful factor in shaping the production curves, which, in turn,  affect the economy and generate a global decline.

So, that's the model, where do we stand in terms of reality? Let me show you some global data.


  (from a paper by Krausmann et al, 2009 http://dx.doi.org/10.1016/j.ecolecon.2009.05.007)

These data go all the way to 2005; from then, these trends have been maintained although growth seems to be slowing down. But, if there has to be a peak, we are not there yet. Yet, we have clear evidence that the world's mineral industry is under heavy stress. We see that mainly from price trends. So, here are some data for some selected mineral commodities, metals which are important for the industry.  




(adapted from a graphic reported by Bertram et al., Resource Policy, 36(2011)315))


And here are some data for oil. Here you have data for both prices and production (from the blog "Early Warning" by Stuart Staniford.



And you see that, although we are able to manage a slightly growing production for crude oil, we can do so only at increasingly high prices. This is an effect of increasing energy investments in extracting difficult resources - energy costs money, after all.

Now, some data for food. Of course, food is not a mineral resource; although it partly is, because modern agriculture "mines" fertile soil. But the main point is that modern agricultural production needs energy that comes from oil, and also fertilizers and other items which are manufactured using fossil fuels. So, if the prices of food increase because of oil depletion and the general increase of the prices of all mineral commodities; as you can see below:



What you see here is a big problem because we all know that the food demand is highly anelastic - in plain words you need to eat or you die. Several recent events in the world, such as wars and revolutions in North Africa and Middle East have been related to these increases in food prices.

All that is rather worrisome already, but the real disaster is another one. Despite the fact that oil production is plateauing, we don't see any plateau in CO2 emissions. We are creating a climate disaster. As you seee from the most recent data, CO2 are still increasing in a nearly exponential manner

 

So, what I was saying at the beginning is taking place: the Limits to Growth scenario was not supposed to become a prophecy but, unfortunately, it is becoming one. Here are the latest calculations for the world's trajectory, made with an updated version of the program that was used for the 1972 "The Limits to Growth", also with updates in the historical data, of course. And, unfortunately, it seems that we are getting closer and closer to the start of an irreversible decline.



Let me note one thing about this figure. You see, the Club of Rome has often been accused to be presenting only problems, not solutions. But look at the figure above: you see what the problem is, but you also see what's the solution. Think about that: why will we have a collapse? It is because we grew too much. There is no escape on this fact: if you grow above the sustainability limit then you go into what is called "overshoot" - you go over your allowable environmental footprint. There is nothing you can do but to go back below the limit, but in overshooting the limit you consumed resources that can't be recreated except in a long time. So, you are condemned to decline, actually to a rapid decline; you may call that collapse, if you like - it is the same.

So, if overshoot is the problem, you immediately see what's the solution can be and what it can't be. Surely it cannot be inventing some clever gadget that produces more energy or allow you to go on without using so much. If you produce more energy from fossil fuels, then this extra energy will be used by someone else for some other purpose and everything remains the same - including the production of pollution. As long as we keep saying that growth is the solution of all economic ills, then there is nothing we can do to avoid going in overshoot. And at some moment we'll have to pay for the consequences. Growth is the problem; stopping growth is the solution; the only possible one. (it may not be enough, though!)

So, the first thing that we must aim for if we want to mitigate the problem is to slow down. Of course, that's not easy to do, because all our political discourse, today, is based on growth. But in the end, if we don't find a way to curb growth by our own action, then the system itself (or "Nature") will force us to slowdown and then decline. It will be the same thing; just a little faster and much more painful.


A last point, but by far not the least important. In the model, the decline of the industrial society is the result not of just depletion but of pollution as well. It is another element of the model; with the first study of 1972, the authors couldn't exactly pinpoint what was the main factor that generated this problem, but now we know that it is the emission of greenhouse gases, mainly CO2. And I don't have to tell you that climate change has an added negative twist in comparison to resource depletion, it is what we call "tipping point". With depletion, you can do nothing worse than running out of something. With climate change, you can trigger a series of feedbacks that grow out of control all by themselves. And the risk is to arrive to truly horrible amounts of damage, including the destruction of the Earth's ecosystem.

In the end, there is a basic point that I'd like to emphasize: climate change and resource depletion are not two separate problems. They are two sides of the same problem. Depletion will not save us from climate change, while climate change will not stop our plundering of the planet.



So, I think the main problem we have is a problem of communication. You see, in the 1970s the Club of Rome and the authors of "The Limits to Growth" were accused of having bad models for their predictions. That was not true, but they had made a basic mistake. They had though that their job was to state the problem and then someone, somehow, would have done something to solve it. It didn't work that way. Stating the problem simply led to the people who would have been most damaged by the solution to mount a campaign designed to discredit the Club of Rome and "The Limits to Growth" study.

That's what's happening today with the IPCC and their climate reports. The IPCC seem to think that their job is to present the problem and then someone will do something about it. That doesn't work. We saw it with the Club of Rome and we are seeing it now for the IPCC which is undergoing the same process of vilification and demonization that wash unleashed against the club in the 1980s.

So, I think it is not a question of lacking solutions for the twin problems of depletion and climate change. We have solutions, and we even have excellent solutions: both depletion and climate change are problems we create with our actions, if we revert our action we can at least enormously reduce the size of the problems. The point, of course, is how to do that and, at this stage, the priority is to find an agreement that certain things are to be done. I think it is not impossible and, in the end, you can be perfectly happy even without a big SUV, as my friend Ms. Ruja Jankovich is showing to us in this picture.



h/t ms. Ruza Jankovich - the car shown here is an old Fiat "500" that was produced in the 1960s and it would move people around without the need of SUVs

____________________________________________


Acknowledgement:

The Club of Rome team

Daphne Davies
Ian Johnson
Linda Schenk
Alexander Stefes
Jos├ęphine von Mitschke-Collande
Karl Wagner


And the coauthors of the book "Plundering the Planet"

Philippe Bihouix
Colin Campbell
Stefano Caporali
Partick Dery
Luis De Souza
Michael Dittmar
Ian Dunlop
Toufic El Asmar
Rolf Jakobi
Jutta Gutberlet
Rui Rosa
Iorg Schindler
Emilia Suomalainen
Marco Pagani
Karl Wagner
Werner Zittel





8 comments:

  1. If someone wants to read the original study of the Club of Rome, here is an interesting news: the complete text of the original "Limits to Growth" study is now accessible for free online, thanks to a partnership between the "Dartmouth College Library" and the "Donella Meadows Institute". Here the link:

    http://www.donellameadows.org/the-limits-to-growth-now-available-to-read-online/

    Bye!

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    1. This comment has been removed by the author.

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    2. Thanks a for the pointer !
      And thanks a lot to Ugo for the great synthesis (reading it right now))

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  2. nice post meh, It reminds me of an equally interesting blog on my reading list which is Daniel's Dating And Personal Development Blog .
    keep up the good work meh and also, please visit my blog and drop a comment even if it's a simple "nice post" reply.

    Regards

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    1. What does this have to do with the subject, for frack's sake???

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  3. Thanks Ugo. I read the 'The Limits to Growth: The 30 Year Update' several years ago. It is a very good book, but after reading 2/3rds I was completely depressed. It is not holiday reading material!

    It stirred such deep feelings of worry, anger, fear, helplessness and sadness, that it took me a long while to find a way forward from there, but I could not deny the logic or doubt it is true. I am an emotional soul, and my mind wandered through all the scenarios for people I know and strangers around the World. It felt bleak.

    I used to work as an engineer in a factory that practiced 'Lean Manufacturing'. I observed that you can cut costs and improve efficiency by reducing wastes, using cheaper materials, cutting staff levels, running longer hours and all number of efficiency techniques. But there comes a point where 'Lean Manufacturing' becomes 'Skeleton Manufacturing' and if you try to take anymore savings out of the process it collapses.

    I feel that in the West we are using and wasting far more resources than we need to and there is plenty of room to become far leaner. However there are people around the World whose lives are far more precarious and small increases in the cost of food or oil can tip the balance into instability. These people are already living on a skeleton basis and we need to find a way to make sure they are not the ones to be hit by reductions in resources. We cannot justify living such bloated lives, whilst others have so little.

    Imagine a 50% cut in personal resources such as money, energy and fuel. It may spell an end to holidays, driving, TV, large homes, electric toothbrushes, Christmas lights, new shoes, meals out and all number of 'luxuries', but if we focused our efforts and resources on the important areas of food, water, heat and health care we could carry on living 'comfortably'. So we adjust and then make another 50% cut and find that we can still live like that. Until you reach 'Skeleton' point, where there are no reserves of fat to see you through even a minor shortage. That is our challenge in navigating the decline.

    You are right that it is about communication now. We need to build up the story of what our communities need to look like to stay alive and change our expectations.

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  4. Great post, Ugo.

    I wonder if some of the complacency about having to live within our means and resources isn't due to the fact that most people, even in the wealthy economies, have felt poor for at least a decade now. They see the 1% and the style of living that goes with it, put up with being squeezed into a low-cost airline seat for a budget-busting holiday at an over-crowded beach, and think that they are already living modestly and sustainably. Therefore cutting back is for others.

    Regards, Sam Carmalt

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)