sustainability the end of growth -...

Jim Pushnik: I'd like to welcome you to the Rollins Distinguished Environmental lecture. I am Jim Pushnik, I'm the director of the Institute for Sustainable Development and a Rollins endowed professor of environmental literacy. This lecture series has, for the last 10 years, brought outstanding scholars and experts on environmental issues to our campus and our community with the sole goal of public education, trying to give you the access to the individuals that are making a difference in our world. Tonight we're going to hear from Richard Heinberg. I would like to draw your attention to another opportunity that's coming up. I know that all of you partied very hard with the planet on Sunday, and you probably missed the PBS special on Earth: the Operator's Manual. We have gotten special permission from PBS to show this free of charge at the Card Center, the first two episodes on Monday, April 30, and the the final episode followed with a community discussion about our way forward on May 17.

Let me just describe the idea of the environmental lectures. These are, in the truest sense, a public education. They're brought to you by the endowment of a gentleman named Jack Rollins. Jack's vision was, that for people to make reasonable decisions about the future, they needed to have the best information they have possible to obtain. So for the last 10 years, like I said, we have brought eminent scholars to foster this conversation. We're going to continue in that tradition tonight. Richard Heinberg is recognized as one of the world's leading authorities on communicating about the need to rapidly transition away from our dependency on fossil fuels.

1

Sustainability The End of Growth

He's known as an educator on peak oil. Richard is also a senior fellow at the Post Carbon Institute, which is a non‐profit organization that provides the tools and resources necessary for communities, businesses and governments to envision and move towards resilient communities and re‐localized economies that are within the bounds of ecological processes and systems.

As I was trying to prepare for introducing Richard tonight, I was sitting in my office, I won't say dozing off, but staring off, and 6 books of his jumped off the bookshelf at me. I first became familiar with Richard's work, with The Party's Over: Oil, War and The Fate of Industrialized Societies. That was in about 2003. Subsequent books, Power Down: Options and Actions for a Post‐Carbon World, followed by The Oil Depletion Protocol: A Plan to Avert Oil Wars, Terrorism and Collapses in Economy. The book that really grabbed my attention was Peak Everything: Waking Up to a Century of Decline. The final book, not the final, in between there was Blackout: Coal, Climate and The Last Energy Crisis. Tonight he will be speaking on The End of Growth: Adapting to New Economic Realities. Please join me in welcoming Richard Heinberg.

[ Applause ]

Richard Heinberg: Thank you so much, Jim. My little microphone here has become detached. So let's hope it stays attached. Stay. OK. Wow, nice turnout. It's a delight to be with you this evening, in this beautiful university, in this beautiful town, on a

2


beautiful day. And I'm sorry to have to bring you some less than beautiful news. But my talk tonight is going to be about our economy and its prospects. And I have to tell you the news is not good. But what I hope to do is to provide you with some context so that you understand why the economy is doing what it's doing, and where it's likely headed. And what we can do to adapt ourselves to this new reality and also help to change that reality in ways that are possible so as to support not only ourselves but our communities.

3


OK, here we go. Yeah, as Jim said, my most recent book is called The End of Growth. And of course the growth that I'm talking about in the title there is economic growth as measured by GDP, gross domestic product, which itself, well, it's a number that represents the total amount of money spent in a national economy. It's a little more complicated than that, but not much. And that, in turn, is a pretty good marker for consumption.

4


And as you can see, GDP growth is a pretty recent phenomenon. We like to think that it's something that's normal and natural, and all economies just do this as if by magic, but in fact it's something that's only been happening over the last few decades or maybe couple of centuries. If you go back a couple of thousand years, even though empires were rising and falling, it doesn't really show up very much on this graph. And of course the last 2 centuries are unusual in other ways. Population growth, there were only fewer than a billion of us humans at the beginning of the Industrial Revolution 200 years ago, and we just passed the 7 billion mark just recently. So that's an extraordinary rate of population growth. Again, just within these last couple of hundred years.

5


Now, not coincidentally there's something else that's been happening over these past few decades, and that's growth in energy consumption. And I'm going to argue that this was a determining factor, that having lots of cheap energy enabled us to grow the economy and also enabled us to grow our population. Now if you look at the chart, I don't know if you can see it all the way at the back, most of the growth has been in these bottom 3 categories here: coal, oil and natural gas. We're using about as much renewable energy in the economy today as we were at the beginning of the industrial period. So there hasn't been much growth there. Most of the growth has been in our use of fossil fuels. Well, what's that about?

6


These are sources of energy, obviously, and we've always used energy for various things. Energy is actually essential to life. Often economists think of energy as just being a part of the economy. You know, we spend, what, maybe 10% of GDP on energy, so energy is 10% of the economy. But really if you think about it, the economy is all about energy. Without energy, nothing happens, by definition. So if we want to increase economic activity, if we want to do more stuff, we've got to have more energy to do it with. And we have had more energy over the past few decades. We had been using solar energy as gathered through green plants and in the form of firewood, food, agriculture for hundreds and thousands of years. And sunlight is an almost limitless source of energy by human standards. But the amount of it that we are able to actually gather and use in the form of firewood and agricultural produce and so on, is limited. And so the size of our economies was limited until recently.

7


With fossil fuels, we gained access to sources of energy that had been created by nature over the course of tens of millions of years. Again, solar energy, but captured by aquatic plants, mostly, tens of millions of years ago and slowly concentrated and cooked so that these fuels became highly energy‐dense. And, in the case of oil, highly portable energy sources that were ideal for the kind of economic activity that we were preparing ourselves for in other respects. We knew about fossil fuels prior to the Industrial Revolution, but it did require a few invention: you know, gears, and a simple heat engine, metallurgy, and so on. Once we had those things in place and we found practical ways of mining coal and pumping oil out of the ground, then it seemed as though the sky was the limit.

8


If you want to just get a kind of practical gauge of what this did for us, think about the last time you ran out of a gas in a car and had to push your car off to the side of the road. That's kind of hard work, pushing, let's say, 2 or 3 pounds of metal even 10 feet. Well, think about pushing your car 20 or 30 miles. How much work would that be? Well, it would be something on the order of 6 to 8 weeks of hard labor. We get that done for us. We get our car pushed 20 or 30 miles with a single gallon of gasoline for which we're paying $4 and change, and complaining. But think about that, 6 or 8 weeks of hard labor the energy equivalent for $4.50 or whatever it is here. What a bargain. And so of course, we've used fossil fuels to power every process of production and transport that we possibly could to mechanize our entire society over the past couple of hundred years.

9


And that gave us an enormous economic payoff in the form of economic growth. Now the first warning that economic growth might be something that couldn't go on forever came back in the early 1970s. This book, Limits to Growth, was published in 1972. I was 21 years old when this book came out. It has become the best‐selling environmental book of all time. And it was a big deal back in 1972. It changed my life. When I read this book, I realized for the first time that society was on a fundamentally unsustainable course. It's kind of the same experience, I think, that a lot of young people are having today when they first learn about climate change. So I would have to say my entire adult life has been shaped by this book. So what was Limits to Growth?

10


Well, it was an early effort to use computers to model the interaction between population growth, resource depletion and pollution from industrial processes. It wasn't an effort to forecast the future. It was a scenario study. The authors of the report were using the computer to generate various scenarios. And they were tweaking the input data to see what kinds of scenarios they could come up with. The standard run scenario in which the input data reflected the best knowledge at that time of resource abundance and so on, the standard run scenario tended to show a peak and decline in world industrial output sometime in the first half of the 21st century. Now this of course was an unwelcome result, so the authors of the study tweaked the input data in various ways. They doubled Earth's resources, economically useful resources, they programmed in government policies to reduce population growth, or to reduce pollution. And by doing these things they were able to push the industrial peak and decline out by 2 or 3 decades. But the same fundamental bell curve kept coming up again and again, no matter how they tweaked the input data. Now of course this book was derided by many economists at the time who believed, and many still do, that economic growth is not constrained by natural resources or pollution or anything else. That it can and will go on forever. However, recent efforts to compare the Limits to Growth scenarios with real world data have shown that the standard run scenario, in fact the most pessimistic of the scenarios, is the one that's actually closest to how things are turning out.

11


So here we are 40 years on, exactly 40 years from 1972 when Limits to Growth was first published. And it would appear that growth, world economic growth, is in fact slowing down. And it is due to limits in resources, particularly energy resources, and to environmental damage from industrial processes. But it appears that there are other factors that weren't studied in the Limits to Growth report that are having at least as big a role in this growth slowdown that we're seeing. And debt, I would suggest, is one of those primary factors. So, over the next few minutes, I want to survey each of these 3 elements in some detail, starting with debt.

12


Now, we hear a lot about the problem of government debt both in this country and also with the European nations, particularly Greece and Spain, Ireland and so on. So what's going on here? Why is debt such a problem, and how have we gotten into a problem with debt? Well, I would suggest it goes back to the early days of the Industrial Revolution. At that time, we had a problem called over‐production. Using powered assembly lines, it was possible for us to make stuff, industrially produced goods, faster than people would tend to buy them.

13


So we solved that in 2 ways. First strategy was advertising. And this is an industry really of the 20th century. Prior to the 20th century, advertising, if it existed, was a pretty inconsequential affair. But over the course of the 20th century, advertising becomes huge as it is part of all of our lives today. This is an ad for a 1910 Studebaker, which cost $900 at the time. It doesn't seem like much now to pay for a new car, but in 1910, $900 was a lot of money. So people had to be talked into wanting these things. Advertising was a way of pushing consumption forward in time, right?

14


But there was another way of doing that which was consumer credit, also a creature of the 20th century. It's not as though debt didn't exist prior to the 20th century, it certainly did. And there is a long history. If you're interested in it, I would recommend David Graeber'sbook, Debt: The First 5,000 Years. He's a marvelous anthropologist and tells the story in about 500 pages, and it's a fascinating story. But in the 20th century, debt becomes again a much bigger deal. A much bigger part of people's daily lives. Remember the 1910 Studebaker that cost $900? Well, in addition to talking people into wanting these things, it was also necessary to make it possible for people to afford to buy something as expensive as a new car. Because most people were accustomed to paying for things with cash, and not many people had $900 in cash. So if you could pay for it on time, then that would again push consumption forward. Consume now, pay later, right? Very effective over the course of the 20th century.

15


There was also something else that happened during this time, which was a change in our money system. Prior to the mid‐20th century, most money was either gold and silver or pieces of paper that could be exchanged for gold or silver. There were exceptions throughout history, but for most of recent history, the last few hundred years; money was associated with precious metals in one way or another. Over the course of the 20th century, that association was severed. Why? Well, there was only so much gold and silver around. Yes, you know, mining companies were producing gradually a bit more here and there, but the rate of production was pretty constrained. Whereas the potential for the economy to grow with all of these cheap fossil fuels ‐‐ coal, oil, and natural gas coming on line ‐‐ was enormous. So by severing that link between precious metals and money, it was possible to increase the money supply to facilitate much more rapid economic growth than would otherwise had been able to occur. So if money isn't gold and silver, what is it? Well, money is debt in the modern world. That is a very simple and absolute equation. And not many people even think of it that way really. Money is debt. And debt is money.

If you go into the bank and take out a loan for $10,000, where does that $10,000 come from? Does it come from the banker going into the vault and searching around in the cobwebs to find $10,000 that somebody else deposited there? No, the banker goes to her or his computer and makes a few keystroke entries, and suddenly you have $10,000 in your account. Where did it come from? It was created at the moment that your loan was approved. It's magic. And then when you pay back that $10,000 loan, the money ceases to exist. It's very convenient. There is a problem with

16


that, and that is that the interest that you're going to have to pay on that loan was not created at the moment that that $10,000 was created.

So where is the interest going to come from? Well, it's going to come from you doing business with other people in the economy who are also taking out loans, you're selling them stuff or working for them. And as long as the total amount of debt is constantly increasing so that the total amount of money is constantly increasing, theoretically everybody will be able to pay back their loans with interest, and the whole thing will work. So we now have a monetary system that is based on the assumption of perpetual growth. The problem is, if the economy stops growing at any particular time, then people start having trouble making their loan payments. And then money starts disappearing from the system. If you default upon a loan, then the bank has to write that off, and effectively that money has disappeared, OK?

17


So we reached a turning point in this process, back in the 1980s, which was associated with globalization. What happened in the 70s and 80s? Well, a few innovations ‐‐ container ships, satellite communications, computer monitoring of inventories ‐‐ all of these things made it possible for companies to outsource production to other parts of the world. So that meant that American factory workers were now suddenly competing with factory workers on the other side of the planet. So while American factory workers' wages had been increasing steadily throughout the 20th century, they reached a plateau in the early 1970s. And actually, hourly wages for American workers have not increased, if adjusted for inflation, since about 1973.

So here's a problem. If wages aren't increasing, but we need people to be buying more and more stuff in order to keep the economy growing so that it doesn't implode on itself, how do we accomplish that? Well, with more debt. So in every year since 1980, the total amount of consumer debt has grown faster that GDP has grown. Consumer debt has grown faster than GDP. So debt is growing faster than the overall economy. That means that the financial industry ‐‐ the banks, the investment banks, the investment services companies and so on ‐‐ that sector of the economy has been growing faster than manufacturing or entertainment, or you name it. It's been the fastest growing sector of the economy. Therefore, the people at the head of that part of the economy ‐‐ we can call them the bankers, if you will ‐‐ have gained more and more social prominence as a result. How so? Well, as the financial sector has grown

18


grown relative to other sectors, the heads of the financial industry have used some of the money flowing into and through their companies to influence Congress and legislation through the standard means of contributing to political campaigns. And so Congress, over the course of the last 20 years, has changed a lot of financial regulations, has de‐regulated the financial industry in ways that the financial industry lobbied for. OK? So, a lot has changed since the 1980s.

19


This is sort of what it looks like. This is household debt, and then corporate debt and so on. The lighter blue at the top is government debt. And as you can see, up until 2008, it was really household debt that was growing fastest. Government debt wasn't really growing any faster than any other sector of the economy. Now that changes in 2008. Why? Well, in 2008 we have the near death experience of the economy itself, of the financial industry, and therefore of the rest of the economy. And the US Treasury, and the US Federal Reserve, the central bank, step in as the borrower and lender and spender of last resort, in order to keep the economy from imploding. Now it's possible, I think, to criticize how this was done, and I would certainly do that. But if something like this hadn't been done, if government hadn't stepped in as the borrower of last resort, most likely we would have seen an almost complete destruction of the economy at that time.

20


As one of my favorite quotes from that era says, if we don't loosen up some money, this sucker could go down. Of course, what the sucker he's talking about was the US economy. And that's what they did.

So what I'm suggesting is that we have reached fundamental limits to debt. How so? Well, if you're constantly increasing debt relative to the rest of the economy, what does that mean? Well, as an individual, whether you're a student or a householder or whatever, how much debt can you take on? How big a payment can you make at the end of the month? How much interest can you pay on your credit card before you get to a point where you just can't make those payments and the bank doesn't want to loan you anymore money? There are limits to how much we can grow debt, relative to the rest of the economy, and we kind of reached those limits in the late 2000s. The housing bubble was part of that, and it certainly fed the last days of the party. But when the party was over, it wasn't just because of the bursting of the housing bubble. It was because we were all loaned up and just had nowhere else to go.

21


But that's not all that's going on. Now when most analysts look at the economic situation today, they sort of stop at where we are right now. But I want to suggest there are other factors at work, deeper factors, and ultimately more important factors. And one of them is energy. And of course we'll talk also about the environment. But again, energy is really what makes the human world go round.

And particularly oil. Oil has become our most important energy source because it fuels virtually all transportation, and if you think about it, trade depends upon transportation.

22


So if oil becomes more expensive or if there isn't enough oil, it really affects just about everything. Well, the oil story is also a very American story. This is where the oil industry started, back in the mid‐19th century. More oil wells have been drilled in the US than in the rest of the world put together. So what is the oil story for the US? Well, the vertical green bars you see there represent discoveries of oil. The rate of discovery of oil in the US peaked in the early 1930s and has generally been declining since then. That's not to say that we're not discovering oil these days, it's not to say that there's no oil left to discover, there certainly is. But when you look at what we're finding now ‐‐ the quality of the oil, the difficulty of extracting it ‐‐ there's no comparison with what was going on back in those days. So discoveries of oil peak in 1930 and actual production of oil, or extraction is a better word for it, peaks in 1970.

23


Now, on a global basis we're seeing something similar play out. Other countries that used to be oil producers and oil exporters are now turning into oil importers. It's hard for us to understand today when we see the US as being by far the world's foremost oil importing nation. It's hard for us to picture the situation in the early 20th century when the US was by far the world's foremost oil exporting nation. We became the wealthy, powerful nation that we are very largely because we had an immensity of these valuable resources. Well now the same thing that happened to our country in between 1930 and 1970 is happening, for example, to Great Britain. Found huge supplies of oil in the North Sea in the 1970s, and extracted and sold that oil. Great Britain became an oil exporter during the 1980s and 90s, and sold that oil on the world market for $10 a barrel, mostly. Now Great Britain is an oil importer, and has to pay $118 a barrel to import oil. Indonesia, one of the founding members of OPEC, now is a net oil importer. We could go on and on. Most countries that produce oil these days are past their production peak and are seeing declining rates of production. For the world as a whole, the discoveries peaked around 1964. Again, it's not as though we're not finding anymore sources of oil, we are. But it's not like what we were finding back in those days.

24


Actual world crude oil production, regular crude oil, has been on a plateau since 2005. So are we at global peak oil? The evidence would suggest probably we are. When will world production start to decline? Could be anytime within the next 2 to 5 years, most likely. The situation is changing.

25


You know, this is what the oil industry looked like back in the 30s,

26


and this is what it looks like today. You know, we're using technology to extract resources that were just out of the picture even a few decades ago. And part of the reason that we do extract these resources and can extract them is not just the technology, it's the price. Oil has gotten expensive enough so that it's worthwhile to spend a half a billion to drill one exploratory well in deep water, which is in many cases what it costs now. And the US is actually seeing increasing oil production right now. There have been some stories in the New York Times, Wall Street Journal, and elsewhere suggesting that the US could become independent in oil sometime in the next few years.

27


Actually that's extremely unlikely because the sources of this new oil, which you see this little bump here, that's the most likely scenario in terms of future US oil production. A subsidiary peak sometime around 2020, not nearly at the same level as we achieved in 1970, but nevertheless more oil than we're producing today, and then back to a slow decline. So we have a bit of a reprieve in this country. And elsewhere around the world, as some of these very expensive new technologies are deployed, we may see momentary recoveries elsewhere as well. But we shouldn't let this fool us into thinking that we're somehow in this new era of abundant resources. Again, the only reason that we're seeing this uptick in production is because prices are set at such an extraordinary level that it pays to go after the last drop in the bottom of the barrel.

28


Drilling costs are much, much higher these days. Yes, it's true the oil companies are making money hand over fist. But again, that's because of the high oil prices. Their costs for exploration and production are actually much higher than they were even a few years ago.

29


The situation with natural gas is also instructive. Natural gas was getting pretty expensive in this country a little less than a decade ago, because regular, conventional natural gas was getting harder to find. Production had peaked and was declining. And as the price went up, it made it worthwhile for companies that were specializing in new technology like horizontal drilling and hydro fracturing of low porosity reservoirs, mostly shale rocks, it made it worthwhile for those companies to go after natural gas in reservoirs that geologists had known about for a long time, but considered to be too costly to address. So as a result of really heroic rates of drilling back in 2006‐2007, we now have a glut of natural gas in this country. And the price of natural gas has plummeted to below where it was a decade ago. Which is really quite extraordinary. Now the industry is suggesting that we have, as a result of this, 100 years of cheap, abundant natural gas. Not true. If you look at the costs of deploying the new technology, the high decline rates per well, a new natural gas well, say in Marcellus or any of these shale regions, typically declines in production by 60% over the course of the first year, in many cases even faster. The increased environmental risks, the fact that only the really sweet spots in these huge regions where they're drilling are likely to be productive, and the situation looks very different.

We did a report on this at Post Carbon Institute, it's available on our website as a free PDF download. And our team was led by David Hughes who's retired senior geologist for the Canadian Geological Survey. And his conclusion is that this temporary glut of fracking gas is really just masking the accelerating decline in production of

30


conventional natural gas in North America. And the companies that specialize in the fracking gas are operating primarily on the basis of investment capital, because natural gas prices have fallen now so low, none of these companies are making money on production. So they're selling off assets, and they're subsisting on investment capital. We're going to see a shakeout in the industry. It's almost the definition of a bubble. And so within the next couple of years we will see both decreased production of natural gas and higher natural gas prices. How all of this will play out in the longer term over the next 20 or 30 years, it's hard to say, but please don't believe the hype that natural gas is now a permanently abundant and cheap resource in North America. It's not.

31


How about coal? Well, the US is the Saudi Arabia of coal, right? We have 250 years worth. Well, not so fast. The situation is more complicated there as well. I wrote a book on this subject a couple of years back called Blackout, looking at global coal reserves and recent studies of world coal supplies, and most of the recent studies are actually pretty pessimistic. Why so? Well, geologists have gotten much better at taking into account what they call restrictions. There is an immense amount of coal in the ground. There's no question about that. But how much of it can we actually get out of the ground? Well, it depends. It depends on factors like the depth of the coal, the thickness of the coal seams, the quality of the coal. Does it have a lot of impurities in it? The vast majority of the world's coal will never be mined. And that's true in this country as well.

32


So some energy analysts who have taken into account these kinds of factors are looking at US coal production and forecasting a peak of production for sometime around 2025. I would say probably give or take 10 years. So coal is an abundant resource, but it's not an unlimited resource. Even in this country.

33


And globally, the situation of course is that China is using an immense amount of coal. The US uses about 900 million tons of coal per year, a little less than a billion tons. China this year, in 2012, will use 4 billion tons of coal, over 4 times as much as the US. And China's reserves of coal are much smaller than US coal reserves. So this means that China is now starting to import coal from other countries. That means, in turn, that the price of coal is inevitably going to increase over the years ahead, even in countries that are self‐sufficient in coal, like the United States. Why? Because now the United States is talking about exporting coal to China. So if you're Massey Coal Company, for example, and you can sell your coal to China for a higher price than you can sell it to the local power utility, who are you going to want to sell it to? So again, that's going to drive up coal prices around the world.

So energy prices with the temporary expectation of natural gas, are trending upward. And this is having an impact on the economy. Remember, the economy is all about energy. We see this particularly in relation to oil. Because the industry needs high oil prices now to justify going out and looking for oil to produce with hydro‐fracturing, and horizontal drilling, or to look for oil under a mile or two of ocean water. Because the industry needs that high price, that's pushing, tending to push oil prices into record territory. World oil price has been over $100 a barrel now for, I think, close to a year. I'm not sure how many months now, but I believe it's close to a year. That's the first time that's ever happened. And we know from recent economic history that every time the oil price goes into record territory, we see a cost to the economy as a whole.

34


The vertical gray bars are recessions, historic recessions going back to 1970. And of course the red line is inflation‐adjusted oil prices. Every time we've had an oil price spike, we've had a recession immediately following. Of course, in 2008 we had the mother of all oil price spikes. It was up to almost $150 a barrel in July 2008. And almost immediately then, the US and the global economy went into a tailspin. Now again, this was not all that was going on. There was the housing bubble, There was the debt bubble. But energy prices are often the trigger that release tectonic pressures building in other areas of the economy.

35


High oil prices also impact just about everything else because transportation is so important because oil is such an important feedstock for so many things. Food prices are right at the top of the list. Food prices and oil prices have begun moving almost in lock step. Of course we use oil to power tractors to make many of the inputs for agriculture, pesticides and herbicides, so of course when oil prices go up, it makes food prices to go up.

36


And then when food prices go up, that impacts social stability, particularly in places where people spend a large fraction of their income on food. If you're spending 5% of your income on food, and the price of food doubles, that's an annoyance. If you're spending 50% of your income on food and the price of food doubles, it's a survival question. And that was the case in many places in North Africa and the Middle East. Egypt, importing 80% of its food. When food prices doubled, people in Egypt went out in the streets to protest.

37


OK, so energy is a big factor now in bringing global economic growth to a close. But there's a third, and I won't take as long with this one.

38


The results of our expanding industrial processes are feeding back upon the economy increasingly, by means of weird weather if nothing else, I know we can't talk about climate change in this country, because one of our two political parties has decided it's a big fraud. So I won't, I'll just mention the weird weather. And if you don't take my word for it, go talk to an insurance executive. Because they're studying this weird weather very closely because as it gets weirder.

39


And they are making their projections into the future, they're seeing that their business model doesn't work for more than another few years.

40


It's not only the weird weather. It's also industrial accidents. As we go further and further afield to produce lower and lower quality fossil fuels, accidents are more likely . And when they happen, they cost more to clean up. And even the normal process of doing business as you're producing lower and lower quality resources like the tar sands of Canada, even normal daily business is more environmentally ruinous. So that also costs. Now in, this of course is the Deep Water Horizon catastrophe in 2010, 2 years ago. In 2010, the total costs for weird weather and industrial accidents to the insurance industry was about $250 billion. Last year, 2011, we passed the $250 billion mark by June. What's it going to be this year? I have no idea. But for the last several years we've been on this kind of exponential curve of increasing costs from environmental disasters. And again, this is not at the point where currently the cost is high enough to choke off economic growth. But the trajectory is such that it won't be long before, in fact, it will be at that level.

41


So we have 3 factors converging here: debt, energy ‐‐ limits to world energy and in the US ‐‐and also increasing costs from environmental disasters. All of them converging on the single economic paradigm that we have decided is most essential to modern life, growth. The economy's been growing, it's been growing rapidly, it's still growing very fast in China. And we see this as being a good thing. As long as we have more economic growth, there are more jobs. There are higher returns on investment. So we want that train to go faster all the time. We want it to increase its speed. We want the size of the world economy to grow. But think about it, how many things in nature grow forever? None. Cancer grows up to a point, but then the host dies, right? Think about a baby hamster. Grows very rapidly. A newborn hamster is doubling its body weight every week for the first few weeks of its life. How big a hamster would we have if it could continue doubling its body weight every week for 1 whole year, 52 doublings? Big hamster, right? 50 pounds, 100 pounds, 500 pounds? We'd have a 9 billion ton hamster on our hands. Has never happened, never will happen. As I say, nothing grows forever in a finite environment, which is what we have here on planet Earth. And yet we have set ourselves up to expect and to need perpetual economic growth.

42


The evidence, I would suggest, is that we are reaching the end of this magical period that we lived through during the late 19th and early 20th centuries of rapid economic growth. It's not exactly like hitting a wall. We're not going to be able to say, OK, September 1, 2012 is when world economic growth came to an end. I think the events of 2008 were signal events. And we've been in a kind of different period since then. And I think there are other events on their way. Perhaps having to do with the European debt crisis that could signal further steps in this same direction. But if we were historians a hundred years from now looking back at where we are today, I think we would characterize this period as the time when economic growth came to an end.

43


So, what's going to happen with the European debt crisis? I don't know. But it's not looking good. It's being characterized as a growth crisis. You know, the debts that were run up by countries like Spain and Italy and Ireland, and of course Greece, were debts that they believed could be paid as long as the economy continued to grow at very high rates. Now that their economies are not growing, they're in a debt trap.

44


And the medicine that's being called for to cure this debt crisis is austerity. What is austerity? Well, it's just cutbacks in spending and services that lead to scarcity and poverty. And even slower growth or a reversal of growth. That's what we're seeing in Greece and Ireland. And austerity is coming to a town near you, believe me. It's what all of our political class are calling for at this point. Cutbacks in spending. There are no other solutions being considered seriously for our economic problems.

45


Austerity is going to mean more social upheaval, almost inevitably, whether the Occupy Movement comes back this year in anything like the same form it took last year.

46


Whether it does so or not, we are in for more social instability as a result of extreme economic inequality in the context of a shrinking economy. You know, while the economy was growing, economic inequality could be overlooked. Look at the situation in China today, a very rapidly growing economy, up to 10% per year. And rapidly increasing economic inequality. Why are people willing to live with that level of inequality? Because of the promise that sooner or later everyone will be made better off by a growing economy. The Chinese even now have the saying, to be rich is glorious. Anybody saying that back in the days of Chairman Mao would have been, you know, dealt with summarily. But now the Chinese see economic growth as their only strategy for diverting increasing political and social instability. As long as there's the promise that everyone can be gloriously rich, then people are willing to put up with these levels of economic inequality. As soon as it's clear that the economy can't grow fast enough to enable that to happen, then we will see problems, one way or the other. So what's the answer to all of this?

47


Well, I don't think that we can solve the problem the way most politicians would suggest, which is just to find a way to squeeze out more economic growth, more jobs, more returns on investments. By doing what? By cutting government spending? Is that really going to make the economy grow? Come on. No, we're going to have to get used to a different kind of economy. I'm asked all the time by interviewers and people, well, what would a non‐growing economy look like? I mean, we've never had such a thing in human history, right? Well, yes. We've only had a growing economy for the past few decades. A non‐growing economy is what's normal. It's what we had throughout human history right up until the Industrial Revolution. So going back to a non‐growing economy, it's not necessarily falling off the edge of the world. It's just going back to a different kind of economy. And that's going to have a lot of implications. It's going to have implications for our monetary system, for our financial system, for our whole industrial system. In the process of making these necessary changes, we have a few shocks on the way. They're baked into the cake at this point. And whether they come from Athens or Wall Street, these shocks are going to be pretty profound, and we will be feeling them over the next few months and few years. And we'll feel them right here on Main Street wherever that is. It will be a locally felt perturbation.

48


So the question is going to be, how do we keep normal life going as much as possible in the context of these kinds of shocks? Well, we have to build local economic resilience.

49


50


The problem with globalization, globalization has made enormous profits for a lot of companies, and it's given us cheap products that we can buy at Wal‐Mart. But there is a cost to globalization, and that is that it's a trade‐off with resilience.

Globalization gives us what economists call economic efficiency. An example would be if you can grow corn more cheaply and effectively in Iowa than anywhere else, then you should grow all of your corn in Iowa, and grow nothing in Iowa except corn. Right, that's economic efficiency. But it reduces the resilience of your food system because if the Iowa corn crop fails, then nobody has corn, and Iowa has no economy.

51


A resilient economy is often one that's at least partially at odds with economic efficiency, because it has redundancy in its critical systems and dispersed system control points. It's less centralized. And there are more inventories. You know, what we've done over the past 2 or 3 decades is try to reduce inventories to an absoluteminimum, just in time delivery of parts and so on. Again, all of this is in the name of economic efficiency. But it means that we have a less and less resilient system. And so our local economies have been drained of resiliency as well. Instead of having lots of mom and pop stores, instead of having local shoemakers who can repair shoes and make shoes, instead of having local electronics shops that can fix your TV when it goes bad, now we all just buy a new one at Wal‐Mart, right?

52


We're going to have to think about making our food systems more local and resilient. That means more people growing food. We did this back in the 1930s and 40s. In fact, every time we've had a depression or a war, we've seen more people growing food in their backyards. Sometimes it was organized as in World Wars I and II with the victory gardens, and sometimes it's just a spontaneous movement as happened during the 1970s with lots of people just deciding they wanted to garden. It's been happening since 2008 too, but it needs to happen on an even larger level so that we have more dispersed production of food throughout society, less centralization of our food systems. So if we have a problem with transportation, it doesn't imperil the most important system of all which is the food system.

53


We're also going to have to reform economics itself. You know, economics as a discipline, I'm not an economist, by the way. And so what I'm saying may seem to be coming out of left field. But I would suggest that economics as a discipline has grown up during an anomalous period of history when we had cheap energy and abundant economic growth. And I think economists internalized those things and came to think that growth was normal and natural, it could go on forever, and it wasn't because of energy, it was because of the magic of markets. They also came to believe that the environment is just a subset of the economy. It's just a pile of resources that we extract to turn into products which then become waste. It's a linear process. Whereas in fact, the human economy is a subset of the environment, always has been and always will be. If we don't have living healthy ecosystems, then our economy can't survive over the long term.

54


We have to understand that growth, not only in consumption but also in population, can't go on forever. It's fundamentally unsustainable. You can grow these things for a while as we've done, but it's like the 9 billion ton hamster. You reach fundamental limits.

55


Renewable resources have to be harvested at less than the rate of natural replenishment. Duh. A principle like that is you think pretty obvious. The average 10 year old could grasp this. But it's surprising how we leave a principle like that out of economics as it's normally taught.

56


Or the fact that non‐renewable resources have to be recycled, and where they can't be recycled, their use just has to decline.

57


OK. Those are very simple principles, absolutely necessary to the reformation of economics as we think of it and as it's taught. Now the question is, can we follow those simple rules and still make these things? I don't know. But that's a question that we need to be asking ourselves. How do we make them now with virtual slave labor on the other side of the planet, and we make them out of depleting, non‐renewable resources? How long can we continue doing that? I don't know. Maybe another 10 or 20 years, but certainly not forever. So we should be making other plans. Can we make these things with local labor, using local, renewable resources? I have no idea. Maybe it's impossible. But if it is impossible, then we should start figuring out how to live without them.

You know, as we make these fundamental changes in society, it's going to be scary, because we're going someplace unfamiliar. But I think as we contemplate these kinds of shifts, we should also keep in mind the goals that will make most sense in keeping society, the ties that bind society together, to keep those ties healthy. We need goals that are achievable. The goal of perpetual economic growth is not achievable. Does that mean that we can't improve human life anymore? No. Human life is not just about consumption. It's also about relationships, it's also about having an environment that is healthy. So there are lots of things, you know, we may be living through peak oil, but we're not living through peak cooperation, peak happiness and all the rest.

58


In fact, psychologists who study happiness have come to the conclusion that yes, up to a point, there's a correlation between consumption and happiness. If you don't have enough energy to heat your home at night or in the winter or to cook your food, you're not going to be happy. But once basic needs are met, there isn't a very good correlation between happiness and consumption. So we can increase our happiness without increasing our consumption, and that's what we should be trying to do. I was just, a couple of weeks ago, at the United Nations at a wonderful meeting convened by the nation of Bhutan, which has been experimenting with gross national happiness as an alternative to GDP for the last 40 years. And they're having some interesting success. I mean, Bhutan has a pretty low GDP but some of the happiest people in the world. So what are they doing right? And can we do some of that here? There are lots of ways of solving the kinds of problems that are going to be coming our way. And in many cases, they have more to do with changes in expectation and behavior than with technology per se.

59


Here's a company that uses cell phone and GPS technology to make community‐supported hitchhiking possible. You know, you can double the energy efficiency of a typical vehicle in this country, which is of course a privately owned motor car, just by adding one passenger, right? So as fuel becomes more expensive and as our household income declines so people can't, everybody can't afford to buy their own personal car, how are we going to remain mobile? Well, I think we will probably be less mobile, but we can still do the kind of transportation that we absolutely need to do with car‐sharing and ride‐sharing. And that's behavior change. It's not appealing to, you know, a miracle technology like, you know, hydrogen‐powered cars and so on. Yeah, maybe we'll have a few. But it'll be beside the point.

60


This was an organization I came across in Montana a couple of years ago. They, oh hello. They have created a food processing and storage center, which you know; Ronan, Montana is a pretty small community. This is the missing link in the local food movement. Because so many small scale producers can't support themselves at that scale, especially in competition with the really large scale producers. But if they could make value‐added products, you know, whether canned soups or bagged herbal teas or something like that, then they could get by. The problem is they don't have access to a commercial kitchen that would enable them, on a seasonal basis, to produce value‐added products. Well, that's what these folks have done. Every community should have a, you know, industrial grade kitchen that folks can rent out, can use, can get together for canning parties, store their food, and so on. That's what'll make local food work.

61


Community currencies. Hard to get started, and often are very peripheral. But in times when a dominant national currency becomes dysfunctional, having a community currency can make all the difference. It's happened time and again during the Great Depression in Europe and also in some American communities where the national currency just wasn't working. But where there were local currencies, people were still able to maintain trade and commerce.

62


The phenomenon of transition towns has sprung up, again, just in the last few years, since about 2007. It started in England. And this is again a social phenomenon. People deciding on a grass roots basis that life can be better without fossil fuels. And let's figure out how to make it better, together. Let's not wait for politicians and political leaders to change the rules to enable things to happen that we know ought to happen. Let's see what we can do ourselves right now with what we have and what we can control. So is there a local transition group, any? Yeah.

Audience member: [ Inaudible response]

Richard Heinberg: Great, so Green Transition Chico. Excellent. And there are a number of other transition projects in Northern California.

63


Something I've been suggesting everywhere I go. Every community could have a centralized location where the alternative economic projects that are already going on can be sort of brought together in one geographical location so everyone in the community knows what's going on. Most towns already have a credit union or a food co‐op, or maybe a car share program or a ride share program. But these are fringe, alternative. In the economy of the future, these kinds of things are going to be at the center of the economy. So let's bring them together and put them at the center of our economy now. Maybe an old legacy building downtown could be made available.

64


I'm going to end just by suggesting that this transition that we're going through now could be a really big deal. It might be as important as the introduction of fire 3 or 4 million years ago that enabled us to cook our food and change our environment.

65


Or language, several tens of thousands of years ago that enabled us to coordinate our behavior over space and time.

66


Or agriculture, 10,000 years ago, the food revolution that paved the way for civilization and money and mathematics and writing and all the rest.

67


And the Industrial Revolution, only 200 years old now, that has changed human life immeasurably in such a short period of time.

68


Now this next transition, I've thought about what to call it, is the sustainability revolution, I don't know. It sounds a little inadequate to me. Maybe you know, a hundred years from now, we can think of a word for it. But whatever it is, it's going to be the experience of learning to live within nature's limits. And learning to do so in a way that allows us to flourish. It's going to be the project of our lifetimes, whether we're 60 years old or 20 years old. This will be the project of the remainder of our lives. We will be living through this transition period. It's going to be a turbulent period. Hopefully knowing something about why it's happening and what some of the underlying factors are can be helpful, but there are no easy answers regarding, you know, what we should do or what it's going to look like when it's all over. This is a project, very much in process and in its early stages, and much of it is not going to be easily controllable. But it's certainly going to be an exciting time to be alive. During our lifetimes, we will have the opportunity to redesign the basic systems that run the world. Our financial and monetary system, our food system, our energy system, our transportation system. It's not only that we'll have the opportunity. We will have the necessity of redesigning them. Well, that's kind of exciting, if you think about it. So I salute you all for being here to talk about this and to think together about how we can do these things.

69


My organization, Post Carbon Institute, again is just a small think tank. Our purpose is to help facilitate this transition any way we can. We have 2 websites I'd like to mention. One is our institutional website, postcarbon.org. And many of our scientific reports, actually, all of our scientific reports are available as free PDF downloads at that site. And then our other site is called energybulletin.net, energybulletin.net. And it's a daily updated aggregation site, so articles, news feeds, on everything related to energy and sustainability and local food and all of the issues I've talked about tonight, you can find on that site. And I have to say about energybulletin.net, even if I were not institutionally associated with it, it's the first website I would look at every morning when I get up. And it is. It's that good and that much fun. So I commend it to you, and I thank you for your kind attention.

[ Applause ]

And hopefully we have a little time for questions and comments. And I don't know if we have a microphone, so if you can stand and speak loudly, I think we'd all appreciate it.

70


Audience member:My question is population control for me is the cornerstone of all of this and I don't see the political will. I mean, people may be taxed for having more than 1 or 2 children, and I don't see the political will, and that's what concerns me. And I feel a little bit hopeless about that, but I sure appreciate you coming here and giving me a big piece of hope.Richard Heinberg: Well, thank you. Yeah, population is extremely important. It's a slow ship to turn. Demographic trends typically take a long time to change. But that's no excuse for not starting. And particularly for poor countries, high birth rates are almost a guarantee of continued poverty. So one of the best things we can do to eradicate poverty around the world, and even without growth, I think we can do that, one of the most important things we can do is to promote family planning around the world. Yes?Audience member:We are concentrating on petroleum and the carbon sources. But we have solar and we haven't even really tapped heavily in. We're still just playing around with it. So maybe it's not quite as bleak, I think more about population rather than the energy right now. We've got to make a transition, and if we don't have the cheap stuff, then we'll have to use the more expensive stuff. And solar, you know, it's more expensive to build, but then the fuel's free. We don't know how to store it very well yet. But just wondered if you would comment on that.Richard Heinberg: Sure, the question is about solar energy. Yes, immense potential there. And solar is seen, I think, the highest rate of important innovation of any of the energy technologies. Now, what's a renewable energy economy going to look like?

71


We've done a fair amount of analysis at Post Carbon Institute on that question, and our conclusion is it's going to look significantly different from a fossil fueled economy, because most of the renewable energy sources, not all of them, but most of them are intermittent. There are ways of making up for that intermittency with energy storage, or with long‐distance transmission, but those have costs associated with them too. So most likely, a renewable energy economy is going to be an economy that uses energy in different ways from how we're accustomed to using it. We will be more conscious of how we use energy, it will be more locally produced, and there is no silver bullet. It's not as though there's one energy source that everyone will be using 50 or 100 years from now, because some places are really good for solar energy, and some places really aren't. Some places are really good for wind, and some places have good potential for tidal power. And you know, San Francisco has pretty good potential for tidal power; Kansas City, not so much. And on and on. So it's going to be a different kind of energy economy, and I don't think it's going to be an energy economy that will support economic growth such as we've been accustomed to. Questions from a woman, yes. I want to keep it balanced here.Audience member: I would love to get back to the population growth issue real quick because a lot of people are concerned you have to eliminate poverty and then the demographics will change because of the increase in wealth in a particular country or a particular group of people. Which I find very problematic because we already talked about the limits to growth here and this approach suggests that first you have to make everybody poor and then it will take care of itself. I was wondering how you would argue that point.

72


Richard Heinberg: Yeah, that's a trend that has occurred in some of the wealthier countries over the past few decades. But I think you're absolutely right. We can't depend upon that same demographic transition to solve the population problem. We have to encourage slower, lower fertility rates as a way of helping to eliminate poverty. Yes?Audience member: I'm sure you meet so many people from all over the world, but there's the other side of the coin, and that is the technology people, the people who think in terms of matter, anti‐matter. And, you know, Back to the Future when he went to the trash can and threw some stuff in the back of the car and took off. I mean, there are those people out there. And I haven't met any. I've read some of the stuff. Technology and innovation and all that stuff, that is salvation for some people. And I'm wondering what you've heard?Richard Heinberg: Question is about sort of futuristic technologies and innovation, particularly energy technologies that are maybe outside the realm of normal discussion. Yeah, I read about these things too. And I haven't been able to verify that there's much there that will make much of a difference. There is a lot of buzz right now about low temperature fusion. Cold fusion is a term that was used back in the late 80s and early 90s, and that was more or less debunked. But the stuff that's being experimented with now is somewhat different. And the jury's still out on that. Even if, in the best case, if this technology works, then I think we're probably still in for 20 years of R&D before it can be rolled out on a significant basis, and probably 30 years to 40 years before that new energy technology would be able to substantially

73


supplant our current energy system. Energy transitions are typically very slow. Typically 40 years is a fast energy transition, historically speaking. So for the foreseeable future, I think we're most likely looking at the fossil fuels that we already know about, and the renewable energy sources that we already know about. That's not to say that there may not be some other game changing technology that will come along at some point. But for the foreseeable future, I think that's what we're looking at. Yeah, sure, in the back.Audience member: So you talked about peak oil, you talked about the end of growth, post carbon economies. What's a post carbon university going to be? I mean, I teach here, a lot of us teach here. What should we be teaching, and if anything, in your opinion, what should we stop teaching?Richard Heinberg: Well, you know, marketing, I think, is going to be a less lucrative career in the future maybe than it has been. But I want to take your question seriously. I think that in the foreseeable future, we're going to need a lot more people with practical skills: how to grow food, how to fix things, how to make things work, how to repair things that break down, and that's not necessarily going to require a university education. I think where a university education is really needed is for system changers, people who want to get into these big systems like the financial system, the food system, at a higher level, and make systemic changes. Those people need to know how those systems work, they need to know advanced mathematics and all the rest. So I think there is an important place for universities in preparing young people to take those system‐changing and system‐redesigning roles which are

74


extremely important. But, you know, I think for a lot of folks, it's actually going to be less important to go into debt to get a college education and more important to get practical skills. I know I'm treading on thin ice saying that at a university, but… Yes? In the back.Audience member: I have a question about the organizational level of this revolution that you discuss. I want to ask whether you think the organizational structure will come from a grass roots level or whether you think it can only be united internationally through the cooperation of the communities as we see them. And then, do you think that this revolution, if it comes from an international or grass roots will in some way mimic the Marxist revolution as he predicted. We can all say that the communist revolutions of the last 100 years have been mega ethical and economic failures but in some way we can also say that these revolutions weren’t in fully industrialized societies. So my question for you is what do you think the relevance of the Marxist doctrine is today and where do you think the organizational capacity for this revolution will originate from via the international or grass roots level?Richard Heinberg: That's a tough one. I understand. I actually addressed this in an essay I wrote a few weeks ago, the title of which I'm desperately trying to remember right now. So you can look it up on our website. You will find it on energybulletin. But it's about the kinds of conflict that are most likely to arise in society as growth tapers off and reverses ‐‐ and how that kind of conflict is likely to play out. I think the conflict arising from wealth inequality is likely to be substantial over the course of the next decade or so. But will it play out in ways that Marx would recognize? I'm not so sure.

75


I'm certain that many countries are going to attempt to suppress that kind of uprising if you will as much as possible, suppress and co‐opt it, as we're seeing happening, not only in this country but also in many of the countries that had Arab Spring movements last year. How long will those suppressive and co‐optive efforts succeed? I don't know. Certainly not indefinitely. At some point, I think that systems lose their legitimacy. If people see very high rates of economic inequality and lots of people are having trouble just getting by, that's a recipe for social disintegration and decay, and I think that's what we will be seeing. Now, how can governments deal with that? One way would be to basically provide the basics for everyone at a lower level. And I think that many governments are going to take that course and call that a Marxist solution, or you know, call it what you will. I think it's a very real and very likely response. Yeah.Audience member: There’s the real world and the physical world and then there’s the systems we build. So, if the situation changes, then we’re going to have to respond and what we respond with will be the systems that we build.Richard Heinberg: Right, absolutely, I don't think that's different from what I was saying, but, yeah. Audience member: I think there is a big fundamental issue that we are trained from birth to want more for less, you know, we are greedy. And today you know to support the local economy but we go to the store and we see a $20 shirt and we see a $40 shirt, one is made in China and one is made here. Many people choose the shirt made in China, do you think it’s a case where things are just going to collapse because they have to collapse. Is this just a case of the system falling to gluttony?

76


Richard Heinberg: Well, I think we have, you know, I try to shy away from that word, collapse, because it's so scary. But I think we do have systemic crises, as I said earlier, baked into the cake. They're on their way, there's almost nothing that can be done by anyone at this point, regardless of their political persuasion to prevent them. The question is, as you suggest, how ready are we at a local level, particularly, to keep things going during these systemic crises. I think that's really the key. And that's why it's so important to build local resilience at this stage of the game. Yeah, I don't know what else to say.Audience member: Your talk is really provocative, and you mentioned social instability, which I guess is a nice euphemism for violent conflict. So have you thought much, or how do you conceptualize the global militaries, in particular the American military, in the face of this energy transition that you were discussing?Richard Heinberg: Yeah. The question is about the military. Well, that's a big subject, because of course the military, within the US, you know, you won't find public statements from the US Department of Energy on peak oil. But you will find public discussion by the US military regarding peak oil. They're very much aware of climate change and resource depletion as issues that will drive conflict in the future. And they are preparing for those conflicts. They are looking for ways to green the military so that they can operate in energy's constrained environments. And of course, our police forces around the country are being militarized to deal with increasing levels of social conflict. So all of this is very, you know, it's very complicated and very scary. And of course, then there's the question of how much energy the military itself uses, and the kinds of international conflict that we are likely to see as energy sources become

77


more scarce. Will we see war erupt over resources in the South China Sea or in North Africa? We're already seeing many resource conflicts in the world, but the potential in the Middle East is very large. So it's scary stuff. Michael Claire, who is professor of peace studies at Hampshire College, has written a number of books on this subject, one of them called Rising Powers, Shrinking Planet. So if you're interested in the dimensions of international conflict that relate to resource scarcity, that's a really good place to go. Yeah.Audience member: I just had a quick question about an economy that sits underneath the environment, it’s trained by the environment. And if you could draw any connection between the work of Jacque Fresco and simply what kind of effects would it have on, let’s say, the monetary system and the economy.Richard Heinberg: The Venus Project, right, right. Yeah, that's interesting stuff. You know, when I read his stuff, I get the feeling that he has more faith in technology to solve some of these problems than I have. I tend to fall more on the side of, you know, if we're going to find ways to adapt and get through this difficult period, it's going to be more social and psychological technologies, if you will, that will get us through rather than sort of futuristic town/city design or something like that.

78


sustainability the end of growth -...

Documents