Thursday, April 17, 2008

Peak Carbon and Global Warming

I have lately been obsessed by Peak Oil and related stuff (Peak Gas, Peak Coal, etc). I've got to stop worrying about this stuff because it is time consuming and there is not much I can do about it. So here's my summary, to get it off my chest.

Huppert predicted in 1956 that US oil production would peak in 1970. He was derided but was almost exactly right. He predicted world production would peak in 2000. It is currently plateauing, only slightly late. However nobody seems to talk about a very big difference between US peaking and the world peaking. When the US peaked, it started importing, but the price wasn't much affected. When the world peaks the price goes up, potentially quite a lot, as we see. This means that a lot of things start to happen:

  1. People use less (vacation travel the first to go).
  2. Exploration goes up (though there probably aren't any more big oil fields with cheap production to find).
  3. More expensive recovery techniques can be used in existing and restarted oil fields. This includes using nuclear power to extract oil from Canada's tar sands.
  4. Gas-to-oil and coal-to-oil technology becomes profitable. [Gas-to-oil is insane with peak gas not far away, but coal to oil is bound to be important, despite the impact on CO2 production.]
  5. Substitutes come into play: electric cars, nuclear energy, renewable energy.
These things take a while. In the short term all these things are likely to be swamped by a global recession. Unfortunately that will reduce demand for all energy and prices will, temporarily, fall. This is where it is very important for government to step in and do what it can to encourage all the processes above to continue during the recession.

America will pull itself out of the recession by energetically going back to making real things and doing real things, not just shuffling money around. In particular they will drive the development of the energy industry. One only has to look at how quickly they ramped up ethanol production given a little incentive. In particular I expect them to lead the push to nuclear energy, thermal solar energy, and electric transport.

There is a vast oil-based transportation infrastructure. We can't turn it around on a dime. Oil for transport will continue to dominate for the next 15 years even though the consequences of expensive transport will be horrible:

  • A return to more locally produced and more expensive goods and food.
  • Economies that work less well, so that everyone is poorer.
  • Everything that uses oil for raw material or transport is more expensive, particularly food.
  • Much less tourism, particularly global.
  • Sea transport is favoured, then rail. Truck transport will be for shorter hauls. Much more messing around getting stuff between different media types: more use of containers/etc.
  • Much reduced jet travel, some return of propeller planes.
The pressure will be on because production of oil will not keep pace with demand, and may decline. So the price will rise inexorably, except when financial systems fail and there are periods of widespread economic collapse. There needs to be a lot more thought about how to manage periods of economic decline without revolutions, wars, starvation, etc.

Prices are already at the point where nuclear energy and solar thermal energy are competitive with coal. The demand for coal for coal-to-liquid will make it even more expensive. So we can move beyond a carbon based economy starting now. This is an unbelievably huge project. It requires us, the whole world, to put a very large fraction of our productive resources into it, at a time when our productive resources will be severely constrained by the growing cost of oil (shortage of oil). But we have to do it, because if we haven't got there when the oil/gas/coal runs out then the bootstrapping process to get back to prosperity will be very hard. It will be done because, with high energy prices, there is money to be made by doing it.

Many people think that catastrophe cannot be averted. Certainly it is hard to have faith in politicians:

  • Cheney and Bush were well aware of peak oil before elected, and their response has been Iraq and food-to-fuel.
  • Australia has just elected an anti-nuclear government.
  • Windmills and solar energy use a lot of steel.
  • Nuclear industry is limited by shortage of expertise and perhaps some essential materials and capabilities.
Still I think we will be ok on non-transport needs and we'll survive the transport problems with a bit (or a lot) of belt-tightening and localization. I'd certainly like to see economic models that confirm this with non-optimistic projections for oil production. The economic theory that increased prices must produce supply does NOT apply to a finite resource like oil. Does the Treasury know this?

Which brings us to global warming. The good news is that there is not enough carbon in the ground (that can be extracted for less energy than they produce) to cause the extreme CO2 rises sometimes considered. It can't go over 500 ppm. The bad news is that the inertia of the vast petrol/diesel transport infrastructure means that we will use more carbon and generate more CO2 than economic fundamentals require (given nuclear energy). In particular there is no way to stop a lot of coal-to-oil production. Even if Australia didn't do it, and we didn't allow our exported coal to be used for it, still our exported coal would just displace other coal that was used for it. Better if it is done as cleanly as possible in Australia.

So there can't be reductions in CO2 emissions between now and 2020. Impossible. The serious economic problems that will be faced between now and then will make extra carbon charges impossible to maintain, and also unnecessary as the natural price of carbon will be enough to encourage everyone who can get off it to do so. The government's job is to plan and to push ahead of the market. Build nuclear and renewable energy power stations, and sell them. Build railways and ship docking. Get into ship building.

Beyond 2020 there will be huge reductions. 90% by 2050 is guaranteed. We just hope the reductions will be because of a smooth and prosperous switch to nuclear and renewable energy, and not because of global economic collapse.