Monday, July 7, 2008

Garnaut and the Peak Oil Tsunami

Garnaut and the Peak Oil Tsunami

Describing Peak Oil as a tsunami is actually a good analogy that goes beyond the scale and destructive power, here's why: In a tsunami an earthquake under water rapidly displaces water. But it can't spread the displacement of water across the whole ocean, so it does a larger local displacement. Then that raised water collapses spreading a wave of high water rolling outwards, followed by a trough, and so on. These waves constitute the tsunami. In the case of oil production we find that supply is unable to grow, being near its peak, while demand is increasing, so the gap at any given price keeps rising. If this gap had arisen slowly then the whole economy would slowly adapt. However it has arisen rapidly. So the price of oil has had to overshoot, rising enough to kill off the sort of demands, like vacation driving, that can easily be foregone. Meanwhile many businesses are continuing that are not viable at this oil price. They are just continuing on momentum and hope and existing contracts, and continuing to consume oil. What then happens, as we see throughout the world economy, is that those businesses die or contract. And since the oil price rise has overshot, this demand destruction will soon cause the price of oil to start falling. This will in turn overshot in a downward direction, resuscitating demand. This will then interact with the worsening supply problem to cause a new bout of demand destruction. So we see that the destruction of demand, that is necessary to bring demand into line with the long term decline in supply, will occur in waves. Each wave first hits the most easily destroyed demand, but reaches out to touch the whole economy.

If, as many have speculated, the recent increases in energy prices are already enough for us to meet our carbon emission targets, then there will be more emission certificates issued than are actually needed to meet our targets. So the market price of emission certificates will rapidly fall to zero, and there won't be any additional burden on the public. The Garnaut scheme is sufficiently flexible that we don't have to worry about whether it might be unnecessary. We must, however, look more deeply into the question of how peak oil and its related problems interact with carbon mitigation.

Some of the people who predicted the timing of Peak Oil so exactly, starting with M. King Hubbert in 1956, have also looked at natural gas and coal. Their deduction is that there is much less than is commonly supposed. The people who said until recently that there was no chance of an oil shortage, are the same people who say that natural gas and coal will last a very long time. Some of those who have been proved right on oil, believe that we will see the world peak of natural gas in 10 years and the peak of coal production in 25 years. Even the lowest scenario for carbon emissions in the IPCC report will never materialize, so the world temperature rise won't exceed 2 degrees (barring unmodelled positive feedbacks). It would however be nice if we could make the temperature rise even less.

The whole thrust of the Garnaut report is on reducing the rate of emissions worldwide to be aligned with the ability of nature to absorb that carbon. We can now see that that isn't going to be a problem. From a point of view of reducing the impact of carbon emissions the issue moves to this: As we move inevitably to a post fossil fuel era, can we leave some carbon in the ground? Clearly if, as I am convinced, those predictions are correct about peak natural gas and peak coal, then the world needs to move very rapidly to a post carbon economy. If we sensibly leave a bit of margin for error in that change, by moving more quickly than is entirely necessary, then we will, as a consequence, leave some carbon in the ground and suffer less climate change.

Garnaut encourages Australia to take the lead in mitigating climate change, since the modelling suggests that we will be the worst sufferers. Other countries are less negative about warming. Russians are publicly licking their lips. The Canadians are too polite. Many countries are too poor to consider any sacrifices. Garnaut himself has expressed pessimism about the whole enterprise. But the world has to respond to peak fossil fuel to lead us to a post carbon energy environment. If we do that as fast as we possibly can then we're still more likely to be late than early. If we're early and manage to leave some carbon in the ground that will be a bonus. If you're worried about climate change but don't actually believe that fossil fuel will peak, I'd still urge support for a world wide campaign to address peak fossil fuel, because that is more likely to actually move the world off carbon than appealing to moral sentiments and good will.

The aims of climate mitigation and overcoming peak fossil fuel are better aligned than they seem to be. Let's look at the two most obvious conflicting cases.

  • Oil is running out first. It is the world's main transport fuel. Compressed or liquefied natural gas is a good replacement. In the circumstances it is a bad idea to burn natural gas for electricity instead of coal. As Matt Simmons says in a recent presentation "Natural gas is our most precious fossil fuel". Carbon trading (or tax) oriented to reducing the rate of emissions may force a switch to gas. However if, as indicated, the gas will soon peak, then we will get back to burning the coal later. If you see the aim as leaving carbon in the ground then the advantage of switching to gas to generate electricity is much less, if any.
  • There is a huge worldwide infrastructure for liquid fuels for transport: most particularly the existing vehicles and service stations. We can't magically switch all that to natural gas and electric in a short time frame. One way to preserve the value of that infrastructure and reduce the economic impact of peak oil is, during the transition, to do some conversion of gas to liquid (GTL) and coal to liquid (CTL). This requires energy, so the quoted figures show high carbon emissions for this process. This is exaggerated however, because the energy source doesn't have to be a fossil fuel one. One needs to also consider the cost in energy of moving the infrastructure away from liquid fuels more quickly, if we don't do GTL/CTL.
Garnaut is an economist and assumes, I guess, that the magic of the market will produce a replacement energy source. It will be wise to be more proactive and to move forward with an option we know will work, even if that doesn't end up being the economic winner. Many people are hoping for coal combined with carbon capture and storage (CCS). That is not going to work if CCS fails or if the world runs out of coal, and I expect both of those things to happen. It is hard for renewables to fill the whole bill because they are intermittent and their huge scale inevitably involves significant ecological impact. I have high hopes for geothermal, but the limitations and costs of drilling technology suggest that this won't be universally applicable.

To me it is clear that the core energy infrastructure for most of the 21st century will have to be nuclear power. If it is inevitable, then let us get there as soon as possible and leave some carbon in the ground. There are many wild claims about this. Some say it is not price competitive. In that case it won't happen, and a lot of dispute will be unnecessary. With modern reactors the available uranium and thorium will last a long time, and there need not be a problem of very long term waste. Nor are modern reactors useful for making real atomic bombs. It would also be possible to site nuclear reactors in safe places and generate other fuel in various ways: e.g. hydrogen from water. Australia would be such a safe place, geologically and politically.

The question of whether Nuclear Power is necessary or not is one of fact. There are many other important questions that need to be answered. We need to get past politicians believing the most plausible experts and pandering to voters special interests. We need open vigorous expert well funded impartial investigations of the facts by people with mathematical skill. As Professor David MacKay says: we need numbers not adjectives, modelling not arm-waving. Prof MacKay is head of the Inference group in the Physics Department at Cambridge. I urge everyone to read his book on sustainable energy which is available free on the Internet at

We are running out of fossil fuel. This is the immediate problem that we need to address. Luckily doing so will address climate change more effectively than worldwide cooperation and goodwill were ever likely to do.