3E Intelligence

Commission President Barroso today (25 Jan) expressed his support for a Davos declaration on the Millennium Development Goals and promised to “discuss with Member States the importance of scaling up aid budgets”.

By putting this issue in the context of “financial aid”, developed countries can feel good about themselves. They are helping (or at least pretending to help) the poor of this world and are willing to do even more in the future (not that their promise to reach 0.7% of Gross National Income is very new - it goes back to my political beginnings and, Jesus, that was ages ago).

That being said, the whole “aid” debate takes on a whole other dimension when one looks at it from a different perspective, as demonstrated by a recent academic study done at the University of Berkeley (California, US). The study “The Debt of Nations and the Distribution of Ecological Impacts from Human Activities” showed that the costs of the ecological footprint of rich nations on the poor amounts to more than the developing countries combined foreign debt (1.8 trillion dollars in 2005 US currency). For more on this story, see a good summary by EurekAlert.

So, thanks, Mr. President for your support, but maybe some humility and some small feeling of guilt might be appropriate?

I was in London yesterday attending the launch of the International Energy Agency’s World Energy Outlook 2007 and I must admit that the report shocked me (because of its content) but also positively surprised me (because of the new ”soft” realism of the IEA)

The new Outlook states in cautious and, of course, more diplomatic words that our world is increasingly on a trajectory towards climate chaos and self-destruction. Anyone who can read beyond the “diplo-speak” will see that the OECD’s energy watchdog is for the first time surprisingly pessimistic about future energy supplies and about the political feasibility of keeping global warming within safe 2-degree-limits.

The economic development of the two new economic giants, China and India, is a direct threat to our Western way of life. This, of course, is not what the report says literally but you need not be an expert to be able to understand the implications of the three scenarios painted by the WEO-2007.

Let’s have a closer look at those scenarios.

The Reference scenario is based on current policies in place and will lead to a growth in primary energy needs of 55% between 2005 and 2030. Global oil consumption will grow to 116 million barrels/day (today 85 million), a figure which even big oil CEO’s such as Christophe de Margerie of Total have questioned to be ever attainable. The IEA, of course, has to keep up a brave story and therefore maintains that these levels can be reached, but in an apparent contradiction also warns of a likely supply crunch by 2015 (last summer it had predicted 2012 - I wonder why they changed dates?).

What is even more worrying in this scenario is that coal use would jump 73% and, of course, with CCS (carbon capture and storage) not yet commercially available on big scale and China and India building new and inefficient coal-fired power plants every week, the impact on greenhouse gas emissions would be devastating (+57% growth between 2005 and 2030). This would bring us close to the 6 degrees warming that the IPCC predicts in its worst scenarios. “I hate the Reference scenarion”, Fatih Birol said openly during his presentation in London.

Is the Alternative scenario which is based on planned (but also still controversial and therefore not sure to be implemented) policies any less worrying? Not really. Oil consumption would still be over 100 million barrels per day and the emissions would lead to a 550 ppm (parts per million) scenario which according to the IPCC would result in more than 3 degrees warming. The IEA also included a “450ppm stabilisation case” which tries to make clear - if you read between the diplomatic lines - that current ambitions of the EU to keep emissions under this level are unrealistic and very costly (the IEA seems to disagree here with the Stern report).

The third “High-Growth” scenario is based on China and India continuing to grow at an annual rate of 7.5% instead of slowing down to 6% (currently GDP growth in China is above 10%). This would really lead to a nightmare world but unfortunately it looks like the most likely scenario to me.  Oil demand would in that scenario be over 130 million barrels per day and emissions would be 23% higher than in the Reference scenario (that growth alone would be as much as Japan and Russia’s emissions now). There is no indication in the book of what this would mean in temperatures but I guess if this scenario happens, we do not even want to know.

Maybe the most candid and significant page in the Outlook can be found on page 215 under the title “Can China and India ever mirror Western lifestyles?”. The answer is a most resounding NO:

“A level of per-capita income in China and India comparable with that of the industrialised countries would, on today’s model, require a level of energy
use beyond the world’s energy resource endowment and the absorptive capacity of the planet’s ecosystem.
A couple of simple calculations illustrate this very clearly: if per-capita oil use in China and India were to rise to the current level in the United States,
their oil demand would increase by a combined 160 mb/d – almost twice the current level of world oil demand (not allowing for future increases in population). Without major changes elsewhere, total world demand of close to 240 mb/d would deplete remaining proven reserves fully in just 15 years, and estimated ultimately recoverable oil and natural gas liquid resources (including proven reserves, reserves growth and undiscovered resources) in 26 years.12 Similarly, if per-capita CO2 emissions in China and India reached current US levels, again assuming no major departures from trends elsewhere, world emissions would be three times higher than today. The implications for climate change of such an increase could be catastrophic.“

All in all, this new Energy Outlook is a remarkable document and should be mandatory reading for all politicians. For the first time, there is a new wind blowing in the normally over-optimistic IEA. And the 2008 Outlook might be even more courageous as Fatih Birol announced during the press conference in London that next year, the study will look into the real declines of oil fields and will also try to bring more transparency (and thus more realism) to the debate on gas and coal reserves.  Has the IEA become a secret “peak believer”?

Further reading:

• IEA: World Energy Outlook 2007
• Forbes: IEA tips ‘king coal’ in bleak view of world’s energy future
• LastOilShock.com: IEA “supply crunch is not peak oil -Birol
• Telegraph: This doorstopper opens our eyes to the energy crisis
• AFP: Blow to environment as demand for fossil fuels set to increase

“Not an environment scare story” is the ironic title of the Independent’s coverage of the fourth Global Environment Outlook: environment for development (GEO-4) assessment published by the United Nations Environment Programme on 25 October.

The report makes indeed for some pretty dire reading. Climate change, population explosion, declining availablity of water, biodiversity loss, growing pollution are just some of the signs that the ecological services from which our world economy draws its life-blood are under serious threat. Published 20 years after the famous Brundtland report, GEO-4 proves that we might have talked a lot about “sustainable development” but our production and consumption practices continue to foolishy pursue their unsustainable “economic growth” path.

How long will our political and business leaders remain in denial? Or do they still not understand that our economy can not be built on an ecological graveyard?

Further reading:

• UNEP: GEO-4: summary for policy makers
• UNEP: press release 25 October
• UNEP: Global Environment Outlook: language versions and background documents
• The Times: ‘Humanity’s very survival’ is at risk, says UN
• James Lovelock: The Revenge of Gaia (Wikipedia)

• Finland is the world’s greenest country and Swedisch capital Stockholm the best city to live in, according to a study by environmental economist Matthew Kahn published in Readers’ Digest. The study is based on data from two original sources: the UN 2006 Human Development Index and the 2005 Environmental Sustainability Index. Measuring welfare beyond GDP seems to be back on the political agenda. The EU is organising a special conference “Beyond GDP” on 19-20 November 2007. The EnviroStats blog has more on this story. It is interesting to see that the greenest countries are also the ones who since years are on top of most economic competitiveness rankings.
• Since Saturday 6th October and for the rest of 2007, the world is living beyond its means. This is the main message of the Ecological Debt Day press release issued by the Global Footprint Network last week. Our economy needs natural resources provided by nature (ecological capital) and since some years we consume more of those resources than nature is able to regenerate. This situation of “ecological overshoot” is not sustainable. Since 1987, Ecological Debt Day has come earlier in the year, meaning we are getting further and further away from sustainability.
• The absurdity of setting national CO2 targets to deal with climate change has been put into question again by a new report published by the New Economics Foundation. The “Chinadependence” report shows that a big part of greenhouse gases attributed to China are the result of products that are made for our Western consumers market. So, in fact, these CO2 emissions should be included in our own greenhouse stats.

Europe’s economic growth is producing more carbon emissions but this is not making us happier, according to a new European Happy Planet Index presented by UK think tank New Economics Foundation (nef) yesterday.

“What is the point if we burn vast quantities of fossil fuels to make, buy and consume ever more stuff without noticeably benefiting our wellbeing?”, said Nef’s policy director, Andrew Simms.

The Scandinavian countries rank highest on the index with some of the former East bloc countries (Hungary, Bulgaria, Estonia) and (surprisingly) Luxembourg (which has Europe’s highest GDP per capita, if I am not mistaken) at the bottom of the league.

Comment:

While I appreciate nef’s efforts on finding new ways of measuring happiness and well-being and agree with their conclusions, I have my own doubts on their instrument. When they applied the Happy Planet Index at global level last year, the list was topped by Vanuatu, Colombia and Costa Rica. I have a difficult time believing these three would really be the world’s happiest. For a good critique of nef’s Happy Planet Index, read Daniel Ben-Ami’s “Who’s happiest: Denmark or Vanuatu?”

Having said that, the nef study underllines (once again) the need for politicians to redefine our definition of progress and move it beyond the flawed GDP instrument. Luckily, there are signs that the European Commission is starting to wake up to this issue. On 19-20 November, the European Parliament will host an interesting conference “Beyond GDP” which is organised in cooperation with the OECD, the Club of Rome, WWF and the European Commission.

Further reading:

• NEF press release: UK 21st in European league of carbon efficiency and well-being
• BBC News: Emissions don’t make Europe happy
• The Independent: A carbon-lite life is a happier life, says economic think-tank

Now, here is a tip for the new French government of President Sarkozy and his “sustainable development” superminister Alain Juppé: scrap the 35-hour-week and make it a 32-hour-week to save the planet!
To be honest, this is not my recommendation, as I am a 60-hour-week workaholic myself, but it is part of the political programme of the Vancouver-based Work Less Party. The story comes from the AlterNet Blog and describes the ecological impact of increased industrial output . Here is an interesting quote from this must-read article:

• “If the world started clocking American hours, then it would be detrimental to its environmental health. According to a paper issued by the Center for Economic and Policy Research (CEPR) in Washington, D.C., if Europe moved towards a U.S.-based economic model, it would consume 15-30 percent more energy by 2050“

• Former US President Bill Clinton announced the creation of a 5 billion $ programme for making existing building in 15 major cities more energy-efficient. Great, but why is it that all these Presidents and Prime Minister always wake up AFTER they have been in power? I wonder what “green cause” Tony Blair will embrace. More on Clinton’s Energy Efficiency Building Retrofit Program in the New York Times and the Clinton Foundation web site
• Europe might lead the world in climate targets but certainly not in private investments for clean energy. Venture capital investment in the US stands at 2.1 billion $ in America and only 499 million $ in Europe, writes Planet Ark.
• Fascinating but gloomy reading in the Oil Drum. Modelling expert professor François Cellier explores the relationship between population growth, resource depletion and world economics and predicts that we are heading for global collapse. “In order to avoid the collapse, we need to get out of the exponential growth pattern as fast as we can. We ought to behave as if fossil fuels had already become essentially unavailable, using this precious commodity only for purposes where they are absolutely essential and to help us create a sustainable energy infrastructure for the future. Such an approach will immediately make us poorer. It will be uncomfortable; but remember, this will happen sooner or later anyway, whether we like it or not, and the longer we continue in our current exponential growth pattern, the more painful the subsequent adjustment will be.”