The short version is that the near-future may be less rosy than the present, not due to climate change, but due to energy scarcity and increasing cost of energy. Focusing on climate change could accelerate the energy crisis. Yes I am a miserable git. This is a long read (3500 words), so if you want easily digestible bite-size nuggets with only good news, its not for you. Hopefully you’ll read on and it will be worth your time.
I am putting this out on the evening of Friday 16th November – not a great publishing date for a LinkedIn post. It also probably needs a lot more editing, but tomorrow there is an interesting event. In France, a grass-roots movement, with no political or union sponsorship is self-organising blockades of roads throughout the country. Not unusual you may say. However, this one has a twist. The protest is against a rise in fuel tax, which has been dressed up as a tax to help pay for the “energy transition”. Part of the anger is distrust that this is just an additional tax, but part of it is a recognition that in a big rural country, the cost of transport (to work) is a big factor for a lot of people, and there is a disconnect between the intellectual urban elite who fret about saving the world, and the population who fret about saving the end of the month. Trump’s rust-belt politics echoed, but without the Trump.
Paradise Foretold
It is a dangerous path to criticise journalists: far from being the enemy of the people they are the guardians of challenge and accountability and should be cherished and supported. Sadly however, most critical analysis seems to regularly evaporate when the green agenda is the subject. One recent example from the BBC here, is an infomercial for one point of view… no challenge to be found anywhere, no alternative viewpoint, just adoration.
You will invariably see the phrase “Greener, Cleaner and Cheaper Future” permeating any article about anything vaguely related to energy. This is not unlike the reflex that forces “fragile” to be the prefix to the word “ecosystem”, or indeed “African” as a prefix to “American” in inappropriate situations. Greener and cleaner, yes; cheaper – unlikely.

There is an implicit assumption that, if we make the right changes, we can have a future that is super hi-tech, green, clean and implicitly affordable (hence “cheaper”). An artist’s impression of this is something we can all relate to. However, the assumption is also that this will apply to all 8-10bn people who will be on the planet by the middle of the century. And as a recurring theme, this is another case of telling people what they want to hear; it is good for business.




Telling people bad news is less rewarding.
Oh well, to the pit I go…
Social Pariahs
Lausanne is the home of BAT and PhilipMorris – vilified names from “Big Tobacco”. People in the area used to joke that the employees were paid a premium to others so as to compensate for the awkward dinner-party conversation-opener of “so what do you do?”…
Working in oil is now up there, or rather, down there, with tobacco, arms manufactures, human traffickers and loan sharks. Only possibly politicians may be lower… The “So what do you do” question can be quite a show-stopper these days. Reactions vary from “how do you sleep at night?” to “clearly you don’t love your children” to “you must be really afraid of electric vehicles”, to, well some frankly quite absurd positions.
A couple of weeks ago over a dinner with a group of people I didn’t know, the conversation got around to electric vehicles. As per the above, I modulate the precise nature of how I describe my work in these circumstances, as saying one “works in oil” can elicit such vitriolic reactions. The protagonist was a university educated person who had run a successful company in the “creative” space – (deliberately vague to preserve anonymity). Having one person describing the way that their hybrid car re-charges the battery when braking and/or on downhills, the comment that came back was “wow, we should all drive in the mountains then we would be able to drive for free…”. I started to laugh, but immediately realized this was a serious suggestion, I was baffled. I did have one question, but didn’t dare ask: “are you really allowed to vote ?”.
The world is made up of 10 kinds of people; those who understand binary and those who don’t.




The traditional riposte to the “oil” question has been to either point out that the questioner had clearly just driven to the venue using petrol and/or point out just how much petroleum products are used in almost everything around us (as per image to right, which appeared in my linkedin feed recently).
This approach may get a grudging acknowledgement, but is countered by “yes but it’s all being replaced by renewable energy and recyclable goods, which is A Good Thing”. Objectively, and all things being equal, this is indeed a good thing.
However, the riposte and the counter arguments are both missing the real issue.
The problem we face is not that everything is partly made from fossil-fuels, but that everything we have and everything we do has an energy footprint. And I mean everything.
Currently some 85% of global primary energy comes from fossil fuels.
It’s the economy, stupid
We think of the economy as having something to do with money. Whilst this is true, there would be no economy with excess energy. A bear hunts and eats fish, uses that energy to move, sleep, reproduce and hunt some more fish. There is basically no excess energy in the system. Humans lived like this for innumerable generations, until agriculture was invented. The key to human development was that farming produced energy in excess of the energy invested. This was in the form of surplus food. Surplus food enabled some people to not farm, but to do crafts, which led to the virtuous cycle of tool making, specialization and eventually industrialization. As industrialization progressed, so we transitioned from biomass (wood) as a primary fuel, to wind and hydro, to coal, to hydrocarbons and subsequently to nuclear and modern renewables. Each step (with the exception of the final one – but more on that later) has had an increasing “bang for your buck” or Energy Return on Energy Invested (EREOI). So now there is so much surplus energy in the system you can be a professional Instagrammer or professional video-gamer. Money is just a proxy for surplus energy.
Nate Hagens describes money as “a call on future energy”; money allows you to purchase goods or services that inevitably have an energy footprint. This logic can be extended to thinking about debt as a call on future money – so debt acts a massive accelerator of the use of energy. To explain this way of looking at money, the “helicopter drop” is a useful thought experiment. A helicopter drops $10 million in bills onto your town. What happens? well people scramble (to put it politely) to fill their bags with bills, some get lots some get less. But then what do they do with the new cash? Well obviously they spend it; buying stuff and/or going on vacation or buying services (which allows the service providers to have more money to spend on stuff or travel). Ultimately all that money has gone on things that have an energy footprint. Quantitative easing has to all intents and purposes been a helicopter drop.
The myth of energy efficiency.
Energy efficiency is widely touted as one key to the “greener, cleaner and cheaper” future – the problem with it is the same as the above. You get a more fuel efficient vehicle, or you insulate your house to reduce heating bills; ultimately you have lower direct energy costs, but you have more money… which you will spend. And as per the helicopter drop, that spend will have an energy footprint. Even wearing a nice jumper rather than turning the heating up will only save energy “locally”, and help pay for that next vacation in the sun… you see the problem?
Embodied Energy
I struggle to communicate the concept of energy footprint – and recently came across the work of Richard Heinberg, amongst a lot of writings and videos, his book “Our Renewable Future” is a great read. The concept of Embodied Energy is explained thus:
“When we estimate the energy required by an automobile, for example, we are likely to think at first only of the gasoline in its tank. However, a substantial amount of energy was expended in the car’s construction, in the mining of ores from which its metal components were made, in the manufacture of the mining equipment, and so on. Further, enormous amounts of energy were spent in building the infrastructure that enables us to use the car—including systems of roads and highways, and networks of service stations, refineries, pipelines, and oil wells. The gasoline in the car’s fuel tank supplies operational energy, but much more energy is embodied in the car itself and its support systems (fig. 1.2). This latter energy expenditure is easily overlooked.” (R Heinberg)
This of course applies to everything (Campbells soup as an example!), and its is pertinent to think about how this applies to renewables. Renewables like solar, wind and hydro are not really renewable, just “replacable“. The wind and sun and flowing water renew, but the machines that capture this energy need to be replaced form time to time. To build a wind turbine, you need to explore for minerals, mine and transport them, smelt and re-transport, craft and fabricate, transport and install, and then maintain. Every step of the way requires energy, and in our current world the energy used in these processes comes dominanty from fossil fuels (remember that 85% of primary energy is from fossil fuels?). Thus cheap fossil fuel energy, which has a huge “bang for your buck” subsidises renewable energy. The obvious question here is what happens as we transition to renewables, and use renewable energy to power the next generation.
So the two features of renewables that are rarely discussed in the “Greener, cleaner and cheaper” literature are (1) that the EROI (“bang for your buck”) is lower for renewables than it is for fossil fuels, and (2) the cost base is subsidised (as described above) by cheaper energy.
The Energy Transition
The consensus view is that the world has progressed through several energy transitions, notably biomass to coal, coal to oil and gas, and now a transition to renewables. Mainstream media loves showing how renewables are increasing, but regularly fail to point out that all primary energy uses are increasing. This is usually obfuscated by presenting renewables as a % of total energy (example).




This is what is meant by the “energy transition”. However, the reality is a lot more frightening – primary energy consumption is increasing rapidly, and whilst it is true that renewables make up an increasing % of that, the bottom-line is that every primary energy sources is increasing – even bio-mass (mainly wood) and coal. In this world view there has never been an energy transition.
Growth for growth’s sake
There is a growing movement who say that fossil fuels are in fact just a symptom, and the real issue is growth. The correlation of primary energy use to GDP growth is about as perfect a straight line as you could hope for. Both of these of course also correlate on a global scale with population growth. Sticking with just GDP and primary energy, the implication of “business as usual” is that the historical and forecast 3.25% annual growth of GDP means a doubling of the global GDP in less than 25 years.




That is, by 2040 GDP will be twice what it is today. Of this, 75% will be driven by increasing prosperity on a per-capita basis, 25% by population growth (BP Energy Outlook 2018). As noted elsewhere GDP and Primary Energy are strongly correlated.




Given the historical correlation, one could assume that primary energy would increase proportionally. This is a pretty scary thought, but one that the BP Energy review addresses. Their assumption is that by 2040, the world will double GDP but require only 35% more Primary Energy – they don’t duck the question but invoke the concept of a decoupling due to an increase in energy intensity – ie energy used per unit of GDP. There is some evidence for this and a potential decoupling is believed to be happening, but it is a major assumption. But even in this case, the absolute amounts of hydrocarbon use is projected to increase. If the decoupling doesn’t happen we will be energy constrained long before GDP doubles.
Meeting the increased energy need will be hard; meeting it whilst simultaneously changing the fundamental nature of the energy supply seems like a majorly optimistic challenge.
Even for people working in the energy industries, the scale of the challenge is hard to grasp. For those who take energy for granted it is easy – you just assume that energy will always be there.
Protesting is lazy




Protesting is a great way to make oneself feel powerful and useful. However, it is also lazy. After a good protest, someone else has to fix the problem and we can go back to our comfortable lives and make token lifestyle changes and feel that we have “done our bit”. If you really cared, you’d go back to school, (university for non-north-Americans) study 80+ hrs a week for as many years as it takes, such that you could contribute to a solution. But that is hard. (paraphrasing J Peterson). The problem is that well meaning social movements driven by genuine concern become reflected in mainstream media (people want to hear what they already believe) and policy becomes driven by opinion. Long gone are the days when politicians led. What if the problem is not solvable? What if we are solving the wrong problem (or at least getting priorities wrong)?
“We are now at a point in time where certain elements of society want to upend the existing order, demanding an immediate cessation of fossil fuel usage and a transition to green energy. As such we need to consider that many of those who want to do this can’t even begin to comprehend what it would take to do that within 10 years, never mind immediately. The progression of skills required to dismantle and rewire an industry, in short order, is beyond the ability of pretty much anyone, and for those whose resume includes only protesting they might as well try to build a car out of lentils” (www.boereport.com)
Mad Max
I started this article with a smug/geeky math joke. The reality is that the world is divided into 2 kinds of people, those who think Mad Max was an entertaining sci-fi film, and those who see it as a documentary of the future.




“It was another time…when the world was powered by the black fuel. Deserts sprouted great cities of pipes and steel, gone now, swept away. Without fuel, they were nothing. The thundering machines sputtered and stopped. The gangs took over the highways, ready to wage war for a tank of juice.” (Intro to Mad Max II)
Quite why you’d drive a massively inefficient 5L V8 when fuel was the most precious commodity is another question… but Mad Max in a Prious might not have been a huge box-office hit…
The investment community is just one part of the global machine, but it is run by people, who read the same headlines as you and I, who have similar concerns and values (in a very general sense). It is only natural then that the investment community wants to use its considerable might to help change the world. The problem is, is that the most media-savvy campaigns with the cutest animals is not necessarily the most efficient use of ones resources. Choosing to use trillion dollar funds to drive change is laudable, whether it is directed by personal conviction or by stakeholder mandate; but the risk is that by trying to solve one problem, it may make a more immediate problem worse.
But what is growth?
Economic growth is generally seen as a good thing as people get lifted out of poverty and hence have longer, healthier and better lives. The argument that we should halt growth to limit resource consumption and limit pollution/climate change has some traction. A counter argument is that deliberately slowing or halting growth would consign vast numbers of people to poverty.
In a very simplistic, but possibly quite accurate way, we can say that one’s energy footprint is directly correlated to one’s disposable income (see the section on money, debt and energy above). Thus, richer people, those pulled out of poverty by growth, will use more energy. So, we start to have an unsolvable problem. From a finite-resources and climate-change perspective we need to reduce energy consumption, but to lift people out of poverty we need to increase energy consumption.
The problem of course is that 24% of the world uses >50% of the energy (on an analysis of national average values) – so to establish an equilibrium we would need the richest countries to reduce their per-capita energy consumption and allow this to be used by poorer countries, rather than having the global total increase.




Spending huge sums on solving a problem that may be unsolvable might make people feel good, but long-term is not great. As an example, the very expensive Paris COP21 pledges to limit CO2 leave a massive, un unbridgeable gap to the IPCC 2deg scenario – see image to right and here. This should not be taken as a call to inaction, but to a view that resources could maybe be better spent. Equally, GoogleX engineers who had a “moonshot” project to use their brains and resources to bear on the problem concluded that there is no solution simply via renewables.
Suppose for a moment that it had achieved the most extraordinary success possible, and that we had found cheap renewable energy technologies that could gradually replace all the world’s coal plants — a situation roughly equivalent to the energy innovation study’s best-case scenario. Even if that dream had come to pass, it still wouldn’t have solved climate change. source
This post is wayyyyy to long already, but CCS research should be heavily funded. The argument against is the one of “moral hazard” as it will encourage fossil-fuel use, but it may just be one element in balancing need for cheap energy and desire to reduce carbon. The other of course is nuclear, but that’s another post.
So in a world of finite monetary resources, should we be focusing on climate change mitigation, or should we focus on how we lift the world out of poverty by ensuring we have cheap energy? As long ago as 2005, Bjorn Lomberg was arguing that the greatest good could be achieved by focusing on projects that had direct impact and that were cost effective; these were not the projects that addressed the more nebulous and longer-term “climate change”. This is a logical, but very unpopular view point.
In my view it is likely that increasing energy costs will dampen consumerism, which will start a cycle of contraction. Energy use will decrease as people get poorer – and sadly this is unlikely to result in any stable equilibrium.
Duty calls
A large number of funds, who control trillions of dollars, are acting out a policy of reducing investments in fossil fuels. This is seen as a powerful way to accelerate the energy transition. Indeed, in one case the non-public version is “to deliberately increase the cost of capital for fossil fuel companies” (by reducing the flow of capital, capital becomes more expensive). The problem with this approach is that reduced investment in the fuels that provide 85% of the world’s primary energy will make that energy more expensive, which will make everything (including renewables) more expensive. If you are a pension fund manager hoping to save the world, you might want to wonder what inflation will do to the pension money you are custodian of and where your duty really lies.
To my mind the perceived evil of the extractive industries is only a symptom, and the disease is consumerism. Someone who works as a product manager for a big household goods company is as complicit in the problem as someone who works on an oil rig. Double that if you work in advertising – your goal is to convince people to buy more stuff. Stuff needs energy, people have too much stuff. However, your company profits, your shareholder returns and your bonus depends on selling more. Those who work on the circular economy have understood this and are trying to do something about it. The developed world needs to stop consuming, the less developed world should be encouraged to continue to allow for growth.
Don’t be evil
If you are a fund manager and you have divested from fossil fuels, should you now start wondering about divesting from consumer staples? And what of technology stocks? Vast energy resources that are used in “digital transactions” (Iceland reportedly used more energy on bitcoin mining that home heating at the peak of Crypto, and Netflix streaming has a hidden cost, as do free internet searches and cat videos). Streaming videos is a form of consumerism, and the “don’t be evil” mission of Google hides the fact that their entire business model is predicated on advertising revenue – advertisers sole goal (apart from political manipulation) is to sell more stuff…. so should you shun Nestle, Diagio, etc. and the FANGs also to save the Planet? The genuinely “sustainable” and “green” asset class starts to look very thin.
You never had it so good
We are very used to the idea that successive generations are “better off” than preceding ones. Now I just hope that my children’s immediate future lives up the past, and is not a whole lot worse. That is why people are demonstrating in France tomorrow.