24 November 2010

Avoiding Catastrophe

Published in today's Independent Editor's choice Blogs

The revelation that carbon dioxide emissions are set to increase this year by over 3 per cent, despite temporarily falling 1.3 per cent between 2008 and 2009 due to global recession, signals an urgent warning that current efforts on climate change have simply failed. Even while we are still in the midst of recession – where the recovery is so fragile that another bank bailout is being pushed through in hopes of preventing a full-blown eurozone crisis – fossil fuel emissions have never been higher, and are projected to accelerate in coming years.

Officially, climate policy targets are aiming to cap emissions at around 450 parts per million (ppm), which would theoretically prevent global average temperatures rising beyond a ‘safe’ 2 degrees Celsius. The first problem is that we are long passed the danger point. In mid-2005, the Intergovernmental Panel on Climate Change (IPCC) confirmed that the total atmospheric concentration of greenhouse gases (accounting for nitrous oxide, methane and so on) was already 455 ppm. This implies that we are already well on course to surpass 2 degrees.

The second problem is that as a growing number of leading climate scientists are now telling us, climate policy targets lag far behind the peer-reviewed science. The IPCC’s and most other conventional climate models used to inform policy, do not sufficiently account for the complex role of uncertainties linked to positive-feedbacks – that is, the capacity of global warming to trigger changes which, in turn, trigger further changes, leading to a self-reinforcing feedback-cycle.

A disturbing body of data indicates that if we stray for too long above 350 ppm, as we are already, we are in grave danger of raising global temperatures by 1C (we are now at 0.8C), triggering exactly such positive-feedbacks with the potential to lead to dramatic, irreversible changes that could possibly culminate in runaway global warming. We don’t even need to get to 2C.

James Hansen, who heads the NASA Goddard Institute for Space Studies, warns that if our “present overshoot” of the 350 ppm upper limit “is not brief, there is a possibility of seeding irreversible catastrophic effects.” According to a 2009 paper in Nature co-authored by 28 international climate scientists, these effects would include “the risk of irreversible climate change, such as the loss of major ice sheets, accelerated sea-level rise and abrupt shifts in forest and agricultural systems.”

It is likely that some of these feedbacks are already underway. The IPCC had originally projected the disappearance of the Arctic’s late summer sea ice by the end of the century. But this year, Mark Serreze, head of the US National Snow and Ice Data Center, reported: “The Arctic sea ice has reached its four lowest summer extents (area covered) in the last four years. I stand by my previous statements that the Arctic summer sea ice cover is in a death spiral. It’s not going to recover.” Scientists fear the summer sea ice could disappear within three years.

The implications could be catastrophic. The accelerating sea ice melt is linked to the thawing of the Arctic permafrost, beneath which is trapped in the form of methane double the amount of carbon in the atmosphere. Current emissions levels, if unchanged, would lead local Arctic temperatures to rise up to around 8C. World permafrost expert Vladimir Romanovsky of the University of Alaska notes that this would be enough for half the world’s permafrost to thaw to a depth of several metres, releasing the vast stores of methane into the atmosphere. Another permafrost expert, Ted Schuur of the University of Florida, observes that the process of thawing and methane release could rapidly accelerate over decades, most likely in the form of a 50-year meltdown intensifying due to rapid feedbacks. The result would be a process of irreversible, runaway warming that would make life on earth largely uninhabitable – “Venus syndrome”, in Hansen’s words.

Unfortunately, even peak oil will not save us. While the International Energy Agency recently confirmed that world crude oil production most likely peaked in 2006 – leading the watchdog’s chief economist Fatih Birol to observe that “the age of cheap oil is over” – there is still enough oil shale, tar sands, coal and natural gas to burn through the first quarter of this century. To be sure, that is not long – but it is long enough to potentially push us off a climate cliff.

Rapid decarbonisation of the economy is therefore not an option. It is a last ditch emergency response necessary for our survival in the emerging post-carbon age. But we cannot achieve this as long as we cling to the mantra of unlimited economic growth on a finite planet. As University of Surrey economist Tim Jackson proves in his Prosperity Without Growth, efforts to ‘decouple’ growth from availability of cheap fossil fuels have not only failed, they have actually gone in reverse.

This means we need to fundamentally re-think the very definition of prosperity if we are to ensure that our children inherit viable societies on a liveable planet. The economics of the fossil fuel age is now obsolete. It needs to be written for the post-carbon age.

16 November 2010

The Oil Drum Book Review of A User's Guide to the Crisis of Civilization

Oil Drum contributing editor Jeff Vail reviews of my book here for one of the world's leading online energy analysis journals:

Anyone who has spent much time discussing peak oil, the collapse of civilizations, climate change or modern security issues eventually confronts the issue of historical antecedents. The [Insert choice of vanished civilization here] collapsed because of X, and that’s the same thing that is happening now . . . . For those who have delved more deeply into such lines of argument, one thing becomes abundantly clear: historical civilizations did not collapse for a single reason. Rather, their troubles, descent and eventual demise or transition were the result of a system of crises. Fast-forward to present, and there is no shortage of commentary forecasting crisis or collapse of our modern civilization. Perhaps for purposes of marketing, simplicity, or simple ignorance, we are awash in commentary on how climate change will spell disaster, or how peak oil will spell disaster, or famine or disease, etc. But these analysts have failed to advance a comprehensive systems-theory approach to our civilization’s troubles. Enter Nafeez Mosaddeq Ahmed.

The end of cheap oil - a critical view

First published in Le Monde diplomatique

The implications of the International Energy Agency’s (IEA) new report, World Energy Outlook 2010, are stark. Its 25-year ‘New Policies Scenario’ projects that it is most probable that conventional crude oil production “never regains its all-time peak of 70 million barrels per day reached in 2006.” In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day. So there you have it. We are now, in all likelihood, living in a ‘post-peak’ world.

The IEA blames a number of factors for this – a combination of supply constraints due to below-ground geological resource limits, and above-ground factors such as political obstacles to fully exploiting existing reserves (such as in Iraq), as well as international commitments to reducing fossil fuel emissions to meet climate targets.

So is this the end of industrial civilization as we know it? The IEA insists - not yet. Despite the peak of conventional oil production, the IEA concludes that total growth in liquid fuels from other unconventional sources – such as tar sands, oil shale and natural gas liquids – will not only make-up for the short-fall in crude, but actually rise as high as around 99 million barrels per day (mbd) until around 2035. Despite this apparent optimism – by this scenario, there are no imminent fuel shortages – we have passed a historic tipping point. In the words of IEA chief economist Fatih Birol, “The age of cheap oil is over.”

The problem is that unconventional sources of oil and gas are far more expensive to get out of the ground and process into usable petroleum, and environmentally problematic. This means that over the next decade, oil prices are likely to become more expensive. Driven largely by industrial growth in places like China and India demand is projected to grow by 36 per cent up to 2035 – at which point, the price of oil will rise beyond $200 a barrel. On the way, by around 2015, we could see price hikes above $100 a barrel.

Unfortunately, a large body of independent scientific literature suggests that the IEA’s favoured scenario is far too optimistic, on a whole range of issues. The Agency forecasts, for instance, that Iraq will be able to triple its production by 2035, and that Saudi Arabia’s production will double. Yet this looks rather unlikely. IHS Cambridge Energy Research Associates (CERA), a leading energy consultancy firm vehemently opposed to the idea of peak oil, nevertheless project that the most we can hope for is for Iraq to increase its output to of 6.5 mbd by 2020 – half of Iraq’s actual target.

As for Saudi Arabia, the late energy investment analyst Matthew Simmons concluded in his extensive book, Twilight in the Desert (2005) that the Saudi oil fields are largely in decline. “Today, the entire field still contains a great deal of crude oil”, reports US energy consultant Michael Lynch of Gerson Lehrman Group, referring to Saudis’ most prized field, Ghawar, responsible for six per cent of the world’s oil supplies – “but it is much harder to get and the production rates continue to fall off.” He characterizes Ghawar as “largely depleted.”

The IEA’s hopes that unconventional oil and gas could rise rapidly to meet expected demand may also be misplaced. “If conventional oil production is at peak production then projected unconventional oil production cannot mitigate peaking of conventional oil alone”, concluded a study by University of Newcastle chemical engineer, Steve Mohr, published in Energy Policy. A Boston University study, concurred, finding that the Energy Return On Investment (EROI) – the energy you get out compared to what you put in – is simply infinitesimal, at around 1:1 or 2:1, compared to conventional oil’s EROI at the well head of 20:1. What about unconventional gas? Although EROI is quite high at inception, the EROI of all gas production rapidly declines as energy costs of compression and distribution to consumers is factored in. An extensive analysis by former Amoco petroleum geologist and World Oil columnist Arthur Berman, who has consulted for ExxonMobil and Total, fundamentally undermines industry forecasts for natural gas production based on shale gas inputs. He argues that actual shale gas production rates are less than half of official industry projections – this is because production decline rates at shale wells are far higher than assumed.

“Many believe that the high initial rates and cumulative production of shale plays prove their success”, says Berman. “What they miss is that production decline rates are so high that, without continuous drilling, overall production would plummet. There is no doubt that the shale gas resource is very large. The concern is that much of it is non-commercial even at price levels that are considerably higher than they are today.”

If the IEA is right about everything, we are in for a rough ride. But if as the above suggests, the IEA is right about us passing the peak of conventional oil in 2006, but almost fanatical in its faith in the prospects for expanded production from unconventional sources, then we are in for an even rougher ride.

The ‘post-peak’ world clearly does not imply the End of the World: but it implies an extremely volatile one, whose dynamics will be difficult to predict. It is a world not of easy abundance, but of declining – and increasingly expensive – carbon-based resources. If we are to develop sufficient resilience to the various price shocks and converging crises of the ‘post-peak’ world, we will need to recognize that they are symptomatic of an inevitable civilizational transition toward an emerging post-carbon age. There is no time for denial. Governments and communities need to start adapting now.

The Age of Cheap Oil is Over

First published in New Statesman

We are now inhabiting a ‘post-peak’ world. That is the implication of the International Energy Agency’s (IEA) new report, World Energy Outlook 2010, which in its 25-year ‘New Policies Scenario’ projects that it is most probable that conventional crude oil production “never regains its all-time peak of 70 million barrels per day reached in 2006.” In this scenario, crude oil production is most likely to stay on a plateau of around 68-69 million barrels per day.

The IEA blames a number of factors for this – a combination of supply constraints due to below-ground geological resource limits, and above-ground factors such as political obstacles to fully exploiting existing reserves (such as in Iraq), as well as international commitments to reducing fossil fuel emissions to meet climate targets.

So is this the end of industrial civilization as we know it? Not quite. Or perhaps, not yet. Despite the peak of conventional oil production, the IEA concludes that total growth in liquid fuels from other unconventional sources – such as tar sands, oil shale and natural gas liquids – will continue to make-up for the short-fall in crude until around 2035. But while this means there will be no imminent fuel shortages as such, it also means, in the words of IEA chief economist Fatih Birol, “The age of cheap oil is over.”

The problem is that unconventional sources of oil and gas are far more expensive to get out of the ground and process into usable petroleum, and environmentally problematic. This means that over the next decade, oil prices are likely to become more expensive. Driven largely by industrial growth in places like China and India demand is projected to grow by 36 per cent up to 2035 – at which point, the price of oil will rise beyond $200 a barrel. On the way, by around 2015, we could see price hikes above $100 a barrel.

Even if the ‘post-peak’ world by no means implies the End of the World, it will nevertheless be an extremely volatile one if business-as-usual continues. The convergence of food and financial crises we saw in 2008 was one of the first signs of a strained system. Oil price volatility due to peak oil was a major factor that induced the 2008 banking crash. The collapse of the mortgage house of cards was triggered by ‘post-peak’ oil price shocks, which escalated costs of living and led to a cascade of debt-defaults. A study by US economist James Hamilton for the US Congress Joint Economic Committee confirmed there would have been no recession without the oil price shocks.

The oil shocks also impacted on food prices. The global industrial food system is heavily dependent on fossil fuels, consuming ten calories of fossil fuel energy for every one calorie of food energy produced. As noted by Australian agricultural expert Julian Cribb in his book The Coming Famine (2010), the six-fold rise in food prices between 2003 and mid-2008 was triggered by escalating oil prices (among other factors), and impacted severely on “farmers’ fuel, fertilizer, pesticide, and transportation costs.” While “financial pain was high” in developed countries, in the less developed world – from where the developed countries import much of their food – “farmers simply could not afford to buy fertilizer, and crop yields began to slip.”

All this was exacerbated by a debt-dependent economic system that systematized the very kinds of dodgy derivatives trading which generated subprime mortgage blowback – with speculators throwing money into futures markets for oil and staple food commodities, rocketing prices even higher. The recession that such price hikes partially inflicted, leading consumption and production to drastically contract, allowed prices to drop. But as economies tentatively recover, as populations grow, as demand rises, the danger that we once again hit the ceiling of the world’s oil capacity limits will remain.

So if the IEA is anywhere near right, we are in for a rather rough ride. The volatility of the ‘post-peak’ world will be difficult to predict. It is a world not of easy abundance, but of declining – and increasingly expensive – carbon-based resources. If we are to develop sufficient resilience to the various price shocks and converging crises of the ‘post-peak’ world, we will need to recognize that they are symptomatic of an inevitable civilizational transition toward an emerging post-carbon age. There is no time for denial. Governments and communities need to start adapting now.

11 November 2010

On George W. Bush's Torture Lauding - my letter in the Evening Standard

I had a letter published in the Evening Standard earlier this week. It was a slightly abridged version of the following:

Dear Sir,

One need only read between the lines of George W. Bush’s memoirs to realise that his unapologetic lauding over torture is merely a front of bravado, designed to disguise serious questions about deeper US intelligence failures which facilitated the 9/11 attacks – failures that occurred on his watch.

Former CIA official Robert Baer, a case officer assigned to the Middle East for two decades, told MSNBC Hardball’s Chris Matthews over a year ago that Khalid Sheikh Mohammad had been water-boarded 183 times, leaving him “almost brain dead.” The ex-CIA operator also pointed out that absolutely no useful intelligence was gained from this exercise.

In Time Magazine, Baer dissected transcripts of KSM’s interrogations released by the Pentagon, finding that while he “comes across as boasting, at times mentally unstable”, he is also clearly “making things up.” But worse, Baer points out that the transcripts, for whatever reason, systematically obscure “evidence of state support to al-Qaeda”. He cites well-known evidence in the intelligence community that major US geopolitical allies in the ‘War on Terror’ – Pakistani intelligence services, along with members of the Qatari and Saudi royal families – have harboured and aided al-Qaeda generally and KSM specifically. Worse, and contradicting Bush’s narrative again, Baer emphasises that KSM had “offered no information about European networks”, and that he “apparently knew nothing” about militants planning attacks on London.

Bush played a central role in crushing pre-9/11 intelligence investigations into the deleterious effects of US relations with countries like Saudi Arabia. Multiple FBI leads identifying key financial and other links between Saudi elites, members of the bin Laden family, and Osama bin Laden himself were shut down in 2001, despite a growing crescendo of warnings of an impending attack involving planes being used as bombs. The fact that this may have had something do with cosy financial Bush-Saudi family deals – such as through the defence investment conglomerate Carlyle Group (where both Bush and the bin Laden family had investments) – raises awkward questions about Bush’s current efforts to vindicate his unconscionable failures both before and after 9/11.

In this context, Keith Vaz's pointed question about US-UK intelligence sharing is on the mark. That is not to suggest that such sharing should simply cease, but it is certainly legitimate to wonder to what extent American strategic interests - and ideology - determine the way trans-atlantic intelligence cooperation works. It is not only a matter of how much MI6 might have known about US methods such as torture, but ultimately about the way the US conducts its whole approach to security, and whether it is undermining our own - with fatal consequences at home.

Yours,
Dr. Nafeez Mosaddeq Ahmed

The Next Crisis: How business-as-usual will kill us all

First published in Ceasefire Magazine

2008 was the year of crisis convergence. Escalating oil price spikes coincided with similar spikes in the prices of staple foods, both driven by a combination of production-supply constraints, rocketing demand, and the ensuing bonanza of commodity trading on futures markets. Then the banks collapsed, prompting massive government bailouts designed to shore-up a crumbling financial system.

As I argued in my previous article for Ceasefire, this convergence of energy, food and economic crises was no accident, but the inevitable outcome of a business-as-usual model of behaviour for a global political economic system that was now reaching its own internal limits, as well as breaching the limits of the natural environment.

Despite official assurances that the worst is over, that economies are now recovering and re-growing, current trends illustrate that the worst is yet to come – and that policymakers are clueless about the fundamental structural causes of crisis convergence.

The first fundamental problem is that orthodox neoliberal economists fail to understand the obvious reality of the embeddedness of the economy in the natural environment. For the economy to grow requires increasing inputs of energy, obtained from exploitation of natural resources – currently, for the most part, fossil fuels such as oil, gas and coal.

In theory, orthodox economists like to argue that capitalism can solve the energy-dependence problem by maximizing efficiency, so that the greater the economic growth, the more efficient the use of resources, and thus the less actual energy is required. This sort of argument underpins government support for the oxymoron of ‘high growth, low carbon’ societies. As is common with neoliberal economic theory, the empirical data raises serious questions about this argument. As Tim Jackson shows unequivocally in his Prosperity Without Growth (pp. 74-6), global trends in fossil fuels and carbon emissions as well as extraction of metal ores and non-metallic minerals have escalated dramatically in the last two decades. In many cases, Jackson observes: “Global resource intensities (the ratios of resource use to GDP), far from declining, have been increasing significantly across a range of non-fuel minerals. Resource efficiency is going in the wrong direction.” (p. 75)

Between 2005 and 2008, world conventional oil production has struggled along an undulating plateau that is unprecedented in the history of world oil production, and is unlikely to be able to rise significantly beyond 2008 levels. As noted by Dr. James Schlesinger – a former US Secretary of Energy (1977-79), Defense Secretary (1973-75) and CIA Director – “given projected decline curves running from 4 to 6 percent, and the projected increase in demand during the next quarter century, we shall require the new capacity equivalence of five Saudi Arabias.” Whatever the uncertainties over deepwater and unconventional reserves and so on, he points out that “in general we must expect to get along without what has been our critical energy source in expanding the world’s economy for more than half a century.”

While supply levels appear to be wavering, a resurgence in demand due to a fragile economic recovery indicates the probability of another near-term oil price spike as rising demand hits relatively flat capacity limits. Much of the rising rampant demand for oil is not from the West, but from emerging industrial economies, such as China, and has already led financial institutions such as JP Morgan to predict an imminent rise in oil prices to $100 per barrel.

Simultaneously, with oil prices set to rise again, we are witnessing a return to spiralling prices for meat, sugar, rice, wheat and maize. As financial forecaster Addison Wiggin warned in a Forbes article at the end of October, “we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory”. He points out that the 2008 food crisis “never really went away”, given that key farm commodities, although not as high as 2008 levels, are still higher than pre-2008 levels:

  • Corn: Up 63%
  • Wheat: Up 84%
  • Soybeans: Up 24%
  • Sugar: Up 55%

Meanwhile, the US Department of Agriculture has warned of falling wheat production next year, largely due to the impact of the Russian drought on agriculture, and highlighted a considerable drop in US corn production this year – apparently the biggest drop in harvest expectations “ever.”

The link between current food supply shortfalls and climate change can no longer be ignored in the aftermath of the devastating impact of the Russian heat-wave and Pakistan floods on agriculture, fitting into the long-term predicted pattern of increased erratic weather and natural disasters due to global warming. The latest projections from the US National Center for Atmospheric Research (NCAR) based on a business-as-usual model suggest that within 30 years, the world could face an extreme permanent drought over parts of Asia, the US, southern Europe, as well as large areas of Africa, Latin America and the Middle East – with a devastating impact on agriculture and water resources.

The plateau in world oil production is not helping matters. Higher oil prices will generate an inflationary effect on the economy, exacerbating food price hikes. Further, because the industrial food system in its current form is so heavily dependent on fossil fuel inputs at multiple levels – onsite machinery; synthesis and production of fertilizers; processing, packaging, storage and transport of food – the energy supply plateau will enforce fundamental limits on world food production, worsening the price spikes.

Unfortunately, the orthodox economic toolbox is likely to accelerate rather than ameliorate the convergence of these crises over the next few years. Currently, despite promising indicators of continuing GDP growth – taken by many as evidence of a continuing if fragile economic recovery – the underlying realities tell a very different story. Current total world derivatives trades remain at around the same levels as they were in late 2008 – about $1 quadrillion (thousand trillion) – which is a colossal 23 times world GDP. As noted by DK Matai, a leading global strategic risk analyst and government advisor on complex security threats, “The entire derivatives-based structured finance pyramid can keel over when the asset prices begin to decline and as a result, some of the counter-parties are unable to meet obligations”, as happened in the lead-up to the 2008 crash.

The problem is that this danger has hardly been eliminated – but perhaps has even increased. Matai continues: “Even if 1% of the derivatives pyramid loses counterparties because they have become insolvent, that is more than 10 trillion dollars of a black hole. If that 1% becomes 5%, that is more than 50 trillion dollars, ie, more than the GDP of the entire world.”

Currently, orthodox government economic strategy, based on neoliberal principles, has been focused on attempting to kick-start economic ‘growth’ through more asset-price inflation and derivatives trading – including on commodities like oil and food: that is, re-inflating the unsustainable debt-bubble that burst two years ago. The extensive bank bailouts – quantitative easing – served only to shore-up insolvent banks and financial institutions with tax-payers money. This reduced the amount of money in circulation – contracting the real-world economy rooted in actual production, buying and selling – while permitting financiers to re-engage in their traditional activities. But both the US and UK authorities have acknowledged the probability of further quantitative easing purportedly to sustain continued economic recovery. Simultaneously, massive IMF-style austerity measures are set to constrain consumption and manufacturing, cut-down public services, while increasing unemployment.

The upward pressures in terms of price spikes for oil and food, both driven by fundamental production constraints impinging on supply in combination with regressive derivatives futures trading, will over the coming years generate an inflationary effect that will, as it did prior to 2008, impact on consumers massively. More quantitative easing, by taking taxpayers’ money out of the real-world economy and plunging it into the virtual financial world, in effect amounts to re-inflating a fictional bubble of ‘growth’ while simultaneously reducing the size of the real-world box in which the bubble is supposed to grow.

Consumers and businesses will struggle to continue to repay debts, even as the debt-derivatives bubble becomes re-inflated in the context of more quantitative easing. Simultaneously, as debt-driven ‘growth’ continues to fuel a semblance of a seeming economic recovery, increasing economic activity will inevitably hit the limits of the world’s plateauing and gradually declining hydrocarbon energy base.

Inevitably, the bubble will breach the limits of sustainability, both in terms of the capacity for debt-settlements as well as in terms of energy inputs from hydrocarbon resources. The result will be another crisis convergence, another comprehensive crash, encompassing the food, energy and economic sectors simultaneously with price hikes intensifying debt-defaults and thus deflating the derivatives bubble – all driven ultimately by a global political economy whose structural organization requires the physically impossible: infinite growth on a finite planet.

The next crisis, moreover, is hardly likely to be the last, as we continue to strain the earth’s hydrocarbon resources while thereby increasingly devastating the planet’s ecosystems and altering its climate. Rather it will be the second of several more rounds of crisis convergence, symptomatic of a protracted process of global system failure.

The question we all need to ask ourselves is, how much crisis can we take, before we wake up and realize that business-as-usual is killing us?

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