MuseLetter #187 / November 2007
by Richard Heinberg

Rethinking the Implications of Climate Change and Peak Oil

Environmental and development NGOs are now fixated on climate change to the exclusion of nearly every other topic. Discussions in and among these organizations center on capping carbon emissions and trading emissions rights, and doing this internationally in a way that will be deemed equitable by the global South and acceptable to the industrial Northern countries.

Most of these policy organizations are seeking ways of implementing recommendations made in 2001 by the Intergovernmental Panel on Climate Change (IPCC), which suggested that to keep the global average temperature rise to two degrees Celsius above pre-industrial levels (by consensus, the maximum increase the world’s climate system can absorb without triggering catastrophic climate change), the amount of greenhouse gases in the atmosphere must be capped at 450 parts per million of carbon dioxide equivalents. This will require a 60 to 80 percent reduction in carbon emissions below current levels by 2050.

In order to win any reduction agreement from less-industrialized nations, the richer, more industrialized nations will have to promise to reduce their emissions more and faster. A growing number of organizations (including the Global Commons Institute, EcoEquity, the Climate Equity Project, Feasta, Just Transition Alliance, The Sky Trust, and Third World Network) contend that the fairest solution would be to allocate annually capped emissions rights globally on an equal per-capita basis; then, if wealthy nations wished to continue using proportionally more fossil fuels, they would have to purchase emissions rights from more parsimonious consumers in poor nations. This would result over time in both a diminishing amount of total emissions (based on the declining trajectory of the annual caps) and an enormous transfer of wealth from the more-industrialized to the less-industrialized nations. Some organizations advocate immediate allotment of equal per-capita emissions rights; others envision a staged implementation of the program, that would give wealthier nations time to plan and adjust (the two most widely promoted versions of this strategy are known as “Contraction and Convergence” and “Cap and Share”).

From the perspective of less-industrialized countries, a global climate policy that does not include an equity provision is a non-starter. The existing humanly produced atmospheric carbon, which will continue driving climate change for the next 40 years or so even if all emissions are halted now, was generated overwhelmingly by rich countries in the process of getting rich. Thus it is these countries’ obligation to shoulder most of the burden of necessary cutbacks. A second equity argument has to do with expected population growth: since the population of the global South is expected to double during the next 50 years while total population in rich countries is projected to remain at current levels (the US is an exception), even if the South reduces carbon emissions at half the rate of the industrial North that will translate to an equivalent per-capita cut.

If people in the industrializing countries (particularly China and India) continue to burn more coal and drive more cars, they will metaphorically cook the planet. These nations have the highest growth rates for fossil fuel emissions, and China is set to soon become the world’s foremost carbon emitter if it has not already done so. These nations are in effect saying to North America, Europe, and Japan, “Agree to reduce your emissions faster than we do, or we won’t reduce ours at all and the entire planet will burn.”

This Grand Bargain could amount to an unprecedented shift of the world’s economic center of gravity. During decades of “development” policy and aid, the disparity between rich and poor only grew; now, however, the poor world has a weapon – even if its use implies a suicide pact.

The environment/development advocacy community is pushing its agenda with particular urgency for two reasons: first, scientific data show dramatic climate impacts already appearing that could devastate global ecosystems within decades or even years (more on that in a moment); and second, the agenda itself promises to solve at one stroke three enormous problems – the world’s unsustainable reliance on fossil fuels, a pending environmental catastrophe, and the global equity dilemma.

However, the Grand Bargain is going to hit three serious snags before it can gain acceptance: politics, scarcity of fuels, and a growing perception that it is already too late to avert catastrophic climate change. These barriers may require new tactics if NGOs are to achieve their goals.

Has the Climate Revolver Already Fired?

In a paper titled “Climate Change and Trace Gases” published in the Philosophical Transactions of the Royal Society earlier this year, six of America’s leading climate scientists, led by James Hansen, director of NASA’s Goddard Institute for Space Studies, warned that the Earth is rapidly approaching a “tipping point” beyond which climate change will become unstoppable (www.planetwork.net/climate/Hansen2007.pdf). The authors discussed feedback mechanisms not included in the assessments of the IPCC and argued that unless effective measures are put in place to control CO2 emissions over the next ten years, the rise in the Earth’s temperature could set loose self-reinforcing processes that would be beyond human control.

Some critics said Hansen was overstating his case. Richard Peltier, a University of Toronto physicist and the director of the Centre for Global Change Science, criticized the tone of the paper and the use of words such as “cataclysm,” saying that Hansen had moved “dangerously away from scientific discourse to advocacy” (http://postcarboncities.net/node/1018).

But this was before the summer Arctic ice melt of 2007.

This year, Arctic ice reached a minimum extent of 4.13 million square kilometers, compared to the previous record low of 5.32 million square kilometers in 2005. This represented a decline of 22 per cent in just two years; the difference amounted to an expanse of ice roughly the size of Texas and California combined. Between 1979 and 2005, the rate of Arctic ice retreat had averaged 7 percent per decade; in the two years from September 2005 to September 2007 that rate increased to more than 20 percent. Moreover, the average thickness of the ice has declined by about half since 2001. Altogether, taking into account both geographic extent and thickness, summer Arctic sea ice has lost more than 80 per cent of its volume in four decades. While sea levels will not be directly affected by the total melting of the northern icecap since it floats on and thus displaces ocean water, that event will severely destabilize Greenland’s ice pack – whose disappearance would cause sea levels to rise by several meters, inundating coastal cities home to hundreds of millions.

The organization Carbon Equity issued a report last month, “The Big Melt: Lessons from the Arctic Summer of 2007” (www.carbonequity.info/PDFs/Arctic.pdf), which draws conclusions from this disturbing new information:

The data surveyed suggests strongly that in many key areas the IPCC process has been so deficient as to be an unreliable and indeed a misleading basis for policy-making. . . . Take just one example: the most fundamental and widely supported tenet – that 2°C represents a reasonable maximum target if we are to avoid dangerous climate change – can no longer be defended. Today at less than a 1°C rise the Arctic sea ice is headed for very rapid disintegration, in all likelihood triggering the irreversible loss of the Greenland ice sheet and catastrophic sea level increases. Many species are on the precipice, climatechange- induced drought or changing monsoon patterns are sweeping every continent, the carbon sinks are losing capacity and the seas are acidifying. . . . The Arctic began to lose volume at least 20 years ago when the global temperature was about 0.5°C over the pre-industrial level. So we can now see that to protect the Arctic the average global temperature rise should be under 0.5°C.

According to the report, if this suggested 0.5°C precautionary warming cap were adopted, the target for allowable concentrations of atmospheric greenhouse gases would have to be about 320 ppm CO2 equivalents, a level that was passed more than 50 years ago.

Another report published this month, this one in the Proceedings of the National Academy of Sciences (www.guardian.co.uk/environment/2007/oct/23/climatechange.carbonemissions), documents that carbon is accumulating in the atmosphere much faster than previously thought, and only adds weight to the Carbon Equity recommendations. While global carbon dioxide emissions from fossil fuel burning rose annually by 0.7 percent in the 1990s, the new study shows they have increased by an average 2.9 percent each year since 2000.

What would targets of 0.5 degrees warming over pre-industrial levels, and 320 ppm CO2e, mean in terms of policy? While the Carbon Equity report doesn’t say so, if all nations were to bear the brunt of equal emissions cuts the latter would have to be huge – well over 90 percent in just three or four decades. But if international equity is also targeted, this means that for the wealthy nations more than 100 percent reduction would be needed. In other words, leaving aside the notion of carbon capture and storage (discussed below), not only would wealthy nations have to transform their economies to run entirely without fossil fuels (which currently supply 85 percent of world energy), but they would need to spend considerable capital on efforts to capture and sequester existing atmospheric carbon – for example, through massive reforestation projects. One has to wonder: With all the energy and investment that would be needed to de-carbonize industrial economies (by developing renewable energy sources, building public transportation infrastructure, and so on) and store carbon, what money and energy would be left to run existing economies, much less to fuel growth in goods and services to the population?

Politics: An Alternate Reality

Climate science exists in a different world from the one peopled by politicians. Inhabitants of both worlds think of themselves as realists: while scientists study the real physical world, politicians are arbiters of what can and will get done in the real human socio-economic world.

In general, any policy that means voluntary economic contraction of any noticeable magnitude doesn’t stand much of a chance in the real world of politics. At least in the current political climate, absent a massive public education effort, voters will not support it and no politician will stake her career on it.

This in itself constitutes an enormous roadblock to the achievement even of the IPCC recommendations, much less the far more stringent targets (but more “realistic” ones in the scientific sense) that Carbon Equity is proposing. Faced with this roadblock, climate activists typically respond by minimizing the estimated cost of de-carbonizing economies, and by assuring one and all that economic growth can continue into the indefinite future while industrial nations radically reduce their consumption of the very fuels that made the industrial revolution possible. But if this sanguine, politically acceptable notion is at least arguable in the case of the IPCC reduction targets, it is hardly credible when it comes to the emissions reduction trajectory suggested by Carbon Equity.

Take the US as an atypical but essential example. One can realistically calculate a possible 50 percent reduction in fossil fuel consumption for the country through conservation (though that will be an enormous job, requiring extensive new electrified public transport infrastructure, new housing codes, subsidized energy retrofit programs, and so on). Another 25 percent of current fossil fuel consumption could be offset with renewable energy sources. All of this would take a few decades, and during that time we have to assume no population growth and no economic growth. That gets us to 75 percent reduction from current levels. Beyond that, it is difficult to see how more could be achieved – unless America continues burning fossil fuels but captures and stores the carbon. Suddenly with that possibility a relief valve is opened: coal-based electricity could flow in to fill the void.

This is why carbon capture and storage is the technical centerpiece of most politically acceptable prescriptions for climate salvation. However, technologies for carbon capture will add to the cost of energy, will reduce the amount of useful energy derivable from fossil fuels, and won’t be ready for widespread commercial application for about three decades. We do not even know if the captured carbon will stay where we put it. These are not trivial problems, and the first two will bite hard in the emerging context of scarce energy supplies and high prices (more on that below).

Still, politicians are feeling increasing pressure from constituents, NGOs, and the scientific community to agree at least to the IPCC target of 60 to 80 percent emissions reductions by 2050. The European nations have signed on to a carbon reduction scheme, as has the state of California. The method being adopted is cap and- trade – the creation of a carbon emissions rights market that, according to its critics, is actually an elaborate shell game that enables wealthy nations and energy corporations to continue burning fuels at high rates by paying others to do the hard work of figuring out how to get by on less fuel (a point hilariously illustrated on the website www.cheatneutral.com). While cap-and-trade employs many of the same basic mechanisms as the emissions rights distribution programs advocated by the environmental/equity NGOs, there are also substantial differences: governments and corporations envision high caps and free or auctioned distribution of emissions rights to industry; the NGOs advocate much lower caps and free distribution of rights to the people. Resolving these two visions of the process will be no small matter.

But let’s assume the best – that cap-and-trade will in fact move nations toward their targeted reductions; in that case, would promises continue to be met if compliance began to compromise economic growth? Significantly, California’s climate law, AB32, contains an escape clause:

1. In the event of extraordinary circumstances, catastrophic events, or threat of significant economic harm, the Governor may adjust the applicable deadlines for individual regulations, or for the state in the aggregate, to the earliest feasible date after that deadline.
2. The adjustment period may not exceed one year unless the Governor makes an additional adjustment pursuant to subdivision (a).

In other words, the Governor can essentially cancel the state’s greenhouse gas reduction efforts for a year, then do the same the next year, and so on.

Meanwhile, international bargaining on the equity issue will be a nightmare. The “North/South” terminology used by development NGOs utterly fails to capture the complexity of the negotiations. The reality is that “North” consists primarily of the US, Europe, Japan, Australia, Canada, and South Korea, which have quite different energy trajectories and political positions. “South” consists of rapidly industrializing countries (China, India), really poor countries whose economies are stagnant or declining (Zimbabwe, for example), as well as major fossil fuel exporters (OPEC) whose revenues are increasing but whose industrial base is small. Again, these categories of countries have very different energy mixes and bargaining positions that are poorly captured by a single term.

China represents itself as speaking for the entire less-industrialized world in insisting on an equity provision, and in some ways this makes sense: its voice is much louder than that of Zimbabwe, so the latter gets a free megaphone. But China can easily afford to bid up energy prices and can continue to grow its economy even with oil at $100 per barrel, while Zimbabwe can’t afford much fuel at all at current prices even if it is permitted to burn all it likes under climate accords. Thus the practical climate mitigation question that must be addressed with regard to the South is not whether the desperately poor in fuel-importing nations should have the right to industrialize using coal or oil – that is not an option, given global supply constraints (which, again, we will address in a moment); the question, rather, is whether China and India will continue to industrialize by burning coal.

Russia is in a category of its own, but due to its wealth of remaining fuels it will be a key player in the energy and climate discussions.

And so, while in some ways the situation is more complex than it is represented to be, in another it is simpler. As James Hansen has recently noted (http://pubs.giss.nasa.gov/docs/notyet/submitted_Kharecha_Hansen.pdf), the resolution of the climate dilemma really centers on coal (it is the world’s fastest growing energy source because of its current cheapness and abundance, while it is also the most carbon-intensive of fuels), and thus it revolves mostly around four nations – China, the US, India, and Russia (the US and Russia have the largest reserves; China is the foremost consumer; and India has both large reserves and fastgrowing consumption levels). Getting these countries to agree on major reductions in coal consumption, in which the US reduces much faster than India and China for the sake of global equity while Russia keeps its treasure chest of fuels buried, is going to be . . . well, difficult. Moreover, since China consumes twice as much coal as the US, arguing for the US to reduce faster than China is also, in effect, arguing for slower total declines in emissions from coal.

And we must remember: the global South may have a leverage point here, but the North still has the guns. In history, nations have gone to war to enforce or avoid transfers of wealth much smaller than those implied in some climate equity proposals.

But What About Supply?

Conventional cap-and-trade carbon markets work by creating a scarce commodity (rights to emit) and then allocating that commodity by price. If the commodity turns out not to be scarce, its price will collapse and so will the market. If fossil fuel depletion means that carbon emissions will be declining anyway, rights to emit carbon will cease to be scarce. People will buy such rights only if they can afford the fuel. When fuel is expensive and the supply is shrinking at a rate comparable to reduction rates mandated by caps, the carbon market becomes utterly irrelevant.

That is essentially the situation we face.

Global oil production has probably already peaked, as was affirmed just this month by an authoritative report from the Energy Watch Group of Germany (www.energywatchgroup.de/Erdoel-Report.32+M5d637b1e38d.0.html). The peak for global natural gas production is likely to follow in a few years, perhaps a decade or two at most. And, according to another Energy Watch Group study, “Coal: Resources and Future Production,” published earlier this year, global coal production is likely to peak between 2025 and 2030 (www.energywatchgroup.org/files/Coalreport.pdf). With oil past its peak, and with gas and coal able to do little to compensate, total energy derived from fossil fuels will peak around 2010, while total CO2 emissions will peak somewhat later due to the fact that coal will commence its decline after oil and gas.

Aside from the fact that it undermines the efficacy of carbon trading, this news has one good, one not-so-good, and one rather terrible implication.

On the good side, the early peaking of fossil fuels means that most estimates of future global carbon emissions will never be realized. The Special Report on Emissions Scenarios (SRES) of the IPCC presents 40 scenarios for future CO2 emissions. Most scenarios show growth in emissions to 2100; the average of all 40 shows fossil fuel consumption in 2100 at about twice current levels. The Report offers no discussion of supply constraints for oil, gas, or coal.

Engineering professor David Rutledge of the California Institute of Technology has authored an online article titled “The Coal Question and Climate Change” (www.theoildrum.com/node/2697), in which he applies techniques typically used to forecast oil production peaks to coal, arriving at conclusions similar to those of the Energy Watch Group. In his analysis, supply constraints will yield lower emissions from coal than envisioned in any of the 40 IPCC scenarios. On the basis of supply constraints alone – not assuming any voluntary emissions-based consumption cuts – atmospheric CO2 will peak at 460 ppm by 2070. Rutledge writes:

The maximum temperature rise for our Producer-Limited Profile is 1.8°C in 2150. The . . . part of the temperature rise that is associated with future fossil fuel use . . . is calculated by running the simulation with and without future fossil fuels, and subtracting. It turns out that the maximum temperature rise associated with future fossil fuel use is only 0.8°C, less than half of the total. This means that the contributions to the temperature rise from fossil fuels that have already been consumed, and from deforestation, and from other greenhouse gases amount to more than the contribution from future fossil fuel use.

So much for the good implication of fuel supply constraints. The not-so-good implication is that, while shortages of extractable oil, gas, and coal will nearly ensure the achievement of the low-range IPCC targets of 60 percent reduction in carbon emissions by 2050, they will not guarantee the more than 90 percent reductions by 2040 that will be required if we are to come close to achieving 320 ppm CO2e before the end of the century. Thus deep carbon cuts will still be needed if there is yet hope of averting catastrophic climate change.

The terrible implication is that a relentlessly declining fuel supply will almost certainly have devastating economic, social, and political impacts. Trade, manufacturing, and farming will be hard hit. No nation is prepared to deal with the high prices and shortages for energy that will soon begin to work their way through the entire global economic system.

Political Reality Confronts Physical Reality

Taking all of this information together – the physical realities of climate data and fuel supply projections, and the political realities previously mentioned – what conclusions can be drawn? Perhaps the best way to find out would be to bring together several of the most knowledgeable and open-minded experts in relevant fields and let them talk these issues through for a few days away from the public eye. However, until that happens here are a few thoughts of my own.

Some kind of climate agreement will probably emerge within the next two years due to pressure from NGOs and the real concerns of governments. But the economic self-interest of those governments (and major corporations) will most likely ensure that only a watered-down version will be agreed to. Some form of carbon market will be deemed the acceptable means of implementing it. And its terms will include a mild equity provision that won’t make anyone happy.

At the same time, supply constraints will be starting to hit hard – globally for oil, regionally for gas, and in China for coal. Ultimately, these supply shortfalls may drive policy far more than fear of climate change. The response of governments to fuel shortages will be one of desperation: climate mitigation efforts will fall by the wayside as nations flail about attempting to keep their food and transport systems functioning. International conflict is likely.

This clearly is not the optimal scenario. What alternative policies would yield different results, and how might we go about assessing policy options in the light of factors discussed above?

One way to begin the assessment process would be to list and rank candidate policies in a two-by-three matrix. Start with two vertical columns; in the first, list those that could actually achieve emissions reductions; in the second, list those that could actually help societies adapt to scarce and expensive energy. In these first two columns, order policies in terms of the degree of positive impact anticipated. Then in three rows, rank those policies in terms of (1) how they will affect equity; (2) how politically viable they are now; and (3) how politically viable they are likely to be in the context of energy scarcity.

If a policy is likely to be highly efficacious but is politically unacceptable now or later, we might leave it on the table for further consideration while taking note of the problem. (The fact is, policies that rank well under the heading of what is politically viable now may not correspond with much of anything in the high range of the two columns.)

It would be interesting to see if different organizations would arrive at similar or widely varying conclusions from this exercise. The following are some observations from my own initial run-through.

At the top of the two columns should be some overall umbrella policy to manage the transition away from fossil fuels. We have already seen the potential problems with cap-and-trade resulting from fuel shortages. Those problems could be addressed by lowering the caps with the goal of making emissions rights scarce again, but in a contracting economy this might not work, and most people would see the effort as arbitrary and onerous anyway. Distribution of emissions rights directly to the people on an equal per-capita basis might help avert a carbon market collapse (as long as there was a demand for fuel, there would also be demand for the emissions rights). But why not just cap the extraction, and ration the distribution, of fuels themselves instead of regulating the emissions they produce? The rationing of scarce fuels is historically proven; this approach would be both more effective, and more intuitively reasonable and understandable to all concerned. Two existing proposals could be helpful here – the Oil Depletion Protocol (www.oildepletionprotocol.org), which if generalized would provide a direct mechanism for capping fossil fuel extraction and consumption; and Tradable Energy Quotas (www.teqs.net), guaranteeing equitable access to the available domestic supply of scarce fuels – a basic electronic rationing scheme that will be essential when oil outages begin, and that needs to be installed in advance.

Since fuel depletion alone will not result in emissions cuts sufficient to achieve an atmospheric greenhouse gas concentration of 320 ppm CO2e, and since carbon capture and storage is problematic, if nations are serious about climate protection the discussion must center on leaving coal and other low-grade fossil fuels (such as tar sands) in the ground. The fact that this is a politically distasteful notion now, and is likely to become even more so, puts a big burden on the persuasive abilities of all of us who care about the climate. But this is the one policy that will assuredly work to achieve our goal.

As for equity: Since we live on a finite planet, equity for the global poor can only really be achieved by a reduction in material living standards for the billion or so inhabitants of wealthy nations. As we have seen, this notion is extremely difficult to sell to the governments of industrialized democracies now, and it will be no less so when their economies are in tatters.

However, steep declines in standards of living will be hitting these wealthy countries anyway, due simply to depletion of important energy resources, starting with oil. The only way to avert massive social chaos and famine as extraction levels decline will be to devote public capital domestically toward the building of low energy infrastructure (e.g., electrified rail networks, trolley lines, wind farms) while moving many people to rural areas and teaching them to farm sustainably. Production and consumption will have to be largely re-localized, essential goods rationed by quota. Basically the same thing will have to happen in the poor nations.

One end result will be a world characterized by much greater international equity – but this will have been achieved without enormous direct international wealth transfers. Another result might be the reduction of control by the present power-holders within all nations, since their power is currently maintained and exerted in the context of giant centralized systems of production and distribution.

One more helpful equity strategy would consist of the transfer of renewable energy technologies from rich to poor countries for domestic implementation free of intellectual property rights.

The single factor that would undermine the energy transition and bring everyone to ruin is resource wars.

Some of the policies mentioned (such as the development of renewables and reforms to industrial agriculture) are ones climate activists are hoping to promote indirectly through emissions caps. My analysis suggests that it may be better to champion these policies more directly, and to buttress the argument with depletion data.

Ultimately, power holders must be convinced that such policies, if obnoxious to them now, will be far less destructive to their interests than a complete breakdown of society and biosphere – which is the very real alternative. For a historic example of a similar conversion of elites think of the 1930s New Deal: then the titans of industry had to sacrifice some of their financial power in order to keep from losing it all. Many wealthy individuals never forgave Franklin Roosevelt, whom they regarded as a “traitor to his class,” but most of them reluctantly agreed that redistribution represented the lesser of evils.

Today the central question facing us is not whether the world will move away from fossil fuels, but how. The primary dispute will be between those who look for short-term solutions to energy supply shocks (burn the last of the coal, attempt to expand the use of other low-grade fossil fuels, go to war to control remaining highgrade fuel deposits), and policy advocates with a long-range plan for dealing effectively and peacefully with climate change, adaptation to scarcity, and global inequity. If NGOs are stuck fighting for policies that simply won’t work, then the short-term options, however disastrous, will win by default.

At best, this article can only describe the situation in general terms, point to a few of the possible policy options, and begin assessing them, without delving into messy but essential details. Much more analysis is clearly required. It is surely time for the climate and equity policy discussion to broaden to include the challenge of impending energy resource scarcity, as well as a more nuanced reconnoitering of the current and future political terrain. Perhaps this essay can serve as a conversation opener.