Jean-Marc Jancovici is a French Engineer, who has spent a lot of time writing about economics. His longer form work is not translated into English, but I thought it might be useful to try and summarise some of his thinking, to think about it. There should eventually be a sequel to this post criticizing or developing it. Occasionally, its more me than Jancovici (and material I have taken or misunderstood from my brilliant colleague Jeremy Walker), but I hope nothing would be unacceptable to either of them.
Jancovici claims that the Western, and world, economies are based primarily on the availability of energy and only secondarily on the cost of energy. Availability of energy drives contemporary economic activity far more than labour or capital, although neoclassical economics largely ignores energy availability (and the ecological cost/destruction of economic activity) in favour of labour and capital. But:
“if we have plenty of workers and plenty of capital, but no energy,… we won’t get any significant production!”
Note this can mean that unless spending frees energy, it may have little effect on the economy.
He defines energy as something which is produced by, or allows changes in, the world/system. Energy is about transformation.
“As soon as the world that surrounds us (= ‘a system’) changes, energy plays a role, and the amount of energy involved measures the magnitude of the change of the system between before and after.”
The greater the transformation, the more energy is involved.
“Our economic system is nothing else than the transformation, on a very large scale, of natural resources into ‘something else’.”
The laws of thermodynamics state that in a closed system, energy can neither be created, nor destroyed, but only be transformed. Therefore, “the energy used by a system has.. to come from outside the system”, and this has usually originated from the sun, causing the water cycle, being transformed and stored in plant material (and then into food, or through release by burning fossil fuels, or simply burning wood or feaces) and so on. This process is essentially ‘free’, although extracting energy takes some energy (and the construction of technology to apply that energy to extract the energy). Every time energy is used it ‘degrades’ and some is lost; this corresponds to the notion of entropy. Every transformation increases entropy, and entropy is sometimes seen as a degree of disorder, or a departure from the order demanded by humans. In a closed system entropy eventually wins out.
the entropy of an isolated system never decreases over time.
Isolated systems spontaneously evolve towards thermodynamic equilibrium, the state with maximum entropy [full thermodynamic equilibrium means there is no flow of heat, no detectable energy….].
Non-isolated systems, like organisms, may lose entropy [or gain organisation], provided their environment’s entropy increases by at least that amount so that the total entropy either increases or remains constant.
Therefore, the entropy in a specific system can decrease as long as the total entropy of the Universe does not.
Entropy is a function of the state of the system, so the change in entropy of a system is determined by its initial and final states.
wiki sentences split apart for clarity.
Life exists on Earth, because of the energy that comes from the sun (and possibly from the interior of the Earth, although if there was no sun that heat would drain away into space).
The use of machines and new organisations of production, during the industrial revolution to transform the newly, and plentifully, available stored carbon and sunlight in fossil fuels, has magnified the amounts of transformation that humans can impose/make on the general system in a short amount of time. Much of this transformation has been declared good in terms of increasing human potential, and human power. Developed countries are able to exert power (military and trade)in the world with relative ease. This is why ‘developing countries’ who had not yet fully corralled this use of energy were, and are, so keen to instigate it. It provides some degree of security from active colonialism (in theory). Again, we can point to technological development as allowing an increase in the amount of energy we can extract – but this is hard to quantify. This is why previously dominant technological processes can lead to a social dead end; the cost of replacement of old tech with new tech seems excessive. The main point is that we are still not creating energy, only transforming it more efficiently and with greater effect on the world system.
Humans today are facing a crisis because of five factors:
- We have, over the last 70 or so years, been increasing human dependency on fossil fuels for our daily life and survival.
- Oil and gas are approaching, or have reached [it is disputable], peak production. Consequently, social availability of energy is likely to decrease.
- With decreasing availability, the energy cost of energy production, and the destruction resulting from energy production, will increase.
- The pollution from burning fossil fuels is overwhelming the planets ecological ability to process, or recycle, that pollution. The results of this excess is changing those ecological systems and producing climate change.
- The potential energy, and pollution, cost of replacing fossil fuels with renewables could be enormous.
In other words the way we have had of maintaining and generating our survival and way of life, undermines survival and way of life, and is likely to come to an end in any case.
Continuing to use fossil fuels increases the likelihood of dramatic instability in weather patterns, sea level rises, water shortages, floods and agricultural shortages. This will likely increase movements of people and produce armed conflicts. Increased temperatures will, in many already warm places such as Australia, make outside labour difficult and possibly harmful for labourers; this will possibly slow production. It also needs to be added that there are other pressures on the ecology as described by ‘Donut economics’ and planetary boundary theory: such as chemical pollution, nitrogen and phosphorus cycle disruptions, biodiversity loss, particulate pollution and so on. Production of chemical fertilisers may not be energy efficient, when joined with the loss of nutriments through disposal of waste, as when phosphorus is flushed into the sea (the real “metabolic rift”).
We may also have stretched the use of other resources to near their limits, which make production that depends on use of those resources, harder and more expensive. In one formulation, we have taken the easily obtained, “low hanging fruit,” and further fruit will require more energy expenditure to obtain, and this expenditure will likely increase over time. The fruit analogy gets broken, when we realise that the ‘fruit’ we have taken is unlikely to all grow back.
With a growing scarcity of easily available energy and resources (even without increased climate instability), economic growth and production (transformation of materials) will slow, and possibly decline.
“A reasonable hypothesis is to consider that our economy will not be able to grow faster than the energy supply.”
According to Jancovici’s figures (based on those provided by the World Bank), a decrease in the growth rate of GDP per capita, seems to have been happening in the developed world since the 1970s. World growth since then has largely come about through the increased use of energy in the developing world:
“no major old industrialized country has done better than a 1% per year growth on average for the GDP per capita over the first decade of the 21st century.”
With an economic slowdown, it will be harder to make a transition to a decarbonised economy and to lower pollution and chances of wild climate instability. The monetary capital will be less available and the costs of transformation are significant. They involve (at the least): changes in building insulation and design to lessen the need for air conditioning and heating; energy efficiency; transformation of water use and slowing our loss of drinkable water; transformation of agriculture to require less fertilizer and lower emissions; and massive replacement of fossil fuel dependent vehicles, changes in transport patterns, and corresponding changes in city layouts.
There is also the cost of moving into renewables when this is a product which does not provide a new service or a significant price reduction, but does involve significant reorganisations of grid requirements, transfer of energy over large distances (with resulting energy loss), changes in landscape usage and changes of energy transformation (and waste products) in manufacture and transport.
Renewables and storage may also involve transformation of resources with finite and increasingly difficult supply, such as lithium (remember economies are about transformation of materials). It may be that energy output per energy input may be better for renewables, as we don’t need to gather the resources to power them, once installed, but I don’t know.
This all takes lots of energy and capital, and is unlikely to be very profitable without taxpayer subsidy, so it is unlikely to happen through the market.
Certainly it appears that renewables may reduce the price of electricity, but price reductions can lead to more usage (Jevons effect), and hence further stress the system. In 2015 fossil fuels provided, in general, 80% of available energy, the rest was largely provided by hydro, nuclear, and biofuels (not by solar and wind); so the amount of work that needs to be done, and energy expended to transform, is huge.
Some forms of renewable energy can feed into destruction, as when biofuels remove waste which would function as fertiliser, or when they lead to deforestation and lessening of food production.
Replacing all fossil fuel and outputs through burning (especially in transport) requires a major and possibly ‘excessive’ level of investment as renewables may need to be able to over-supply energy to guarantee a constant minimum transmission of energy (although this may not be as necessary as is sometimes claimed, as people can adapt to fluctuating energy flows and did with relative ease 40 years ago). Over-supply of renewables is likely to cause conflicts over land use, as renewables tend to take large areas of land. Storage and release, in batteries, always involves an energy loss, and may also lower the quality of the storage medium. In other words storage mediums tend to decay.
Generating ‘sustainability’ (whatever that is) requires resource and energy usage, and we do not know how much it will take to get there, or what culturally defined “needs” actually need to be satisfied. As Jancovici says:
“Have we ‘met our needs’ when we have 100 square feet of heated living space per person, or will it be the case only when every inhabitant on Earth will own 1500 square feet with central heating, air con, plus a jacuzzi and a private spa?”
These individual needs may conflict with collective needs for survival, with the governance processes for separating them being quite difficult. Similarly, is it possible to be ‘sustainable’ and experience perpetual growth in prosperity, or to extend current living standards (together with the energy use required) to everyone in the world? Will such an extension also require a change in economics and governance? The speed of any such transformation will depend on the politics of the distribution of economic proceeds of the change, or lack of change.
Most of these changes involve changes in society, and threats to established power relations, which also brings up obstacles to them. If the owners and controllers of economic and energy machinery oppose transformation or suck away the profits, it will make transformation slower.
This is what we are observing at the moment. There appears to be a large popular awareness of the need for transformation, but there seems to be little political will to engage in conflict with the power of resistant private capital. Given that money, energy and materials may be short, governments may need to promote public projects in renewable energy, and that requires the possibility of offending powerful and wealthy people and organisations. However, it seems clear that any project that depends on oil or coal production continuing to be cheap should not be encouraged.
A sustainable economy must be able to extract the production of resources to keep the economy going. It must be able to provide energy for its machines, and food, shelter and relatively good health for the people within it.
“if we don’t finance the ‘good’ transition, we will get an economic collapse,”
and
“The sooner we move in the direction of massive ‘decarbonization’ of Europe, the higher our chances are to export what we have found (techniques, systems, ways of thinking) elsewhere.”
