Putting it all together: part-3

Hybrid cars, windmills, solar panels, energy efficient CFL bulbs, carbon sequestration, biofuels … The list almost seems endless. These are the often touted panacea for resource and environmental crisis of our times. How do they alter the dynamics of earth-economy interaction, in terms of resource consumption, waste output and the overall effect on the earth system ?

On the input side, some technologies give access to new low entropy resources. They enable new resources to be exploited — for example, wind energy, solar energy, or energy from biomass. Some of the solutions enable more efficiency — for example, a hybrid car will let you move from point-A to point-B with lesser fossil energy consumption; a CFL bulb will get you same lighting with lesser electricity consumption.

On the output side, some solutions result in lesser pollutant output — for example, carbon sequestration from coal fired power plants may capture co2 before emitted into the atmosphere. Some of the solutions have advantages on both input and output sides — Wind power lets us tap new forms of energy, and has no harmful emissions.

So far so good. On the face of it, these technological solutions may appear promising and contributing to the overall solution. However, if we investigate a little deeper, we will see that there are some major pitfalls in depending solely on a technology / efficiency driven solution.

Firstly, there is the obvious problem that most of these “solutions” are not a complete package. At some point during their life cycle, they involve great impacts on the earth system. Take carbon sequestration. Even if we manage to capture co2 and store it in the ground, it addresses only the climate part of the problem. What about coal mining and the disastrous impacts it has ? Take hybrid cars. Yes, they enable fuel efficiency, thus save precious fossil energy and emit less co2 per unit distance traveled. But obtaining the metal needed to build the body of the car involves mining for ores in sensitive ecosystems and manufacturing of the metal itself involves lot of adverse impact on the earth system. Take biofuels. Leaving aside the debate whether biofuels actually involve less co2 emissions than fossil fuels after taking into account the full life cycle of biofuel production, there are other side effects. There are reports that forest land is being cleared to grow biofuel crops. Also, biofuels put upward pressure on the food prices as lesser crop produce is available as food, when part of it is converted to fuel.

The second, less obvious pitfall in depending solely on efficiency solutions is that “as technological improvements increase the efficiency with which a resource is used, total consumption of that resource may increase, rather than decrease.” (This is popularly known as Jevons paradox). I would add to this observation that total consumption of other resources may also increase because of efficiency gains in a particular resource. Let me explain why. Suppose there is a technological breakthrough and the fuel efficiency of hybrid car is double that of currently used car. Initially, that may reduce the demand for fuel — thereby decreasing its price. However, the decreased price of fuel will inturn stimulate more demand — either through more driving or demand from other existing applications or a decreased price of fuel may even make new applications market competitive. Thus, the overall use of fuel may actually increase even after the efficiency gains achieved in one application. There is another way of arriving at this rather counter-intuitive conclusion. Lets start again with the assumption of a technological breakthrough in doubling fuel efficiency. The consumer will have saved half the fuel money by the end of the month. Now, what can he do with that saving ? (a) He could choose to drive more, thereby consuming some of the gains due to efficiency. (b) He could spend that money to buy another good or service. Say to buy a cell phone. Now, the manufacture of the cell phone needs some materials and energy to produce. Thus the efficiency saving on fuel has resulted in spending of material and energy to manufacture a cell phone. Thus efficiency gain on fuel has resulted in stimulation of consumption of different materials ! (c) He could choose to put the saving in a bank. Now we all know the very purpose of a bank is to loan these savings to borrowers, thus stimulating more consumption ! Infact, thanks to fractional reserve banking, bank can loan out n-times the fuel savings deposited in the bank. More consumption !

My point is this: Energy-and-material efficiency gains will stimulate economic growth and only make an economy more efficient in terms of consumption of resources. Efficiency gains will only improve the energy intensity or material intensity of the economy — the amount of energy or material used per unit of GDP. Looked at from earth system point of view, however, the energy-and-material intensity numbers are not very useful. What matters to health of the earth system is the overall use of resources by the economy and its impact on the earth system, and not how efficiently the economy is running. In the context of an actively pursued policy of economic growth — and — without explicit policies which aim to reduce the overall impact on earth system, efficiency gains will most likely increase the overall consumption of resources, thus increasing the impact on earth system.

Don’t get me wrong. Iam all for employment of efficient and less-polluting technologies. However, to have a lasting positive impact, they must be part of an explicit larger policy which aims to reduce the overall impact of our economies on the earth system. At the risk of stating the obvious, this policy is again a political decision our societies have to make.

A word on “economic growth”. I think growth per-se is not as much of a problem, as the kind of growth we are pursuing. I believe the current state of technology ought to direct how-much and what-kind of growth is to be pursued. Our current technologies regarding energy production-and-use or material production-and-reuse are dirty, and involve harming the larger ecosystem — think oil, coal, mining, industrial chemicals etc. So our current state of technology does not warrant a growth policy in the direction of intense usage of materials-and-energy. But unfortunately, we are doing exactly that. Case in point is personal transportation, which currently involves profligate wastage of energy and material resources. Imagine that down the road our technologies evolve to be cleaner and having less impact on the earth system — say we perfect extracting solar energy efficiently or improve material production using nano-technology. Then that technological improvement can expand the sphere of choices with respect to what kind of economy we can safely have, without impacting the larger ecological system. I’ll call it “ecologically safe economic possibilities frontier”. Until an improvement in technology expands that frontier, we need to direct economic activity within the sphere warranted by current technology.

Given current population of the earth and the technologies available to us, two trends in economy seem to be appropriate , so that we remain within the current safety sphere: (a) Shared use economy (b) Services economy. By “shared”, i mean the kind of economy that optimizes the use of resources. For example, lets take housing. Given our current population on earth, especially in densely populated countries such as India, we cannot afford individual villas for everyone. It creates sprawl, takes up green lands for building houses and roads (which could be used for gardens or agriculture), and creates a more energy intensive economy by requiring people to move around too much. When housing is compact and apartment style, it enables sharing and optimal use of other resources as well. I chose this particular example because i see and hear in the news everyday, acres and acres of land being taken up for “real estate” projects. Just an awful waste of precious land. There are a number of other examples on how our economy can get the job done, but at the same time optimize the use of the resources.

The other broad trend appropriate in our times is to have a predominantly service economy rather than a manufacturing economy. This is because services in general tend to take less material-and-energy resources than manufacturing activities. Think public transportation services, rather than private automobile manufacturing. Think economy focused less on producing tangible goods, but on services like education, health-care, arts etc. The jobs in a service economy will be directed at delivering services, rather than producing goods.

Why are we not implementing policies which keep an economy within a sphere of ecological safety, and which direct an economy in terms of shared-use and services. Its because free market fundamentalists continue to insist, despite evidence to contrary, that “free markets” will always automatically generate the optimal solution, and that all “interference” with markets is to be avoided. I think markets do a fantastic job at creating efficiencies — However, the market cannot automatically know (as i discussed in part-2) the boundaries within which to create efficiencies, or the direction in which an economy ought to go. To me, these are clearly policy choices to be made. Within a framework of direction and boundaries, defined explicitly through our policy choices, iam all for markets and private sector to work out the efficiencies.

(To be continued. This is part-3 of a series)