The end of ingenuity???

The end of ingenuity

Thomas Homer-Dixon
The New York Times
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Maybe Malthus was on to something, after all.

First, some background: Twenty-six years ago, in one of the most
famous wagers in the history of science, Paul Ehrlich, John Harte and
John P. Holdren bet Julian Simon that the prices of five key metals
would rise in the next decade.

Ehrlich and his colleagues, all environmental scientists, believed
that mankind’s growing population and appetite for natural resources
would eventually drive the metals’ costs up. Simon, a professor of
business administration, thought that human innovation would drive
costs down.

Ten years later, Ehrlich and his colleagues sent Simon a check for
$576.07 – an amount representing the decline in the metals’ prices
after accounting for inflation.

To many, the bet’s outcome refuted Malthusian arguments that human
population growth and resource consumption – and economic growth more
generally – would run headlong into the limits of a finite planet.
Human inventiveness, stimulated by modern markets, would always trump

Indeed, the 1990s seemed to confirm this wisdom. Energy and
commodity prices collapsed; ideas (not physical capital or material
resources) were the new source of wealth, and local air and water got
cleaner – at least in rich countries.

But today, it seems, Ehrlich and his colleagues may have the last
(grim) laugh. The debate about limits to growth is coming back with a
vengeance. The world’s supply of cheap energy is tightening, and
mankind’s enormous output of greenhouse gases is disrupting the earth’s

Together, these two constraints could eventually hobble global economic growth and cap the size of the global economy.

The most important resource to consider in this situation is energy,
because it is our economy’s "master resource" – the one ingredient
essential for every economic activity. Sure, the price of a barrel of
oil has dropped sharply from its peak of $78 last summer, but that’s
probably just a fluctuation in a longer upward trend in the cost of oil
– and of energy more generally.

In any case, the day-to-day price of oil isn’t a particularly good
indicator of changes in energy’s underlying cost, because it’s
influenced by everything from Middle East politics to fears of

A better measure of the cost of oil, or any energy source, is the
amount of energy required to produce it. Just as we evaluate a
financial investment by comparing the size of the return with the size
of the original expenditure, we can evaluate any project that generates
energy by dividing the amount of energy the project produces by the
amount it consumes.

Economists and physicists call this quantity the "energy return on
investment" or EROI. For a modern coal mine, for instance, we divide
the useful energy in the coal that the mine produces by the total of
all the energy needed to dig the coal from the ground and prepare it
for burning – including the energy in the diesel fuel that powers the
jackhammers, shovels and off-road dump trucks, the energy in the
electricity that runs the machines that crush and sort the coal, as
well as all the energy needed to build and maintain these machines.

As the average EROI of an economy’s energy sources drops toward 1 to
1, an ever-larger fraction of the economy’s wealth must go to finding
and producing energy. This means less wealth is left over for
everything else that needs to be done, from building houses to moving
around information to educating children.

The energy return on investment for conventional oil, which provides
about 40 percent of the world’s commercial energy and more than 95
percent of America’s transportation energy, has been falling for

The trend is most advanced in United States production, where
petroleum resources have been exploited the longest and drillers have
been forced to look for ever-smaller and ever-deeper pools of oil.

Cutler Cleveland, an energy scientist at Boston University who
helped developed the concept of EROI two decades ago, calculates that
from the early 1970s to today the return on investment of oil and
natural gas extraction in the United States fell from about 25 to 1 to
about 15 to 1.

This basic trend can be seen around the globe with many energy
sources. We’ve most likely already found and tapped the biggest, most
accessible and highest-EROI oil and gas fields, just as we’ve already
exploited the best rivers for hydropower.

Now, as we’re extracting new oil and gas in more extreme
environments – in deep water far offshore, for example – and as we’re
turning to energy alternatives like nuclear power and converting tar
sands to gasoline, we’re spending steadily more energy to get energy.

For example, the tar sands of Alberta, likely to be a prime energy
source for the United States in the future, have an EROI of around 4 to
1, because a huge amount of energy (mainly from natural gas) is needed
to convert the sands’ raw bitumen into useable oil.

Having to search farther and longer for our resources isn’t the only
new hurdle we face. Climate change could also constrain growth. A
steady stream of evidence now indicates that the planet is warming
quickly and that the economic impact on agriculture, our built
environment, ecosystems and human health could, in time, be very large.

For instance, a report prepared for the British government by
Nicholas Stern, a former chief economist of the World Bank, calculated
that without restraints on greenhouse gas emissions, by 2100 the annual
worldwide costs of damage from climate change could reach 20 percent of
global economic output.

Mankind’s energy and climate problems are intimately connected.
Petroleum’s falling energy return on investment will encourage many
economies to burn more coal (which in many parts of the world still has
a relatively good EROI), but coal emits far more greenhouse-inducing
carbon dioxide for every unit of useful energy obtained than other
energy sources.

Also, many potential solutions to climate change – like moving water
to newly arid regions or building dikes and relocating communities
along vulnerable coastlines – will require huge amounts of energy.

Without a doubt, mankind can find ways to push back these
constraints on global growth with market- driven innovation on energy
supply, efficient use of energy and pollution cleanup.

But we probably can’t push them back indefinitely, because our
species’ capacity to innovate, and to deliver the fruits of that
innovation when and where they’re needed, isn’t infinite.

Sometimes even the best scientific minds can’t crack a technical
problem quickly (take, for instance, the painfully slow evolution of
battery technology in recent decades), sometimes market prices give
entrepreneurs poor price signals (gasoline today is still far too cheap
to encourage quick innovation in fuel-efficient vehicles) and, most
important, sometimes there just isn’t the political will to back the
institutional and technological changes needed.

We can see glaring examples of such failures of innovation even in the United States – home to the world’s most dynamic economy.

Despite decades of increasingly dire warnings about the risks of
dependence on foreign energy, the country now imports two-thirds of its
oil; and during the last 20 years, despite increasingly clear
scientific evidence regarding the dangers of climate change, the
country’s output of carbon dioxide has increased by a fifth.

As the price of energy rises and as the planet gets hotter, we need
significantly higher investment in innovation throughout society, from
governments and corporations to universities. Perhaps the most urgent
step, if mankind is going to return to coal as its major energy source,
is to figure out ways of safely disposing of coal’s harmful carbon
dioxide – probably underground.

But in the larger sense, we really need to start thinking hard about
how our societies – especially those that are already very rich – can
maintain their social and political stability, and satisfy the
aspirations of their citizens, when we can no longer count on endless
economic growth.

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