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Category — Sustainable Development

On Sustainable Energy (Part II)

Minerals cannot be synthetically reproduced in human time frames. But in the world of human action, neither crude oil, nor natural gas, nor coal exists in one, total, known form to start a depletion clock.

Erich Zimmermann warned against the fallacy of importing the physical science concept of fixity to the real-world process of mineral development. “If petroleum resources were in their entirety available from the beginning and could not increase but only decrease through use, it might be correct to advocate ‘sparing use so as to delay inevitable exhaustion’,” he explained.

But if petroleum resources are dynamic entities that are unfolded only gradually in response to human efforts and cultural impacts, it would seem that the living might do more for posterity by creating a climate in which these resource-making forces thrive and, thriving, permit the full unfolding of petroleum reserves than by urging premature restraint in use long before the resources have been fully developed.

Human ingenuity in market settings explains why age-old predictions of energy famine have failed to come to pass. Joining dire forecasts of prior decades, the chief geologist of the United States Geological Service stated in 1919: “The peak of [U.S.] production will soon be passed—possibly within three years.”

Erich Zimmermann, whose functional theory of resources pointed to open-ended resource development, waxed pessimistic when comparing the alternatives to coal: “Oil and natural gas are forging ahead rapidly, but because their total reserves are much smaller than those of coal they are bound to lose in relative importance in the not too distant future.” [1] [Read more →]

January 10, 2012   4 Comments

On Sustainable Energy (Part I)

The market order encompasses the concept of sustainability, which has been defined (Brundtland Report) as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”[1]

In a sustainable energy market, the quantity, quality, and utility of energy improve over time. Sustainable energy becomes more available, affordable, usable, and reliable. Energy consumers do not borrow from the future; they subsidize their progeny by enabling the expansion of technology and upgraded infrastructure.

The catchphrase sustainable energy encompasses the goals of security and reliability, energy availability, and environmental progress. Critics of industrial modernism censure fossil fuels, beginning with coal and continuing with oil. Relatively cleaner-burning natural gas is preferred of the three, but sometimes only as the transition fuel to an envisioned post-hydrocarbon economy.

Market failure is alleged where private benefits from producing and using carbon-based energies create net social costs (more costs than benefits). It is the invisible hand in reverse, whereby self-interested action creates a so-called negative externality. But is this the case?

Statistics support the conclusion of increasing energy sustainability, not its opposite, whether measured in terms of air emissions or resource development.[2] Regarding the latter, the natural science concept of mineral fixity—and thus depletion with every extraction—is contradicted by the business and social science reality of replenished supply and net reserve additions from entrepreneurship, or in this case, resourceship. [Read more →]

January 9, 2012   5 Comments

A Free Market Energy Vision (Part I: Worldview)

[Editor note: This is a revision of a previous post at MasterResource last year. Part II highlights a federal free-market energy bill created for discussion by the Institute for Energy Research. Part III examines the Cato Institute's (Jerry Taylor and Peter Van Doren) federal energy priorities.]

Energy is the master resource. Without it, other resources could not be produced or consumed. Oil, gas, and coal could not be replenished without the energy to manufacture and power the requisite tools and machinery. Nor could there be wind turbines or solar panels, which are monuments to embedded (fossil-fuel) energy.

And just how important are fossil fuels relative to so-called renewable energies? Oil, gas, and coal generate the electricity needed to fill in for intermittent wind and solar power to ensure moment-to-moment reliability. So renewables, ironically, codepend on nonrenewable energy given that battery storage to firm the flow of electricity is prohibitively expensive.

As a component of all products and services, energy is the fourth factor of production in addition to the textbook triad of land, labor, and capital. Ubiquitous energy must be affordable, convenient, and reliable for economic progress, which requires that public policy respect consumer preference and allow energy producers to meet the demands of the marketplace. Enter private property rights, voluntary exchange, and the rule of law to facilitate the global exchange of energy and its innumerable subcomponents.

Government Intervention

Global energy supplies are primarily the product of government, not the free market. In state-run economies, political elites make the decisions that otherwise would be made by the multitude. Win-win voluntary exchanges are supplanted by bureaucratic command. Without incentives to minimize costs, and without competition between firms for the same resources, wealth is redistributed and wasted that otherwise would go to better uses.

Government intervention with privately held resources also has unintended negative consequences. For example, a state law (such as in Texas) may force electric utilities to buy wind power, solar power, or another politically correct energy under a state law. A mandate is required because a free marketplace would not support such expensive, unreliable—noncompetitive—supply. [Read more →]

May 6, 2011   1 Comment

‘Sustainability’: Some Free Market Reflections

A few months ago, I participated in a symposium entitled, “A Sustainable Energy State — How Remote Is the Possibility?” I prepared some talking points for the event and, heeding the injunction to re-use and recycle, turn them here into a MasterResource column.

The following reflections make three main points: (1) A “sustainable” energy system, as that term is commonly used, will likely not materialize in our lifetimes; (2) except for heavily-subsidized wind, solar, and biofuel energy, the current, largely fossil fuel-based energy system is already sustainable; and (3) the “sustainable energy” agenda imperils the improving state of the world and, therefore, is politically unsustainable.

Just around the Corner (Not!)

How “remote” is the “possibility” of a “Sustainable Energy State”? That depends, of course, on the meaning of sustainability. When environmental advocates call wind farms, solar power, or “next generation” biofuels “sustainable,” they imply that energy is sustainable only if it is carbon-neutral or non-emitting. If that’s the definition, then the possibility of a sustainable energy state is remote – many decades away at a minimum.

Wind and solar power are more expensive than fossil-generated electricity in most markets, and will likely remain so for some time. The U.S. Energy Information Administration (EIA) estimates the following average levelized costs (2008 $/megawatt hour) for new electric power plants entering service in 2016: conventional coal, 100.4; advanced coal with carbon capture and storage (CCS), 129.3; conventional natural gas combined cycle, 83.1; advanced nuclear, 119.0; onshore wind, 149.3; offshore wind, 191.1; solar photovoltaic, 396.1; solar thermal, 256.6.

In addition, because wind and solar are intermittent energy sources, their value as either base load power or dispatchable peaking power is severely limited. Unsurprisingly, wind and solar depend on Soviet-style production quota (“renewable portfolio standards”), feeder tariffs, and other subsidies to “compete” for customers.

Subsidy-dependent enterprises are not self-sustaining. Chronic subsidy dependence indicates that a firm’s products or services are less valuable than the resources it consumes. On both business and environmental grounds, one could argue that wind and solar power are not sustainable.

Fiscal considerations point to the same conclusion. Subsidized renewables contribute to the egregiously unsustainable spending binges pushing entire states and nations to the brink of insolvency. That is why the cash-strapped governments of Spain, Germany, and France are cutting back green-energy subsidies. The global recession has done more than any climate treaty or national cap-and-trade scheme to reduce greenhouse gas emissions, but it also makes wind and solar power even less affordable.

[Read more →]

February 11, 2011   19 Comments

“The Environmental Responsibility of Business is to Increase Its Profits” (Pierre Desrochers on capitalism & environmentalism)

[Editor note: This review was completed before the BP oil spill. To the extent that cost cutting was responsible for the Deepwater Horizon rig blowup and the uncontrolled oil spill, it was a monumental miscalculation under profit/loss accounting.]

A hallmark of the “sustainable development” mantra is the notion that business’s pursuit of profit maximization must necessarily lead to environmental degradation and the depletion of “non-renewable resources,” and that such activities must be closely regulated by government. However, this assessment does not square with the historical environmental record of market-based industrial progress and it ignores basic economic concepts.

Pierre Desrochers, Ph.D., Associate Professor of Geography at the University of Toronto, maintains, “It is unfettered governments that are no friend to the environment.” An expert in economic geography with specialization in the study of the history of technology, Desrochers provides an abundance of historical evidence to substantiate his position.

North American and British industrial history is replete with examples of profit maximizing firms practicing “sustainable development” long before the term was in vogue and distorted by modern day environmentalists, he documents. It was through the discipline of free market competition and the profit motive that a lengthy history of “green” innovations were realized, significantly predating the modern environmental movement. [Read more →]

May 4, 2010   5 Comments