The Equanimist

Response to Global Trends 2025, Part II: Clean Is Good (Formerly "Green Is Good")

Posted in Corrections, National Security, Political Economy, Public Policy, Socioeconomy by equanimist on December 18, 2008

Global climate change hasn’t gone on holiday because the US is staring down the barrel of a financial gun. There remains no doubt that the world is warming, and, there is vanishingly little room to speculate that human activity is not to blame (at least in some part). According to the Intergovernmental Panel on Climate Change (IPCC) Climate Change 2007: Synthesis Report:

Global atmospheric concentrations of CO2, CH4 and N2O have increased markedly as a result of human activities since 1750 and… in 2005 [concentrations of CO2 and CH4] exceeded by far the natural range over the last 650,000 years. Global increases in CO2 concentrations are due primarily to fossil fuel use, with land-use change providing another significant but smaller contribution… There is very high confidence [equal to or greater than 9 in 10 chance] that the global average net effect of human activities since 1750 has been one of warming…

The report continues, relatively small changes are already baked into the system. But don’t let small numeric values fool you. We can be quite confident that these same small changes (less than 1 or 2 degrees Celsius) will put tens or hundreds of millions under “increased water stress”, while negatively impacting food production, increasing risk and damage of flooding, and adversely affecting human health (pps. 50-52). Again, the consequences of changes that cannot be avoided do not bode well for the future. The effects of continued unmitigated global climate change could be catastrophic.

If for no better reason than we are playing a far riskier game than Russian roulette, clean is good.

“But,” you say, “It [R&D] is a huge economic burden. I don’t live in Africa. What do I care if Africans die of thirst? And, I can afford healthcare. Besides, this global warming might be good for US farmers, for a while anyway.” Right you are. But, here’s why you should care anyway.

(1) Addiction to oil is bloody expensive. According to T. Boone Pickens’s Pickens Plan the US currently imports nearly 70% of the oil it uses at a cost of about $700,000,000,000US per annum and will spend about $10,000,000,000,000US (ten trillion USD) on foreign oil over the next ten years. These numbers aren’t strictly accurate since the bottom fell out from under the oil market. At $49 a barrel, it’s about $263,000,000,000 per annum. But, barring total worldwide economic collapse, $49 per bbl. may not last. [Saudi Oil Minister Ali al-Naimi recently indicated that oil has a “fair” price of about $75 per bbl., so, OPEC may move to cut production. (Am I missing something? Isn’t $49 the fair price, the market price? $75 is the price after market manipulation!) And $75 per bbl. is down from June when $100 per bbl. seemed reasonable to the Kuwaiti finance minister.] So barring disaster, with no further interruption and at relatively “flat” reserve estimates over the mid-term, oil ought be expected to fluctuate between $49 and $150 per bbl.

In perspective, US GDP is presently valued at approximately $14.4 trillion. So, at $263 billion, the US annually spends about 1.8% of GDP on foreign oil; at $100 per bbl., that figure rises to about 3.7%; and, at $150 per bbl., that’s nearly 5.6% of GDP! Even if oil settles back down into the twenty dollar range, at $25 per bbl., the US will continue to pay nearly 1% of GDP (about $130,000,000,000 per annum) on foreign oil, a foreign tax on US productivity paid not by big US corporations alone but individual US citizens.

(2) And do not be deceived, the Saudis do not and will not show the US any special treatment. Sure, their king likes to hold hands with ours but, they’re not partners. Case in point, according to Gulf News, “Saudi Arabia’s King Abdullah Bin Abdul Aziz [recently] stressed that Saudi Arabia and other Gulf states did not and will not give any amount of money to the US for that purpose [i.e., the financial crisis].” Translation, The US is dependent upon disinterested foreign oil producers for continued national security.

Why do we stand for it? Why do we continue to lay prostrate at the feet of despots like Abdullah Bin Abdul Aziz? Well, as T. Boone points out, we only import 14,700,000 bbl. of oil every day. The other 6,300,000 bbl. come from US fossil-fuel magnates who collect another nearly 0.8% of GDP at a rate of only $49/bbl. and as much as 2.4% of GDP at $150/bbl.!

It should be clear, (3) energy production must go green and whoever holds the means of producing clean energy will be future king, and, it should be self-apparent that (4) real or imagined depletion of limited resources creates real potential for inter-regional and international conflicts. Wind farming, solar cell, fuel cell, hydroelectric and hydrothermal technologies will ensure continued US hegemony and will make “free-”market capitalists big bucks. But, the US procrastinates. Procrastination provides opportunity for technological powerhouses (e.g., Japan, Germany and Korea) and motivated states (e.g., United Arab Emirates and other Europeans) to gain the upper-hand and, further, runs the risk that money and means run dry in the interim.

According to the CIA’s World Factbook US foreign debt currently ranks number one in the world at $12,250,000,000,000 while US current account balance ranks dead last at $ -731,200,000,000. In a crisis of confidence (not unlike the current financial crisis) might there come a time when these extravagant Joneses get a knock at the door from debt collectors? Will the US find a new foreign securitizer? The answer seems a stern, “No.”

Will the US kowtow to some foreign superpower in the way that Europeans now kowtow to Russia? When Abdullah grabs George’s hand is it in friendship, or is he really telling the world, “George is my bitch.” How will these debts be paid?

Still, the US controls extraordinary means of production and a vibrant, albeit decimated, scientific community. There remains the possibility that the US can rally and rise to the occasion, as it has done throughout its history. But, it’s a closing window of opportunity. With jobs rapidly disappearing, manufacturers facing bankruptcy, no plan to tackle staggering imbalances, and rapidly gaining technological rivals, the US will either create jobs, secure manufacturers’ viability and aggressively develop future technologies or be eclipsed by foreign rivals.

For these reasons, it must be “unthinkable” that US policymakers do not reinvest in infrastructure now. A clean revolution offers fundamental solutions to all of these problems. And, if it costs even a trillion dollars in investment capital this small sacrifice will pay for itself in less than ten years at one tenth the estimated cost of foreign oil over the same period.