Chapter 5: Ecological Economics by Herman Daly & Josh Farley Abiotic Resources Chapter 5: Ecological Economics by Herman Daly & Josh Farley

Chapter Overview Fossil Fuels Mineral Resources Water Ricardian Land Solar Energy Key Question: How do the laws of thermodynamics, the distinctions between stock-flow and fund-service resources, and the concepts of excludability and rivalness relate to these resources?

Fossil Fuels Crude oil 38% of energy for global economy Coal 25% of energy for global economy Natural Gas 22% of energy for global economy TOTAL (fossil fuel) 85% of energy for global economy Energy Return on Investment –How many barrels of oil does it take to recover a barrel of oil (including exploration, machinery, transportation, etc.)? 1950’s Energy Return on Investment in U.S. was about 50:1 2000 Energy Return on Investment in U.S. was about 5:1 What is ‘Peak Oil’? Are we presently in ‘Peak Oil’ globally?

How much oil is left? Global Annual Consumption of Oil : 25 Billion Barrels (~70 million/day) In 1997 the world used 23 Billion Barrels, discovered 7 Billion more, yet the estimated reserves increased by 11 Billion. How does that make sense? There are uncertainties with respect to how much oil is left in a given location. For example, the P90 estimate for a field in Norway might be 11 million barrels (that means there is 90% confidence that 11 million barrels can be extracted from that field. A P50 estimate for the same field would be a higher number). Countries and companies manipulate their estimated reserves for various reasons such as attempts to increase stock prices, garner greater access to credit, and, for OPEC countries, to increase their Oil production quotas.

The ‘Peak Oil’ Graph Noam Chomsky on Peak Oil and more (20 min): http://readersupportednews.org/video/4-video/4901-noam-chomsky-peak-oil-and-a-changing-climate Question: Economists argue that price reflects scarcity. Do you think the price of oil is a good indicator of how much oil left in the ground? Why or Why not?

http://www.energybulletin.net/primer.php

The sink will be full before the source is empty Used fuel does not disappear; it must return to the ecosystem as waste. Acid rain, global warming, carbon monoxide, heat pollution, and oil spills are unavoidably associated with the use of fossil fuels. On a small scale, some of these wastes could be readily processed by natural systems, but on the current scale, they pose serious threats. Indeed, the growing accumulation of waste products from fossil fuel use and the negative impacts these have on planetary ecosystems is probably a far more imminent threat to human welfare than depletion; the sink will be full before the source is empty. Question: What is the bigger problem, running out of oil or dealing with the oil we have already used?

Mineral Resources Grouped with fossil fuels in econ textbooks Fossil fuels are permanently changed when used. Minerals are not (they are almost 100% recyclable). Mining accounts for 10% of Global Energy use. According to Georgescu-Roegen mineral depletion is a bigger concern than fossil fuel depletion because fossil fuels can be substituted with solar energy whereas minerals cannot. Extracted mineral stocks will eventually succumb to entropy. (example: Pennies slowly eroding away) We often find substitutes for scarce minerals. This process is probably slow enough that we could achieve a steady state economy through material recycling for a time sufficient that extinction through evolution would happen before extinction through resource depletion. Minerals are rival goods within a generation and nonrival between generations. Fossil fuels are rival both within and between generations.

Water (a complex abiotic resource) The myriad ways we use water makes it very difficult to characterize its economic properties in a general way as an abiotic resource. For drinking, irrigation, industry, and waste disposal water is a stock-flow resource; however, many water resources are renewable via the hydrologic cycle. On the other hand many aquifers are being mined at rates that necessitate regarding water as a mineral. These rivers sometimes never reach the sea: The Colorado, The Rio Grande, Amu- Dar’ja & Syr-Dar’ja (flowing into the Aral Sea), and the Yellow, Hai and Huai rivers in northern China. It seems natural to think of flowing water as a fund-service but dams allow us to stockpile water – and fund-service resources cannot be stockpiled. Water: or lack thereof

An ecological economic way of thinking about Flowing Water as a resource Perhaps the best way to think about flowing water is to distinguish it from the hydrologic cycle. The water itself is a stock-flow resource that is rapidly renewed by the service (provided by solar energy) of the hydrologic cycle. Hydroelectricity is not provided by water, but rather by the energy transferred to water by the hydrologic cycle – solar energy stored in water. Solar energy is generally a fund service, but when stored in water, it can be either a stock-flow or a fund-service resource. When mechanical energy in the water is converted to electric energy by a micro-hydro power plant that depends on river flow, it is essentially a fund-service resource. However, damming of the river allows the energy to be stockpiled by converting mechanical energy to potential energy, which is a stock-flow resource.

Water (continued) Like Biotic resources, water can be a stock-flow and fund-service Resource simultaneously. Unlike Biotic resources; however, humans cannot meaningfully affect the total stock of water on the planet. We can and do reduce the stock of usable water, and while it is possible to restore the usability of water , there are no substitutes for its most important uses. Water has a dual nature. Water can be rival or nonrival depending on its use. Stock-flow uses are rival, fund-service uses are nonrival. However, as flowing Water is recycled through the hydrologic cycle, it is intergenerationally nonrival. Excludability varies dramatically depending on existing institutions, though rainfall Is practically nonexcludable by nature. Q: Should water be privatized to ensure we use it more efficiently?

Ricardian Land (after David Ricardo – ‘comparative advantage’ guy ) Land as a physical substrate and location, distinct from its other productive qualities. A fund that provides the service of a substrate capapble of supporting humans and our infrastructure. A fund that provides the service of capturing solar energy and rain. Land is excludable. Land is not depletable. Land is rival within one generation but nonrival between generations. Questions: Why do you think we distinguish between Ricardian Land as a physical substrate and the more conventional definition of land that includes the soil and its mineral content? Who or what creates value in Ricardian Land? What makes land in one place more valuable than a similar piece of land elsewhere? Who or what creates value in fertile topsoil?

Solar Energy Some Factoids 1 Ton of Oil Equivalent (toe) = 7.33 Barrels of oil The Sun shines on the Earth 19 trillion toe per year. (The energy of ~139 Trillion barrels of oil every year) Recall that we presently use ~25 Billion Barrels of oil every year. The sun provides 5,560 times more energy to the earth every year than we burn as oil every year. (139 trillion / 25 billion) But wait a gosh darn second…. The earth reflects a whole bunch of sunlight Photosynthesis (H2O + CO2 + sunlight energy --> CH2O + O2 ) is only 3-6% efficient depending on plant, temperature and other conditions. Still, Americans consume 40% more energy energy than is captured by photosynthesis by all the plants in the United States.

Solar Energy (continued) Global Gross Energy Consumption is ~9 Billion toe per year. ( ~ 66 Billion Barrels of oil per year) Biomass, hydroelectricity, wind, photovoltaics, and wave/ocean thermal energy are all forms of solar energy we can possibly capture. Limitations of Biomass liquid fuels (e.g. corn based methanol) – Even if ALL of the Net Primary Productivity (NPP) of the U.S. was converted to bio-fuels it would still not meet our liquid fuel needs. Hydroelectricity provides 19% of global electricity but even if fully developed could only provide 60%. Wind power is presently negligible as a percentage of global supply; however, the amount of wind power is doubling every 3 years. Photovoltaics Energy return on Investment has been poor but is improving.

Summary Points Question: Why is the information in this table important to ecological economic analysis?

We should be careful about the rate at which we unnaturally mix biotic and abiotic resources. How quickly we forget. The BP Coffee Spill – Have you seen this? How far is this from the truth? http://www.youtube.com/watch?v=2AAa0gd7ClM

Big Ideas to remember… Ch 4 ideas in Ch 5 P10 and P90 reserves Ricardian Land Entropic Dissipation Energy Return in Investment Rival within vs. between generations Recoverable reserves Garbo-Junk vs. Pure Waste Net recoverable energy from fossil fuels Unique characteristics of water and solar energy Aboveground and subterranean Mineral Stocks Time permitting: The Story of Stuff with Annie Leonard http://www.youtube.com/watch?v=gLBE5QAYXp8 Does she do a better job at this than me or the authors of the text?