Contrary to being a liability for adapting to and eventually solving climate change, economic productivity undergirded by private property, markets, and prices - is our primary asset.
I assume "economic freedom" is alternate wording for capitalism. I appreciate that capitalism does not imply unlimited growth. Harnessing capitalism can both limit CO2 and also encourage prosperity in developing nations.
Thorcon International is developing fission reactors that produce electricity cheaper than from coal-fired or LNG-fired power plants. Nuclear power radiation fear propaganda has created regulations that make nuclear power excessively expensive in the US and EU. The developing nations' leaders know they need more, inexpensive, 24x7 energy to increase prosperity, so they encourage low-cost fission power to undersell electricity from coal. Economic self-interest will lead to zero CO2 emissions at no excess cost. See thorconpower dot com slash news/
There are two views of climate change; the scientific view that almost no one is aware of, and the political one that everyone is aware of. Think about it. The one that matters is almost unknown. The one that is worse than pointless is the one that everyone pays attention to. Why is that?
As far as I know scientists have identified a number of geophysical processes that are affected by the increase in CO2 (and methane) in the atmosphere. Economists have costed out those changes and recommend policies that incentivize actions that reduce net emissions globally at costs less than the harm done by the accumulation. Unfortunately, these recommendations have not been followed yet, but I do not call that a "view that almost no one is aware of."
Well, no. I know of no calculation that finds mitigation to be an economical "solution." I put solution in quotes, because I almost never hear anyone say what "solution" they're trying to achieve, much less show any math that indicates they're solving it. Windmills are solar panels (and batteries) do as much or more damage than just burning more natural gas to get our electricity.
Try to find a physicist who will endorse the foolishness of politicians. That's what I'm getting at.
And remember, as you buy into how evil those capitalist fossil fuel companies are, remember that windmill companies and solar panel companies, and battery companies are also huge capitalist enterprises. And they grease the wheels is Washington, same as the fossil fuel companies. Take my word for it or not (I used to teach earth science), if all you know about climate change is what the MSM tell you, you are seriously misinformed.
I think that a simpler factorization of CO2 emissions would leave out the GDP: population x energy consumption/capita x CO2 emissions/energy. I agree that population is best addressed with reduced poverty but also by empowering women. Technical Innovation from free markets clearly helped here, but a social safety net is also essential. The lowest birth rates are found in developed nations with strong social programs. Energy consumption per capita is reduced with increased energy efficiency but also with more compact housing and cars. The primary power consumption of the US is 9 kW per person - twice the value in Europe and Japan with just as high a standard of living!
There is a clear benefit from the innovations fostered by the capitalist free market. However, by not giving any intrinsic value to natural resources, the capitalist exploitation of natural resources is as damaging as it is highly efficient. For example, the international oil market with the price of a barrel of oil set by the marginal barrel produces enormous profits for most of the petroleum states and companies and also guarantees that essentially all the oil in the ground is extracted. Burning all the fossil fuel that is in the ground will supercharge global warming!
Of course, the oil market is not a free market but it has a powerful producer cartel trying the maximize the profits. With enough carbon-neutral energy sources (I prefer nuclear) one could form an oil consumer cartel to force the oil price down and get the more expensive crude sources shut in leaving some of the oil in the ground. Alternatively, one could give the oil in the ground an intrinsic value maybe equal to the cost of removing the resulting CO2 from the atmosphere...
Capitalism and free markets, as great as they are, do not address the problem of externalities; the person oxidizing a carbon atom and releasing the CO2 into the atmosphere receives all of the benefit from the oxidation/emission, but bears an infinitesimal proportion of the cost. Hence the need for a Pigou tax on net CO2 (and methane) emissions.
Anti-anti-growth as an approach to climate change is a useful probably necessary attitude, but it does appear to skip over the reason to reduce CO2 (and methane) accumulation (and possible reduce it, but let’s let the folks who will be making decisions in 2050-2100 decide that). Accumulation causes harm and incurring costs now to reduce that harm (mitigation and adaption) is a good investment provided the costs are no greater than the harms done by the accumulation. Basically, we need to focus on what TO do not just on what NOT to do.
Unless I am missing something I think we are in violent agreement: some form of tax on CO2 emissions is necessary to reduce CO2 emissions meaningfully. Actually, I think an incentive (payment) to leave the fossil fuels in the ground in the first place might be more effective because once they are extracted they will be burned.
My main point of my comment was that arguments about GDP growth or de-growth are missing the point. The world's focus needs to be on stabilizing population, increasing energy efficiency (reduce energy footprint), and reducing CO2 emissions (reducing carbon footprint) - the three factors in the equation at the beginning of my comment. How this affects GDP/capita is irrelevant.
With regard to reducing the energy footprint I can highly recommend the 2000W Society (https://www.2000watt.swiss/en/english.html). with the goal of 2 kW/capita world primary power consumption. 2 kW is higher than the 0.8 kW of India but much lower than the 9 kW of the US. It is inherently fair and challenges S&T to bring down often wasteful energy consumption. Note that subsistence living needs 100W/person (2000 calories/day).
I would respectfully submit that your oil argument has two factual errors. First, oil and gas operations are not very profitable, at least for publicly listed firms. Just check the average profitability of the sector over the last 15 years, which includes all parts of the commodity cycle. You will find that the returns are the lowest and most volatile of any sector of the s and p 500. Secondly, opec has not been able to raise prices in any sustained way. Oil prices have fallen in real terms over the past 30 or 40 years. Indeed, oil and gas have, on average, been exceedingly cheap, which is one of the reasons for continued high emissions.
You might be right about the private oil companies but the petro-states derive enormous profits from oil extraction. For many, particularly in the Middle East, the production cost is as low as 10$ per barrel giving them up to 700% profits, all because the price of oil is set by the most expensive barrel of oil sold.
There are 3 things you may not be considering. 1) you are using the example of the Saudis or Emiratis for your opex of $10 per barrel. Most NOC's have an operating cost of $20-$30 per barrel (even after stripping out all of the bloated bureaucracy and corruption). so this leaves an operating profit/cash flow margin of about 60% ( your number of 700% should be 70% as profit margin is the operating profit divided by revenues). So most NOC's start out making less. 2) In a normal manufacturing business (or software, for example), you would be right in your reasoning. However, oil and gas is wasting resource. If you do not do not bring onstream any new resource, production next year will be 4-12% lower (or in the case of the US onshore, 30-35% lower). This is actually quite difficult and usually more expensive than opex. So companies must spend large sums (check their financial statements and you can see it clearly) just to stand still. so thinking in terms of an operating margin is not the best way to think about it. NOC's (National Oil Companies) often lack the skills, risk tolerance and even the funding to undertake exploration and development.
Remember that the governments usually take most of the money (which is why they are petrostates). Even more unfortunately, corruption and venality can and do steal from the amount that could go to the poor. 3) Petrostates may seem rich -- and they do have a stream of income that many of the poorest countries have never had. But they also provide subsidies to consumers and are often called upon to provide many functions for the government.
All told, it may seem like oil and gas are vastly profitable for petrostates. But the reality is that with a few exceptions, the market is free, it is volatile, and spreading an income stream over a large population does not go nearly as far as the general perception believes. This is not my opinion. Anyone can do the math form available data. Unless you are Norway, UAE, Saudi, or Guyana, you do not have much per capita wealth, and the petrostate is mostly a taker of the decisions that the other 8 billion of us make every day.
Thank you for the extended reply/comment. If the profit is 7 times the production cost then the profit is 7 x 100% = 700 %. Anyway, I didn't mean to imply that petrostates are all very rich but they all are very dependent on the enormous income from selling fossil fuel, which means that they will extract all the oil. And this is the problem. How can we stop the extraction of oil and leave some of it in the ground? I think this is the fundamental problem of ending CO2 emissions from burning fossil fuels. The capitalist international oil market is clearly not doing it and I am afraid that alternative carbon-neutral energy sources will not do it either. We need something else. I made a couple of suggestions above, but I am sure there other and better ideas.
Good article, but I would take issue with confusing the term "capitalism" with "free market economics". In many ways capitalism is the enemy of the free market. The Market is supposed to be a black box that we sell goods & services into and buy goods & services out of. But big capitalistic enterprises don't accept that. They seek to manipulate the Market, subvert it, control it, by any and all devious unscrupulous means. Why must we always discover that the end run of Capitalism is Fascism? Which is where we are rapidly heading right now. Not with Trump/MAGA but with Neoliberalism.
So instead of Free Market Economics we have a version of Capitalism which is entirely dominated by Crony Capitalism, Monopoly Capitalism, Stakeholder Capitalism, Corporate Socialism, Casino Capitalism, State Capitalism and Vulture Capitalism.
I view the radical zero-sum activists on either side (climate change denier capitalists and socialist-identity-distracted activists) as both on the wrong paths to sustainability and environmental stability.
This author makes good points about capitalism’s dual impacts on positive as well as negative carbon reduction outcomes. What is also rationale about fertility is true. Consider in the U.S. the strange push for women’s rights only to then champion a hypocritical push to replace that native-born fertility with poor and often uneducated immigrants who are more likely to produce more children for the same reason oppressed women did so before women’s rights.
A natural reduction in fertility to champion those hard-won rights should not be replaced with a ballooning population from millions of new migrants. While economic adjustments will occur from fewer people, this will stabilize and be the lesser of two evils which is otherwise likely to be an aggressive move from Nature to ramp up pandemics and casualties from unbalanced climate-induced natural disasters. BALANCE id needed after so much growth. It won’t be painless, but the alternative will be worse. Capitalism is the best kind of imperfect system we have.
I assume "economic freedom" is alternate wording for capitalism. I appreciate that capitalism does not imply unlimited growth. Harnessing capitalism can both limit CO2 and also encourage prosperity in developing nations.
Thorcon International is developing fission reactors that produce electricity cheaper than from coal-fired or LNG-fired power plants. Nuclear power radiation fear propaganda has created regulations that make nuclear power excessively expensive in the US and EU. The developing nations' leaders know they need more, inexpensive, 24x7 energy to increase prosperity, so they encourage low-cost fission power to undersell electricity from coal. Economic self-interest will lead to zero CO2 emissions at no excess cost. See thorconpower dot com slash news/
"...solving climate change."
Is that like "follow the science"?
There are two views of climate change; the scientific view that almost no one is aware of, and the political one that everyone is aware of. Think about it. The one that matters is almost unknown. The one that is worse than pointless is the one that everyone pays attention to. Why is that?
And it will remain unknown if you won't share. :)
As far as I know scientists have identified a number of geophysical processes that are affected by the increase in CO2 (and methane) in the atmosphere. Economists have costed out those changes and recommend policies that incentivize actions that reduce net emissions globally at costs less than the harm done by the accumulation. Unfortunately, these recommendations have not been followed yet, but I do not call that a "view that almost no one is aware of."
Well, no. I know of no calculation that finds mitigation to be an economical "solution." I put solution in quotes, because I almost never hear anyone say what "solution" they're trying to achieve, much less show any math that indicates they're solving it. Windmills are solar panels (and batteries) do as much or more damage than just burning more natural gas to get our electricity.
Try to find a physicist who will endorse the foolishness of politicians. That's what I'm getting at.
And remember, as you buy into how evil those capitalist fossil fuel companies are, remember that windmill companies and solar panel companies, and battery companies are also huge capitalist enterprises. And they grease the wheels is Washington, same as the fossil fuel companies. Take my word for it or not (I used to teach earth science), if all you know about climate change is what the MSM tell you, you are seriously misinformed.
I think that a simpler factorization of CO2 emissions would leave out the GDP: population x energy consumption/capita x CO2 emissions/energy. I agree that population is best addressed with reduced poverty but also by empowering women. Technical Innovation from free markets clearly helped here, but a social safety net is also essential. The lowest birth rates are found in developed nations with strong social programs. Energy consumption per capita is reduced with increased energy efficiency but also with more compact housing and cars. The primary power consumption of the US is 9 kW per person - twice the value in Europe and Japan with just as high a standard of living!
There is a clear benefit from the innovations fostered by the capitalist free market. However, by not giving any intrinsic value to natural resources, the capitalist exploitation of natural resources is as damaging as it is highly efficient. For example, the international oil market with the price of a barrel of oil set by the marginal barrel produces enormous profits for most of the petroleum states and companies and also guarantees that essentially all the oil in the ground is extracted. Burning all the fossil fuel that is in the ground will supercharge global warming!
Of course, the oil market is not a free market but it has a powerful producer cartel trying the maximize the profits. With enough carbon-neutral energy sources (I prefer nuclear) one could form an oil consumer cartel to force the oil price down and get the more expensive crude sources shut in leaving some of the oil in the ground. Alternatively, one could give the oil in the ground an intrinsic value maybe equal to the cost of removing the resulting CO2 from the atmosphere...
Capitalism and free markets, as great as they are, do not address the problem of externalities; the person oxidizing a carbon atom and releasing the CO2 into the atmosphere receives all of the benefit from the oxidation/emission, but bears an infinitesimal proportion of the cost. Hence the need for a Pigou tax on net CO2 (and methane) emissions.
Anti-anti-growth as an approach to climate change is a useful probably necessary attitude, but it does appear to skip over the reason to reduce CO2 (and methane) accumulation (and possible reduce it, but let’s let the folks who will be making decisions in 2050-2100 decide that). Accumulation causes harm and incurring costs now to reduce that harm (mitigation and adaption) is a good investment provided the costs are no greater than the harms done by the accumulation. Basically, we need to focus on what TO do not just on what NOT to do.
https://thomaslhutcheson.substack.com/p/market-forces-are-not-enough-to-halt
Unless I am missing something I think we are in violent agreement: some form of tax on CO2 emissions is necessary to reduce CO2 emissions meaningfully. Actually, I think an incentive (payment) to leave the fossil fuels in the ground in the first place might be more effective because once they are extracted they will be burned.
My main point of my comment was that arguments about GDP growth or de-growth are missing the point. The world's focus needs to be on stabilizing population, increasing energy efficiency (reduce energy footprint), and reducing CO2 emissions (reducing carbon footprint) - the three factors in the equation at the beginning of my comment. How this affects GDP/capita is irrelevant.
With regard to reducing the energy footprint I can highly recommend the 2000W Society (https://www.2000watt.swiss/en/english.html). with the goal of 2 kW/capita world primary power consumption. 2 kW is higher than the 0.8 kW of India but much lower than the 9 kW of the US. It is inherently fair and challenges S&T to bring down often wasteful energy consumption. Note that subsistence living needs 100W/person (2000 calories/day).
I would respectfully submit that your oil argument has two factual errors. First, oil and gas operations are not very profitable, at least for publicly listed firms. Just check the average profitability of the sector over the last 15 years, which includes all parts of the commodity cycle. You will find that the returns are the lowest and most volatile of any sector of the s and p 500. Secondly, opec has not been able to raise prices in any sustained way. Oil prices have fallen in real terms over the past 30 or 40 years. Indeed, oil and gas have, on average, been exceedingly cheap, which is one of the reasons for continued high emissions.
You might be right about the private oil companies but the petro-states derive enormous profits from oil extraction. For many, particularly in the Middle East, the production cost is as low as 10$ per barrel giving them up to 700% profits, all because the price of oil is set by the most expensive barrel of oil sold.
There are 3 things you may not be considering. 1) you are using the example of the Saudis or Emiratis for your opex of $10 per barrel. Most NOC's have an operating cost of $20-$30 per barrel (even after stripping out all of the bloated bureaucracy and corruption). so this leaves an operating profit/cash flow margin of about 60% ( your number of 700% should be 70% as profit margin is the operating profit divided by revenues). So most NOC's start out making less. 2) In a normal manufacturing business (or software, for example), you would be right in your reasoning. However, oil and gas is wasting resource. If you do not do not bring onstream any new resource, production next year will be 4-12% lower (or in the case of the US onshore, 30-35% lower). This is actually quite difficult and usually more expensive than opex. So companies must spend large sums (check their financial statements and you can see it clearly) just to stand still. so thinking in terms of an operating margin is not the best way to think about it. NOC's (National Oil Companies) often lack the skills, risk tolerance and even the funding to undertake exploration and development.
Remember that the governments usually take most of the money (which is why they are petrostates). Even more unfortunately, corruption and venality can and do steal from the amount that could go to the poor. 3) Petrostates may seem rich -- and they do have a stream of income that many of the poorest countries have never had. But they also provide subsidies to consumers and are often called upon to provide many functions for the government.
All told, it may seem like oil and gas are vastly profitable for petrostates. But the reality is that with a few exceptions, the market is free, it is volatile, and spreading an income stream over a large population does not go nearly as far as the general perception believes. This is not my opinion. Anyone can do the math form available data. Unless you are Norway, UAE, Saudi, or Guyana, you do not have much per capita wealth, and the petrostate is mostly a taker of the decisions that the other 8 billion of us make every day.
Thank you for the extended reply/comment. If the profit is 7 times the production cost then the profit is 7 x 100% = 700 %. Anyway, I didn't mean to imply that petrostates are all very rich but they all are very dependent on the enormous income from selling fossil fuel, which means that they will extract all the oil. And this is the problem. How can we stop the extraction of oil and leave some of it in the ground? I think this is the fundamental problem of ending CO2 emissions from burning fossil fuels. The capitalist international oil market is clearly not doing it and I am afraid that alternative carbon-neutral energy sources will not do it either. We need something else. I made a couple of suggestions above, but I am sure there other and better ideas.
It is not the "operations" that are profitable but the ownership of the fossil fuel assets.
Good article, but I would take issue with confusing the term "capitalism" with "free market economics". In many ways capitalism is the enemy of the free market. The Market is supposed to be a black box that we sell goods & services into and buy goods & services out of. But big capitalistic enterprises don't accept that. They seek to manipulate the Market, subvert it, control it, by any and all devious unscrupulous means. Why must we always discover that the end run of Capitalism is Fascism? Which is where we are rapidly heading right now. Not with Trump/MAGA but with Neoliberalism.
So instead of Free Market Economics we have a version of Capitalism which is entirely dominated by Crony Capitalism, Monopoly Capitalism, Stakeholder Capitalism, Corporate Socialism, Casino Capitalism, State Capitalism and Vulture Capitalism.
I view the radical zero-sum activists on either side (climate change denier capitalists and socialist-identity-distracted activists) as both on the wrong paths to sustainability and environmental stability.
This author makes good points about capitalism’s dual impacts on positive as well as negative carbon reduction outcomes. What is also rationale about fertility is true. Consider in the U.S. the strange push for women’s rights only to then champion a hypocritical push to replace that native-born fertility with poor and often uneducated immigrants who are more likely to produce more children for the same reason oppressed women did so before women’s rights.
A natural reduction in fertility to champion those hard-won rights should not be replaced with a ballooning population from millions of new migrants. While economic adjustments will occur from fewer people, this will stabilize and be the lesser of two evils which is otherwise likely to be an aggressive move from Nature to ramp up pandemics and casualties from unbalanced climate-induced natural disasters. BALANCE id needed after so much growth. It won’t be painless, but the alternative will be worse. Capitalism is the best kind of imperfect system we have.