The Future of Energy: Embracing Biophysical Realities

Nathan Surendran on behalf of Degrowth Aotearoa New Zealand - Submission to MBIE SSAG consultation on sectoral questions that consider the role of science and innovation in New Zealand

Context:

There is a story of a person standing by a river who sees a baby floating by struggling for its life. They immediately jump in and pull it out. Then they see another, and another. Consumed by pulling babies out of the river they never look up stream to see who is throwing them in. At business schools around the world, professors admonish: 'When something goes seriously wrong in your org, it is usually a symptom of system failure. Don’t just treat the symptom, correct the cause.'

By failing to acknowledge the systemic limitations and failures of the underlying assumptions of the economic rationale and linear thinking that drives erroneous, GDP growth-focused prioritisation in science funding, this consultation demonstrates blindness to the reality of the predicament our society faces and to the shortcomings of our dominant tools of governance, primarily the linear projections of neo-classical economics. 

Why is systems thinking better than linear? Ironically, given how defensive the Old Guard in economics is of its generally linear approach, one of the best explanations of what linear thinking is, and why it is misleading, was given ten years ago by the chief economist at the IMF, Olivier Blanchard. Looking back at the failure of mainstream economic models to forewarn of the 2008 economic crisis, Blanchard -  Where Danger Lurks noted that these models only made sense if “small shocks had small effects and a shock twice as big as another had twice the effect on economic activity”:

“These techniques however made sense only under a vision in which economic fluctuations were regular enough so that, by looking at the past, people and firms (and the econometricians who apply statistics to economics) could understand their nature and form expectations of the future, and simple enough so that small shocks had small effects and a shock twice as big as another had twice the effect on economic activity. The reason for this assumption, called linearity, was technical: models with nonlinearities—those in which a small shock, such as a decrease in housing prices, can sometimes have large effects, or in which the effect of a shock depends on the rest of the economic environment—were difficult, if not impossible, to solve under rational expectations.”

As Professor Steve Keen noted at the time: “Then along came the economic crisis, and suddenly in the real world—unlike in their models—“the effect of a shock depended on the rest of the economic environment”, and what appeared to economists to be a small shock (the Subprime crisis) had a very large impact on the global economy.”

It is also important to distinguish the ongoing process of science from the religious practice of scientism: “Science, at its core, is simply a method of practical logic that tests hypotheses against experience. Scientism, by contrast, is the worldview and value system that insists that the questions the scientific method can answer are the most important questions human beings can ask, and that the picture of the world yielded by science is a better approximation to reality than any other.” ― JMG. 

Also note that the evidence base that exists from our experimentation with the industrial path to this point in 2024 is not necessarily a useful predictor of future trajectories, as it has relied on leverage of a finite depleting resource (fossil fuels), that are non-substitutable for many of today’s uses, certainly to support current global GDP.

“We believe that the future is likely to be very different, for while there remains considerable energy in the ground, it is unlikely to be exploitable cheaply, or eventually at all, because of its decreasing EROI. Alternatives such as photovoltaics and wind turbines are unlikely to be nearly as cheap energetically or economically as past oil and gas when backup costs are considered. Additionally, there are increasing costs everywhere pertaining to potential climate changes and other pollutants. Any transition to solar energies would require massive investments of fossil fuels. Despite many claims to the contrary—from oil and gas advocates on the one hand and solar advocates on the other—we see no easy solution to these issues when EROI is considered.” - Hall

Topics:

This submission addresses Question Set 1 of the consultation, specifically focusing on the biophysical constraints that define our future energy landscape, as nothing happens in science research or the broader society without energy to drive it. Drawing on understanding of the potential of systems science and dynamic analyses, this response critiques the framing of the consultation and emphasises the importance of recognizing the complex, emergent behaviour of systems. The perspectives from the reference documents by Murphy and Hall, underscore the need to move away from technological solutionism and toward a realistic understanding of the intractable dilemmas posed by fossil fuel depletion, and adopt a systems-oriented perspective that recognizes the complex, interconnected nature of our energy challenges. 

Question 1: What future should be envisaged for a publicly supported science, innovation, and technology system?

A future science, innovation, and technology system must acknowledge and operate within the immutable constraints described by science. As outlined by Hall, the depletion of fossil fuel resources is an imminent reality that will significantly constrain future energy availability.

This necessitates a shift towards systems science and biophysical economic analysis that incorporates the realities of the fundamental bio- and geo- physical limits imposed by foundational concepts from the ‘hard sciences’ including maths, physics and systems sciences and philosophical perspectives such as deep ecology and understanding of complexity science regarding complex adaptive systems.

Publicly supported research should focus on strongly sustainable practices and tools should be integrated from disciplines such as behavioural science that inform the configuration of market based approaches to address the reality of human cognitive biases and herd behaviours. Science must also recognise its own limits!

As the net energy from fossil sources declines, we must anticipate and manage the resulting shrinkage in economic activity. Innovation should prioritise demand reduction first and foremost, then energy efficiency, renewable energy development, and the optimization of existing resources. This approach will help transition towards a lower energy throughput society, aligning economic activities with reality. 

Question 2: What are the opportunities, challenges, and barriers 

Opportunities: Indigenous Knowledge Integration: Leveraging the traditional ecological knowledge of Māori communities that matured during an era where limits were real and obvious, and technologies that could be sustained had to respect these constraints. We don’t know the extent of the potential because we haven’t conducted sufficient enquiries into it, although some such as Rua Bioscience are innovating. 

Sidenote: There is a LOT more that could be said about opportunities and the other thing on everyone’s minds, AI, but to keep this submission within the 4 A4 sheets required, I have had to omit it. Maybe the subject of a separate piece of writing…

Challenges:

1. Economic Transition: Shifting from a fossil-fuel-dependent economy to a diversified, low-carbon economy will require degrowth down to a scale of material and energy throughput that can be maintained as the global economy goes through a fundamental shift as biophysical constraints limit the future ‘Solution Space’.

2. Technological Limitations: The lower energy return on investment (EROEI, aka Net Energy) for renewable energy sources compared to fossil fuels poses a significant challenge for maintaining current energy consumption levels.

3. Resource Constraints: The financial and material costs of transitioning to renewable energy infrastructure are high, particularly given the global competition for critical minerals and other resources that will occur as everyone tries to do the same thing at the same time. The assumption that renewable energy can fully replace fossil fuels is unrealistic due to lower energy returns and higher costs. Economic growth expectations are misaligned with the material constraints imposed by energy limits. The decline in affordability of necessities and public services will impact discretionary sectors, leading to economic contraction. Property prices and financial stability are at risk as energy costs rise and economic output declines constraining further debt based expansion options. Systemic risks will emerge in non-bank financial intermediaries, exacerbating economic challenges.

Barriers:

1. Institutional Inertia: Existing economic and political structures are often resistant to change, particularly when it involves reducing reliance on established fossil fuel industries.

2. Public Awareness: Enhancing public understanding of the biophysical constraints and the need for strongly sustainable practices is crucial for garnering support for necessary policy measures.

3. Global Competition: Competing internationally for technological advancements and resources can hinder New Zealand's efforts to develop a thriving, sustainable research and innovation system that protects the wellbeing of future generations.

Question 3. What principles should underpin the design of a science, innovation, and technology system?

Alongside the obvious principles of Inclusivity and Equity, Public Engagement and Education, Collaboration and Integration, Resilience and Adaptability, Innovation for Public Good described by science, logic and ethics, the three primary principles commended from a biophysical constraint perspective are:

1. Biophysical Realism: Policies and research must be grounded in the finite nature of resources, especially fossil fuels.

2. Systems Thinking: Embrace a holistic approach that considers the interconnectedness of environmental, economic, and social systems. This ensures that root causes of issues are addressed.

3. Strategic Degrowth: Focus on strongly sustainable practices and managed reduction of resource use. 

Scientific and mathematic principles that should be at the heart of all discussions include the Principle of Ecological Limits, and of Carrying Capacity, Liebig’s Law of the Minimum, the Maximum Power Principle, the Second Law of Thermodynamics, the Law of Diminishing Returns, Jevons Paradox, Energy Return on Investment (EROI), the Exponential Growth Function, non-linear dynamics / emergence, etc.

Key References: 

• Charles Hall: Energy and the Wealth of Nations 2018

• Tom Murphy: Energy and Human Ambitions on a Finite Planet 2021

• New Zealand National Commission for UNESCO: Strong Sustainability for Aotearoa 2009