Resource Shortages

The unfortunately common idea that conservation—using less of finite resources, or using them more efficiently—means a lower standard of living, is generally wrong. Conservation means not wasting resources needlessly. It doesn’t mean living like a medieval peasant or a caveman. Equally unfortunate is the notion that running out of a particular resource, such as oil, will result in society reverting to a dark and distant past when, as the historian William Manchester put it, our ancestors lived in a world lit only by fire.

Indeed, it was a sad day in the mid-1800s when the world ran out of whale oil and everyone had to live in darkness. In fact, electricity really did revolutionize human existence. Electricity expanded the day wherever it went. Before electricity, people tended to go to bed a lot earlier, and the night shift was a largely unheard of event. The advent of the internal combustion engine and automobiles saved major cities the world over from a sea of horse manure and, often, abandoned dead horses.

The point is not that technology will save us from resource shortages, but markets might. A shortage of any resource raises its price and thereby makes substitutes more affordable and desirable. In your own lifetimes, higher gasoline prices have prompted consumers to seek and auto makers to provide hybrid and electric cars. The documentary Who Killed the Electric Car misses the key point that at the time, the economics of building a new technology car didn’t justify the expense of developing and selling that vehicle. One could argue that General Motors and other auto makers were a bit shortsighted in not pushing the idea further, but at the time it was essentially a market-based decision, and not terribly surprising.

So there’s good news and bad news on the energy front. First the good news: For 200 years, until the mid-19th century, whale oil was the chief source of lighting for much of the United States, and in some other parts of the world. And yet the demise of the whaling industry didn’t plunge the nation into darkness. People discovered uses for oil from the ground, such as refining it into kerosene, and gave the whales a break. The great advantage of oil and its derivative fuels, such as diesel oil, gasoline and kerosene, which is used in jet fuel, is that they are energy dense: They pack a lot of energy into a small volume.

What has many people’s knickers in a twist at the moment is Hubbert’s Peak. M.K. Hubbert was a Shell Oil geologist who, back in the 1950s, predicted that U.S. oil production would peak about 1967. Derided by experts at the time, he was pretty close to perfect in his estimate. Using Hubbert’s methods, others have now predicted when world oil production will peak. Estimates have ranged from 2004 to 2112, with the gloomiest group aiming for sometime this decade.

Someday, we will run out of oil. With China and India’s economies blooming into fuel-burning, car-driving splendor, consumption of oil is rising. There are a couple of rocks in the path of this wheel of misfortune, however. First, the estimates all depend on how much recoverable oil you assume is out there. Estimates range from 1.8 trillion to nearly 4 trillion barrels.

It was probably easier for Hubbert to estimate how much U.S. oil was left, if only because the OPEC nations—the Organization of Petroleum Exporting Countries, which includes the nations of the Middle East—tend to try to keep the wraps on just how much oil they have in the ground. Nor do the estimates include oil from the tar sands of Alberta or the oil shale of Colorado. As prices rise, reclaiming those becomes profitable. The average estimate is for oil production to peak about 2037, including 2 percent annual growth in consumption. This seems like a reasonable guess.

Left alone, oil prices will rise, which will make substitutes such as hydrogen fuel cells more economical. Markets aren’t good at everything, but they are very good at allocating resources. Expensive oil eventually means more transportation choices. It’s no accident that higher prices have coincided with more offerings of hybrid gas-electric vehicles for sale. Moving from a petroleum-based economy to one based on another source of energy will have costs, but they are likely to be gradual and spread across the nation and the world.

Such a transition also will have benefits. Automobiles continue to be a major source of air pollution and greenhouse gases. And that’s what markets aren’t good at: dealing with the unintended consequences (externalities, in economese) of economic activity, such as pollution.

The pressure is thus on policymakers in governments the world over to plan for the day when in fact oil becomes scarce. The challenge there is the up-front cost of developing new technologies, and whatever technologies the government chooses to support means that some technologies will not be supported. Remember the role of interest groups in government; the people who have put their money on the technologies not chosen will campaign both to get government support and to block support for the other technologies. It is possible right now to reduce one’s dependence on oil. Brazil, the fifth largest country in the world with the sixth largest economy, essentially imports no oil from anywhere, as they have developed fuel alcohol production to the point where they don’t need foreign oil. In Brazil’s case, they rely on sugar cane, a relatively cheap feedstock from which to distill alcohol.

The Corn Problem

In the United States, in contrast to Brazil, we heavily subsidize the production of corn, a lot of which gets turned into ethanol, which gets added to gasoline to produce a slightly cleaner burning fuel. The problem with ethanol is that it takes nearly as much energy to produce alcohol from corn as you get from the alcohol produced. It’s not very efficient. Corn also requires copious amounts of nitrogen to grow, which then washes into the Mississippi River basin and into the Gulf of Mexico, where the overabundance of nitrates is slowly turning the gulf into an underwater desert. Meanwhile, a lot of the corn is fed to cattle in industrial feedlots to help fatten them up before they are slaughtered. Unfortunately, beef cattle can’t properly digest corn, so if they’re not pumped full of antibiotics, they become sick. The overuse of these antibiotics is quite likely breeding strains of drug-resistant bacteria, since, like our ancestors who survived the plague in the Middle Ages, some of the bacteria will simply survive the assault of antibiotic drugs. These bacteria eventually will be consumed by humans who may then become ill.

This raises the question of why the U.S. adopted this policy. First, the corn farmers are not inherently evil people. They are, like most of us, just trying to make a living. Agricultural subsidies in the United States were ratcheted up during the Nixon Administration, when inflation was high and food prices in particular were rising. Oil prices were rising, and energy costs tend to affect everything else. A policy that provided for more affordable food would help the government maintain legitimacy, and so it was pursued. Farm-state members of Congress would of course be very supportive of such policy, because their constituents are likely to be very connected to and reliant upon the farm economy.

But say that current U.S. policymakers recognized what was going on and found themselves on the corns of a dilemma. How could they respond? Simply ending subsidies for corn and for ethanol production would impact a lot of people and their jobs, and so the corn lobby, the ethanol lobby and the farm-state legislators would all work to keep that from happening. Whether you think this is right or wrong, you should not be surprised that this is how politics works. People seek to preserve and advance their own interests.

The answer might be to pay the farmers to do something else, such as grow a better feedstock, such as sugar beets, from which alcohol can be produced more cheaply and with less environmental impact. The challenges here are that 1. People don’t like change and 2. This would have a substantial up-front cost. So even if the government were able to offer a low-cost conversion to another way of making a living for some corn farmers, there would be resistance.

It’s worth noting that some resource shortages aren’t as easily dealt with. Overfishing of the world’s oceans has caused many fish populations to collapse, threatening a major source of food for the world. Although nations by themselves can check this through various methods, when the problem spills over into disputes between nations, the situation gets trickier, as we’ll see with the question of water.

Water

Another resource issue is water, in particular fresh water. Current estimates suggest that one-fith of the world’s population lacks consistent access to clean drinking water. Moreover, several large aquifers are steadily running dry. Aquifers are the often-gravelly spaces under the ground where rainwater collects. Ever since human beings figured out how to dig wells, people have been tapping aquifers to get water for drinking and irrigation. Along with rivers, aquifers are one of the chief sources of usable water. But now, with population growth and thereby rising demand for water, the Ogallala aquifer, which stretches from the Dakotas to Texas and irrigates one-fifth of U.S. farmland, is being depleted faster than rainfall can fill it up. Aquifers in Africa, the Middle East and China face the same problem. Water is being pumped out of the ground in the world’s largest city, Mexico City, at such a rate that the city is literally sinking into the earth.

Rivers pose additional challenges. Rivers are useful for raising fish, generating power, irrigation, and capturing fresh water for drinking. However any one use reduces the amount available for any other use. Hydroelectric dams generate clean electricity, but greatly decrease the numbers of fish, since even with fish ladders, fish returning to spawn upriver get there in much lower numbers. Running more water through the turbines for electricity affects both fish and the water available for irrigation and consumption; diverting more water for irrigation or consumption impacts fish and electricity.

People the world over waste a lot of water. In the city of Phoenix, Ariz., two rivers flow into the city, and none flow out, even as citizens’ lawns remain green and outdoor malls employ battalions of nozzles spraying mist to keep the walkways cool for shoppers. Estimates are that the United States loses 7 million gallons a day to leaky pipes and faucets; another estimate says England and Wales are wasting 20 percent of their treated water through leakage. And these are developed countries. Worldwide, estimates range as high as 60 percent.

Meanwhile, 2.6 billion people in the world live without adequate sewage treatment, and another chunk of the world’s sewage system needs repair and upgrading. Sewage treatment helps prevent disease and limits the pollution of groundwater, which could further extend drinking water resources.

The importance of sewage treatment can’t be overstated. On Hood Canal, near where I live, houses are on septic systems, which leak into the canal, creating a zone of water devoid of oxygen, and hence devoid of fish. The easy answer would be replace the septic tanks with a sewage treatment facility. The technology is fairly simple: Pipes run from people’s homes to the treatment facility, where the effluent is pumped into a vat, slowly stirred by a large agitating blade, like you’d find in a washing machine, and bacteria do their job. Primary sewage treatment involves one vat; secondary treatment involves two. Tertiary treatment, which is both expensive and uncommon, can remove 99 percent of impurities. Experiments with running sewage through mini-canals of swamp plants, has produced drinkable water as well. But even adequate secondary treatment systems would do a lot to prevent water pollution and improve human hygiene, and create at least temporary construction jobs all over the world.

So why doesn’t this happen? At this point, you should be able to break down the steps of seeing the political challenges of making something like this happen, even with the obvious benefits involved. First, none of this would be free. Somebody will have to pay. In the U.S., homeowners can jointly agree to pay the cost of hooking up to a sewer line. That can cost thousands of dollars per home, money people may not have or may not want to spend. Otherwise government will have to step in and foot the bill. Local or national legislatures will have to vote to allocate funds, and sources of revenue will have to be found. And all for a project that, while important, lacks the excitement of more obvious economic development projects, or the immediate gratification of a new bridge or highway. We should note that the World Bank has helped finance wastewater treatment projects in several locations around the world.

Some scholars predict that the relatively near future could see wars over water allocation. The technological fix, desalination of seawater, is growing in use but still very expensive. Nations might solve the problem within their own borders. Leaking pipes and faucets and excessive irrigation consume an apparently frightening amount of water, as you may discover when you own a home of your own one day. But disputes between nations over water allocation poses greater challenges. Remember that unlike within the borders of a sovereign state, where the authority of the government can, ultimately, impose a solution, between states there is no higher authority. Anarchy prevails because no one is in charge.

Once again, domestic politics complicates a bilateral or multilateral solution. A treaty with a neighboring state to share a water resource will provoke some opposition inside each state, and it’s an open question as to whether those interest groups will compel a change in policy. Moreover, the realist perspective on the part of the stronger state may suggest thumbing the collective nose at the weaker state and sharing less of the water, if any at all.

Market forces will help; increasing shortages of water will raise prices and encourage conservation, while making desalination more affordable. Of course, inland communities and states without ready access to ocean water will face greater challenges than will coastal states. Areas where desalination plants already are a major source of drinking water, such as Dubai on the Persian Gulf and Key West, Florida, have plenty of water close at hand. Either way, states will face increasing pressure to do something more. If states can force themselves to think ahead, so that water allocation and resource development can be planned an implemented on a regional and global scale before tempers become too hot and lines are drawn in the spreading desert sand, there may be a way past this problem. States that successfully navigate the water course may also find ways to convince their neighbors that the solution is one that somehow makes the well wider and deeper.

Climate Change

Climate changeRising average annual temperatures, resulting in more extremes of weather throughout the world, likely caused by deforestation and increased burning of fossil fuels. may be the most important issue of our time, and also the most challenging. The great majority of scientific research and evidence suggests that it’s happening, and that human activity is a major contributing factor. The evidence against climate change tends to come from scientists who have been paid by the energy industry.See, for example, Oreskes and Conway, Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming. New York: Bloomsbury Press, 2010. The argument that some people make, that people who believe that climate change is both a problem and a manmade problem simply want to lower our standard of living, is absurd from every angle. Nobody really wants a lower standard of living. Even people who contrive to live “off the grid,” in homes that are largely energy self-sufficient, are not really trying to live like our pioneer ancestors. It’s difficult to imagine what profit there could be to people who argue that climate change is a serious issue that should be dealt with.

How do we know there’s climate change? Ice and snow have been piling up on Greenland for at least 110,000 years. The ice includes tiny pockets of air. By drilling and taking core samples from lower strata in the ice, scientists are able to tap those tiny air pockets and see what the atmospheric composition was like in previous millennia. What they have found is that the amount of carbon in the atmosphere has never risen so far so fast as it has since the dawn of the Industrial Revolution in the 1800s. That’s when humans began cutting down forests and burning large amounts of fossil fuels such as coal and oil. They’re called fossil fuels because they were created from layers of vegetation laid down millions of years ago, which then was compressed by layers of sediment piled on top over time. The pressure turned the decaying vegetation into coal, oil and natural gas. As we noted earlier, fossil fuels have the great advantage of being energy dense—they pack a lot of power into a very small space. A coal fire, for example, burns much hotter than a wood fire; steam engines became much more powerful and efficient when they changed from burning wood to burning coal, and more efficient still when they burned oil. In many ways, they made the modern world possible.

They do, however, release large amounts of carbon into the atmosphere, which creates the greenhouse effect. A greenhouse works because it traps heat inside, raising the average temperature and allowing you to grow plants out of season, for example. On a global scale, however, this means average higher temperatures worldwide, as evidenced by steadily retreating glaciers around the world.

This phenomenon led to the use of the term global warming, which is probably unfortunate because the real effect includes not just global warming but more temperature extremes everywhere, including colder temperatures in some places and warmer temperatures in others. It also means more and more powerful storms, more droughts in some areas, and rising sea levels, threatening coastal communities and islands around the world. In a worst-case scenario, the arctic ice cap melts at the North Pole, releasing massive quantities of frozen carbon now held in check under the ice cap, greatly raising average temperatures and radically altering the biosphere. Trees, as we know them, likely would disappear. And, among other places, goodbye, Florida; so long, Seychelle Islands; adios, Aruba.

In any event, scientists now speak of climate change as opposed to global warming. We’ve known this for a while; the second Bush administration suppressed a study by government scientists who concluded both that climate change is real and that people are causing it. One study concluded that it would only really impact food production, but that in itself should be enough to be cause for alarm. By one estimate, climate change will lower world GDP by 1–3 percent, and that is a lower standard of living for everybody.

Do we know that all these terrible things will come to pass? We don’t, but it’s a big bet to make that they won’t. Assuming all this is true—and at the moment, it doesn’t appear to be a big assumption—it will require global policy solutions. It’s unlikely that the market forces by themselves will address this. As valuable as clean air and more stable temperatures are, they are hard to put a price tag on. The production of greenhouse gases is a classic free-rider problem. Any one of us can do something to lower our carbon footprint, but the individual (or nation) assumes all the cost of doing that and shares the benefit with everybody else for free. Under that scenario, few people are likely take on that expense. Once again, absent a world government the power to enforce the decision, anarchy prevails and nations do not unilaterally change policy.

In 1997, the nations of the world went to Japan and negotiated what became known as the Kyoto protocol. To date, 191 nations signed the agreement to lower their output of greenhouse gases, but the two big kids on the block—the U.S. and China—have not complied. Profit and legitimacy seem to be the two drivers. In the case of China, the legitimacy of the government largely relies on continued economic growth. China’s booming economy is every hungry for more electricity, so China keeps building coal-fired electric plants and gets nearly 70 percent of its electricity from coal. Burning coal is a major source of greenhouse gas emissions. Reducing its reliance on coal would cause at least short-term dislocations in China’s energy supply and threaten the country’s stability.

Coal is the leading source of the world’s energy, including 68 percent in China and 50 percent in the U.S. Technology to create energy from “clean coal” is at best decades away. No one is even sure if solutions such as sequestering carbon emissions from coal in abandoned mine shafts would even work. The excess carbon produced does eventually filter to the ground, including seawater, which is becoming more acidic and less hospitable to fish as it happens.

Again, it’s probably not helpful to look at coal companies or coal miners as inherently evil. Coal mining is a dangerous and therefore well-paid occupation. U.S. states with big coal interests will feature members of Congress who will stand by their constituents in the coal industry and try to protect them from being put out of business by the government. A lot of jobs and profit are at stake, and those things are important too. Unlike oil, we’re apparently in little danger of running out of coal anytime soon.

Alternatives are uncertain at the moment. The process known as frackingHydro-fracturing, a process by which water is pumped underground to fracture underground pockets where natural gas may be found and pumped to the surface. It makes more gas available, but also appears to threaten drinking water sources. is getting more natural gas, a much cleaner-burning fuel, out of the ground, but threatens underground drinking water sources in the process. Nuclear power is actually remarkably safe, overall, but when things go wrong, as at Chernobyl and more recently in Japan, they go wrong in a big way. Consequently safe nuclear power is one of the most expensive forms of electricity available. Hydropower from dams is very clean, but poses all kinds of other challenges, as we’ve already noted. Biofuels don’t add more new carbon to the atmosphere but require substantial resources, such as water, to produce.

Economists in the last few decades suggested a market-based solution to help deal with carbon emissions, generally known as cap-and-tradeA proposed market-based solution to carbon emissions, in which government sets a cap on total emissions, and industrial polluters are rewarded or penalized for going under or over the cap, respectively.. Under cap-and-trade, government sets a lid (the cap) on allowable carbon emissions. So, major carbon producers such as factories and power plants pay a tax on higher emissions, or get a credit if they fall below the cap. They can sell those credits on the open market to firms that go over, who thereby avoid the tax. This puts a market value on pollution, and gives firms an incentive to clean up even as it rewards clean producers. It has been used with some success in the western United States, and in Europe. The Europeans, however, dealt with the cap in part by moving the most-polluting factories to India and China, and that’s one of the problems. Unless it’s a global system, a major polluter can simply relocate to someplace where there’s no cap. It also doesn’t address a major source of pollution—individual people and their households. Non-point source pollution, as it’s known, is in some ways harder to deal with. One nasty factory could be cleaned up directly; a million smoky car exhausts is a different sort of challenge.

It’s not difficult to imagine a world where every house features solar panels and some kind of windmill on the roof, and a hydrogen fuel cell in the back yard. And therein lies the policy challenge: a high short-term cost in exchange for a long-term benefit that many people will not live to see. As with corn farmers, the answer for coal producers may be to pay them to do something else. But that requires revenue, in the form of taxes from people who may very well question why they have to spend money to convince other people to stop producing a product they don’t see as affecting their immediate lives. And as soon as government starts picking winners, it also is picking losers, and nobody likes to be on the losing side.

This chapter is a bit of a downer, but ignoring problems, like ignoring exams, doesn’t make them go away. The broader point is that all of these problems will require something in the way of policy solutions, which is government’s job. Perhaps you can now see that within one country, such problems are challenging enough; in the global society, convincing a collection of sovereign states that they all need to take the same steps may be even more difficult.

None of this is impossible; human beings have a remarkable ability to adapt. Remember that your ancestors, wherever they were from, were the clever ones, the resilient ones, the ones who could cope with and make the best of change. Your ancestors were the ones who figured out how to survive. So you come into this world with a very, very good genetic history. As college students perhaps just beginning your way in the world, you should at least understand that this is the world you are inheriting. And perhaps understanding the business of politics and government will help you navigate that world a little more skillfully.