Minnesota's Energy Future?^©

Minneapolis, MN
October 20, 2003

Part III:  Conservation, Jevons’ Paradox and
Alternative Energies

Part III-A

Conservation and Jevons’ Paradox

There has developed in the contemporary natural sciences a recognition that there is a subset of problems such as population, atomic war and environmental corruption, for which there are no technical solutions.
     Garrett Hardin, 1998.¹

The most frequently proposed remedies to our energy dilemmas are conservation, increasing efficiencies, and the development of alternative energies.  The underlying idea is to bring energy use into conformance with resource reality without structural changes.  The primary drivers of these approaches are that they are consistent with past practices, require little, if any, structural or social changes, and are politically uncomplicated.

While conservation has been the cornerstone of energy policy since the 1970s, society is closer today to a serious energy dilemma than when the initial alarms were sounded.  Because the conservation strategy contains mixed messages it obligates supporters to clarify conservation proposals by providing the details.²

The strategy appears to be accepted because it is consistent with prior practices rather than promoting thoughtful methods designed to achieve a sustainable society.  As the well-known advertisement says, “pay me now, or pay me later, but pay me you will!”  In the sustainability sense, the jingle means to avoid the path leading to the paying predicament.

In 1845, English mathematician William Stanley Jevons studied efficiency and use of resources.  Specifically regarding coal use in England, John H. Lienhard wrote that Jevons said the “Watt engine … was invented because the older Newcomen engine was so inefficient.  Did Watt’s invention cut coal consumption ―by quadrupling efficiency?  Quite the contrary!  By making steam power more efficient, he spread the use of steam throughout the land. Coal consumption was skyrocketing.”  Lienhard continued stating that Jevons concluded, “increased efficiency wouldn't save us in any case.”  The same could now be said of a significant number of energy related proposals.³

Jevons’ Paradox explains why improving gasoline mileage standards has not reduced oil use or oil imports, has not prevented Minnesota's and California's electric grids brownouts and blackouts, or improved gas mileage standards, improved home insulation, or efficiency of refrigerators and numerous calls to reduce “consumption” (reduce the “Footprint”) and other “conservation” programs have not lead to a decrease in energy use.  On the contrary, conservation and improvements in efficiency or productivity are frequently used to accommodate or encourage growth.  The net of improved energy efficiency and conservation is to encourage additional use by reducing or limiting prices.  The process of improving efficiency lowers consumer cost and encourages additional energy and resource use for individuals and for societies worldwide.  Thus, conservation or efficiency supports further consumption, while simultaneously discouraging investments in alternative energy.

Dr. Horace Herring explains the economics of conservation behavior observing that “technology tends to be used to provide greater levels of service, rather than reduced consumption”.  This should come as no surprise; it is the fundamental tenant of Western behavior, economic thought, and teaching.

The irony of the conservation and efficiency principles is that these programs would lead to the best of all possible worlds if populations were at sustainable levels.⁴  Dr. Herring quotes Wolfgang Sachs saying that “an increase in resource efficiency alone leads to nothing, unless it goes hand in hand with an intelligent restraint of growth.”  The effects are as stated above and are abundantly evident in the costs and energy statistics presented in Part I of this paper discussing energy and population growth.⁵

Conservation becomes an unfortunate Jevons’ paradox when the efficiency improvement programs are said to reduce energy use in the face of actual energy increases.  It will be difficult for the public to comprehend why a policy recognized for decades (if not centuries) for promoting growth and resource consumption in an era of looming resource shortages is said to conserve those resources.

Conservation

We need an energy bill that encourages consumption.
President George Bush, State of the Union Speech, Trenton, NJ, September 23, 2002.

Setting Mr. Jevons aside for the moment, conservation is frequently thought of as part or a substantial part of the solution to energy problems.  Supporters frequently broaden the concept to include increasing efficiency and by implication, economic productivity.  The common understanding of conservation is to use less of something yet have the same results.  As will be discussed, however, what appears beneficial at the individual level can have its presumed benefits nullified if society as a whole attempts the same.  Conservation encourages further consumption.  Without addressing more fundamental issues, conservation and increasing efficiencies are counterproductive to a sustainable society and dependable long-run energy policies.

Conservation’s initial steps are almost without effort.  Generally less publicly known are the subsequent characteristics of conservation and efficiency —the last few steps are difficult.  Because of human nature, practicality, economics, and primarily, that bugaboo natural law, the 2^nd Law of Thermodynamics and its brother the Law of Diminishing Returns, the initial implementation of conservation and efficiency policies are relatively inexpensive yet produce significant benefits.  However, each increment of benefit becomes increasingly difficult and costly to implement.

The passage of the Environmental Protection Agency (EPA) and implementation of various anti-pollution measures demonstrates the well known engineering principles.  Because of the physics involved, the first approximately 90% of benefit generally is an ordinary almost inconspicuous matter.  The removal by scrubbers of air pollution from electric generating plants is relatively inexpensive for the first 90% to 95% of contaminants.  The reduction in pollutants is relatively painless and consequently politicians and environmentalists are held in high public esteem.  However, as the percentage of contaminates removed increases, expenditures increase at an even higher rate, each of the last few percentage points of removal could cost a multiple of each preceding percentage.  Although ecosystem needs are unchanged, the increasing expenses changes the political will to sustain the anti-pollution system.  A similar situation is seen in water pollution.  The removal of particulate matter and bacterial control is easily and inexpensively accomplished.  On the other hand, explaining why few communities construct these facilities, the tertiary level removal of chemicals and toxic metals requires substantial cost increases.

The suggestion is also made that controlling pollution at the source is both morally and economically appropriate.  Although in conflict with appropriate market pricing ―controlling pollution at the source― shifting cost underlies current commercial interest in passing “cost to benefit” legislation.  In reality, rather than incorporating all cost of production into the product this class of legislation is an attempt to shift cost from production of a product to the commons and the public.  The economics and science may indicate the product or service may not be sustainably produced if priced appropriately.  Indeed, it essentially implies that with growth, increments of conservation and efficiency must be continuously implemented and that additional costs be subsidized by the public.

The concepts of efficiency and productivity ―the maintenance or bettering of existing standards of living― are somewhat inconsistent with the strategy of conservation.  Although Minnesota and federal energy policies assert that conservation and efficiency are actually sources of additional energy, this is not the case.  True, society may benefit in not spending money on current energy, thus, “creating” discretionary income with the money spent on other items or saved and invested.  Although not using energy today may give the appearance of providing additional energy, conservation and efficiency should be seen as tools to reallocate energy rather than a means of providing new energy reserves.  Rather than burning a lump of coal or Mcf of natural gas today only to be used tomorrow, it is not a source of new energy.  Thus, the strategy of “conservation” creates a conflict between its core assumption, that of doing with less, and rising or even maintaining living standards.  However, conservation will play a role in establishing a sustainable society if today’s foregone consumption is accomplished in a stable society rather than providing for growth.

Because the reallocation can be between public or industry groups, regions, states, internationally, or over time, it is important to explicitly describe the intent of a conservation program.  That is to say, which target groups will benefit from the personal sacrifices requested of individuals, households or industrial sector and in what time horizon?  As demonstrated in the first part of this paper discussing growth, the goal of conservation or efficiency may be to benefit other individuals and groups from a different place or time.

How can personal sacrifice be of personal benefit when reallocation to others is the primary policy goal?  The implementation of conservation policy is at the level of the individual while the goals tend to be abstract.  When government conservation programs are directed to the utility, they misdirect responsibility for reducing energy use from end users and consumers; consumers do not receive the necessary price and use signals necessary for a sustainable economy.  Government policies are almost always broad based, thus, personal conservation efforts are frequently rewarded by higher prices and higher taxes to make up for the less conservation minded.  Unless the program is carefully designed, the small user will be compelled to pay the system costs of the average or large user.

From the perspective of preparing for a sustainable society, the energy critical matter is the determination of the quantity of energy used to produce the energy output.  In this regard, conservation may be thought of as the leading option —in many respects, not requiring additional energy.  As common sense suggests, it is of limited utility in the long run.  Even primitive societies require energy.

Perhaps the best, if not only reason supporting conservation is that it has the potential of postponing the crisis aspects of resource depletion, providing the opportunity to constructively revise existing policies and programs.  Although temporary, the process is more certain than exploring for additional scarce resources in the belief that an unknown yet colossal resource discovery will redeem the status quo.

When natural resources become a critical concern, as they inevitably will, a surreal race betting continual increases in conservation or efficiency to match otherwise unlimited population growth ensues.  It should be clear that “conservation” becomes a means of distributing what remains when increases in efficiency fail to pace growth.  Policies, for example, of remedying energy or housing affordability are heartfelt but actually address symptoms of larger problems and are circular in nature.  The 50 governors and Minnesota policymakers ought to recognize this fact and prepare to reconcile current policies.

In August of 2001, the governors of the fifty states, three territories, and two commonwealths convened the 93rd annual meeting of the National Governors Association in Providence, Rhode Island.  The collected governors agreed that looming energy shortages and environmental challenges could affect their state and national economies.  The economic damage in California offered well-understood economic lessons.  Therefore, at that conference the governors began to promote a national energy policy and agreed to the strategies and language to be used.

The governors' fundamental message was to emphasize conservation.  According to Iowa Governor Thomas Vilsack, Chairman of the Natural Resources Committee, “the policy sends a clear message that solving our nation's energy problems demand more conservation, especially utilizing renewable fuels like ethanol.”  Not only is conservation and ethanol development a priority but, to use Governor Vilsack's words, so is assuring “adequate, affordable energy supplies and services … and stable [energy] prices.”⁶  The Governors Association's agreement to promote conservation and efficiency is truly an acknowledgement that existing efficiency and conservation programs are no longer keeping pace and that growing demands have begun to stress resource limits.

The language and focus agreed to at the governor's conference are unmistakably threaded throughout Minnesota energy reports.

The governors appear to be mixing common conservation policies with ambiguous farm policies and labeling it “conservation”.  The questionable energy flows of ethanol or biodiesel for example, are discussed later in this part under “alternative energies”.  Attempting here to finesse the political implications, it appears that the governors are attempting to counterbalance the Bush Administration's national energy policy issued in May 2001, that, although promoting energy alternatives, emphasized nuclear and fossil fuel based energy development with decreasing regulatory procedures involved in obtaining additional energy reserves.

The conservation strategy implies reserving some quantity of resources for future use.  Its function is to change current behavior and lifestyles to reduce patterns of energy use.  Because economic success is directly correlated with energy use, an implication of many forms of conservation is the redistribution of income.  As illustrated by the governors at Rhode Island, various allied groups have carefully chosen the use of the term “conservation”.  The reason is that the term itself, “conservation”, carries positive public impressions —that of doing good.  However, there is another reason.  The term was chosen to replace the word “consumption” or “over-consumption” which is less relied upon at this time.  Formerly, this language was frequently expressed by social activists, anti-establishment, and politically left of center groups —then spread to government departments.

Apparently certain groups in and out of government found that the public did not approve the use of the pejorative term “consumption”, occasionally preceded by an unkind adjective describing Americans.  It would be foolhardy for these groups to promote a program that maybe difficult to implement under other circumstances.  Thus, in or out of government they hitched their wagon to a more favorable term that has many equivalent implications.

The motivations of certain groups may also have special interests at heart.  Although that statement may bring to mind some nefarious group, it may apply to associations one wouldn't generally think of.  Horace Herring in his paper titled “Why Energy Efficiency is not Enough” found the “Voluntary Simplicity” movement is dominated by religious and similar groups.  Although they reduce personal consumption, e.g., “Little House on the Prairie”, they use the benefits of technology and increasing efficiencies to, as Dr. Herring states, “expand their religious institutions, in terms of numbers, power, and wealth.”  Thus, he writes, “personal abstinence is no guarantee of institutional frugality.”  In Minnesota, the “NextStep” movement with its substantial involvement with social activists, developers, real estate interests, and associated groups have an unclear motivation as well.⁷

Perhaps, the greatest failing of the conservation, efficiency, and alternative energy strategies approach is the implication that current social, energy, environmental, and economic patterns are sustainable: as presently construed, conservation's primary function is to maintain the status quo and cloak economic and social problems associated with resource changes.  In that manner, it may lull the public into inaction and shield policymakers from fashioning appropriate policy.

As the public realizes the increasing demands of the conserver philosophy, the motivation to accept the changes in social and economic lifestyles could be tested in spite of the language used.

Consumption

It is population growth alone ―not an increase in per capita consumption― that is driving much of the environmental destruction we see across the globe today.
        Patrick Burns, National Audubon Society. January 2003.⁸

Some say the energy problem is one of over-consumption and that the “conserving” solution lies in reducing consumption.  Is it really conserving, consumption, or are the dilemmas centered on population growth or some combination?  The preceding discussion regarding conservation, energy and growth suggests the answers are more complicated than those who argue consumption admit.  Jevons Paradox is that conservation encourages consumption.

If one argues that the energy problem is primarily one of consumption it is reasonable to ask that an objective, quantified level of “appropriate” consumption and coincident population levels be given (as measured by per capita GDP, Footprint, Btu's of energy, et al.).  It is also important to specify the amount of reduction by economic sector, residential, commercial, and so on.  Finally, it is critical to answer at what level of consumption will the regulations be satisfied?

The underlying motivation of those who argue consumption generally appears to be income re-distribution and balancing living standards on a global scale.  Although frequently well intentioned, these compassionate individuals fail to note that resources are not equally distributed, a pricing system is required to serve as an allocation mechanism, and most importantly, local culture overwhelmingly determine standards and practices of living.⁹

Charts presented in this paper help visually provide an answer to the opening question.  Yet, it is common sense that increasing energy use is primarily dependent on more people using energy, and as noted previously, consumption and standards of living are inexorably connected to the quantity of energy used by society.  Limiting increases in consumption or establishing an unchanging, or possibly arbitrary, level while under a growth scenario implies annual decreases in per capita energy use and commensurately declining living standards.

Perhaps the initial reductions in consumption can be accomplished without significant difficulty.  However, after a few years the burdens will become evident and society is likely to chafe under the tightening restrictions.  For example, assume the objective is a modest 3% annual consumption decline.  In the first or even second year, 3% will be barely noticeable.  A 10% reduction in about three years will certainly become noticeable and consumers may begin to question the program.  Possible weak forms of anarchy, thriving black markets, an expanding underground economy, and government restrictions to thwart it may result.  In time the grinding nature of the regulations hit home.  Nevertheless, steadfast proponents could point to the initial successes and remind the public the anti-consumption program is the correct solution.  Because the effects are cumulative, after 20 years a 65% lower living standard will be the result.  With the U.S. population increasing another 70 – 80 million inhabitants in this short period, the strains will be more than economic.  Indeed, long before the 20^th year, social conflicts will be commonplace, air conditioning will be prohibited, thermostat settings halved, and bicycles and mopeds will be the required transportation vehicles!

Consumer resistance may become more pronounced when citizens realize the consumption reductions mandated are not meant to conserve energy or resources for future use —their children and grandchildren― but primarily to provide the energy necessary for population increases particularly to those from foreign lands.  The California example vividly demonstrates that reducing consumption prolongs the status quo but doesn't provide the comprehensive solution the situation requires.

It is equally problematic that a substantial percentage of U.S. energy consumption is involved with transportation.  Approximately 60% of oil use is for transportation.  Although the quantity Americans use is admonished by some, the fundamental reasons for the quantity are overlooked: the U.S. population is immense, geographically large, its people travel, food and manufactured items are frequently transported across thousands of miles within the country and the seldom mentioned reason that the U.S. is the world's largest exporter.

The good U.S. neighbor to the north, Canada, is also geographically large and therefore a leading user of energy.  Indeed, Canada's per capita energy use is significantly greater than the U.S.  Those who argue against U.S. consumption fail to note this fact.

They also make invalid comparisons.  A generally valid comparison would be to compare the combined states of the “European Union” (EU) to the U.S.  Both population levels and geographic area are approximately similar.  European states on the other hand, are unlike the U.S. in that each nation has a long history of independence and separation whereas the various U.S. states are inseparably interconnected.  The patterns of energy use in transportation under the EU will merge over time with the U.S., Canadian, and Australian experience.

Which brings us full circle.  Not only are the power “shortages”, but also increasing traffic gridlock, sprawl, loss of wildlife habitat, pollution, and a lengthy list of other concerns, primarily not a result of consumption.

Improper use of data is used to promote an otherwise untenable position.  By emphasizing consumption government and environmentalists are promoting economic inefficiencies, much higher energy cost, and a destabilized and unsustainable society.  Worse, it generates public confusion and the potential for legislating inappropriate and unsustainable policies.  As California clearly demonstrates, in light of diminishing resources current practices and policies are creating the energy dilemmas now confronting California, Minnesota, and the U.S.  The conserving philosophy, reducing consumption, clearly has a role but with little lasting benefit unless the underlying demand factors are addressed.

Efficiency & Productivity

Whereas conservation involves behavioral changes, efficiency and increasing productivity involves the application of science and technology to reduce energy use.  Efficiency and productivity generally imply increasing units of output without increasing fixed costs.  Lacking increases in productivity living standards cannot improve.

The aim of technology is the discovery of the perpetual motion machine, a device that does work without the use of energy or produces as much energy as it uses while providing the substance to do work: unending improvements in living standards.  The welcome effects of improved efficiency are evident throughout technological societies.  Because efficiency and productivity means to do the same amount of work with less energy, technological advancements will be required to not only bridge the Olduvai Gap to a sustainable society, but also play a significant role in maintaining society.

Increasing efficiency is nearly the definition of economical energy use.  On the other hand, in almost every instance, changing efficiencies requires the purchase of an item, increasing consumption.  The concept of efficiency is often promoted by those with an economic agenda.  However, unless the criteria used measures the energy output relative to the energy inputs unsustainable decisions may be made.  This concept unquestionably applies to the development of alternative energies.  It cannot be the attraction of technology that governs the policy, but the net energy involved in the process.  It is energy available from ongoing processes that determines a sustainable society.

Although the strategies of efficiency and productivity appear a laudable goal, wisely using resources ―as Jevons Paradox indicates― the employment of these strategies in uneconomic alternative energies may aggravate energy use and exacerbate the human condition.

Unfortunately, losing energy at each level of processing ―the 2^nd Law of Thermodynamics― interferes with human faith in technology and its ability to solve human predicaments.  Physics, not economics, explains why oil or natural gas or water cannot be extracted faster than ground pore spaces allow or as the pores dry, no high price will release their hold.  Forcing natural resource fields to give up their resource by using technology to pressurize, heat, or develop a chemical agent to squeeze out small additional amounts of the resource takes place at much higher costs.  Raising prices has widespread economic repercussions and on allocations of energy.

Note the distinction between energy, a natural based resource, and dollars, a means of pricing economic items, a distinction government reports fail to consider.  If the price of gasoline is reduced because of “conservation” the driver will tend to spend the savings, money not spent on gasoline, on another product or service and with it, changing patterns of energy use.

There is another subtle misapplication of the idea of “efficiency”, a belief that efficient energy use is the same as efficiency in the economic sense.  Economic efficiency is sometimes thought of as efficient distribution of income.  In that regard, it would maximize resource use by encouraging consumption (“Pareto Optimality”).  In general, economic efficiency has to do with the speed —generally freedom of money flows through the economy.  In its purer form it’s a laissez-faire economic doctrine or Libertarian view or even the politics of anarchists.  In semi-free American markets, natural resources and energy are parts of the process, but labor, productivity, regulations, taxes, and so on are all mixed in the general economic milieu determining economic efficiency.  Economic efficiency very likely is consistent with conservation in some respects and actually discourages conservation in other respects.  Jevons would say the same situation applies to gas mileage standards and efficiency of cars in the attempt to reduce gasoline and oil use.

In other words, current developed societies are more than capable of using substantial quantities of energy very efficiently.  Indeed, the U.S. is the largest user in total (not per capita) energy in the world and its industry is far more efficient and capable of competing globally than any other nation.  Clearly demonstrating the philosophy of conserving by increasing efficiency, U.S. energy in terms of consumption of Btu's over the 1948 – 1999 period has grown at an annual compounded rate of 2.6% while energy consumption per dollar of real GDP (inflation adjusted) has shown a -1.3% rate.  The result has been that energy per dollar of GDP has fallen almost by half even as total energy use has increased by more than 2.6 times.¹⁰  The decline in energy required per dollar of GDP is the reason underlying the rising U.S. standard of living.

Conservation & Vehicle Mileage Standards

In many respects mileage standards are a growth accommodative mechanism.  The purchase of a new vehicle reflects Americans’ optimistic nature, sense of excitement, power, self-worth, and technologically superior skills; all of those base emotions are very expertly marketed by the industry.  Although the marketing reinforces Americans’ self-image, in terms of energy, higher mileage standards and more Americans is an inconsistent policy.

Rather than a rational decision that petroleum resources at some point will dry up, the impetus for improving mileage was a response to the OPEC block’s sharp increase in oil prices in the early 1970s.  Nevertheless, the results have been impressive.  According to the Energy Information Agency a 52% increase was attained from 1967 to 1997, from 14.1 to 21.5 miles per gallon.  Since that time improvements have come grudgingly and now appear in decline.  The 52% increase in mileage was, however, overwhelmed by an 18% increase in miles driven per vehicle, 9,849 in 1967 to 11,575 in 1997.  Consumption increases were primarily due to a 69 million (34.7%) population increase.¹¹

If population had achieved stability in 1967, as the U.S. population was trending, the 52% increase in mileage would have flowed through to future drivers and generations.  The 7.4 mpg increase would have resulted in a decline in average gasoline use of 240.1 gallons per driver, -34.2 %, if population had not grown.

The data indicates that today's drivers use 34.7% or 2.0 billion gallons more than the same number of drivers at the 1967 level, given the substantial increases in mileage.  This is a real-life example of population growth overwhelming conservation and efficiency.¹²

Moreover, if a comprehensive oil use reduction program were implemented, then increasing mileage standards could provide the funding wherewithal and buy time to facilitate the development of appropriate alternative energies.  Because of the enormity of the situation, small mileage improvements will have negligible impact on consumption.  Because air travel uses the equivalent of almost 20% of total U.S. oil consumption (approximately 1.8 billion barrels per day), reducing air industry subsidies would be an important consideration in any oil conservation program.  It should also be apparent that sprawl control to alleviate increases in miles driven is of minor benefit compared to benefits of moderating growth.

Let's use a second approach to more clearly demonstrate how conservation, technology, and increasing efficiency function.  The following approximately real-world illustration of automobile gasoline mileage standards will be used.  As in the actual national data described above, technology and improved efficiency is clearly seen in the production of recent vehicles and engines while conservation evident in significant decreases in gasoline use per mile traveled.

Assume miles driven per vehicle are constant, and:

1,000 cars @ 20 mpg. = 50 gallons consumed.

2,000 cars @ 30 mpg. = 66 gallons consumed.

3,000 cars @ 35 mpg. = 85 gallons consumed.

The frequent characterization of the improvement in gas mileage seen in the example is that conservation achieved a 50% reduction in gasoline use (20 => 30 mpg.) and because of the increase in miles per gallon conservation's virtue is praised.  In the period following the praise continues when technological advancements produce another 15% improvement in miles per gallon (30 => 35 mpg.).  Nevertheless, in the first instance, gasoline consumption increased by a third (50 => 66 gallons) and another 28% increase in the second (66 => 85 gallons).  The substantial increase in gallons consumed demonstrates that growth overwhelms conservation or improvements in efficiency.  California and its electricity use is a shining example.

Jevons paradox explains the futility of setting gasoline mileage standards.  Setting standards does not discourage consumption.  On the contrary, gas mileage standards work to stimulate demand by limiting price increases.  On a different level, it is a means of misallocating resources by concealing the correct economic costs, a “subsidy” that overtime is counter productive to sound energy policies.  In no small measure by misallocating resources, gas mileage standards inappropriately stimulates transportation dependent sectors of the economy and exacerbates energy and other related matters.  In some respects, setting standards is a misguided egalitarian effort that results in little consumer benefit.

The most compelling example of the futility of conservation is from Minnesota's own energy report, “Minnesota Energy Planning Report, 2001 Draft”.¹³  Rather than using vehicle data to promote a sustainable society the report promoted instability by attempting to downplay population's role in increasing gasoline consumption.  Overlooked by the Minnesota report's statistical analysis is that those awesome “muscle” cars of the early period presented in the State's report were powered by dinosaur engines, big V-8 engines which averaged miles per gallon in the single digits or low teens.

Many cars today are equally quick, much smaller, and with miles per gallon averaging over twice those of their forerunners.  In other words, the 122% increase in gasoline use of the state’s report was propelled by Minnesota's million-population increase over the period.  Had Minnesota's population been stable, mileage improvements would have actually conserved the resource and flowed through to future generations.  A stable Minnesota population would have resulted in halving gasoline consumption.  The identical situation exists for every state and nation.

Gas mileage standards and other similar "conservation" measures work as an effective conserving measure only if additional vehicle sales are limited to replacement of existing vehicles or annual total gasoline consumption from all vehicles is a fixed amount.  The benefits of technological efficiency will flow through to society and its resource base only under these circumstances.  Under present conservation program standards or its proposed substitution, rail transit, neither required stipulation is mandated.

Despite the laudable goals offered, the apparent state and national practice has been to sell more people more but smaller cars, each vehicle with improved miles per gallon.  Subways, light or commuter rail transit are merely an extension of this unsustainable philosophy.  The establishment of gas mileage standards should be thought of as a means of protecting and sustaining the involved and very powerful transportation and other consumer industries rather than a means of resolving energy dilemmas.

Conservation Summary

Government has the obligation to pass appropriate legislation that would guide population, consumption, alternative energy, and other developments toward a sustainable society.  However, the public and policymakers must be cognizant of the distinction between the ongoing energy needs of society and welfare to the few.  The presumed benefits of increasing efficiency should build on market based principles in general or misallocation of resources will work counter to policies leading to a sustainable society.

Conservation and efficiency are means of maintaining the status quo as long as possible.  Although temporarily moderating energy use, it should be thought of as a short term tactic in a proposed energy program; it is clearly not sufficient.  As Jevons Paradox confirms, conservation or energy efficiency accommodates or encourages the trend to population extremes.  Unless reconsidered the pattern will continue until the inexorable reality arrives —with a more vulnerable population and fewer options.

On the other hand, conservation and improvements in efficiency can be pathways to maintaining or possibly bettering standards of living while reducing the use of resources.  Although clearly following the governors' program, the California situation demonstrates that conservation and efficiencies should be considered secondary to other long-run solutions.

Reducing consumption does not produce energy but can be a useful short-term facilitator of change.  The benefits of conservation are best applied in a short-term crisis situation ―when a portion of the electric grid becomes regionally unavailable due to weather or accident for example.  In emergency scenarios rapid implementation of conservation programs would be a prudent first step.  Conservation should be thought of as a temporary practice that stretches existing energy resources further providing the opportunity to implement other fundamental long-term policies.  In that manner, conservation can facilitate progress toward a more sustainable society, but not sustain it.

The fundamental purpose of “green” or similar kinds of taxes should be to increase revenues designated exclusively for the development and later implementation of improved energies.  Because higher energy prices will affect the disadvantaged, there will be proposals to adjust energy prices based on income levels ―a laudable and heartfelt idea that must be avoided.  If the true expenses of energy are not immediately evident to the consumer, unsustainable energy patterns are likely to continue.  Meeting both assistance and energy objectives simultaneously can be achieved by working through the income tax rather than the utility regulatory system.

Unless programs far beyond any now considered are implemented, reductions in oil and other energy resources through mileage standards, energy efficiency, or conservation policies will only play a minor role in achieving a sustainable energy policy.  It should be noted that current Minnesota and other states’ proposals to reduce energy efficiency standards ―notably proposals for home and apartment construction standards to make housing “more affordable”― misallocates and create additional demand on resources.

Similarly, ill-designed carbon based or ecotaxes, consumer or industrial tax exemptions and credits may result in unwise subsidizes of energy alternatives and behaviors.  If subsidies exist or if all production costs, including ecosystem based and future cost, are not fully included in the selling price of the service or product, then use of resources ―even if efficiently flowing through the economy in the short run― may not be conducive to achieving energy objectives.  These kinds of taxes presume governments fathom the economic and ecosystem requirements regarding the best approach to achieving sustainability.  Intelligent planning implies that the energy processes chosen must be those with the greatest energy output relative to energy input —net energy benefit― and conservation as a policy be sparingly employed.

If reducing standards of living by promoting conservation or limiting consumption is the most meaningful solution offered by policy, then it is fair and logical to ask “what is the quality of life they have in mind?”  When living standards are sufficiently lowered will policies change or will the government's declining living standard spiral be maintained in response to continuing growth and diminishing resources?

What is a practical thermostat setting in a Minnesota winter?  Arizona summer?

In answering this question recall that population growth has tremendous momentum, requiring over 50 years before reaching a stable level after implementing a policy to stop growth.  Our children and their children will bear the brunt of decisions made today.  Their interests must be foremost in mind.

The reality of conservation in the face of growth is that despite the praise, society is worse off in each succeeding period.

Alternative Energies

The search for alternatives can be summarized as follows¹⁴:

1.      Potential energy alternatives will require substantial quantities of existing baseline energy sources to develop, manufacture, and distribute;

2.      Possible alternatives to current energy systems, especially petroleum, will require the remodeling of a substantial portion of the world's existing energy infrastructure;

3.      All major current energy sources, especially oil, are either not directly substitutable or only with extraordinary effort and expense; and

4.      The search for alternative energies is a search for the technological fix, the pattern society has followed, inexorably leading to the current imbalances.

Although alternative energies employ fossil fuels in their development and manufacture, they are frequently referred to as renewable or sustainable forms of energy.  Thus, there is considerable ambiguity surrounding what a “renewable” energy source is and what it is not.¹⁵

Generally, renewables are thought to be sun, wind, biomass (vegetation), and water based.  With the exception of water —hydro is restricted by geology and weather― it is correct to say these energy inputs are indefinite.  However, energy for human work is man-made; the energy from these sources may not be “renewable” because the costs of conversion exceed the energy derived from the “renewable” source.  What is termed “renewable” in the biological sense is seldom sustainable in the energy or economic realm.

In the last three decades, energy from renewable sources has grown in line with increases in total energy, just over 2% per year.  However, more recently the “new renewables” such as wind, solar, and geothermal, experienced growth of 9% with wind producing the highest increase (52%) and solar energy 32% per year.  The high percentage increases are due to the low beginning basis rather than the relative contribution to total energy consumption.  On the other hand, the International Energy Agency (IEA) forecasts relatively greater use of non-renewables ―1.7% growth vs. 1.4% growth― over the next three decades due to, they believe, improving industrialization and modernization of today's developing nations.  The IEA believes the developing countries will burn fewer trees and less dung and greater amounts of oil, coal, and natural gas.  The trend to renewables and a quick reading of Part II of this paper suggests the extent of the contradictions in the IEA position.¹⁶

If wise long-run resource decisions are to be made, a benchmark is required to base and prioritize competing energy systems.  Without a proven standard the promotion of an alternative energy may do more harm than maintaining the status quo.  The priority list should be based on net energy returned analysis.

The 2^nd Law of Thermodynamics and the Law of Diminishing Returns are the reasons Dr. Barry Commoner said “there is no free lunch.”  That is to say, every step in the process of manufacturing alternative energy requires substantial energy.  Each successive level required to produce energy is less efficient overall, results in less available energy, and corresponding higher prices.  The greater the number of processing steps removed from the primary energy source, the greater the energy losses, higher the end product (user level) costs, and less sustainable the energy source.

Therefore, for the end user the important factor in proposing alternative energies is the process efficiencies involved and, of crucial importance, reducing the circular nature of the energy requirements of the alternative.  Frequently, the manufacturing, production, and distribution processes require the same increasingly scarce energy resources the alternative energy is said to substitute.  The test of an alternative energy is if it can be sustained using the alternative energy's output as the processing energy.  However, studies have concluded that when alternative energies are used to produce alternative energies, the process becomes an endless spiral of increasing costs.  It is imperative to recognize that researchers have concluded that modern Western economies cannot be sustained on hydrogen, solar, windpower, and biomass alternative energies.  Because of costs of production and weak efficiencies, the bugaboo of high dollar and energy costs invariably outweigh the consumer energy potential.

In addition to economic factors, the alternative energy must produce enough energy to manufacture and deploy the same energy source.  Whether this is measured in payback or net energy returned, the critical issue is energy efficiency.  An appropriate policy may be a transition period using less costly alternatives in the short run while longer term incorporating a more expensive and sustainable option.

Thus, advancing the idea that they are “renewable” mischaracterizes the actual relationship between energy inputs and outputs.  Generally when it is said that efficiencies are weak or costs high, the implication is that it can be “sustained” only temporarily.  Moreover, baseline energies are required to construct the manufacturing and processing facilities.  Contrary to the substitution theory, as current energy resources rise in price, alternative energies rise at a greater rate, becoming less economic.  Reconstructing society using alternative energies will be expensive!

In many respects the search for alternative energies involves the establishment of a parallel and duplicate energy system.  Rather than a solution, the production of alternative energies will lead to resource shortages sooner and ratcheting higher energy costs.  Unfortunately, as society approaches the Olduvai Gorge, carefully crafted temporary energy inefficiencies may be a useful transition option.  However, the window of opportunity for social and structural change is drawing to a close; the time necessary for implementation of appropriate programs is dwindling.

Net Energy

Minter's Maxim: A society's transition from a more efficient energy source to a less efficient energy source will always and invariably decrease the wealth, flexibility and options available to that society.
        James H. Minter. 2002

An essential technique for evaluating energy systems is net energy analysis.  Net energy determines the quantity of energy delivered to society by an energy source.  Briefly defined, energy returned on energy invested (often EROEI or less frequently, eMergy) is the total energy required to find, extract, process, deliver, and reform a source of energy into a socially useful form ―every phase ending with the light switch and light bulb of consumer use.  In brief, it is the ratio of energy (a thermodynamic quantity, a physical unit) invested to produce and use the energy output, consumer energy.  The models demonstrate the intermediate steps and lock on energy production of the 2^nd Law of Thermodynamics ―each processing step reduces available energy.  It is stated as a ratio of energy returned to energy invested, e.g., 2 : 1, 20 : 1.^17,18  Its calculation can involve complex flows and use a less rigorous social science (economics) to calculate portions of the investment.  The process discloses the energy patterns fundamentally, and incidentally the economic patterns.  Generally not considered by traditional analysis, the declining quality (btu output) of extractive energies ―coal, oil, nuclear, and natural gas― can be included in the net energy calculations.  Because of these factors, EROEI is the true measure of the effectiveness and sustainability of an energy source.

A similar but narrower relationship is the Energy Profit Ratio to Energy Payback Time (EPR : EPT).  It is a long-term measure of the net energy produced over the life of the energy source.  This measure compares the energy availability in a fuel or equipment to the quantity of energy necessary to produce it.  In describing the alternative energy benefits both government and industry promotions frequently use an incomplete version of the EPR : EPT method.  These “studies” often overstate the justification of alternative energies.  The difference is that EROEI is a more complete measure because it considers more than just the energy source and its use.

Drs. Cutler J. Cleveland and Robert K. Kaufmann describe net energy systems stating that,¹⁹

Biophysical and ecological economists argue that net energy analysis has several advantages over standard economic analysis. First, net energy analysis assesses the change in the physical scarcity of energy resources, and therefore is immune to the effects of market imperfections that distort monetary data. Second, because goods and services are produced from the conversion of energy into useful work, net energy is a measure of the potential to do useful work in economic systems. Third, EROI can be used to rank alternative energy supply technologies according to their potential abilities to do useful work in the economy.

International Standard 13602-1: 2002 - Technical Energy Systems - Methods for Analyses, describes a means of evaluating net energy.  ISO 13602-1 provides methods to analyze, evaluate, and compare energy systems.  It describes relationships between energy inputs and outputs.  In this regard, it is helpful, however its goal is for certification, marketing, and labeling purposes.  ISO 13602-1 is available the American National Standards Institute.²⁰

When an alternative energy is proposed as a substitute for existing baseline energies the EROEI of the alternative should be analyzed and contrasted with the energy source it is intended to replace.

The larger the net energy ratio the more condense the energy and efficient the energy source.  Traditional baseline energy sources such as hydropower (40+ : 1) and oil (30 : 1) have very high ratios.  Alternative energies characteristically have low or even negative net energy ratios.

Thus, the primary reason for performing net energy analysis is to compare alternate energy technologies without the noise of the money system.  Although analysis can be accomplished incorporating economic variables such as money, because many energy prices are distorted by legislation and sometimes the physical nature of the energy such as hydro-power, the evaluation of the physical aspects is used.  Comparing EROEIs of various energies places them on an equal basis for making judgments.  Fortunately, sufficient net energy analysis has been performed to compare the relative merits of competing energies, and in most circumstances net energies based on robust analysis are available.

In reality, sustainability and consumer costs are determined by the net energy of the energy.  Table 12 (next page) demonstrates that because of significantly reduced net energies, it will be difficult to sustain current population and consumption preferences using even the best of the alternative energies.  Sustaining current economies will be improbable with the majority of alternative energies.

Table 12 illustrates the net energy of traditional and alternative energies.

Table 12:  Comparative Net Energies 

Dr. Gene Tyner performed a comprehensive net energy from windpower analysis using two scenarios.  In the first scenario, a static ―unchanging analysis― the net energy of windpower was determined to be 4.15.  The reason for the difference from the higher range shown in the table is that this study is substantially more factor inclusive than average or earlier studies.  It should be noted that the reason for the poor EROEI and economics are that the substantial net energy (and financial) losses in early periods are too great to overcome in later years due to low energy output of windpower.²¹

The second scenario is long-run; it illustrates a 100 year dynamic with growth analysis assuming an economy using 25% windpower.  The analysis concluded that net windpower energy over the period is -116%.  In other words, roughly speaking, in a growth scenario for every $1.16 invested, $1.00 in energy is returned from windpower. (Tyner, 2001. p9, Table 3b. Line 23, Col O.)

Implications in Brief

There are several implications of net energies ―noted by “Minter’s Maxim” opening this section.

Subsidizes are necessary to overcome the physics of net energy.  Examining the list of state and federal subsidies and comparing them with the net energies seen in the above table demonstrates that there is a strong correlation between low energy returns and increasing subsidies.

Dr. Tyner also performed a net energy analysis for the overall U.S. economy.  Tyner’s research found that the overall net energy (EROEI) for the U.S. is 9.8.  Considering the high “current society” values presented in the above table, this is a relatively low number.  Thus, a critical finding demonstrated in Table 12 is that in order to support U.S. and Western societies’ high EROEI, energies in the 20 – 30 range are required.  These are the traditional concentrated forms of energy.  Future energy sources are less concentrated, diffuse, and less reliable.  Columns D & E of Table 12 also demonstrate that the energy future will be characterized by reducing net energy (lower EROEI) energies.²²

The most significant aspect of net energy is that the higher the ratio, the lower the quantity of energy and resources required to process and deliver energy to the end user.

Generally, the higher the net energy,

·         the lower the costs of energy;

·         higher the productive employment;

·         higher the potential living standard;

·         longer high energy level societies can be maintained; and

·         less complicated the transition to a sustainable society.

In summary, higher net energy (higher EROEI’s) imply higher productive employment and standard of living.  The lowest cost sustainable society can only be achieved if the net energy returns of energy sources are an important consideration.  In order to maintain a living standard using an energy source with a net energy of 5 when the living standard is based on a 20 net energy system implies that four times the current energy structure is required.

Because petroleum embedded in tar sands is one proposed method of expanding oil (and gas) reserves the next few pages discusses this option.  Following the discussion of tar sands is a brief analysis of hydrogen or fuel cells as an alternative to oil in transportation.  It will be seen that neither of these energy alternatives is realistic.  A discussion of the potential for windpower follows.  Windcommerce is properly viewed as a supplementary energy source.  This section concludes with a discussion of ethanol, methanol, and biodiesel as a transportation fuel.  These farm-based alternatives have negative implications for farmers and lack sustainable economics.  Finally, a brief discussion of wood as a firing source for generating electricity is presented.  The conclusion is that the use of wood biomass as an energy development has little in economics or biology to support its development.  The section on alternative energies concludes with a brief discussion of the sustainable farm transition.

Tar Sands

According to industry analysts the world leader in tar sand ores is Canada where the mineral covers approximately 77,000 square kilometers (km²).  The oil bearing sands are found chiefly in four Alberta regions:  Athabasca (26,300 km²), Cold Lake (13,500 km²), Peace River (4,900 km²), and Wabasca (4,300 km²).  It is estimated that in this region between 280 and 300 billion barrels of oil are recoverable.  However, as serious existing problems document, the development of the Canadian tar sands comes at high environmental and economic costs while producing negligible or net negative energy.

The largest producer today is Syncrude of Canada producing about 215,000 barrels of oil daily, about 14% of Canada's total oil production.  In an $8 billion project a consortium lead by Syncrude expects to produce approximately 25% of total Canadian oil.  In 1999, Syncrude produced 81.4 million barrels and by 2007 the plan is to produce 170 million barrels per year.

If the $8 billion capital investment is divided by the output (170 million barrels), the result yields a ballpark breakeven oil price almost double the market price today —$47 per barrel (in today's dollar).  This implies a cost of gasoline over $3 a gallon before transporting, operating expenses and profit margin ―when the current gasoline price is less than $1.50.  Suggesting the temporary nature of the large Syncrude development, if production reached a goal of 200 million barrels per year the total recoverable reserves will be exhausted within 15 years.  That is to say, by the year 2020 Canada will have few remaining natural gas or oil reserves in any form.  The environmental consequences of extraction and processing, however, will persist.

The effect on the land is only one of several environmental consequences.  Mining the tar sands is a massive undertaking.  To simply prepare the site for the Aurora mine opened last year required the removal of over 20 million cubic meters of overburden.  The tractor-like vehicles have 43 cubic meter “shovels”, each scoop significantly larger than a two-car garage.  Syncrude is proud to state that “more soil has been excavated by Syncrude than from the construction of the Great Pyramid of Cheops, the Great Wall of China, the Suez Canal and the 10 biggest dams in the world combined.”  And the developments are in the early stages!  With 77,000 km² of land with ore, the size of the mines could easily swell beyond imagination.²³

Although Canada has greater free water resources than any other nation the copious use of a life-sustaining resource for tar sand processing requires careful thought.

Water laced with oil and tailings is a byproduct of the manufacturing process.  It has been found that for every barrel of useful oil manufactured, over twice the volume of water polluted wastes result.  The current Alberta Syncrude pond is greater than 23 kilometers (14.5 miles) in circumference (25 km²), with about six meters (20 feet) of water polluted with tailings laced oil lying above a 40 meter layer (125 feet) composed of oil mixed with sand, silt, and clay.  Thus, by 2025 Syncrude will have in excess of one billion cubic meters of fine tailings and other matter stored in ponds and maintained as polluted muddy water.  (However, as described above, recoverable tar sand oil deposits will be depleted a decade before 2025.)  In addition, there are also heavy tailings requiring sizeable ponds as well.

The good news is that these heavier tailings are less “long lived” than the lighter fine tailings and require smaller water “recycling” ponds.  Nevertheless, with the proposed increases in production a body of contaminated water resembling a small sea will be required.²⁴  Recognizing the staggering water requirements —the tar sands developments are now using half the region’s water― the Alberta government is in the process of restricting access and raising water prices to discourage its consumption.

The development of the tar sands is an excellent example of the idea of “not-in-my-backyard”; it's out, way out of general public view.  One suspects that if its development were close to Edmonton or Montreal there would be vigorous energy discussions throughout Canada regarding the overall benefits of tar sands.  However, with the proposed production increases its environmental aspects will become apparent to all but the least informed.

In addition to land and water pollution are the effects on the planet's atmosphere.  The 1997 Kyoto Protocols are frequently cited as a reason not to undertake a development using energy ―energy developments often increase air and other pollution.  In terms of energy returned on energy invested, the lower the output ratio the greater the pollution.  Tar sands (and oil shales) development requires substantial energy, thus there is the potential for relatively increasing air pollution.  In the Kyoto Protocols Canada agreed to reduce emissions to 6% below 1990 levels by 2012.  Because of increasing energy developments and consumption Canada is 20% above its Kyoto commitment and will likely rise above 40% because of energy projects such as tar sands development.  One study reports that if the tar sands are developed as scheduled it would raise global greenhouse emissions by 6.7% above Kyoto targets.²⁵

Finally, as previously suggested by its high processing cost, the manufacturing process is another circular energy sink yielding significantly less useful energy than the energy inputs.  Because its manufacture and processing inefficiencies require large quantities of energy, its trendline production and selling costs will always lie above and at a steeper rising slope than the primary energy sources it proposes to substitute (whose costs are also rising).

To replace any meaningful number of existing oil plants or decommissioned nuclear electric generating plants would involve the construction of large numbers of tar sand conversion manufacturing facilities.  Additional plants would also be required to make up the difference in efficiencies, about two tar sand conversion plants to every current oil plant and four or more for each nuclear plant.

The enormous expenditures will outlive the useful life of the investment.  Assuming further development and construction, the tar sand ores would be exhausted in less than half the optimistic time horizon stated above.  Further development further reduces its useful life.

As the cost of production increases with decreasing primary energy resources, the unsupportable economies of tar sands will become even more evident.  Moreover, the transport of manufactured oil several hundred —even thousands― of miles across Canada or to its southern neighbor will necessitate very substantial costs via pipelines or other means of transport.

A similar energy conversion proposal was circulated about 25 years ago in Minnesota by Minnegasco (now Reliant Energy) and the huge peat bogs in Koochiching County in northern Minnesota.  The proposal was to use dried peat as boiler fuel.  The process would have required the removal of about five to ten acres of peat a day to a depth of ten feet creating a vast hole of dark brown (tannic acidic) water.  Minnegasco thought the plan was a prudent one because it required large amounts of natural gas to dry the peat!

Reminding one of the Canadian tar sands proposals, few at the time questioned the net energy implications.  It is clear that the energy requirements to produce the end consumer product significantly exceeded the energy sold to the consumer.  This peat-to-electricity plan is a clear example of negative net energy.   The plan was dropped when the Indian Reservation holding most of the land rejected it.

To replace a meaningful percentage of U.S. oil supply by developing the Canadian tar sands requires substantial environmental and economic tradeoffs.  The manufacture of oil or gas (or worse, LNG) from tar sands requires a multiple of today's baseline energy costs.  Significant development of the tar sands would imperil the economy without benefiting a trend to a sustainable society.

Hydrogen

As fusion is to the electric industry, hydrogen is to the transportation industry ―virtually the technologist dream of a perpetual motion machine.  The federal and Minnesota governments believe hydrogen is an endless perpetual motion machine without environmental consequences.²⁶  However, if it is to be realized, the “hydrogen economy” will be substantially more expensive and smaller scale than planned.²⁷  Hydrogen's characteristics as a fuel source have been known for many years.  Also well known are the energy drawbacks preventing its economical use which today's sophisticated technologies have been unable to overcome.

Natural gas or propane fuelled vehicles as oil based substitutes are not discussed because of diminishing resources and probability of escalating prices.

The last of a series of three Minnesota energy reports (released January 7, 2003) promoted a “hydrogen economy” ―notably in transportation.  It's improbable that hydrogen's time will come —certainly not as the hyped “hydrogen economy”― because of insurmountable difficulties: liquid hydrogen as a fuel source requires minus 250ºF storage, an absolute guarantee the liquid hydrogen tank won't explode, with poor “gas” mileage hydrogen requires vast increases in “fuel” production, ponderous cryogenic storage tanks, and is an energy sink costing more to reach the car's tank than the energy consumed as fuel.  The “hydrogen economy” is unworkable: a trend toward a hydrogen economy implies greater dependence on diminishing fossil fuels.

Currently the U.S. produces more than 100 billion cubic feet of hydrogen.  In addition to use in producing rocket fuels for NASA, hydrogen is most frequently used in ammonia (fertilizers), methanol production, glass, various chemical products, cosmetics, lubricants, and refining petroleum for gasoline and heating oil.  Its use in methanol is frequently to produce the gasoline additive MTBE.²⁸  Despite unsatisfactory economics, hydrogen technology is also being applied to portable power generating plants.²⁹  The Schatz Energy Research Center, for example, recently built a hydrogen generation station for use with their fuel cell vehicles.

An alternative to hydrogen in fuel cells or batteries is a zinc-air fuel process.  Zinc-air power is more economical and efficient than hydrogen.  The zinc-air process uses conventional