Ignazio Musu, Ca’ Foscari University of Venice.

Economic challenges in the Anthropocene.

1 What is Anthropocene.

•Nobel laureate Paul Crutzen (2002): for the past three centuries, profound shift between humans and the rest of nature; unprecedented influence of human action.

•The Earth system has left the interglacial (Holocene) era and entered a new one: Anthropocene.

•The qualitative shift was determined by the industrial era.

•Energy bottleneck in the final stage of Holocene removed by diffusion of fossil fuels.

2 During Holocene:

•Impact of preindustrial human societies on environment (through hunting, gathering and, later on, agriculture) within the bounds of environment’s natural variability (Steffen and al., 2007).

•Constraints to energy available:

• Water and wind power only in favorite locations and limited by importable technologies (of watermills, sailing ships and windmills).

• Energy from animals (and through them from plants) limited by land suitable for crops and forage.

3 • Fossil fuels removed the energy bottleneck by offering access to carbon stored from millions of years of photosynthesis.

• Industrial societies use four or five times as much energy as did agrarian societies , which in turn used three or four times as much as did hunting and gathering societies (Steffen and al., 2007).

• Examples of scientific and technological progress based on fossil fuels: • Invention (and refinement) of the steam engine by James Watt in the 1780s; • Ammonia synthesis from atmospheric nitrogen pioneered by Fritz Haber (the Haber-Bosch synthesis) in the early 20th century.

4 Summary on energy transitions (Scott Taylor, 2012)

•Biomass (old green power) to Coal •Coal to Liquid Fuels – Oil and Natural Gas •Liquid Fuels – New Green Power (?)

•Past transitions were very slow and of relatively small magnitude. •Transitions always to higher density sources (density power: energy per m2). •Low pre-industrial energy density of “old green power” (plants, water, animals) led to small city size; denser energy sources in industrial era led to higher urban dimensions. •Fossil fuels reduced transport costs and widened their potential.

5 Oil

Gas

Coal

From its introduction in 1850 to its complete dominance by 1920, coal took 70 years. From the first well in 1880 until its point of maximum dominance in 1970, oil and natural gas took 90 years.

Source: Scott Taylor, Moreno Cruz, 2012 6 Biomass Coal Oil, gas

Source: Scott Taylor, Moreno Cruz, 2012 7 Source: Scott Taylor, Moreno Cruz, 2012 8 Three stages in Anthropocene (Steffen and others, 2011):

•First stage: from the industrial revolution to the Second World War.

•Second stage: “Great Acceleration”, from the end of Second World War to the end of twentieth century;

•Third stage: present one, challenge to mankind for the sustainability of the Earth system.

9 Great acceleration after the Second World War, Source: UNEP, GEO5, 2012

10 The Great Acceleration: population

From 1800 to 1950 world population tripled: from 1 to 3 billions. From 1950 to 2000 world population doubled: from 3 to 6 billions.

Source: Steffen e al. 2011. 11 The Great Acceleration: urban population

In 2050 more than 50% will live in urban areas. Urban size will grow. Today more than 20 cities have more than 10 million inhabitants and 450 have more than one million.

Source: Steffen e al. 2011. 12 The Great Acceleration: total real GDP

From 1950 to 2000 world total real GDP increased from 7 to 35 trillions 1990 US dollars ( a multiplier of 5) Source: Steffen e al. 2011.

13 The Great Acceleration: motor vehicles

Motor vehicles grew from 40 millions in 1945 to almost one billion now. According to IEA in China car sales in 2016 (11 millions) will be higher than in US. Source: Steffen e al. 2011. 14 New car sales in China

IEA, WEO 2007, p.300

15 The Great Acceleration: fertilizers consumption

Source: Steffen e al. 2011.

16 Global-scale transformation of the environment particularly evident in the atmosphere.

CO2 concentration:

•Range of Holocene variability: 260-285 ppm.

•1750: 277 ppm. •1800: 283 ppm •1850: 285 ppm. •1900: 296 ppm. •1950: 311 ppm. •2000: 369 ppm. •2011: 395 ppm.

17 Temperature change and CO2 concentration

Source: UNEP, GEO5, 2012

18 Anthropocene, technological change and economic growth.

Three technological revolutions in the Anthropocene (Gordon, 2012; Smil, 2005, 2006).

•First technological revolution (Industrial Revolution): 1750-1830.

• Coal replaced wood as main energy source • Inventions of steam engines and cotton spinning. • Energy density of coal facilitated its use in transportation. • Improved communications through early railroad and steamships.

19 • Second technology revolution: 1870- 1960s.

• First phase: 1870 – 1914.

• Oil and gas replaced coal and wood. • Their higher energy density allowed further mobility and miniaturization of engines.

• Great innovations: • Electricity, • Internal combustion engines , • Chemistry and chemical engineering, • Running water, indoor plumbing, central heating, • Telephone, telegraph, radio.

• Crucial phase: roots of technological transformations of the second phase (Smil, 2005). 20 • Second technology revolution: 1870- 1960s.

• Second phase: 1918-1960s.

• Incremental innovations based upon first phase radical innovations: • road means of transport, • durable consumption goods, • new systems of communication and entertainment (motion pictures, TV).

• Fading benefits of the second technological revolution in the 1970s ( “productivity slowdown” ).

• Energy crises (increases in oil price).

21 • Third technology revolution: ICTs

• Big developments in 1990s.

• Economic globalization.

• Technological «leapfrogging» in emerging economies.

• Incremental innovations in communication and entertainment (Ipod, smart phones, tablets, Ipad).

• 2001: ICTs bubble starts bursting; twin towers.

• Growth supported through explosion of private debt: housing and financial bubbles.

22 Evolution of primary energy by different energy sources and technological innovation (Global Energy Assessment, 2012)

23 The nature of the technological revolutions in the first two stages of Anthropocene.

•What did the three past technological revolution in the industrial era have in common: a virtuous circle between innovations and market demand.

•Innovations successfully absorbed by a widening market demand, particularly for consumption goods.

•Larger market demand at the basis of likely increasing profits from investments in R&D and new products, which promoted further innovations.

24 A new technological revolution for the third stage of Anthropocene?

Warnings (Steffen e al., 2011):

•Growing awareness of human impact on the Earth system, particularly through the energy-environment issue.

•Commitment to build systems of global governance because of the globalization of the problems.

•Awareness of limits (planetary boundaries (J. Rockstroem e al. 2009) ?

25 Source: J. Rockstroem e al., A safe operating space for humanity, Nature, 461, 2009, pp. 472-475. 26 Questions about the energy-environment crisis (latent during the economic crisis):

•scarcity of fossil fuels?

•energy safety?

•sustainability: the climate change problem.

27 Scarcity of fossil fuels: increasing role of unconventional reserves.

Remaining recoverable natural gas resources, end-2011 (tcm) (IEA, WEO 2012)

Unconventional gas: 41.5% of total remaining resources 28 Unconventional gas production in 2035 (IEA, WEO 2012)

29 Energy safety: is there a “political peak” concerning fossil fuels supply?

•Political power of the oil producers’ cartel, OPEC, and gas suppliers such as Russia; political instability in many oil producer countries.

•However:

• Price effect of restricting supply: alternative supplies encouraged, energy efficiency, promotion of alternative technologies.

• Likely reaction by fossil fuels exporters: increased supply to finance investments for a better level of life asked by an expanding population. 30 The energy-environment challenge: climate change (Helm, The Carbon Crunch, 2012).

•News about a world with still abundant fossil fuels are not good news for the climate change issue.

•More necessary and urgent to explain why it requires to be addressed (particularly mitigation).

•Important to recognize that different types of fossil fuels emit different quantities of carbon.

•A switch from coal to gas: great difference in terms of aggregate emissions; useful as a transitional solution.

31 Energy efficiency.

•Can be stimulated by a higher energy price; but it is doubtful whether markets will lead to this result, given the abundance of unconventional reserves.

•Problems for markets to implement energy efficiency measures: why energy saving companies do not emerge to exploit the fact the investments now will produce future energy consumption savings?

•Policies required to support energy saving investments: but they are costly and need resources.

32 Need of a carbon price: but on consumption rather than on production.

33 Problems with current renewable technologies as an alternative to fossil fuels.

•Low density power and the need of large spaces.

•Intermittency, storage and the need of back-up traditional technologies.

•Needs of costly subsidies (feed-in tariffs).

•Are the new infrastructure with the existing renewable worth?

•For nuclear: increasing capital costs (safety) and unreliability of political framework.

34 The need of investing in new technologies.

•Little technical progress in the energy industry in the past century.

• Coal power stations date from the 19th century. • Gas combined cycle and the nuclear power stations date from 1940s and 1950s. • Electricity is still produced mainly by burning coal, oil and gas or as a result of a nuclear reaction.

•How to foster a technological breakthrough?:

• A rising carbon price and an appropriate innovation policy combined ( twin externalities).

35 Opportunities:

•Applying the new information and data technologies for a radical change in markets and systems for energy and transport.

• Existing energy industry: dominated by large vertically integrated utilities because of no storage and passive demand.

• Smart technologies (smart meters and smart grids) will increasingly allow for: • decentralized generation (also to address intermittency problem), • consumers to take control of costs and use electricity more efficiently; • system operators to better manage demand. 36 • Innovation in batteries will help in solving the storage problem (electric cars, intermittency in wind and solar).

• Solar: increasing research attention to artificial photosynthesis as new electricity generation technology.

• Biomass: other plants than corn and sugar cane (requiring a lot of land and water and conflicting with agriculture) may be discovered (algae is one possibility).

• Nuclear: ambitious projects being undertaken in fast breeders reactors.

• Geothermal heat: already being exploited in volcanic locations, but a lot of technological development needed.

37 Large investments required to find out new technologies and make them deployable.

Additional total investment needs in the 2DS compared to 6DS (IEA, ETP 2012): 36 trillions USD from 2010 to 2050.

Transport as leading sector in additional investments to decarbonize the economy (more than 40%); the residential sector (buildings) follows with 30% and power with 20%. Energy efficiency measures will prevail. 38 • FEEM-WITCH model: to achieve the 450 ppm concentration result at 2100, 4% of the Gross World Product would be required; even to achieve the more realistic target of 535 ppm., 2.8% of the GWP required.

• European Road Map to a Low Carbon Economy (CO2 emission could be reduced by 80% in 2050 compared to 1990): • Increase in investment over the coming 40 years estimated in 270 billions euro annually (totally above on trillion euro): an additional 1.5% of EU GDP per annum above the current share of investment on GDP (19%). • Special policy and financial effort: possible role of project eurobonds (bonds issued jointly by European governments and by the EU).

39 Conclusions.

•Reasons to be technological optimists, but awareness that decarbonizing the economy will be costly.

•Required technological progress can only partly be supported by private demand, even with the necessary cultural change in lifestyles and consumption patterns.

•Research race towards new low-carbon technologies should be supported (without a preliminary decision about predetermined winners) by governments and hopefully through an international effort.

40 • There should not be too much optimism about the costs of the transition to a decarbonized economy.

• Temptation of recovery based upon the traditional growth model.

• Limited financial resources for a green technological revolution not only in advanced but also in emerging countries imply:

• priorities and political willingness (role of social norms); • international technology cooperation • maybe a lower rate of growth (although these investments may provide new jobs).

41 References.

P. Crutzen, Geology of Mankind, Nature, vol. 415, p.23.

GEA, Global Energy Assessment, Towards a Sustainable Future, Cambridge University Press, 2012, pp. 1865

R.Gordon, Is U. S. economic growth over? Faltering innovation confronts the six headwinds , NBER, WP 18315, august 2012.

D. Helm, The Carbon Crunch, Yale University Press, New Haven 2012.

IEA (International Energy Agency), WEO (World Energy Outlook), Paris, 2012

42 IEA (International Energy Agency), ETP (Energy Technology Perspectives), Paris, 2012.

OECD, Inclusive Green Growth. For the future we want, june 2012

J. Rockstroem e al., A safe operating space for humanity, Nature, 461, 2009, pp. 472-475.

J.Rockstroem, A. Wijkman, Bankrupting Nature, Earthscan, Routdledge, 2012.

M. Scott Taylor, J.M.Cruz, Back to future of green powered economies, NBER WP n.18236, 2012.

V. Smil, Creating the Twentieth Century, Technical Innovations of 1867-1914 and their lasting impact, Oxford University Press, 2005 43 V. Smil, Transforming the Twentieth Century, Technical Innovations and their consequences, Oxford University Press, 2006

W. Steffen, J. Grinewald, P.Crutzen, J. McNeill, The Anthropocene: conceptual and historical perspectives, Philosophical Transactions of the Royal Society, 369, 2011, pp. 842-867.

UNEP, Towards a Green Economy, 2011.

UNEP, Geo-5, Global Environmental Outlook, 2012.

World Bank, Inclusive Green Growth, 2012.

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