Monthly Archives: November 2011

Problems for the environment

Posted on by

Here is an interesting thing. Over time, each and every corner of the planet has experienced just about every extreme of environmental condition.

Any given place on the earth will have been really hot, freezing cold, wet, dry, flooded, parched, ravaged by fire, hit by tsunami or earthquake, bathed in toxic gases from volcanic activity and seen the effects of meteorite strikes large enough to send gigatons of dust into the jet stream. It has all happened.

The only thing needed for all of these events to occur in any one place is a very, very long period of time. So long that, although we can write down the length of time in numbers, it is beyond our human perception.

One million years is a yawn in evolutionary time and a blink in geological time.

Certainly when impacts occur, there is a change to the way the environment works. Ecological processes may speed up, slow or shut down for a while and many species may be lost until others arrive more suited to the new conditions.  But over time a new pattern emerges and life continues. No matter the severity or extent of change, disturbance and impact, planet earth has absorbed it and kicked on.

Even when the disturbance is extreme, such as a volcanic eruption sufficient to put the landscape under two feet of caustic ash, there is a period of apparent sterility until rain and the arrival of microbes start to turn the ash layer into something tolerable for bigger organisms. In a few hundred years, a little longer if the climate is cold, the process of succession will return a green mantle to the landscape.

So for the environment, there is no such thing as a problem, only change.

Not only is there change, but change is normal.

Enter Homo sapiens, modern humans, us. Initially we were of minimal consequence to this overall pattern of change. We started out with just a few million individuals spread far and wide in small groups in sync with the grand scheme of predator and prey on the savannas. This arrangement persisted for just shy of a million years, and then, all of a sudden, we figured out novel ways to appropriate resources – lots of them.

In an evolutionary blink we entered an exponential phase of population growth and migrated to all continents. Today we number 7 billion souls, with an additional 8,000 net added every hour (1.3 million per week). Together we appropriate over 40% of the global primary production, modify landscapes everywhere and have even started to change concentrations of atmospheric gases. If Homo sapiens were a species of insect or rodent the description would be ‘plague proportions’.

Still this is not a problem for the environment.

Voracious herbivores have come and gone before.  Appropriation of resources by one species simply leaves less carbon to fuel other species and most plagues pass. For the environment, a plague is just another source of change.

Not so for us. We see change as a problem, a big one if it means that our means of production are compromised, or worse, our primary needs for food, water and shelter might not be met.

Unlike the environment, we have an awareness of self that makes us worry about change. We alter the environment to best produce resources for us and then we want it to stay in that modified state, steadily delivering the resources we require. Except that the very modifications we induce are a driver of change to the ecological processes that support primary production. They are disturbances as severe and widespread as any other.

Not only do we disturb; we have developed a system that allows a handful of us to supply the primary resources for everyone else in return for cash. This has too many consequences to describe here but it means that most of us can bunch up and live far away from the sources of our food and water. We then use energy to move these resources, and ourselves about the place.

As the modified system of production is efficient (initially at least) most of us have time to consider, manufacture and acquire goods that supply our secondary needs – we acquire lots of stuff. These goods use up materials that we have found in the landscape and under the earth. We extract and transform natural resources and further modify the landscape generating by-products as we go.

Even when this goes on for 7 billion humans scrambling for food, water, shelter and wants, the environment does not see this as a problem. It is merely another novel disturbance akin to a meteorite the size of a city crashing into the desert. This is bad news for humans and their needs for food and water but just another bout of disturbance and change for the environment. It will shrug and go on just as it has through deep ice ages, big meteorite impacts and a host of other disturbances that are just the way of things.

So what if there is a mass extinction? This has happened half a dozen times before and over time biodiversity has come back stronger. It will do it again, only maybe not with quite the array of mammal species we have now.

Pretending that the environment has a problem is a deflection. In the long run there are no problems for the environment, only problems for us.

More on forest loss

Posted on by

A good friend of mine Alex Nimz who has been devoting his considerable intellect and energies into the development of REDD+ projects in Asia made an interesting observation on my Forest loss post.

Alex suggests that when the western economies converted their forests to agriculture, the products were distributed locally, and economic benefits from agriculture were also kept locally. In many countries were REDD+ is being trialled, the capacity for agriculture development is imported, would-be agriculture products are exported, and most of the economic benefits flow back overseas to the investors in the projects. Consequently from the perspective of a customary landowner of primary rainforest, the opportunity cost of REDD+ is quite low because clearing and development of agriculture does not represent a great economic opportunity locally. Instead the REDD+ opportunity allows them to participate in stewardship and other activities that match their existing capacities.

I agree with this analysis. If the locals take the agriculture development route in the modern world of international markets, not enough of the production stays to stimulate a local economy. Only for me this doubles the twist because I am not sure that locals perceive the opportunity cost as low.

Ask an African from the village if he wants a mobile phone, a BMW and sharp clothes and he says, yes please. In other words I suspect there is an innate human urge to have more, wherever you come from and at whatever level in the economic game you start.

And a forest converted to agriculture would always seem like a start.

Forest loss

Posted on by

Forest clearing for agriculture, Papua New GuineaThere is a curious twist in the ongoing debate over the protection of tropical forest.

In the west we say that we are worried by the rate of deforestation that is equivalent to an area twice the size of Tasmania every year or an area the size of Sydney every two days. And we are becoming more concerned when we hear that this deforestation, the cutting and burning of carbon stores, makes up around 13% of global greenhouse gas emissions from human activity.

No matter that many of the trees end up providing us with furniture or paper and the cleared land grows cows for our wrapped up burgers.

In an attempt to slow the rates of both legal and illegal logging, the west is talking up various financial incentives to reduce the rates of deforestation in the tropics. There have been stewardship payments before but this time we are proposing making payments for the carbon that stays in the forest if trees are not cut, an avoided emission.

Several labels have been used to describe this incentive for forest protection. It started as RED, reduced emissions from deforestation. Then a second ‘D’ was added to capture situations when forests are degraded but not felled. And now a ‘+’ has been included to cover the social and economic implications of both deforestation and the incentive mechanism.

So we now have the inclusive REDD+.

The idea is simple enough. An estimate is made of the carbon emissions that would happen if a forest were cut down completely and/or degraded as a result of timber harvest. A detailed set of carbon accounting rules and information on the forest is used to determine the amount of avoided emissions that would accrue from keeping the forest intact. Once the amount of avoided emissions is verified carbon credits can be issued and sold on international carbon markets for areas where the forest is protected. Those with a need for carbon credits and pay the market price for each ton of carbon dioxide to whomever is responsible for keeping the forest intact.

At first glance it seems like a great deal. Local peoples get paid to keep their forests standing and greenhouse gas emitters get to pay to offset their negative effects on the atmosphere.

And where these payments flow and are equal to or greater than the value that would accrue from clearing and cultivating their land, it will seem like a good deal for everyone.

Carbon emitters in the west pay real dollars to resource owners in developing countries to keep the trees standing.

Recall, however, what happened in the industrialised countries where just about everywhere land was cleared of forest for agriculture. Less than 3% of Western Europe still has natural forest, down from over 80% before agriculture. In the US where there are large tracts of inaccessible land unsuitable for agriculture where forests are still intact, some 40% of the forests in southern and northern states were cut down during the 1800’s.

Agriculture in these places was hugely successful. Crops were grown and sold each and every year that created wealth and with it innovation, industry and more wealth. Then that wealth created finance that generated even more wealth with lifestyles to match.

So with REDD+ actually we are asking that for modest payments spread out over a few decades and spurning the opportunities of the repeat revenue from agriculture, owners of tropical forests will forego the route to opportunity and wealth that, so far, is the only one we know works.

I wonder how many of us who already live in affluence would take that deal?

Not many is my guess. And yet conservative management of tropical forest remains is a critically important task. It is just that we must find an alternative development pathway to mobile phones, plasma TVs, education and health care that is both equitable and reliable.

At some point we must understand that we cannot be so numerous and still try to solve problems on the cheap.

Stranded assets

Posted on by

My analogue television is a stranded asset. It has perfect picture and sound, plus it has worked this way for years without a flicker. Only now there is no signal for it because we have moved into the digital age.

I could complain. My investment in that analogue TV still had time to run – I expected to get entertainment returns from reruns of the Simpsons for years to come.

Instead I was forced to purchase another asset, either a set-top box to convert the signal or a new digital TV. I chose the second option in plasma. By doing so I wrote off any returns from my stranded asset and made another investment.

And the world did not end.

In fact I did what the economists, politicians and business owners want; I made another purchase.

It would be interesting to see what would happen to the performance of super funds that have invested in fossil fuel power plants if those assets were also stranded. No doubt returns would take a hit, but again, I doubt that the world would end.

We are always told that superfunds, the investment vehicles that take a proportion of our before tax income that in Australia is a compulsory 9% of salary paid by all employers on behalf of their staff, are risk adverse investors. Surely then, they should have balanced portfolios.

Presumably someone has done the sums, but I would guess that the inherent and irrational volatility of the markets is a far bigger hit that the loss of some power stations. And like the banks that chose to lend to the Greek government, they might not be as sure of their returns as they think and they may not get a bailout.

So the noise and bustle over the loss of these assets to accommodate the necessary change to alternative fuels is really vested interest. It comes across as a rail against a redistribution of returns but in really, it is the fear that they might actually have got the investment wrong. That in following what they claimed was conservative investment management they, in actually, were taking a huge punt.

This reality comes for adherence to growth economics 101.

To keep economic growth happening, funds must be mobilized to generate new assets, goods and services. How else are the GDP numbers expected to grow?

In fact we do it all the time. It’s just that we are so under the thumb of the current set of asset holders we forget that as part of normal economic activity some assets will do well while others fail. It is a normal pattern of economic activity. Consequently there will always be stranded assets; and the world will not end.

More importantly we will have to spend to create new assets to allow us to complete the transition from fossil fuels without seeing the end of the economic world.

 

A future economy

Posted on by

Over the past 120 years ago the have been an average of 114 million sheep grazing on Australia paddocks producing wool and meat for export. In 1970 the numbers peaked at 180 million. Today there are still 72 million sheep but there are also mines making Australia the 2nd biggest global producer of iron ore and 4th biggest producer of coal. Australia the country has done very nicely out of the natural resources of the world’s largest island.

In time the Australian economy will need to make money from something other than natural resources. This is a significant reality for a society that was created on the back of the sheep and now rides high on coal trucks and ships laden with iron ore.

“No worries, mate,” some say. There is plenty of time. There will be generations of demand for those salable mineral resources from the 4 billion people who still don’t have a washing machine but would dearly like one.

Plus we could always go back to sheep. For soon there will be 10 billion humans to be fed and we have all that wet and wonderful land in the north to turn into a food basket.

I joke not. The latter idea is under serious consideration by the right leaning Federal opposition party. Equally there are those who would see remaining forests in the east paved to provide the living space for 100 million.

And maybe that is enough. There could be another 100 years of wealth in natural resources grown on and dug up from the land and immigration to provide local customers who will buy houses, white goods and visit air-conditioned shopping malls.

But I would think we need something else; at least a couple of alternative sources of external income. Not least because there will be a need to find something for everyone to do. Else the nation becomes a handful of miners and hi-tech farmers supported by millions of shopkeepers (or, more likely, couriers for online stores) and civil servants. And not everyone can be those; and already 3 out of 4 Australians in the workforce are paid for delivering a service of one sort or another.

So what would the else be?

Presumably something that the people are good at, have an aptitude for, and makes sense economically. Sport perhaps.

Commentators in the US have asked the same question of their nation. One of their answers is for the US to drive the technology revolution needed to shift our energy supply away from fossil fuels. They have capital, smarts, institutions, and the all-important entrepreneurial spirit. That they are being left behind in this by China and Germany also supplies plenty of motivation.

Australia lacks the scale of entrepreneurial spirit and risk capital to make innovation become a serious earner. Sole trading we can do, but a desire to build empires from small beginnings is rare. Consequently, the risk capital that runs at close to 10% of commercial investment in the US barely makes it to 0.1% in Australia. This lack of support requires that most innovators with a big vision must find what they need overseas.

So what does Australia have? What it has always had; abundant natural resources.

It makes sense to use the vast landmass, the myriad animals and plants, the minerals in the earth and become a regional, even global, breadbasket. Not least because Australia does have smarts, capital, infrastructure and the experience to overcome the significant practicalities that such a mission presents.

Only water, nutrients and labour are in short supply. Land must be managed carefully to avoid soil degradation and salinity. There has to be a careful eye on the changing weather and an ability to drought proof agricultural production.

Australia has a well-developed system of regional natural resource management, generations of farming experience, research and innovation capacity, a world-class tertiary education system and an emerging culture of prudent agriculture epitomized by the Landcare movement. It has what it takes.

This is not a proposal for turning the tropical savannas into laser leveled rice paddies, at least not everywhere, or to continue with meandering livestock left to their own devices and rounded up once in a while for market. This is a call for a radical change to agriculture that will make it into a smart, sustainable production system that accounts all production costs and harmonises output to the capacity of the landscape. In short, to create a totally new way that requires the engagement of everyone.

Why not do it? Create a robust economy on sustainable use of natural resources.

Preparation for change

Posted on by

Solar panels, BavariaThere were times during the recent debate in the Australian parliament on the clean energy futures legislation when leader of the opposition Tony Abbot was sounding forth his hip pocket rhetoric to an empty lower house. The green leather on the government benches was unmoved.

“This is a toxic tax,” he kept saying, “that on the governments own figures will cost the average Australian a years salary by 2020.”

As the benches were unable to respond, his words echoed round the chamber and into the television cameras.

Why would anyone vote for losing 5% of his or her salary? There has to be a good reason. So what is it? Why should there be a surcharge on a gas that is plant food?

As John Mathews puts it in an online article

“The $25 billion charge on the major carbon polluters is really no more than a signal that they represent the old, brown economy, and will have to start to upgrade their activities if they wish to join the green future. The rest of the world, notably China, Japan, Germany, Spain are all putting huge investments into such a green future. It is long overdue that Australia joins them.”

There it is. The answer is that there will be a green future.

In fact it will not be called green, but normal. Future goods and services will be made possible from what are currently alternative fuels, resource conservation will be the norm, and production efficiency will be an industry mantra because consumers will demand it. The Marks & Spencer Plan A will be copied by everyone.

The chatter about the clean energy futures legislation is about the cost of the tax and the slugging of industry with an emissions obligation but the real guts of the policy is preparation for change that is as inevitable as the weather but not about the weather. It is preparation for an economy  that runs without fossil fuels.

Again quoting Mathews,

“Everyone knows that what goes into the atmosphere over the next 20 years will be the result of investment decisions taken in Beijing and New Delhi, not in Canberra.”

But also the decisions made in the US, Europe, and yes Australia too, on the speed of the transition away from our fossil fuel dependency. Remember folks, this is really what it is all about.

So it was a great shame that those leather benches weren’t warmed by government MPs countering the toxic tax rhetoric with passionate explanation of how this legislation is a historic step on the road to changing the way things are done… to avoid being left behind.

Maybe they just didn’t believe it.