The missing curve

The recently released BP Energy Outlook 2035 is an interesting read. Not because of the predictions it makes but because of the things it neglects to say.

The report looks at the energy sector for the years from 2012 to 2035 and concludes that

  • energy demand will increase by 40%
  • CO2 emissions will increase by 29%
  • GDP will more than double

The supposedly good news is that the increase in CO2 emissions is slower than the increase in energy demand and that the GDP increases much faster than energy demand. It does not give too much thought to the environment but concludes that – in an epic understatement – we “could do better” on the issue of sustainability. That is one way of expressing that we are destroying the Earth’s climate.

GDP

It you only have a hammer, every problem looks like a nail. There is a glaring omission in this analysis, which might be difficult for mainstream economists to catch. The only way the analysis makes any sense is if we accept the GDP to be an appropriate and accurate indicator of human well-being. Sadly, we know perfectly well that this is not so. The GDP does not account for the distribution of wealth or damage to the environment. It is perfectly possible for a nation to have GDP growth whilst getting poorer, as is arguably the case in the USA today.

If we were to add another curve, such as the Genuine Progress Indicator or GPI, to the plot, things would look really dismal. Because the GPI accounts for a number of effects that are neglected in the GDP, it is probably a more accurate (or less wrong) indicator of human quality of life. To take an obvious example, an oil spill has entirely positive effect on the GDP but also has some negative consequences according to the GPI.

The point is that the GPI is increasing much more slowly than the GDP. Thus, even though we are burning more and more fossil fuel, it does not seem to improve our quality of life on a global scale. In other words, we are wasting fossil fuel without any real benefits.

Let us get this straight! There is no question that a part of the world’s population has unmet material needs. Their quality of life would probably increase with more energy and resource consumption. However, material consumption suffers from diminishing returns. Once a certain level of material well-being has been reached, adding more stuff does not make you happier. The GDP curve does not account for this. It also does not account for the damage to the natural environment.

This explains why a Global Sustainability Fee (GSF), as proposed by GISEco, is necessary. To begin with, it would provide the poorest nations of the world with the financial resources necessary to improve the lives of their citizens. These nations would have faster economic development with a GST than without it. Other nations would see a slower growth in GDP – which is not directly related to real progress – and a much faster transition to a carbon free economy. Thus, to paraphrase the BP report, we would do a lot better with a GSF.

Actually, there is an even more important reason for a GSF. An obvious problem with fossil fuel is that the reserves are unevenly distributed. Some countries profit from having large reserves whereas other nations need to import all the fuel. However, combustion requires two components: carbon and oxygen. Even though, arguably, the carbon belongs to a specific country, the oxygen does not. The GSF can be understood as payment for the oxygen needed to turn the carbon into useful forms of energy. As this oxygen belongs to all of us, the money should be distributed evenly among the world’s population. This would not only be fair, it would also reduce global tensions between the haves and the have-nots.

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