Forty years from now, how much will energy cost? What will happen with the climate? Most importantly, will you be richer?
Let me answer some of your likely questions about the next 40 years as I expect them to unfold.
Some of us will, others will not.
In order to give a clearer answer, the question must be asked more
precisely. The question must be: Will I be poorer compared to x? And you
must decide whether x should be (a) today, (b) what you would have been
if humanity rose to the occasion and ran a rational world, or (c)
relative to your peers.
Furthermore you must be precise about what future time you are asking
about. Is it 2052? Or the halfway mark, 2032? You do remember, I hope,
that the average income path to 2052 will not be a straight line. Per
capita consumption in my forecast grows to a peak sometime within the
next 40 years and is in decline in 2052—details depending on where you
live.
If we’re willing to sacrifice some precision, though, I can provide
this general answer: As long as you are not a citizen of the United
States, you will be richer in 2052 than you are today. But only slightly
so, unless you live in China or BRISE. I can add some detail: you will
be much poorer than you would have been in 2052 if a benevolent dictator
took control in 2012 and forced through the necessary investments to
keep everyone employed and global warming below plus 2°C.
And I can add: Unless you do something very stupid (or very
unconventional) during the next 40 years, you will be in the same
position vis-à-vis your neighbors and peers as you are now. Both you and
your peers will experience the same parallel development over the next
40 years. The only exception is if you are presently very affluent. Then
it may be that your social rank will have declined through the
processes of redistribution, which I believe will occur during the next
40 years in order to reduce some of the tension implicit in the rapid
increase in inequity in the capitalist world.
Finally, I will give you a piece of uninvited advice: Yours is the
wrong question. You should not ask, “Will I be poorer?” You should
rather ask, “Will I be more satisfied?” Whether you are satisfied with
life is more important (for you) than whether you are somewhat richer or
poorer. Empirically, for some, income is the sole determinant of life
satisfaction. But for the majority, a whole host of factors influence
our well-being—job, health, family, community, prospects for the
future—in addition to income. It is the sum total of all aspects of life
that determine your well-being, both now and in the future.
So when you privately assess the implications for yourself of my
global forecast, try to judge what it will mean for your well-being, not
only what it will mean for your income.
Yes.
Or to be slightly less flippant: there will be as many jobs in the
future as there have been in the past—relative to the workforce, that
is. Or to be more scientific: there is little reason to expect that
underemployment will be much higher (or lower) in the future than it has
been over the last generation. This means that 10% of those who would
like to get a paid job won’t get it overnight. The number will be closer
to 5% during business upturns and closer to 15% during downturns. In
the future, like in the past.
The reason is simple. A job is absolutely crucial from the point of
the individual in industrial and postindustrial urbanized society. It is
the only way in which the individual can get part of the societal
pie--without engaging in theft. Since a job is crucial, the individual
will do his utmost to obtain one. And society--at least in the long
run--will do its utmost to ensure there are jobs, typically by seeking
rapid economic growth. But we know from recent history that this is a
taxing task, and that politicians often fail. As a result we do
experience lengthy periods of excessive unemployment, even in the
advanced economies. And the task of securing full employment may become
harder in the future, since I forecast lower growth rates in GDP.
But given the importance of employment for societal peace and order,
and given the real fear among the elite about a reshuffling of the
cards, the necessary effort will be applied--sooner or later. The reason
why I am willing to state this so blatantly is that the task is
solvable in principle. When the unemployment problem is not solved in
the short term, it is because society is not immediately willing to use
the tools that the ruling elites actually have at hand. Because these
tools imply taking from the rich (those with a job) and giving to the
poor (those without a job).
For in the end the rulers can print paper money and pay unemployed
people to do what society needs to get done, in return for the paper
money. For example, politicians can decide that society needs to build
dikes to protect against rising sea levels, or remove litter from public
places and highways, or paint all roofs white (in order to reflect more
sunlight and reduce global warming), or create new pieces of art for
public enjoyment. And they can print the necessary money to pay for this
work. The new money will boost demand for everything that the workers
need--food, shelter, energy, vacation--and have the traditional
expansionary effect. The cost will be higher inflation, but that bothers
the rich more than the poor. As long as there are underutilized
resources in the economy, deficit financing of compulsory work for the
state is sustainable. It is possible to lower unemployment by printing
new money. But the rich will scream. Because they will see this for what
it is: namely, a transfer of wealth and income from the rich to the
poor.
If the elite is stupid enough not to solve the unemployment problem
within reasonable time, revolution (or at least sufficient rattling of
the system to get crisis work going) will result. Such disruption will
lower incomes in the short term, but it will distribute the cards in new
ways in the longer run and therefore provide new opportunity for the
formerly unemployed. Disruption makes unemployment more bearable, and
probably gets it back down into the 10% range.
So I see little reason why there should be higher levels of
unemployment in the future. But that is not the same as saying there
will be smooth sailing. Unemployment figures will continue to fluctuate
between the barely acceptable and the totally unbearable. And all along
there will be unnecessary suffering.
Yes, but not critically before 2040.
My forecast shows in quantitative detail how I believe the global
average temperature will increase over the next couple of generations.
The average temperature will go from plus 0.8°C relative to
preindustrial times in 2012 to plus 2.0°C in 2052, and a maximum of plus
2.8°C in 2080.
The forecast maximum in 2080 is above the threshold that world
leaders agreed would place us in the danger zone for runaway climate
change; but it is important to realize this is a politically negotiated
goal. Views differed, and still differ, on what will be safe. Or in
other words, what will hurt us.
There is a large body of literature about what will happen at plus
2°C. Science agrees on the broad lines--more drought in drought-prone
areas, more rain in rainy areas, more extreme weather (strong winds,
torrential rains, intense heat spells), more melting of glaciers and the
Arctic sea ice, somewhat higher sea levels, and a more acidic ocean, in
addition to the higher temperature and the higher CO2 concentration in
the atmosphere that will boost food and forest growth in higher northern
latitudes. Ecosystems will move poleward and uphill.
But science cannot yet predict the detailed strength and regional
distribution of these impacts. Thus it is impossible to forecast what
will be the effect on your surroundings over the next generation. But
you can get a strong indication if you start looking slightly beyond
science. By asking locals in daily contact with nature, you will get to
know what has changed over the last 20 or 40 years. You can do worse
than assuming that these changes will strengthen during the rest of your
life.
Let me give a concrete example. The only rational reason to live in a
cold, northern city like my hometown of Oslo during the dark
subfreezing period from mid-November to mid-March is the great
opportunity for cross-country skiing (ideally on moonlit white glades in
the pine forests just north of the city) on the one meter or so of cold
fluffy snow that covered the ground until the last real winter in 1986.
But over the last 25 years, the average winter temperature in Oslo
has gone up by plus 2°C. This has shortened the period of stable cold
weather from four to two months. Instead, we now have two months of good
skiing and two months of wet, gray, and cold slush, which keeps the
forest dark and makes it impossible to even go jogging there after work.
One-half of the Oslo winter is gone, sacrificed on the altar of climate
change. This is clearly visible in the eyes of someone who has been
skiing regularly over the last fifty years. It is discernable in the
snow statistics, but it is not yet an established fact in the urban
public mind. And certainly not institutionalized in a strong Norwegian
climate policy.
This loss of skiing is a nuisance, but not catastrophic. As is the
prolongation of the dry period in the western United States, or the
increased number of very hot days in Provence. But they do constitute a
loss. And a longing, among the grown-ups, for the good old days. A
little more problematic, to say the least, is the slow rise of the ocean
level around those Pacific islands that will be submerged if the ocean
actually rises by a meter—just twice the expected sea-level rise by
2052.
So if you want to find out how climate change will hurt you, ask a
local elderly outdoorsman or old farmer what he believes is going on.
And then try to answer the question “Will I be more satisfied?” under
the conditions that he thinks are emerging. But please be aware how
subjective the answers you get will be: Most Norwegian farmers living
next to my moonlit skiing forest are delighted at the prospect of higher
temperatures, better forest growth, and the opportunity to clear-cut
more often, with less snow bothering the cutting operations.
Yes.
But once more, the precise answer depends on the detail in your
question. Let us start by deciding what cost you are thinking about. Is
it your total energy bill (in hard-earned dollars per year)? Or the
national bill? Or the cost per unit of energy (in dollars per kWh of
electricity or gallon of gasoline)? Or is it the share of the economy
that is engaged in getting hold of all the energy that is needed to run
the economy (measured as the percent of GDP in the energy sector—which
should include those export sectors that are required to finance the
importing of energy, if there is importing)?
I can answer only some of these questions, and the answers differ
with the precise questions asked. The average per-person use of energy
will increase. But only for a while--energy use per person peaks around
2040. So we will each have more energy available to us for some decades,
until growth slows and growing energy efficiency leads to reduction in
our annual use of energy.
So we will use more energy--more tonnes of oil equivalents of energy
per person per year--until the 2040s. But will this cost more? I can’t
predict in detail. My spreadsheets tell me that the energy intensity of
the economy will decline monotonically from 300 kilograms of oil
equivalents per $1,000 of GDP in 1970 to 180 in 2010, and some 120 in
2050. This means that the value created per unit of energy used will
increase dramatically, which also means that the share of total value
creation that is expended on energy is likely to decline. But I can’t
say for sure, for it depends on whether the new forms of energy,
replacing increasingly the old fossil sources, will prove to be very
much more costly than power and heat based on coal, oil, and gas.
More simply put, after much empirical work, I have concluded that I
think that future energy may be 30% more expensive than current
fossil-based energy. During an initial introductory period the
renewables will be even more costly, but in the long run I believe
solar, wind, biomass, and CCS will be available at current prices plus
30%.
So in answer to your question: I believe energy prices will increase
per unit of energy by one-third. But since the energy intensity will
fall by 50% to 2052, your absolute bill per year may even decline. And
the energy cost will be a declining share of the GDP, which will grow by
more than 100%. But that is on a 40-year horizon; in the meantime,
while society is increasing its investments in order to help the
transition from a fossil-based toward a renewables-based economy, energy
will be more expensive.
The percentage of the GDP that is in energy production gives a
reasonable approximation to how energy prices will “feel” for you as a
consumer. The percentage of the GDP in energy production translates
(very roughly) to the percentage of the time you have to spend paying
for your energy use.
The Institute for Energy Research (IER) in
the United States has tried to estimate the share of energy in the
world GDP. In 2005 some 8% of the U.S. GDP was in the provision of
energy. It means that (roughly) 8% of all labor and physical capital was
used to obtain energy. The share has varied quite a bit over the last
40 years. It started at 8% in 1970 and then rose to 14% after OPEC
raised oil prices in the 1970s. It then declined over two decades to 6%
during the years of recovery of the U.S. economy after the oil shock.
Since the year 2000 the share in energy increased once more, to 9% in
2006. The IER estimates that the equivalent number for the world economy
is also 8%.
So this means very roughly that the average global citizen is
spending one-twelfth of his or her time paying for energy, and that this
could increase to one-eighth during the transition to a renewable
future.
So energy will be more expensive, but not very much so, as I see it.
The fundamental reason is the fact that one can even today produce clean
power and heat from coal at a cost (using CCS) that exceeds the cost of
conventional coal-based power and heat by only 50%. And coal with CCS
will act as a near infinite backstop technology, keeping a lid on energy
prices in the long run. I am obliged to stress that many informed
people disagree with this estimate, which I base on engineering
assessment of the (significant but finite) efficiency loss in CCS. My
critics believe CCS will be much more costly. If they are right, it
means that CCS will not be used, or at least not until later in the day.
The effect will be to lower your energy bill in the short term and
lengthen the period of transition to a low-carbon future.
In summary, the main reason why energy costs won’t rise more in the
short term is that humanity will be slow in making the transition to
renewable energy. In 2052 a full 60% of the energy used will still be
fossil. As a result climate damage will be growing fast, as will the
unavoidable costs for repair of that damage. Paradoxically this means
that humanity will choose to pay bills for repair after the crises,
rather than paying the same amount of money for renewable energy ahead
of time and avoiding the damage.
No.
I am now moving up the ladder of abstraction to look at some
intangible issues beyond the more tangible questions of income,
employment, climate damage, and energy costs.
The first issue concerns intergenerational equity, and it is
particularly relevant in the industrial and emerging economies where the
old ways of solving rights and obligations between the generations (and
sexes) have been most dramatically changed over the last couple of
generations. In the rich world, particularly, the first generation that
has rung up a huge national debt and established a huge unfunded pension
scheme is about to retire. The interesting, to say the least, question
is whether the next generation will be willing to carry this burden and
peacefully pay the debt and peacefully pay the pensions. I repeat my
answer: I think not.
The simplest reason is they don’t have to. They are legally obliged
but can’t be physically coerced. If they choose not to and stand
shoulder to shoulder, there is little the elderly can do. The old will
lose the intergenerational war if push comes to shove. The second reason
is that we can already see that the burden is being shed. In
forward-looking, well-organized countries, pension schemes have already
been revised--in order to lower future payments. Greece was the first
country to shed the sins of the fathers--and got the rest of the world
to pay for one-half of the debt of the old generation. Former homeowners
in the United States have started the struggle to get back some of the
wealth that ended up in the financial institutions.
These processes will continue, I believe, although it is hard to tell
what will be perceived as the equitable balance point in the
distribution of well-being among the generations. But there is little
doubt that the current situation (read: legislation) excessively
benefits my post–World War II generation.
If we add impending climate damage into the intergenerational
perspective, my generation looks even worse. Because then it is not only
the current young but also the unborn future generation who are losing
out. They have to live with the CO2 emitted during my generation’s
partying during the last 40 years. Many argue that this does not matter
because we are leaving for future generations a whole lot of capital,
infrastructure, and technology. But to paraphrase the
World Business Council for Sustainable Development, “People cannot succeed in ecosystems that fail.”
In short, the current generation has tried to load too much onto the
next generations. This will be undone. The young, I predict, will not
take over the burden unabridged. Some debts won’t be repaid, and part of
my pension won’t appear in my bank account.
Does it matter? It depends on who you are. Once more, you should try
to decide how my answer is going to affect your own well-being.
Yes.
The starting point here is my belief that China will be the world
leader in 2052. In 2052 China will have a population three and a half
times bigger than that of the United States. The Chinese economy will be
nearly two and a half times larger, and Chinese per capita production
and consumption will be more than 70% of the U.S. equivalents. China
will be the premier driving force on the planet.
In some ways this is already the case. Current China is capable of
acting in a manner that far exceeds the maneuverability of the two
competitors for global supremacy: the European Union and the United
States. The United States still has the biggest muscle (the U.S. GDP
equals 13 T$/yr, similar to that of the EU), but China is much more
agile in the use of its somewhat smaller muscle (China’s GDP is near 10
T$/yr). Militarily the United States is still more powerful outside U.S.
territory, but economically the Chinese influence is rising fast. It
does not weaken the Chinese hand that it already owns 1 T$ of U.S.
federal debt, one-quarter of the U.S. federal debt held by foreigners.
This equals ownership of more than one month of the total output of the
U.S. economy.
Many believe that China won’t reach hegemonic status because of lack
of domestic resources or because of counterrevolution. My view is that
China has sufficient coal and shale gas to run the economy in the
transition stage, enough sun to fuel it in the long run, sufficient
understanding of the climate threat to work up front to reduce the loss,
and a sufficient tradition of Chinese independence to be willing to
develop internally the resources it does not currently hold. But most
important is the willingness and the ability of the Chinese to govern
investment flows so as to achieve their goals. It should also be
remembered that in the long run, China will no longer need all the
energy and resources it currently uses for the production of export
goods. In the long run it will suffice to have a sustainable interior
supply of energy and resources sufficient to provide for the Chinese
population, which will peak at 1.4 billion people around 2020 and be
down to 1.2 billion in 2052.
Clearly things can go wrong for China, but I think this will take
time. The alignment of the interests of the Chinese Communist Party and
the great mass of Chinese is near perfect. Both need rapid growth in per
capita consumption. Both will applaud when it is achieved. Both will
hurt when it fails, and try once more. There is, of course, at any time a
group that would like to emphasize values other than material growth,
but I believe they will be in the minority for a long time (just like in
the United States), and their softer goals suppressed.
To do more with less will be the mantra of Chinese growth, in order
to continue the goal of the last two thousand years, namely, to be a
self-sufficient China independent of the barbarians from outside the
Middle Kingdom. Increased energy and resource efficiency will be pursued
with enthusiasm. Since both are achievable in principle, through the
planned use of money and manpower, they will be achieved.
So what will the Americans do when the Chinese hegemony further
exposes its full body? Not much. I believe in a friendly resolution of
the potential conflict between China and the United States, because the
United States also has enough resources inside its boundaries to run a
self-sufficient shop for its inhabitants. It is true that the country
currently depends on vast oil imports from abroad, but like China, the
United States has enough coal and shale gas to run its economy for a
long time (assuming little real GDP growth in the country over the next
40 years, as I do). It has large agricultural muscle (more than
sufficient for its domestic population--and if Americans decide to eat
more healthily, also for quite a bit of biofuels). Furthermore the
United States has some space that will be livable after climate change.
Water may be a problem where it is currently needed, but activities can
and will be moved if that is required to have enough water. And
GMO crops
will be used large-scale to reduce water scarcity, despite their
drawback. If the American democracy finally decides to try to solve its
obvious societal problems in a collaborative manner, the U.S. investment
capacity is huge and the problems solvable.
I think the latter sentence contains the essence of the U.S. fate
over the next 40 years. The United States could maintain its hegemony if
it decided to do so. But I don’t think the American system of
governance will be capable. Quick, bipartisan decision making is
certainly not a U.S. strength. And I see little that will change this
fact on a 40-year horizon. Since the country is already rich, and the
resources are there at least for living at a slightly lower footing, the
United States can allow itself to slide into a secondary role, as a
provincial and self-content country. Much like Europe smoothly moved
down to second rank after the two World Wars.
Both China and the United States will be bothered by climate change.
But both countries are big enough to include places that are relatively
less affected. Their starting points are very different, the United
States being rich and China much poorer (GDP per person today is
one-sixth of the U.S. rate). But their governance systems differ, will
differ, and will help China move fast when the United States will be
floundering. This won’t create war since China’s ambition is to be
self-contained.
In more places, but not everywhere.
Over the next couple of decades the world will be facing new problems
(in addition to the well-known challenges of creating economic growth
and maintaining social stability), some of which cannot be easily solved
by the market.
The prime example is the climate challenge. It is a truly global
problem: the temperature will rise everywhere, irrespective of who was
the source of the emissions. And it is a truly long-term problem: The
temperature will not react (that is, deviate from its current path)
until 30 years after the initiation of the effort (as long as that
effort is of realistic proportions). Such truly global, truly long-term
problems are hard to solve if one restricts oneself to using the powers
of the “free” market only.
It’s also likely that the state may need to intervene to address the
increasingly uneven distribution of income and wealth that builds up
over time as a natural consequence of the free market. Even the most
diehard liberalists appear to agree that redistribution is something
that is not automatically undertaken by the market by itself, but needs
to be done via political action (such as through taxation). There is
need for collectively agreed action in order to remove explosive
inequity as a potentially destabilizing factor in the economy.
A third reason why the time might have come for stronger government
is the historical fact that the world currently is a full 25 years into a
period of increasing liberalization. This makes it likely that we have
solved most of the problems that are easily solvable by the free market.
If we try to extend the current era of liberalization, we will end up
in a situation where the market has solved all the problems it can
solve, so we are left facing only those problems that the market cannot
solve. Sometime before this point, society will start exploring again
societal solutions based on policy rather than relative prices.
So, in some nations, we will see a demand for a stronger state,
capable of cutting through the democratic to-and-fro and making clear
and effective policy, even if that implies less democracy and less
market freedom. How fast will this happen? I think we are near a turning
point in the slow societal oscillation between liberalism and a strong
state. Over the next 20 years, we will see more frequent instances where
the state intervenes and makes the necessary decisions rather than
waiting for the market to lead the way.
It is hard to guess where stronger states will emerge first, but
likely candidates are those nations that have pushed the liberalist
thinking all the way to the brink, and those that have a tradition of
successful government. Meanwhile, strong centralist authorities like
that of Singapore will look increasingly good, as long as they manage to
handle the tendency toward greater inequity. Curbing corruption is a
first and very important step in that direction.
To avoid misunderstanding I would like to clarify what I mean by
strong government, through a simple example. A strong government, for
instance, would be able to shift a nation from cheap and dirty fossil
energy to more expensive solar energy—before the latter is competitive.
It is a government that would act in the long-term interest of the
people, even if they do not agree in the short term. It is a government
that is capable of withstanding not only the opposition from the
existing energy business, but also the opposition from the voting
majority who will want the cheapest possible energy in the short run. A
strong government would also be capable of convincing the people to wait
for a better solution and pay for its development while waiting. I
agree that there is always the risk that the government may choose the
wrong solution (and that the market might not have made the same
mistake). But the risk can be reduced, for example, by letting the
government define the goal and put up the money while allowing the
market to choose the technique through a bidding process.
Will strong government come in time to solve the climate problem? As
you have seen from my forecast, I think not. But by 2052 the acceptance
and belief in strong government will far exceed that of today, and some
of the obvious solutions will be well on their way.
The answer depends on your age, profession, nationality, and,
probably, family situation. And again, the answer does not rest solely
on whether disposable income will be higher, but on whether your general
satisfaction with life will have increased. There will be huge
differences between people. To simplify, the average life satisfaction
in 2052 will reflect the satisfaction level of some two billion people
who will have moved from the farm to a decent apartment in a megacity
during the last 40 years, some two billion middle-class people who will
hardly have had a wage rise in 40 years, 2 billion who will have moved
during their lifetime from $10/day (today’s Vietnam) to $20/day (today’s
Ukraine), and two billion people who are still living a strenuous life
in a semirural setting in a poor country.
All eight billion will have some level of Internet access, be much
better informed, and be increasingly helped by local solar energy. They
will have many fewer children. They will be largely urban (except for
the minority still living off the land). They will grapple with overall
effects of climate damage, but those in dense urban areas will likely
have little firsthand experience with the damage caused by the erratic
weather (though plenty of secondhand information via electronic media).
They will live with the unpleasant knowledge that even more climate
impacts lie ahead.
So, materially speaking the answer is probably yes--on average the
world will be a better place. From a psychological perspective, probably
no, because the future prospects in 2052 will be grim. That could
change, though, if there is hope. If those experiencing the impacts of
climate change have the comforting knowledge that, somewhere on the
planet, some resourceful and well-run countries are putting tremendous
effort into stopping global warming, they can maintain the hope of a
better future world.
Again, it boils down to whether these groups will have more or less
life satisfaction than they do today--a very subjective question, based
on how they view their own well-being. It’s important to note that
people 40 years from now will judge their circumstance more on how it
has changed from their own recent past than from our vantage point of
today.
For more information about this book, visit www.chelseagreen.com or www.2052.info.
Source: http://www.fastcoexist.com/1680127/8-ways-the-world-will-change-by-2052
