The challenge of moving towards a low carbon future is one now embraced by the political leaders of the G7, but how that path will unfold is still a live political debate. The importance of such a transformation could herald a new form of capitalist economics - thermo-economics - in which the laws of thermodynamics frame economic decision-making. Taking the lead from Germany's Energiewende the UK should look to an expansion of local, community energy co-ops to not only meet our climate change commitments but to create fairer, more resilient communities.
Just prior to the General Election I got the opportunity to put my pennyworth towards the debate about environmental issues, or lack of it, courtesy of the BBC Radio 4’s Listeners Election. My concern was, where was climate change in the election debate? Virtually non-existent.
The decisive issues that swayed those swayable hundreds of thousands who perennially decide a British general election - the middle ground – were predominantly framed around fear. Fear of economic instability, fear of the Scots, fear of the undeserving poor and migrants and fear of taxation. It certainly wasn’t fear of a future beset by the multiple crises that climate change will bring, most certainly within our children’s lifetimes, if not before.
This short provocation is concerned with a different view of the future. A future where not only the G7 aspiration of the “decarbonisation of the global economy over the course of the century”1 becomes a reality, but also that the post-fossil fuel age ushers in a more equitable world. Equality remains a key pillar of sustainability and key to that aspiration is an energy policy that presents people with the ability to control the means of production.
This is not a story of doom and despondency, but one that is concerned with a positive potential path into a post-fossil fuel age, a time when the entropic outcomes of human agency will be diminished to, so it might be hoped, a level that within the time frame of many generations might be considered sustainable.
Of course at present any such aspiration is having to be framed within a world of neo-liberal capitalism where the mathematical improbability of compound interest is still upheld as an aspirational reality and capital constantly sweats rent – mathematically increasing its value (unless muted by inflation) whilst the stock of real wealth that it is held against is constantly assailed by the entropic decay of the bio-physical world: rot, rust and worms.
True sustainability vs capitalism
The second law of thermodynamics, which explains the observation that processes in nature are not reversible, always moving in a direction which increases the total entropy of the universe, underpins our understanding of the physical world and offers valuable insights to economic theory as well. The thinking behind thermo-economics, which has at its centre the idea that economic systems have to be framed by thermo-dynamics, is not new. The reality that all life is supported by a constant feed of low-entropy energy (solar energy) and creates high entropy outcomes through dissipative structures– outcomes such as the weather and climate change – was propounded long ago by 1921 Nobel Prize winner the chemist Frederick Soddy and more recently by Romanian American mathematician Nicholas Georgescu-Roegen2.
Don’t imagine that such thinking sits outside of the mainstream – it did but not now. The knowledge that the move from an organic energy system (biomass/wind/water) to a fossil fuel energy system harvesting the concentrated solar energy of millions of years ago has a significant entropic outcome – climate change, has emerged over recent decades. Everywhere pennies are dropping, visions are being cast beyond five year election cycles and capitalists are starting to re-think capitalism.
The scientific haggling over whether climate change is anthropogenic or not is over. The questions to be addressed today are how much we can mitigate against excessive climate change (and of course what would be the parameters of ‘excessive’) and how we will adapt to a new climate normal (if such a thing exists) – with its enhanced extreme weather events, rising sea levels and biome alterations.
Since the 1992 Rio Earth Summit incremental progress has been made towards sustainable development. This has been entirely framed within a global economic system that is moving in the opposite direction to the fundamental scientific thinking that underpins sustainability. Today the phrase sustainability is used with carefree abandon and is attached to any thinking that implies a degree of resilience over time but at heart it remains the idea that humanity lives in a way today that does not compromise the ability of those in future generations to live within a bio-sphere at a level compatible to today – a hell of challenge with on-rushing climate change.
There are some ‘rational’ capitalists who have been bolder than many politicians in identifying the changing world we are entering. Generation Investment Management’s prospectus sets it out thus; “We are convinced that the transition from a high-carbon to low-carbon economy will be the most significant process in modern economic history – matching the industrial revolution in scale, and the technological revolution in pace,”
The world’s largest sovereign wealth fund Norway’s Government Pension Fund Global (GPFG) announced in March the beginnings of disinvestment in some coal stocks3, Norway’s largest private wealth fund had already disinvested from coal as had its capital city Oslo. Norway owns 1.3% of all global equity. That is the Norwegian people not just a few Norwegian individuals.
Even in the US the fault-lines of capitalism are shifting. Former Head of Asset Management at Goldman Sachs, David Blood, has teamed up with ex-US presidential contender Al Gore to launch Generation Investment Management, a company that is committed to investments supporting the idea and operation of sustainable development. Already they manage funds worth £8bn4.
In the next couple of decades a transformation will take place that will be as significant as the transformation from an organic (biomass) economy to a fossil fuel (coal) economy in late 18th century Britain. As yet no leading politician in Britain has been able to recognise this, articulate this or put in place the enabling governmental structures to progress this. Elsewhere this is not the case.
The local energy revolution
In Germany since 2011 an ‘Engeriewende’ – or energy revolution - has been on-going, providing us with a template to adapt for the direction of UK energy policy. Renewable, decentralized, co-operative and community based. Of course there are those who argue that the much heralded impact of this revolution – a substantial reduction in the national CO2 output of Germany - represents an overbearing intervention in a market enforcing higher energy prices upon a beleaguered German industry and its residential consumers.5 Others argue that its efficacy is overstated, and that it has barely dented German’s CO2 output.6
It is true that the UK between 1990 (Kyoto baseline) and 2012 saw a greater per capita decline in CO2 output than Germany over the same time period (25.1% to 21.42%).7 However, since Angela Merkel committed her political legacy to the transformation of the German renewables sector, the move towards lower CO2 per capita levels in Germany will almost certainly have sped up in the last couple of years.
On May 11th 2014 74% of grid electricity in Germany was supplied at one point in time (mid-afternoon) by renewables.8 At the end of 2013 there were 804 local energy co-operatives feeding renewable energy into the grid on top of the tens of thousands of individual providers.9 Large-scale energy companies are being incrementally squeezed out of this dynamic market. Some, like Sweden’s state owned energy company Vattenfall, are attempting to sue the German government for $6 billion in compensation related to the German’s move away from nuclear power.
Hence Germany has pivoted towards localised decentralised provision of utilities, namely energy, and has in turn enabled local investors to access a new type of investment that can provide a better rate of return to capital than a typical bank savings account (4-5% on average return on renewables). This positive reinforcement effect ensures that local energy co-operatives form a transformative social and economic process, not simply environmental.
Going carbon neutral together
An energy revolution in the UK should have been at the heart of any progressive political coalition in 2015. It would have meant investment in new energy infrastructure and the continuation of subsidised feed in tariffs (but nowhere near the historic scale of subsidy to the fossil fuel industry as recent research from the IMF demonstrates)10. A decentralised but interconnected grid is also needed, which would have a greater degree of resilience and provide the UK with a very high degree of energy security in an energy uncertain geo-political world, being neither in thrall to Russian gas nor the machinations of global energy TNCs such as Shell.
Evidence in Germany is that energy-engaged communities are also drawn into the wider applicability of sustainability within their communities. Of particular interest to any prudent future Chancellor of the Exchequer, evidence also suggests that it is the oligopolistic power of large energy providers in the UK that pushes up energy prices compared with Germany11. TNCs have a competitive need to sweat their assets as highly as possible and one of those key assets is the strike price for energy that it negotiates with the government. If you want confirmation of this just look at the strike price negotiated for the electricity that will flow from the as yet unbuilt Hinckley C nuclear power station - £92.50 mWh over 35 years which is 400% higher than German (mainly co-operative provided) on-shore wind generated electricity. Such a financial carrot was required to get outside investors on board – those investors are primarily the Chinese government, the French government and the Saudi government. None are privately owned British companies.
Finally, the imperative to move towards a new energy age in the UK is enhanced by the redistributive impacts that should follow. Energy co-operatives enable local communities to develop a greater circular flow of finance within their economy; employment is created, investment is local and stable (tied as it is to something you can see and use) and energy prices become stable and sustainable (in the true sense). Any community can make this happen. In London, Brixton Energy, a 100% community owned company in Brixton are expanding capacity on the Loughborough Estate. There is no social housing estate in Britain that would not benefit, but these communities need the capacity (social, technological and most of all economic) to gain traction.
This is the political thinking that was missing from the election debate. There are no doubt a myriad of complexities that stand across the path to a low-carbon future. There is clearly a debate to be had around what will be the most effective levers of government that will enable this energy revolution, but Germany has shown us change can be enacted rapidity.
Back in 1911, the Nobel prize winning chemist Frederick Soddy fully grasped the centrality of energy to society when he observed of the laws of thermodynamics that they “control, in the last resort, the rise and fall of political systems, the freedom or bondage of nations, the movements of commerce and industry, the origin of wealth and poverty, and the general physical welfare of the race”12.
The transformative revolution of the now is energy. It is the solar revolution (because all energy flows from the sun). When will elections be won with a positive vision for our grandchildren’s future rather than the fear that enables neo-liberal hegemony for another five years?