Monetary Light for Beating the Heat?
Currently topical concerns over global warming (Al Gore’s book and movie, An Inconvenient Truth) and controversy over the Kyoto Accord are reinforced by illustrative news items. A recent article in The New York Times ("The Not So Good Earth," by David Barboza, June 23, 2006) reported that "a coal mining boom...is devastating large swaths of north China, where some of the nation’s richest coal deposits lie. China is the world’s largest producer of coal.... [In Shanxi province, which] provides [much of] the fuel that powers China’s sizzling economy, thousands of acres of land are sinking because of the ravages of underground coal mining.... [At one locale, residents recounted how] their village was rocked by what everyone thought was an earthquake. The ground shook. The houses trembled. And the earth cracked open. Moreover, coal fires are burning uncontrollably below ground here and through much of northern China, adding to global warming by releasing huge amounts of carbon dioxide into the atmosphere." Other reports blame coal mining for a significant share of desertification in China, and pollution from both its dust storms and industrial smokestacks is reaching North America.
On the same day as the Times article, the International Energy Agency announced its finding that oil and electricity consumption across the world could easily be cut by half, with major benefits for the environment, if clean energy technologies that are currently available were applied. "A sustainable energy future is possible, but only if we act urgently and decisively to promote, develop and deploy a full mix of energy technologies.... We have the means, now we need the will." The IEA report was written in response to a request last year from G8 leaders, for discussion this year at St. Petersburg (Rory Mulholland, Agence France Presse, June 23, 2006).
The weight of expert opinion, as assembled for example by Al Gore, points strongly to a conclusion that beneficial use of carboniferous fuels has reached a point of no return. It not only diminishes human comfort in several ways, but through its devastation of the biosphere it also threatens our very survival. The dilemma is acute because fossil fuels consumption is the established driver of industry and regarded as indispensable in conventional attitudes toward economic policy. The problem is exquisite, as illustrated in a very interesting small book about the central place occupied by coal in the emergence of the world as we of the twentieth century have known it (Freese, Barbara, Coal: A Human History. Cambridge, MA: Perseus Books Group, 2003).
The Coal Industries Feel Threatened
The author describes herself as a former environmental attorney for the state of Minnesota whose interest in her subject grew from "a legal proceeding [by the state] that tried to quantify the impact of its electricity use on global warming. Most of Minnesota’s electricity, like that of the US as a whole, comes from coal, so this meant trying to figure out what effect the emissions from our coal-burning power plants would have on the earth’s climate.
"When the proceeding began, few realized what an exquisitely sensitive nerve it would touch. Representatives of the nation’s coal industry intervened in our hearing. They brought in a phalanx of scientists who testified that Minnesota should ignore what the vast majority of their colleagues around the world were saying about climate change and argued instead that the climate was not changing except in small ways we were all going to enjoy.... The industry’s aggressive response was fueled by its recognition that climate change threatens its very existence. Climate change is mainly caused by burning fossil fuels – namely, coal, oil, and natural gas – and of these fuels, coal creates the most greenhouse gases for the energy obtained. Today, the United States burns more coal than it ever has, almost all of it to make electricity.
"...Minnesota’s decision makers flatly rejected the industry’s notion that climate change would be limited to climate improvements.... I was left not only deeply concerned about the changing climate but thoroughly intrigued by the lump of carbon at the center of the storm, this often-overlooked fuel that reveals so much about us and the world we’ve built. The more I dug, the more I could see that a deep, rich vein of coal runs through human history and underlies many of the hardest decisions our world now faces. Following that vein in the intervening years has taken me far afield – from paleobotany to labor issues, from ancient history to modern geopolitics, and from the massive state-of-the-art power plant a few miles from my home to a primitive little coal mine in Inner Mongolia. This book is the result of that journey."
Freese’s account is highly sympathetic to the coal industry insofar as its product has played an essential role in what must be acknowledged as human triumphs. In concluding that the era of coal must be brought to an end, she points to technological alternatives that already show sufficient promise as adequate replacement. And opposition from the coal industry per se is to be expected. The question she does not address is the role played by finance in both propping up the existing industry and obstructing transition to beneficial and sustainable energy supplies. Given the critical role of energy sources to civilization as we know it, this is an important domain for thinking about the role of monetary institutions and policies in economic management. To underscore that assertion, the following conclusions drawn by Freese from her historical exploration are highly thought-provoking.
Our Civilization was Created by the Use of Coal
"We’ve made a lot of mistakes over the centuries as we’ve struggled to understand the nature and impact of coal and its smoke. Some thought coal grew underground from seeds or in mines guarded by demons or dragons. Some saw in the mines scientific proof of the biblical flood. Some credited coal with protecting people from the bubonic plague; others accused it of promoting baldness, tooth decay, sordid murders, caustic speech, and fuzzy thinking. More recently, many of us believed we could burn vast amounts of coal indefinitely without disrupting the natural balance of the planet. No doubt we still have much to learn about coal, but at least we’ve been able to dispel many of the old myths.
"There is, though, at least one truth that was more widely understood in the past than it is today – the critical importance of coal in shaping the fate of nations, and of the world as a whole. Coal transport lured the British to the sea, promoting the nation’s growth from a small rural nation into a world-class commercial power. The Royal Navy was kept strong largely to protect the coal convoys; and in war time, it seized the coal ships and crews to fight its battles, helping Britain rule the seas. Thanks to coal, London grew into a metropolis large enough to become a vital center of commerce and cultural achievement. With an economic, military, and cultural influence far out of proportion to its size, this tiny nation began building a global empire of unprecedented reach, defeating native populations and European rivals such as France and Spain – nations with far more land and people, but far less coal.
"And then there was the industrial revolution – fueled by coal, built around coal-smelted iron, and driven by two key innovations first developed to meet the needs of the coal industry: the steam engine and the railway. Coal alone did not make the industrial revolution happen any more than coal alone made Britain a global superpower, but neither event could have happened without it.
"To grasp the magnitude of coal’s global impact, we must try to picture history without the momentous, high-intensity pulse of industrialization that started in Britain and then swept the world. The mainly agrarian world would have stayed in place for decades or centuries longer, with slower technological progress, less material wealth, and more gradual social change. Mass-production capitalism would not have soared to prominence, industrial working classes and places like nineteenth-century Manchester would not have mushroomed, and the Communist Manifesto would never have been written. The North might have lost the American Civil War, or it might never have started, and the transformation of the American West would have happened slowly by wagon rather than quickly by rail. The World Wars might never have exploded without the industrial rise of coal-rich Germany. Colonial conquests would have been far less sweeping, dramatically altering the history of all the societies that were dominated by foreign industrial powers, including China’s (whose ancient history would have been altered as well). The labor and environmental movements, if they had existed at all, would have taken very different forms. In short, none of the defining and epic struggles of the nineteenth and twentieth centuries would have played out as they did.
"This is not to suggest the world would have been necessarily stable and peaceful, as a glance at our planet’s violent pre-industrial history shows. If human progress had been more dependent on harnessing surface energy rather than mineral energy, it’s possible, for example, that slavery might have become an even more entrenched evil. And, although our air would have been cleaner and our climate less threatened, our forests and wilderness areas might have been more widely depleted. The pressure on the land would have been far greater because it would have been drawn upon for fuel as well as for food. No doubt, eventually somebody would have figured out how to turn heat into mechanical motion, inventing the steam engine or something like it, and the pressure on the remaining forests would have intensified. In such a world, heavily wooded nations like Sweden might have achieved global prominence. Oil and natural gas resources would have been tapped, too, but probably much later than they actually were...."
But Its Continued Use Now Threatens our Survival
Turning to the downside, Freese briefly explains the problems with coal burning. Sulfur dioxide (SO2) was the first hazard clearly identified, as causing the acidification of lakes and the killing of marine life. The particulates from coal fires that carry SO2 were reduced substantially, but the killing impacts persist. Centre stage has been taken by carbon dioxide, however, as a major contributor to global warming. The only solution on the horizon for this problem, and the one preferred by the coal industry, is carbon sequestration. This amounts to pumping the gas into old mines or under oceans. It is a huge waste management problem, akin to wastes from nuclear fission.
Freese therefore prefers that we swear off coal entirely and embrace alternative technologies that exploit more direct sources of solar energy, including wind power. These other sources can be used to power the release of hydrogen from water, to be stored in tanks. Hydrogen fuel can then be used for motive power, in automobiles and airplanes. The technology for this is already sufficiently advanced that recent news showed test buses operating on hydrogen fuel cells in Beijing. Major investment is still required to make the technology cost-effective for a mass market. Coal industry people prefer to carry on with the game they know and with the comfortable, unregulated context they have created by successful lobbying with the current government in Washington. This could inhibit the possible good scenario until it is too late.
The question for readers and writers of this journal is where to place the blame for failure to take appropriate action? It is not difficult to understand the interest of the coal mining and coal burning industries. The more interesting question concerns the viewpoint of those who provide the financing, whether it is to continue funding the coal industries or to speculate seriously in alternatives. Where is the principal source of opposition to financing developers of solar collectors and hydrogen fuel cells, e.g.? To what extent can blame be assigned to the financial and banking industry? Does the influence exerted on legislators and presidents come only from the financial resources husbanded by the coal industry from its own operations? Is the malign influence of finance mainly an indirect one that stems from the existence and evolving nature of financial instruments and the ancillary, complementary practices of measuring and calculating values in numbers that represent money? Or is it none of the above? To what extent is it the "mythology of growth" and the doctrine that it is the laboring class that chiefly benefits from policies that encourage investment in "growth industries" via job opportunities? And that prompts a question of which social classes today gain the most from the kind of growth that has been experienced over recent decades. Has it been workers or speculators?
– from Economic Reform, July 2006