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Changing the Energy/Economics Paradigm

Discussions about the economic and financial ramifications of PEAK OIL

Changing the Energy/Economics Paradigm

Unread postby Timo » Wed 13 Apr 2016, 12:15:24

New discussion regarding our current trajectory to AGW/OP/TEOTHWAWKI.

#1. Think about the paradigms that dictate our current economic systems across the globe. What is the fuel for global our economy? Money? I think so. The more the merrier. The acquisition and accumulation of money is the primary goal for everyone who participates in our modern, 21st Century economy. Money governs policy. Ecological concerns are secondary to financial concerns. Threats to income and jobs outweigh the threats to our planet and our environment.

#2. Which is the greater resource for our future? Money, or energy? Can money do anything without energy? Money can buy energy, and money can produce energy, but energy is the greater of those two resources. You can do pretty much anything with energy. You can use energy to grow food. You can use energy for transportation. You can use energy in nearly every aspect of our normal daily lives. Does money illuminate a light bulb, or does energy illuminate a light bulb?

#3. In order to influence people to take AGW more seriously, and to follow through with the Paris Climate Accords and COP21, which is the greater incentive to change people's policies and behaviors: money, or energy? Right now, the greater of the two incentives is money. Money is what runs our economies, and that is the paradigm that we must change if we are to avoid/minimize AGW. Energy must become the currency that drives the changes necessary to sustain society. What is the use of money to buy energy when you already have the means to produce your own energy for all of your household needs? In that sense, as payment for the performance of Job A, would you rather be paid in dollars, or with the independent means to produce your own energy? Or, would you rather be paid in dollars for a job, or would you rather be paid in the use of 1000 kws of renewably produced electricity from your local utility?

#4. Money buys energy, but energy is the end product. Nothing can be produced without energy, and using energy as an incentive for the conduct of responsible behaviors will achieve greater results than the continuation of BAU, where everything is valued in terms of dollars. Would you rather be told you have to behave in a certain manner, or forced by a law to change your behaviors in order to implement any particular policy goal of COP21, or would you find it more palatable to be rewarded for your participation/behavior with the use of energy, or the ability to independently produce your own? The value of money goes down appreciably when energy is offered as an alternative form of payment, or as an incentive for positive behaviors.

#5. Both money and energy are measurable, controllable, and quantifiable values. In order to change our direction, which makes more sense in the form of currency? Could energy be transformed into a new global currency?

#6. The common understanding of energy must be separated and distinguished from fossil fuels. A barrel of oil has a certain value in its energy equivalent, but the side effects of the conversion of that oil into energy reduces its value as a form of currency. For example, a barrel of oil produces X ppm of CO2. CO2 has a negative value to the goals of COP21 and the Paris Climate Accords. Therefore, that barrel of oil has less energy value than wind or solar that convert sunlight and wind into energy with fewer negative side effects. The conversion of our economic system from money to energy will greatly accelerate the production of clean energy, aka currency producers.

Shifting the paradigm of our global economic system to the end product as the goal and purpose of our economic system will accelerate and enhance the global economy, and health of our planet.

And BTW, i am not suggesting that we get rid of money as a currency, altogether, Clearly, it still does have several beneficial uses and purposes, but on a global scale, energy must become considered and used as a viable currency.

OK. Rip it to shreds. That's what i'm here for.
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Re: Changing the Energy/Economics Paradigm

Unread postby Tanada » Wed 13 Apr 2016, 13:54:50

Simple solution, base money on energy instead of government fiat. A long time ago there was a member here whose avatar was a made up paper currency with a picture of George Washington and an exchange statement of valid for 1 unit of Gasoline. Make your new international currency exchangeable on a 1:1 basis for a liter of Gasoline/Diesel/Kerosene or the equivalent of Propane/Butane/Natural Gas. Overnight you have a currency that has an intrinsic exchange value and it constantly reminds the population that energy is what makes the world go around.
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Re: Changing the Energy/Economics Paradigm

Unread postby Timo » Wed 13 Apr 2016, 14:51:00

Thanks, T. That certainly would be an instant transformation, but the forms of fuel you listed, i think, should have less value than renewable units of energy. What's the goal? Reduced CO2. To achieve that goal, the concept of energy as currency needs to value renewable energy at a far higher level than combustible energy.

As another example, plastics in the oceans are an absolutely terrible concern for almost all nations in SE Asia. Those concerns have tremendous economic consequences. As a means of transforming individual behaviors regarding their disposal of plastics and garbage, i would like to assign an economic value to that garbage NOT ENTERING THE BIOSPHERE, thus addressing and helping to solve a huge economic concern of those nations. That economic value would then be returned to individuals as credits for the lease/use of solar PV systems mounted on their homes. Energy is the reward for waste disposal BMPs instead of money. Energy is used as an incentive for BMPs to address both an immediate national concern (plastics in the ocean), and a larger global concern (transition away from ff energy).

Or here in the US, tax credits for buying an EV could be substituted with an equivalent value solar PV system. The buyer is rewarded for the purchase of the EV, and the greater purpose of that tax incentive is enhanced because it directly addresses the purpose of that incentive, which is the reduced consumption of ffs. Plus, in the long run, the solar PV incentive will have significantly greater returns to the buyer than the cash tax credit. And, the PV system directly addresses one of the main objectives of COP 21 and the Paris Climate Accords.

Am i making any sense?
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Re: Changing the Energy/Economics Paradigm

Unread postby Tanada » Wed 13 Apr 2016, 17:03:33

Well if your goal is to promote renewable sources you can set the currency up so for example, instead of liters of fuel it represents Kilo-Watts of energy, then have it count as double for non carbon supplies. Wind/solar/hydro power electricity, or liquid fuel produced from wind/biomass/solar/nuclear/hydro/wave/tide power gets you two KW of energy, Coal/Oil/Natural Gas gets you one KW of energy. No other subsidies apply, if you can't compete with a 2:1 ratio then subsidies are pointless. Many modern cars/trucks engines are rated in KW instead of horsepower so its a system that could easily be adopted.

For the trash, I think a mandatory charge on disposable items would be the best solution. We don't need another billion sets of one time use plastic utensils for our takeout meals, nor do we need super cheap flimsy plastic shopping bags. Not to mention all the consumer just designed to break shortly after delivery so you can throw it away like the light structure plastic toys they make for kids these days. It wasn't all that long ago that everyone used paper or cloth grocery bags, kids toys were made of solid metal, and restaurants supplied metal utensils that were cleaned after use and reused instead of disposed of. It would require a transition back to a more sustainable lifestyle, but I see that as a positive step, not a negative one.
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Re: Changing the Energy/Economics Paradigm

Unread postby Timo » Wed 13 Apr 2016, 17:56:31

Tanada wrote:Well if your goal is to promote renewable sources you can set the currency up so for example, instead of liters of fuel it represents Kilo-Watts of energy, then have it count as double for non carbon supplies. Wind/solar/hydro power electricity, or liquid fuel produced from wind/biomass/solar/nuclear/hydro/wave/tide power gets you two KW of energy, Coal/Oil/Natural Gas gets you one KW of energy. No other subsidies apply, if you can't compete with a 2:1 ratio then subsidies are pointless. Many modern cars/trucks engines are rated in KW instead of horsepower so its a system that could easily be adopted.


That is essentially what i'm trying to accomplish. "Energy" is a measurable unit. I want to reinvent the discussion of energy from barrels, litres, gallons, etc.... to kwh. Renewables are worth more than ffs because they have fewer negatives. The unit of energy becomes the new currency, and that new currency can be traded according to the protocols of all global climate agreements. It's not a "carbon tax" that can be bought or sold. It becomes a commodity where the "good" is more valuable than the "bad."
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Re: Changing the Energy/Economics Paradigm

Unread postby Tanada » Thu 14 Apr 2016, 02:29:23

I dug up that image I was talking about earlier, a ration coupon from way back in the early 1970's.

http://postalmuseum.si.edu/collections/ ... pon-06.jpg
Image
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Re: Changing the Energy/Economics Paradigm

Unread postby radon1 » Thu 14 Apr 2016, 05:43:45

Timo wrote: Does money illuminate a light bulb, or does energy illuminate a light bulb?


Energy has existed forever, but light bulb was not created until money was introduced.

Money is one of the greatest inventions in the history of humanity. Like wheel.
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Re: Changing the Energy/Economics Paradigm

Unread postby radon1 » Thu 14 Apr 2016, 05:54:36

Timo wrote:
Tanada wrote:That is essentially what i'm trying to accomplish. "Energy" is a measurable unit. I want to reinvent the discussion of energy from barrels, litres, gallons, etc.... to kwh.


That kind of suggestions go back to 1920s or something. With gasoline standard, you'll face the same problem (among other) as with gold standard: scarcity of gasoline. And resulting deflationary depression.

And this is nothing new: here, bottle of vodka used to be the currency of trade at times. At bad times.
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Re: Changing the Energy/Economics Paradigm

Unread postby Timo » Thu 14 Apr 2016, 08:14:34

Radon, you obviously didn't bother to read what i wrote. The currency becomes units of "energy". Units of gasoline, or oil, or kerosene, or diesel, or coal has nothing to do with it. All of those ffs are used to generate energy. They are not energy in and of themselves. They are only material goods that can be burned to produce energy. They're no better in that regard than wood. "Energy" causes everything to happen on this planet. Gasoline is not a form of energy. It is used to create energy. See the difference?

In simpler terms, your mouth is not your stomach. You put food into your mouth that then is transferred into your stomach where your body uses that food for energy. Your mouth cannot use that food as energy. Food must first be transformed into energy. Does that help you understand?

I realize getting past the 20th Century is difficult for a lot of people, but this is a pretty simple concept to grasp. Think "ENERGY" in terms of measurable units. Stop thinking that materials that are burned to create energy are, in fact, energy. A gallon of gas is not energy. A gallon of gas is burned to create energy.

I hope this helps you finally understand.
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Re: Changing the Energy/Economics Paradigm

Unread postby shortonoil » Thu 14 Apr 2016, 11:48:48

Our fiat currency is based on something; debt. It is a debt based currency system. It is assumed that the debt will be repayable at the current going interest rate. The intrinsic problem is when the debt becomes high enough the debtor can no longer service it. Then we wind up with a Lehman type of crisis. The FED papered over that situation by printing more currency, and using the US Treasury issuance of bonds to back it; that is more debt. Obviously, such a situation can not continue forever because at some point no one will be able to service the debt.

Servicing the debt requires that the debtor repay both the principal and interest. That is only possible if there is sufficient growth in the economy to cover the interest. Simply stated, there is not now sufficient growth in the economy for the world to continue servicing its debt. World debt has grown by 40% in the last six years. When it no longer can, the system collapses!

That will require the establishment of a new currency system. Energy is a very attractive possible alternative. It is measurable, and it is necessary for any economic activity to be performed. The glitch here is that net energy (what we define as Deliverable Energy) must be used instead of gross energy production. It is the Deliverable Energy that powers the non energy goods producing sector of the economy. Entropy production in the energy production system will reduce the net energy even if gross energy remains the same. The Second Law guarantees it.

Some simple equations to define these energy terms can be found here:

http://www.thehillsgroup.org/petrohg10.pdf

A fuller discussion on the impact of entropy production, and its effects on petroleum production can be found here:

http://www.thehillsgroup.org/

Good luck with your book.
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Re: Changing the Energy/Economics Paradigm

Unread postby Timo » Thu 14 Apr 2016, 16:43:05

THANK YOU, SHORTONOIL!!! Your insights were tremendously helpful! I'll follow up on the links you posted. I need all of the information i can get.

As you pointed out, and what i've also been trying to convey is that the current economic system/paradigm is unsustainable, and that unsustainability parallels the unsustainability of our planet, as well. In fact, one is the cause of the other. To survive, we must figure out a new system that #1, preserves economic livelihoods for humanity, and #2, preserves a planet worth living on.

I think i get what you refer to as entropy, but i'll have to read up on that to make sure, or to learn, either way. As you describe it, though, it makes complete sense. There are caveats to the feasibility of the new currency i am suggesting. It might be much more practical to offer units of energy, or the means of producing units of energy as an alternative to normal currency v an outright substitute. If the US government offered me a choice between a $7500 tax credit for buying an EV OR an allowance worth $7500 dedicated to the purchase solar PV panels, i'd sure as hell take the PV panels over the tax credit. That would be worth far more than $7500 in the long run.

I guess that's what i'm trying to do. It's rather simply, really. Offer energy, or the ability to generate your own energy, as an alternative to cash as an incentive to promote certain consumer behaviors. This alternative would potential\y have much greater impact in most 3rd world countries where access to energy far outweighs the value of most consumer goods that are, or are not available for purchase with money. Energy, or electricity for household use is very valuable, and is a great enabler for families that have a limited or costly supply of that form of energy. The more energy you have, the more things you can do with that energy. That energy can promote self-sufficiency to no small extent.

Thanks again for your comments and insights. I'm glad you, at least, grasp what i'm trying to accomplish.

And BTW, i'm not writing a book, at least about this topic.
Timo
 

Re: Changing the Energy/Economics Paradigm

Unread postby Ibon » Fri 15 Apr 2016, 08:19:26

I was drawing a comparison to debt, credit and extinction. If a species population goes to zero they are extinct. There is no debt or credit. In economics we created credit and debt so that if a company goes to zero they can secure a loan and survive a rough patch and be resuscitated. It's magic. You get a mulligan, a second chance.

There is this healthy role that debt plays in an economy. Since we have created digital trading and all the fancy algorithms and traders and have relegated so much power to the banking sector this original healthy relationship that debt plays in an economy has gotten totally warped.

So what happens after this big global debt bubble pops? Can we ever get back to usage of debt that plays a positive role in an economy? A global currency tied to energy would mean every sovereign nation would surrender their monetary system over to a global central bank at the same time as they keep their own sovereign nation status. The EU would be the closest example we have of this and it doesn't seem to be working that well.

So what happens after the global debt bubble pops?
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Re: Changing the Energy/Economics Paradigm

Unread postby Timo » Fri 15 Apr 2016, 16:12:37

Ibon, i'm not suggesting every nation give up their sovereign currency. As you correctly explain, currency does have a place in any healthy economic system. That goes for debt, as well. Sure, we've managed our global economy in a manner that has been FUBAR, but i'm not suggesting we drop currency and replace it with units of energy. What i'm suggesting is that governments offer the option of energy as an incentive to influence consumer behavior instead of money, or tax credits, or rebates, or whatever. This suggestion could be played out between nations in trade, as well.

Hypothetically, if Nation A needs product X from Nation B, then Nation B provides that product in exchange for Y units of energy, NOT FUEL! Fuel causes negatives to the planet and atmosphere. "Energy" is the currency. I'll grant everyone that the transmission of that energy is no small problem, but if Nation A has excess production capacity for the energy they use, they can offer that excess in exchange for other materials they need from other nations. 1 million bushels of wheat for 10 billion kwhs of energy. I won't claim that exchange rate makes any sense, but the premise is the same. Energy is the currency that pays for the product, not money. Energy could potentially be transmitted through advanced battery technologies, or thru fuel cells, or solar PV arrays, or wind turbines, or even something as simple as an upgraded electrical distribution system.

I'll also have to put this idea into the structural context of COP21 and the Paris Climate Accords. The planet has a verifiable, stated goal to reduce GHGs. This change, or optional currency moves us collectively in that direction. Money will still be used. Units of energy can also be used as an alternative to money as an incentive to influence desired changes toward achieving our collective goals. Nothing is a 100% change from BAU. What i'm suggesting is a substantial alternative to the exclusivity of BAU.

EDIT: If the global debt bubble goes POP! then those with energy will survive. Energy is and will remain more valuable than money. Those that don't have energy will become desperate, and will rush to develop their own renewable energy sources PDQ, because energy is what makes the world go round.
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Re: Changing the Energy/Economics Paradigm

Unread postby tita » Wed 20 Apr 2016, 04:27:41

I was looking at the "Fortune Global 500", which ranks the major companies of the globe from their revenues. A change happened, which saw energy companies taking more importance. On the 6 first ranks, 5 are major petroleum companies. Back in the days, industrials groups were at the top. Big finance depends on the results of these firms (high oil price), while industry growth depends on the ability of the same companies to provide enough oil at a price not too high... Don't know where this lead.
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