Closing the gap between energy research and modelling, the social sciences, and modern realities

Energy Research & Social Science 4 (2014) 42–52

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Energy Research & Social Science journal homepage: www.elsevier.com/locate/erss

Review

Closing the gap between energy research and modelling, the social sciences, and modern realities Michael Jefferson ∗ ESCP Europe Business School & Advisory Board Member, RCEM, 527 Finchley Road, London NW3 7BG, UK

a r t i c l e

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Article history: Received 31 July 2014 Accepted 18 August 2014 Available online 22 September 2014 Keywords: Energy transitions Energy modelling Economic methodologies

a b s t r a c t Disregard or ignorance of history, the overlooking of energy issues in standard economic growth theory, and failure to recognise the role which declining marginal returns on energy exploitation has played in the decline of earlier complex societies, are evident in academic and more general discourse. Excessive resort to equations, modelling, and standard economic theories, have instead clouded imagination and focus on reality, while hindering focus on complicating factors as we consider future possibilities. This paper provides an overview of these issues and their potential implications now and for the future. © 2014 Elsevier Ltd. All rights reserved.

Contents 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ignorance of history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disregard of history . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selectivity in the choice of historical material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Perspectives on the Anthropocene Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy and economics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy and the shortcomings of the first law of thermodynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power densities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy return on energy invested (EROI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The challenge of the “peak oil” hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . New renewable energy prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A need for more fundamental change? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The need for re-thinking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Introduction In human actions, academic discourse, and media coverage ignorance of history, disregard of history, selectivity in the choice of historical material where used, and failures to check historical facts where possible, have long been apparent. This state of affairs is clearly evidenced in energy research and policy, and the forces underlying the latter. Mainstream economic growth theory has tended to overlook energy issues completely in

∗ Tel.: +44 (0) 1234708285. E-mail addresses: [email protected], [email protected] http://dx.doi.org/10.1016/j.erss.2014.08.006 2214-6296/© 2014 Elsevier Ltd. All rights reserved.

42 43 43 44 44 45 45 46 46 47 48 49 49 51 51

favour of asserting that labour and capital are the only two factors of production. There is a widespread disregard for the role which declining marginal returns on energy production have played in the decline and collapse of complex societies in the past. Concepts fundamental to the usefulness of different forms of energy are regularly overlooked. Several core examples are fundamentally irrefutable, as the works of Ted Trainer, Charles Hall and Kent Klitgaard, and others have pointed out [1]. The challenges to the future of the human race embodied in growing world population, and limited resources, find many in a state of denial. The exploitation of fossil fuels, and efforts to expand the availability of low carbon energy technologies, are seen by an increasing number of observers to place the “great acceleration” of economic

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growth and material living standards under fundamental pressure. Some consider that the resulting pressures put what has been called the Anthropocene Age – variously claimed to have begun with Francis Bacon, Thomas Newcomen, or simply “the 1800s” – under terminal threat. Lying behind the ideas and evidence presented in this paper is the view that so complex, uncertain and incomplete a set of future possibilities cannot usefully be handled by seeking to model them. Modelling specific aspects – the estimated future supply and use of conventional oil resources, for example – may help assess future challenges and underpin aspects of the scenarios developed. But too great a recourse to mathematics, equations and models, is liable to hamper imagination at the outset of the effort, along the way, and/or in assessing their results. The economist George Shackle (a considerable mathematician himself) took the view that: We cannot build up a general, omni-competent model by fitting together our special models, because it happens in many cases that one of these special models depends on assumptions incompatible with those required by another. Instead, we have to strive for an insight which fuses informally and, if you like, non-logically, a number of strands which, in their formal aspects, mutually repel each other [2]. Such a position is anathema to many mainstream economists, who have come to believe that only through mathematics, modelling, and the application of over-simplified theories can their professional status be exemplified. In an interview in 1983 Shackle was even blunter: “Those economists who are going to give advice, or who are going to be advisors either to governments or to business, should have their training based in economic history, and they only need as much theory as you find up to the second year textbook.” [3] There has been an expansion of the literature reminding us of catastrophic events in the past – some related to general climatic events, some to more regional catastrophes, and some to cataclysmic events such as asteroids or comets striking the Earth or voluminous volcanism. The latter lie beyond what it is reasonable to expect concerns about energy policy to cover. But many of the other threats to sustainable development just touched upon need to be considered in developing scenarios, and explaining vulnerabilities, of the global energy system in the 21st Century and beyond. The concern that some of us have is that detailed modelling of the myriad of uncertainties and inter-connections which exist lie beyond useful modelling – the sort that allows third parties to understand what has occurred during the modelling exercise. Instead, a simpler approach, keeping the mathematics in proportion to needs, may be more comprehensible and more likely to sway energy policy in needed directions. At the end of the day, what are required are precautionary policies, measures, investments and actions by end-users which are fit for purpose. All too often they fail on that basic premise. With the arrival of “Energy Research & Social Science” we at last see a journal encompassing history, behavioural change, some fundamental technical issues surrounding energy resource availability, energy transitions, real economics, potential risks and externalities, and energy research methodology [4]. This paper touches on all these, and how they may be better understood and addressed.

2. Ignorance of history Joseph Tainter’s “The Collapse of Complex Societies” [5] provided a rich treasury of examples of how the declining marginal returns on energy production have resulted in the collapse of

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earlier societies. Minoan civilisation is just one of 18 cultures which he considered, and he concluded that complex societies depend on the production of agricultural, energy and minerals production. He found that energy and minerals production follows the same productivity curve as subsistence agriculture, that fuel resources used first by a rational human population are those that are most economically exploited, and that when it becomes necessary to use less economical resources then marginal returns automatically decline. Some have followed the same trail but with more obvious (and to my mind unfortunate) ideological purpose, and while calling for “a radical critique of industrial society” from a Marxist perspective express hostility to the “many ecologists such as H.T. Odum, (who) make energy the central concept of their analysis of society and describe social mechanisms in terms of energy flows.” [6, p. xiv] In fact Howard Odum did make fundamental criticisms of the drive for economic growth in developed and developing economies on a wide range of practical grounds – 20 numbered points in one contribution [7]. Others, and Thomas Piketty offers a good example in his “Capital in the Twenty-First Century”, get things half right (and therefore seriously wrong overall). Pilketty states: “To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves.” [8, p. 32] Here he reflects the predilection of standard economists to resort first to equations. Yet elsewhere Pilketty falls into the same ideological trap he warns against by resorting to a narrow Marxist agenda. Some of the earlier societies examined by Tainter, Yoffee, Cowgill and others, resorted to territorial expansion to capture additional resources, but this was never permanently successful and in modern societies where population has grown and energy resources are stored, this is even less feasible (Tainter, pp. 214–215). Climatic change has been cited as a major factor in explaining the collapse of some early complex societies, as well as tectonic changes. Droughts, reflecting climatic change, are favoured as one of the causes of the collapse of the Mycenaean and Roman civilizations. We do not, therefore, need to go back to early geological periods for evidence of climatic fluctuations. And as Geoffrey Parker has recently reminded us, in his: “Global Crisis: War, Climate Change & Catastrophe in the Seventeenth Century” (2013), the Little Ice Age also brought problems with it. There were crop failures, deforestation, claims of over-population, and other familiar claims, coming from North America across to China. Studies of the 13th and 14th centuries also indicate that the beginnings of the Little Ice Age impacted on agricultural yields and social stability, as did the bubonic plague, in parts of Western Europe.

3. Disregard of history The recent financial crisis provides another rich resource of evidence for disregard of history. The vast outpouring of books and papers which trace its causes to faulty decisions about loans for housing and automobiles in the USA from the early 1970s, through what Michael Lewis called “Liar’s Poker” – the 1989 book that “revealed the truth about London and Wall Street”, to the financial follies of the UK’s Blair/Gordon “governance” – especially from 2001 tell their own story. Nouriel Roubini and Stephen Mihm have referred to the “Great Instability” being a better description of the coming era than the “Great Moderation” (“Crisis Economics: A Crash Course in the Future of Finance”, 2010, p. 300), but the issues discussed here go far wider than assets bubbles and busts.

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Why, for instance, has so much been written about what is now termed “the Great Recession” after the event, and why did so few people see it coming? Two book titles tell the story more succinctly than a thousand words: “This Time is Different: Eight Centuries of Financial Folly”; and “Debt: the first 5,000 years” [9]. This is not a unique situation, of course. Forty years ago Friedrich von Hayek delivered his Nobel Memorial Lecture: “The Pretence of Knowledge”, where he began by saying: “the economists are at this moment called upon to say how to extricate the free world from the serious threat of accelerating inflation which, it must be admitted, has been brought about by policies which the majority of economists recommended and even urged governments to pursue.” It was about that time that this author was invited to write a short book on the history of inflation over the previous 2000 years. It was also about the time that leading specialists on cartels and trusts, led by Maurice Adelman, were telling us that OPEC would quickly collapse because that is what had happened to US trusts. In fact there was plenty of historical evidence – notably from the UK and Germany – that cartels could last for scores and (in some cases, on and off) even hundreds of years. Whenever one reads statements such as new renewable energy will provide 50% of the World’s energy needs by 2050, or 100% by 2100, there should be a natural response of looking back at the past. Solar photovoltaics, for example, on which AlexandreEdward Becquerel was working as long ago as 1839. Or fuel cells, on which William Grove and Christian Friedman Schonbein were writing in 1838 – almost 60 years before Henri Becquerel happened upon spontaneous radioactivity. Then there is Concentrating Solar Power, and Frank Shuman’s CSP plant at Meadi (just outside Cairo) which started up in 1912 – part of the rich story of solar energy told by Ken Butti and John Perlin which so often seems to be overlooked, and which so far seems too marked by solar PV cells rather randomly placed on roofs in northerly latitudes in response to subsidies offered rather than to solar irradiation levels, or by pessimism about the Desertec concept in the wake of the Arab ‘Spring’ [10]. Or, as Lewis Dartnell has recently reminded us, “electric vehicles were once common”; “in Chicago, they even dominated the automobile market”; and in 1912 – that year again – 30,000 glided silently along the streets of the USA, another 4000 were gliding in Europe, and by 1918 20% of Berlin’s taxis were electric [11]. Indeed, the record of the 20th Century suggested that except in times of war rapid change seemed unlikely – the advances in materials and communications in the run-up to, during, and after the Second World War seeming to point firmly to this. Since then the momentum of change in such fields as communications and energy have appeared remarkable, but for energy availability and use a number of fundamental challenges remain apparent, such as: the declining availability of conventional oil resources; the additional costs and environmental impacts of non-conventional oil; the continuing roughly 80% global dependency on fossil fuels; the 90% global dependency on oil products for transportation; the uphill struggle in resorting to “new” renewables, which rising from a small base still only make a small contribution and continue to raise concerns about their intermittency in the cases of wind and solar energy.

4. Selectivity in the choice of historical material Many years ago, looking at the record of climatic change, a subject that has interested me for nearly 60 years, I came upon the claim that deforestation had noticeable local climate effects. Theophrastus, who lived in Athens somewhere around 370–290 B.C. took that view, and having written a nine-volume work on plants and another six-volume one, I was inclined to

take him seriously [12]. Then I read Oliver Rackham and Jennifer Moody’s: “The making of the Cretan landscape”. There, while recognising the severe impacts of earthquakes and the eruption of Santorini during the Bronze Age, they concluded that, contrary to “the Ruined Landscape” or “Lost Eden” theory, the Cretan landscape has changed little since the Bronze Age. Since then fluctuations have occurred within “fairly narrow limits”, and Cretan vegetation has proved resilient although climatic changes and population pressures have shifted the balance one way and then another [13]. Subsequently Oliver Rackham returned to this subject when, with Dick Grove, he concluded that: “in Crete the intensity of landuse in the late Bronze Age could hardly have been less than it is now.” The situation appears to have differed from that in Corsica, Sardinia, and southern Greece [14]. The lessons drawn by these authors were: avoid over-generalising; be wary of written evidence if it covers periods when no-one was writing; verify the evidence and do not rely on other people’s interpretation of it or their interpretation of written texts; and be open about what you do not know so as to avoid what Rackham and Moody termed “pseudohistory”. One just needs to consider some recent books covering early Mediterranean history to be aware of the complexities – such as Eric Cline’s: “1177 BC: The Year Civilization Collapsed” – which covers in great detail earlier centuries; also David Abulafia’s: “The Great Sea: A Human History of the Mediterranean”; and Lincoln Paine’s: “The Sea and Civilization”. Both Abulafia, and Richard Berthold in greater detail for Rhodes during the Hellenistic period, cover the range of issues – including how neighbouring states would sometimes pull together to help allies enduring stresses – such as those which followed major volcanic eruption [15]. Thus the story is not just one of earthquakes and volcanic eruptions causing societal collapse, but of invasion and revolt, alliances, drought, and the cutting of ‘international’ trade routes. Pressures of human population, food and water availability are apparent, as Joseph Tainter’s work found. This is just for the Mediterranean area, although that then covered more than one civilization. How much more complex to work through the myriad of critical features of the whole World, taking account of potentially relevant factors from population expansion to climatic change concerns, in considering global energy challenges of the 21st Century?

5. Perspectives on the Anthropocene Age The challenges of rising human population, pressures on food and water availability, and the declining marginal returns on energy have caused growing concern about whether demands for increased material living standards and the continuation of modern consumption aspirations can be met as the 21st Century passes. Instead of referring to the Holocene Period, which in geological terms began around 10,000 years ago, it is suggested that the present phase of the Earth’s evolution is termed the Anthropocene on account of the enormity of the impacts of the human race upon it. The suggestion is alternatively based upon the notion that humans now dominate biological, chemical and geological processes on Earth, with the dubious implication that the human race is in control of its destiny in a favourable sense [16]. Setting aside the arguments about who started using the term “Anthropocene” first (the biologist Eugene F. Stoermer is one claimant, while Andrew Revkon referred to the “Anthrocene” Age back in 1992), and whether humans actually do and will continue to dominate the Earth’s key processes – which is clearly open to doubt, it is clear that the increasing exploitation and use of fossil fuels, rising population, and new technologies have caused a “Great Acceleration”. Some date this back as far as Francis Bacon in the 17th Century; others to Thomas Newcomen and some other

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technology innovators in the early 18th Century; and others more loosely to “since the 1800s” [17]. The implications of this “Great Acceleration” have been worked over by many people in recent years. One of the most comprehensive is “Global Change and the Earth System: A Planet Under Pressure”, by Will Steffen and others, which also contained a chapter headed: “The Anthropocene Era: How Humans are Changing the Earth System”, first published in 2004 [18]. There has been a revival of the idea of “voluntary simplicity” – a term first introduced in the 1930s, of a rural existence resonant of space and relative silence, among those with the opportunity and means of achieving these. Fewer are inclined to ridicule “The Limits to Growth” as they were in the early years after its first publication in 1972, or its 30-year update published in 2005. Ugo Bardi has recently written “The Limits to Growth Revisited”, where he ends by suggesting that “mind sized models” may help understanding and overcome biases, but it is essential to avoid the trap of over-exploitation – a point to which I will return in concluding [19]. The discussion of the “Great Acceleration” has followed many different paths. Some have seen a need to turn away from “a market utopia” towards “the reality of society” (as Karl Polanyi put it in “The Great Transformation”, 1944), but for most of us who have observed fascism and socialism at work neither has great appeal as both – despite the pretensions of the latter – fail to safeguard freedom. Instead, the rest of this paper will focus more closely on energy – its supply and uses, as what we seek from energy are the numerous services it can provide.

6. Energy and economics Since there are some concluding comments on modelling these energy challenges, and as many ‘standard’ or ‘neo-classical’ economists enjoy excessive dabbling in mathematics, dubious theorising, and modelling, a brief survey of the relevance of standard economic growth theory to energy issues seems appropriate here. Such a survey inevitably highlights the failures of much economics and many economists. In a Special Issue of “Energy Policy” on “Oil and Gas Perspectives in the 21st Century” Robert Ayres and Vlasios Voudouris authored the first paper – on the economic growth enigma [20]. Bob Ayres focussed on three matters of great importance: the failure of neoclassical economic growth theory to take due account of energy and other natural resources; the failure to take into account the shortcomings of the first law of thermodynamics; and the failure to take due account of the implications of the concept of “useful energy”. Robert Solow’s famous paper on the theory of economic growth appeared almost 50 years ago [21]. For those with little interest in, and less understanding of, its mathematics his final two paragraphs probably struck a chord. He admitted his analysis was highly abstract, and that he had “been deliberately as neo-classical as you can get” [21, p. 93]. He concluded by stating that no credible theory of investment can be built on the assumption of perfect foresight and arbitrage over time. At about the same time there were some whose belief in any practical relevance of general equilibrium theory or perfect competition justifiably went out of the window as well. Many years later, Solow’s: “Growth Theory: An Exposition” (2nd ed., 2000) claimed there were no really new or interesting ideas appearing after 1970 until: “What later came to be seen as the post-1973 worldwide productivity slowdown, an extraordinarily important event (which) was not recognised – could not be recognised – right away.” [22] This caused amazement in some quarters because there had been discussions about a likely future “oil crisis”

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going on since 1970, which was bound to have powerful repercussions across a broad front – and not just on productivity. By May, 1973, “The Rapids” described how Shell’s Group Planning scenario team considered things were likely to evolve. Solow may have partly rescued his reputation by admitting in the Preface to that book that his problem was: “that a model of genuine endogenous growth seems to be achievable only if everything in the model turns out just so. There is a dangerous lack of robustness in the assumptions that, so far, underlie every version of the theory.” [22, p. viii] But here the greatest weakness of Solow’s growth theory was that it assumed only two factors of production – labour and capital. Because energy and other natural resources contributed little to national accounts in monetary terms and therefore (it was assumed) very little to the economy, they could be ignored. In fact, as Bob Ayres and Vlasios Voudouris concluded, growth since the Industrial Revolution has largely been driven by the increased stock of capital and the supply of useful energy due to the discovery and exploitation of relatively inexpensive fossil fuels. However, Ayres also believes there are good prospects for “a clean-energy future” and a major improvement in the efficiency of energy provision and use, a view which may be challenged as the 21st Century evolves [23]. The challenge is likely to arise on two grounds: apart from solar energy (with ultra-high voltage direct current transmission) there is little evidence that new renewable forms of energy will meet future needs – especially not modern biomass/biofuels – without chronic adverse side-effects; and the “rebound effect” or “Jevons’ paradox” is likely to undermine efforts to realise the great potential for efficiency improvements. It has been suggested that Solow’s neoclassical growth theory has given way to more practical theories – “evolutionary theory” and “endogenous growth theory” – but others shed doubt on this. Bob Ayres in recent years has sought to bring together an endogenous growth theory which is compatible with the laws of thermodynamics [24]. Others have usefully emphasised the importance of “biophysical economics”, such as Charles Hall and Howard Odum [1,5].

7. Energy and the shortcomings of the first law of thermodynamics Bob Ayres has also for many years pointed to the shortcomings of the first law of thermodynamics – the idea that energy can only be converted, not wasted or destroyed. In the process of transformation, however, the second law of thermodynamics indicates that the initial quality is not conserved. Few economists have addressed the resulting issues. Bob, as a physicist as well as an economist, has done so. The result of the exposure of the weakness of the first law, and implications of the second law, is that there arises the need to provide an effective measure of energy use – the minimum energy required under ideal conditions to perform the energy tasks desired – and one which can take account of the whole energy system and its streams. The term “exergy” arose to describe this, and it was apparent that a very high proportion of energy inputs are wasted against the theoretical ideal as a result of numerous practical limits. Closing the gap between the theoretical optimum and the performance in practice is the measure of energy efficiency improvement, but the extent to which the gap will be closed in the future will remain uncertain. Probably the best known recent effort to set out global energy flows from primary resource input to final uses is by Jonathan Cullen and Julian Allwood, first published in “Energy Policy” (2010) and reproduced in IIASA’s “Global Energy Assessment” (2012). They

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concluded that there is an over 70% loss in transportation; 62% loss in industry; and a 60% loss in the residential and commercial sector [25]. In 2005 it was estimated that the overall average efficiency of converting final energy forms into useful energy was about 34%. (IIASA: [25], p.117). These figures are inevitably “best estimates”. They also fall far short of the theoretical optimum under the concept of exergy, or “useful energy”. The only other economist who wrote at length on these matters was Nicholas Georgescu-Roegen. In Part I of “Analytic Economics: Issues and Problems” (1966) he drew attention to the fact that he believed that “economists have failed to pay attention to this law, the most economic of physical laws.” [26] He criticised the general practice among economists of representing the material side of the economic process by a closed system (his italics), that is a mathematical model in which the continuous inflow of low entropy (low availability of a system’s thermal energy for conversion into mechanical work – relating to the second law of thermodynamics) from the environment is completely ignored. His central concern was that, as has been recognised from Sadi Carnot in 1824 onwards, “all known forms of energy move in a unique direction, from a higher to a lower level”, and there is a continuous “qualitative degradation of energy” [26, p. 68]. He could recall only one previous reference to energy in economics (T.C. Koopmans contribution to a book published in 1951 – [26, p. 96]. Georgescu-Roegen then provided a critique of “standard economics” and modelling. He wrote: “we must deplore the exaggerated fondness for mathematics which causes many to use that tool even when a simple diagram would suffice.” [26, p. 115] He later explained that an economic model is merely a simile, a guide only for the initiated who have acquired the necessary insight “through some laborious training”, and cannot dispense with “delicacy and sensitivity of touch” – art, particularly the art of simple, good writing. He also wrote that “the widespread view that the economist’s role is to analyse alternative policies, whereas their adoption is the art of statesmanship, is no excuse. An artless analysis cannot subserve an art.” [26, p. 117] Georgescu-Roegen’s other conclusion worth highlighting here was his discussion of the “conflict” between standard economics and all other schools of economic thought. Standard economists, he asserted, have an inability to understand “obscurantist” ideas, while their critics reject an idea which reduces the economic process to a “mechanical analogue”. He considered that: “The much better faring of standard economics notwithstanding, it is the position of the historical school that is fundamentally the correct one. The point seems to be winning the consent, however tacit, of an increasing number of economists.” [26, pp. 124,125] This first sentence is self-evidently correct; the second remains an aspiration despite the impact of Herman Daly’s call for “replacing the economic norm of quantitative expansion (growth) with that of qualitative improvement (development) as the path of future progress.” [27, p. 1] Supportive of the latter view, Charles Hall and Kent Klitgaard have commented that “economics as a discipline rumbles onward year after year with little real change in the way that our young people are indoctrinated. This point of view – that much of what is taught in economics is quite divorced from biophysical reality – is apparent to most of our students.” [1, p. 303] In “The Entropy Law and the Economic Process”, 1971, Georgescu-Roegen returned to many of his earlier themes, with a clear progression from theoretical science to “the economic science” [28]. He concluded that it would be absurd to rely upon ordinary logic alone whenever a mathematical tool can be used, but he castigated economists who claimed that it is irrelevant to point out the inaccuracy of economic models. He compared and contrasted models in physics, which must be accurate “in relation to the sharpest measuring instrument existing at the time. If not, the model is discarded.” In the social sciences there is no

such objective standard of accuracy. Thus there is no acid test for the validity of an economic model. No economic model proper can serve as a guide for automatic action to either the uninitiated or even “a consummate economist”. Before repeating what he had written in his earlier book, Georgescu-Roegen pointed out: “Everyone is familiar with the dissatisfaction the average board member voices after each conference where some economist has presented his ‘silly theory’.” [28, p. 333] 8. Power densities There are two further, basic, concepts which those considering global energy challenges in the 21st Century need to consider. The first is power densities, a subject covered fully and well over the years by Vaclav Smil. Vaclav has written many relevant books – on energy in history, the links of energy to the biosphere, uncertainties concerning the future, and on oil. In his most recent four books, and in a “primer”, he has written on power densities [29]. The importance of the power density concept (W/m2 of horizontal area of land and water surface) is that it measures energy flux. Those for the fossil fuels are much higher than those for renewable energy. This has various serious implications for the ultimate technical potential of energy from “new” renewables; for overall electricity supply; for the reliability of electricity supply (for example, the issue of intermittency and its implications); for land use and water availability; for transmission; and for biodiversity (for example, the impacts of modern biomass and biofuels), wind turbines (especially where sited in locations where mean wind speeds are low); large hydro schemes; and estuarine barrages. Smil has found that the power density of natural gas is 1000–2000; of coal 100–1000; of oil 150–1000; of thermal power plants 120–800; of geothermal 10–20; of tidal power 10–12; of solar PV 4–50; of solar “parks” 4–11; of solar thermal (CSP) 6–10; of hydro 0.5–15; of wind 0.5–1.5; and of biomass 0.5–0.6. Obviously, for solar, wind and biomass location is extremely important (for example, levels of direct and indirect solar irradiation; mean wind speeds; and agricultural fertility). Although these figures are broad estimates, they are indicative both of the general energy challenges that confront the World in the 21st Century, and the particular hurdles confronting “new” renewable energy. 9. Energy return on energy invested (EROI) Another important concept is that of energy return on energy invested – or, more broadly, energy returned to society over energy required for obtaining that energy. This concept originated as net energy analysis in the works and teaching of Howard Odum [5,30]. His student Charles Hall, from the late 1970s, began to develop the EROI concept and its wider implications, including its highlighting of the weaknesses of standard economics. One of the key books is Charles Hall, Cutler Cleveland and Robert Kaufmann’s: “Energy and Resource Quality: The Ecology of the Economic Process” [31]. Among the purposes the authors had in writing the book stemmed: “in large part from our considerable dissatisfaction with much of modern economic theory, and with the policies that are based on that body of theory. In our opinion, there has been little or no sophisticated treatment of the physical attributes of the resource base in much of modern economic theory or in the standard economics textbooks even though those resources are the basis for economic productivity and virtually all wealth.” [31, p. xii] The authors remind us, having adversely criticised Robert Solow’s growth theory, that another Nobel laureate in economics – Wassily Leontief – lamented “the fact that modern economics has emphasised increasingly highly theoretical analyses that often have little

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bearing on what is going on in the real world.” [31, p. xi] Leontieff, it may be recalled, wrote for quite a wide audience in such publications as “Science” and “Scientific American”. Although a highly quantitative economist, and one who had attempted to formulate a general equilibrium theory capable of empirical implementation, Leontieff railed against moving from more or less plausible assumptions to elegantly demonstrated, but irrelevant, conclusions. Charles Hall had provided some estimates of EROI from the literature in Hall and Klitgaard (1, p. 313), and contributed with Jessica Lambert and Steven Balogh on this topic to the January, 2014, Special Issue published in “Energy Policy”. In Table 1 of the Special Issue (supra p. 145), they provided nearly 40 published EROI values. It was clear from these that the EROIs of the fossil fuels had been declining since 1970, but remain well above those for “new” renewables, especially biomass, solar and wind. Like the evidence on power densities, the precise numbers are elusive. Just to take a simple example: wind turbines. In the January, 2014, “Energy Policy” paper wind turbines are given a mean EROI of 18:1 (quoting Kubiszewski and Cleveland, 2007), the same figure and source as appeared in Hall and Klitgaard. But in England’s Cumbria there are two wind energy developments 2.3 km apart – Lowca and Siddick. At Lowca the rolling annual average capacity factor achieved since the development started up in 2002 is 29.6%; at Siddick, which started up at the same time, the rolling average is 19.6%. Or take the Companion Guide to the UK’s renewable energy planning guidance (PPS 22) that operated for several years from 2004 and still has some influence. There it was claimed that the capacity factors for wind energy developments in the UK ranged from 20% to 50%, and averaged 30%, per annum. Yet in 2010 nearly 60% of England’s onshore wind energy developments failed even to reach a capacity factor of 20%. The general picture of generally low modern renewable energy EROIs is clear – and disturbing for those considering the energy challenges of the 21st Century. The January, 2014, Special Issue also provided the opportunity to draw on the EROI concept to offer enlightenment at the societal level, and in particular a new composite energy index (the Lambert Energy Index), a subject about which a book is shortly to appear (Lambert, J. and G.: “Life, Liberty, and the Pursuit of Energy: Understanding the Psychology of Depleting Oil Resources”).

10. The challenge of the “peak oil” hypothesis Those of us who were directly involved in the oil industry in the 1970s (and were anticipating an oil “crisis” from at least 1971) would converse frequently about the “oil mountain” – or, as is now standard terminology, the Hubbert “bell curve”, not that Marion King Hubbert ever claimed the pattern of oil extraction and depletion would be a neat bell curve. For anyone who does not believe this is a very old story, they are invited to read a paper by Hans DuMoulin and John Eyre: “Energy Scenarios: A Learning Process”, Energy Economics, April, 1979, pp. 76–86. What is now debated under the heading “peak oil” has aroused much controversy in recent years. Contributors to the January, 2014, Special Issue included Charles Hall and Kjell Aleklett, who have provided very useful input over the years. John Hallock, Charles Hall, Wu Wei and this author have had papers published in this field [32]. Ian Chapman covered this topic in the Special Issue previously mentioned, referencing over 100 books and papers – merely a selection of what is available. There has been a great deal of controversy over the “peak oil” issue, for reasons that remain difficult to comprehend since the pattern is very clear for most producing countries [32]. The issue concerns “proved” reserves of conventional oil – not any other sort of oil – and whether these are sufficiently substantial to ensure

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availability for many years to come, and adequate to avoid serious upward price movements. The standard sources (Oil & Gas Journal, BP Statistical Review, IEA, US-EIA and CIA, and OPEC) all nowadays quote roughly the same figure – 1688 billion barrels at end-2013 (BP Statistical Review of World Energy, 2014). But this figure includes Venezuelan heavy oil (which explains an increase of some 275 billion barrels in the overall figure), which is not conventional oil. The total also includes Canadian tar sands, which explain a further increase of some 166 billion barrels, and again is not conventional oil. Finally, in response to OPEC production quota figures introduced by OPEC in the face of declining oil prices in the early 1980s, most OPEC Member States changed the basis of their calculation of proved conventional oil reserves from a 90% probability (P90 or P1) to a 50% probability (P50 or P2). Previously “proved” conventional oil reserves had meant a 90% probability of existence and extraction, whereas 50% reflected “proved plus probable”. As a result five Middle East producers increased their claimed proved reserves by nearly 450 billion barrels, of which Iraq accounted for 120 billion barrels; Iran for 99 billion barrels; Saudi Arabia for 98 billion barrels; the UAE for 67 billion barrels; Kuwait for 33 billion barrels; and Libya for 19 billion barrels. Thus the standard estimate of proved conventional oil has arguably been expanded by some 880 billion barrels, whereas under the proper definition the total global volume is slightly under half of what is now claimed. Of course, consideration needs to be given to how much conventional oil in situ can be extracted by more advanced technology, and the existence of non-conventional oil and the potential contributions of conventional and non-conventional natural gas. But there has been little evidence of significant new finds of conventional oil in the OPEC Member States for many years (although there could be significant potential in Iraq/Kurdistan), and resources elsewhere (mostly offshore) are not considered to revolutionise availability. Parallel with these developments within the past decade have been the frequent references to fracking gas and oil, accompanied by large swings in expectations. This situation is of great importance both in terms of perceptions and reality. First, previous periods of rapid oil price rises (even where they have fallen back again) have been a major cause of economic recession over the past 40 years in numerous industrial nations as James Hamilton has shown [33]. Secondly, although there have been several forces operating on oil prices (the low price elasticity of demand, strong growth of demand in many industrialising countries led by China, demand growth due partly to ongoing subsidies in the Middle East and elsewhere, temporary ‘boom’ conditions in some leading industrial nations, and failure of global production to expand in line with demand) scarcity rent is likely to play an increasingly important role in oil prices. Other concerns have been expressed, such as structural issues which could impact on both oil supply and demand. For example, there is great uncertainty over whether technical developments in the transportation sector (oil products continue to supply some 90% of the world’s transportation requirements) will result in global demand for oil in the transportation sector declining significantly. Much of that uncertainty arises from questions about the sources of electricity required for electric or hybrid vehicles (coal, natural gas?), and the loss of interest in fuel-celled vehicles apparent over the past decade or so – which may be about to reverse. Conventional oil price rises are therefore increasingly likely to snuff out incipient economic expansion or halt an economic boom in oil-importing countries. This is what has been termed “the global curse of black gold” [33]. Although non-conventional oil resources appear huge, it has been estimated that only about 300 billion barrels (25% of the estimated resource base) are recoverable; a similar quantity of tar sands are estimated to be recoverable (about 12.5% of the estimated

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resource base), and about 600 billion barrels of oil shale (about 15% of the estimated resource base). The recovery of the various nonconventional oil resources will involve considerable quantities of energy, water, and chemical inputs, driving their EROI down even further and their costs even higher. Each of these resources is unlikely to supply today’s global demand for more than 20 years, and their quality is inferior to conventional sources, generally more costly to exploit, and more likely to be associated with adverse environmental impacts. As Colin Campbell and Jean Laherrere pointed out, when ending their famous article in the March, 1998, issue of “Scientific American” (“The End of Cheap Oil”): “The world is not running out of oil – at least not yet. What our society does face, and soon, is the end of abundant and cheap oil on which all industrial nations depend.” That is a strong reminder of what Joseph Tainter and others previously referred to in this paper have warned about. Recoverable resources of conventional and non-conventional natural gas are also huge, but again finite (with concerns about the availability post-2035 rising despite recent shale gas developments – in the USA large initial output in some areas appears to have faltered), and their cost of recovery is likely to increase considerably. The history of exploiting the most readily available, and least costly, energy resources confirmed once more. The exploitation of coal, hampered in most countries by concerns about carbon emissions, is also constrained by the limits on the stable sequestration of the resulting carbon.

11. New renewable energy prospects Concern for the prospects for the fossil fuels, partly due to availability (including fears of supply disruption) and partly due to the associated carbon emissions, has promoted greater interest in and support for new renewable energy sources. Much of this interest has been rather uncritical, and much of the support encouraged by the subsidies that have been made available. The promotion of modern biomass and biofuels has had adverse impacts on food and water availability, and on ecosystems and biodiversity, as the IPCC Working Group II’s Fifth Assessment makes clear. This has been widely remarked upon, not least by those considering the causes of food and food price riots in 47 countries in 2008. What is therefore most surprising is that, although the IPCC’s Working Group II Fifth Assessment Report made clear in its Technical Summary that these negative effects had already occurred and were likely to intensify unless reversed (TS pps. 33, 35, 43 and 56, for example), and reflected views expressed in supporting chapters (notably Chapter 9, pp. 3, 17, 31, and 33; but also and especially Chapter 19, pp. 17, 21), not a word of these concerns appeared in the Summary for Policymakers. This seems very strange, and was presumably a deliberate decision made on political grounds [34]. By contrast the Summary for Policymakers of Working Group III’s AR5 Report (approved on April 12th, 2014) mentions other “new” renewable forms of energy on page 23, but not modern biomass or biofuels, in a positive manner. On page 28, however, there are warnings of issues to be considered with bioenergy, namely: emissions from land, food security, water resources, biodiversity considerations, and livelihoods. There is a need for heavily reliance on efficient biomass-to-bioenergy systems and sustainable land-use management and governance – criteria which have already been found wanting. Quite apart from the knock-on effects of the massive switch of corn and soya bean production to biofuels in the USA, which has had many negative global impacts, there have been many strange more local decisions. Among these is the decision-making of UK Planning Inspectors who have, for example, given permission for

developers to build electricity-generating plants for a “preferred feedstock” of palm oil – notwithstanding evidence (from, inter alia, the World Resources Institute), that on average 33 tonnes of carbon dioxide are emitted for every tonne of palm oil produced in Indonesia – so before transhipment to point of combustion – and also with severely adverse effects on forestation, wildlife habitats, and species’ survival [35]. Concerns about wind and solar energy are widely based. Their use of “rare earth” materials such as neodymium, dysprosium, terbium, europium, and yttrium – all relatively scarce and energyintensive, and also used in electric vehicles, car batteries, and energy-efficient lamps. Other “critical”, though not “rare earth”, materials used for solar PV are indium and tellium, which are exceptionally scarce. In some cases their use involves widespread ground and water pollution and, for instance with the melting of silicon rock for solar panels, heating up to 3000 degrees Fahrenheit – much of it by burning coal. China currently accounts for some 97% of the global production of “rare earth” metals, but recently began cutting back its exports, claiming this was required to protect its environment (in some places the local land and water pollution is extremely severe). As a result the prices of “rare earth” metals: “have skyrocketed, and the clean energy industry is in turmoil.” Those economies where the demand for these “rare earth” and “critical” materials is greatest – the USA, EU and Japan – have begun to take the first steps towards reducing their dependency on Chinese supplies [36]. Wind energy is having a major impact on bird mortality, as birds collide with turbines; and can affect human health as a result of amplitude modulation from wind turbine blades affecting sleeping patterns for some local residents, as well as worries about reductions in nearby residential property values. Dam failures, with resultant human fatalities, can result from hydropower. Estuarine barrages can destroy the local ecology, and adversely affect migratory and over-wintering birds in particular. Residential property values can be reduced, and for many rural dwellers visual intrusion, especially in attractive landscapes and close to historic assets, are serious issues. Solar parks can also result in visual intrusion as well as reducing agricultural land otherwise available for food production. For many urban dwellers (who now represent over 50% of the world’s population, and this percentage will grow steadily), local rural issues no longer influence them greatly – a “Great Disconnect” has occurred. Vocal rural minorities have sprung up, scarcely understood by either urban dwellers or developers, but whose concerns are not merely opposition to anything in their backyard (the contentious NIMBY labelling). Here again there are dangers in overgeneralisation. There appear to be significant differences between countries when it comes to rural countryside protection concerns. In England they appear to be stronger than in The Netherlands or Germany [37]. More generally, it may be the case that our knowledge of, and level of interest in, the economics of ecosystems and biodiversity remain at a rather primitive level and need to be raised [38]. Perhaps an over-riding concern is that as human activities appear to have contributed to a modest increase in near-surface global warming during much of the 20th Century of around 0.8 ◦ C (and it is highly likely that the increase in atmospheric concentration of certain gases is the result of human activities) then sound adaptation and mitigation policies, measures, and schemes are required. This is not to form a judgement about future nearsurface temperature changes given the imperfections of climate models; the possible impact of solar variations; the carbon emissions’ absorptive capacity of the oceans; and the roles of water vapour and clouds. Some consider that the climate models, their results, and the manner in which they are presented, tend to

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exaggerate the warming outlook [39]. What seems rather obvious, even to some of those with many years of involvement with the IPCC, is that neither the “climate sceptics” with what may appear to be their root-and-branch opposition to mitigation, nor those who proclaim the coming consequences of anthropogenic climatic change with almost religious conviction, are necessarily correct. These are very complex matters where we simply do not know enough to comprehend what the future may hold. Thus sound precautionary measures seem the rational way forward. That does not mean massive modern biomass or biofuel developments which wreck ecosystems and biodiversity, or food and water availability. It does not mean placing wind turbines where mean wind speeds are low and the environs are sensitive to humans and wildlife. It does not mean placing solar “parks” or PV panels where neither direct nor indirect solar irradiation is dense. What may be required is a Promethean Leap to another level of energy provision (such as, it is claimed in Ancient Greek legend, occurred when Prometheus stole the gift of fire from Olympus for the benefit of humanity), and thus of its nature unknowable, to a low carbon energy form that could be supplied in the required quantities. The IPCC Working Group III AR5 Report suggests that nuclear power could make an increasing contribution, although it recognises that its share in global electricity production has been declining since 1993 and a number of well-known barriers continue to exist (heightened by what many consider the unreasonable panic and foolish responses of some governments following the Fukushima incident). Whether a move from uranium to thorium, as a precursor to the long and hitherto elusive search for nuclear fusion, will provide the way forward is one speculative possibility, though with prospects recently damaged by the finding that 96 kg of thorium appear to have disappeared in the USA [40].

12. A need for more fundamental change? Ted Trainer (who contributed the final paper in the January, 2014, Special Issue of “Energy Policy” under the heading “Some Inconvenient Theses”) has argued that renewable energy cannot sustain a consumer society built upon the ever greater acquisition of consumer goods and services that “modern” societies claim to require. The costs are simply too great [41]. Instead, he argues that there is no alternative (TINA) than to shift to The Simpler Way (TSW) of living [42]. Ted believes that the practical strategy to achieve this is local co-operative development – ideally through gardens and workshops, especially in towns and cities [42, p. 302 ff.]. Others, considering that there are limits to the problem-solving capacity of human beings, sceptical of the belief in technological optimism for finding a route out of the challenges increasingly facing human society in the 21st Century, accept Garrett Hardin’s work on “the tragedy of the Commons” and have a profoundly pessimistic outlook [43]. For example, although Smith and Positano recognise there may be benefits to be derived from the Transitional Towns Movement, they believe all such movements require the existence of socially co-operative communities, and they consider these do not exist because of the dictates of consumer society and the increasing diversity of urban populations [43, p. 98]. They conclude by stating that “the iceberg of ecological scarcity lies ahead and the crash of our world . . . now is inevitable. A new, savage Dark Age is coming.” [43, p. 134] Given that the majority of the world’s population is already urbanised, and this trend is expected to continue to the point that around 80% of the world’s population is urbanised before 2100, it is difficult to believe that large-scale co-operative endeavours to meet basic needs will spring up on a large scale in urban communities. For many rural dwellers it seems obvious that there is a Growing

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Disconnect between the city and the countryside, and increasing impositions by urban communities on rural ones in the areas of food, water and energy matters. This brings us back to “The Limits of Growth” and the earlier history of declining marginal returns on energy investment. It is not even that one can place faith in international institutions to make significant contributions in this field. The eight Millennium Goals produced by the UN, which ran to 32 paragraphs over nine pages, failed to mention the word energy once. The Rio Declaration itself subsumed energy matters under the heading protection of the atmosphere. Rio + 20 did little better, and although there have been spasmodic efforts to promote access to modern energy services little has been achieved via the UN system. The diversity of national governments’ interests and policies offer no more encouragement, with even those which claim to be addressing the key issues – energy, food, water availability – engaged in activities having unintended consequences [44].

13. The need for re-thinking So in conclusion we return to the question posed in the title of this paper: how much of this can be expressed through mathematics, through the equations and theories expounded so frequently by standard economists, and by modelling so many variables requiring imagination and careful thought? What has been written here is quite simple and, hopefully, expressed in simple English. How much of it can be successfully modelled? How many variables are there? Can the attempt to model the totality of future global energy prospects be done in such a way as to avoid hindering imaginative reflection on future possibilities? The values of models would appear to be two-fold: to examine a limited field of mainly physical properties – such as the availability of a seemingly fixed volume of energy resources against alternative future demand possibilities; and to test the logic of particular aspects of forward projections, including those covered in alternative scenarios. Both properties have potential benefits. But the second, where it shows there is an infeasibility or lack of adequate logic in a scenario’s proposition, does not then mean that the model has provided, or can provide, the correct answer. As Nicholas Georgescu-Roegen pointed out, the most obvious merit of an anthropomorphic model is to bring to light important errors in the works of literary economists who reasoned dialectically. It is an expedient way of detecting errors in some mental operations. But if the model reveals no error it does not mean that the dialectical argument or the mathematical calculation is wholly correct [28, p. 337]. Already, along the way, sceptics have been quoted – quite a number of them highly numerate people who have not hesitated (much at least) to engage in modelling. It will be clear by now that many experienced people do not think much of the modellers claim that if we have a thought it is a mental model. For many, a model is a set of equations wrapped up in mathematical jargon, subsuming a mass of variables, which results in something rarely comprehensible or practical on close examination. In his book “Analytical Economics” Nicholas Georgescu-Roegen referred approvingly to Erwin Schrodinger’s “What is Life” (1955), which expressed the thought that “the difficulty of analysing the process of life does not reside in the complication of mathematics, but in the fact that the process is too complicated for mathematics.” [26, p. 415] Tony Lawson is by no means alone in having concluded that academic economics is not in a healthy state, is usually unable to forecast or explain any actual event or situation, and indeed is unlikely ever to do so [45].

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We are, in short, in the realm of what the late George Shackle termed “the unknowable”, where we are hindered by “unforeknowledge”. Most modellers appear to be uninterested in the sorts of historical background and fundamental constraints which have been touched upon in this paper. There are approaches and techniques which may help to explain and prepare for some of the uncertainties which lie ahead, particularly the multiple scenario approach which George Shackle seized upon in the closing years of his life. Shackle wrote about economics and uncertainty over a long period – from 1939 to 1990 – and for much of that time concluded that a lack of knowledge about the future meant it was impossible to get around the pitfalls created by uncertainty. His contributions to economic thought have been well covered in a book of essays published in his memory, but the links to scenario analysis all too briefly [46]. In particular, although reference is made in this book to contributions by Brian Loasby and this writer [46, pp. 26, 311], there is no reference to the important chapter that George wrote: “To Cope with Time”, which appeared in a book published in 1984 [47]. There he discussed Shell’s multiple scenario approach, which he concluded came very close to his own concept of “a skein of imagined sequels deemed possible” and by adopting the notion of possibility rather than probability (except in a purely subjective sense) matched it completely. His turn of phrase is often interesting, as in the danger “of (necessarily subjective) assigning probabilities to supposable aspects of history-to-come. If such a development is seen as both possible and important (if it can happen and make a great difference if it did) then it ought to figure in one of the scenarios.” He was unstinting in his thanks to Shell for its “incisive audacity of thought and policy” [47, pp. 78,79]. Brian Loasby followed with a short contribution on scenarios and decision-making [47, pp. 80–83]. The two contributions, by Loasby and the present writer are in [48]. Hitherto unpublished correspondence between George Shackle and this writer on his reactions to Shell’s scenarios work have recently been published. [49] Brian Loasby did not gloss over the challenges of getting commitment to the multiple scenario approach, nor of the risk that poorly assessed scenarios having created an illusion of reliability fail to anticipate discontinuities. Shell’s scenario work has not been free of the former, as Angela Wilkinson and Roland Kupers’ recently published history of Shell’s scenario work: “The Essence of Scenarios” indicates, but the process has also encouraged curiosity and openness [50]. They have raised the important question: “It is not clear at this point, whether or how such scenarios would address an ‘elephant in the room’ kind of question like that raised by the 2008 global financial crisis, such as: Has the Anglo-Saxon model of capitalism reached its sell-by date? What comes after the economic myth?” [50, p. 73] It should be clear from what has been written earlier, given past history and the range of future possibilities, that meaningful scenarios can be developed to cover a reasonable range of future possibilities – a range which many people may consider very wide and include some very challenging and pessimistic possibilities. Forty years ago Shell’s scenario team developed the World of Internal Contradictions scenario, which in its essence has stood the test of time well. Shell’s medium-term scenario work effectively anticipated the 1973 and 1979 “oil crises”. Shell’s latest “New Lens” scenarios – “Mountains” and “Oceans”, which were discussed by Jeremy Bentham, Head of Shell’s Scenarios Team, in the January Special Issue of “Energy Policy”, are powerful and thoughtprovoking [51]. Where scenarios may fail is in exploring vulnerabilities to the extent policymakers, bureaucrats, and decision-makers would like, if they care to bend their minds to such issues. Here there is room

for testing ideas and consequences over a carefully declared area of specific issues relating to energy policy-making. This is not a suggestion for global models seeking to encompass every possible factor which might be relevant to energy prospects (covering social, economic, political, institutional, and environmental aspects) – one such exercise 40 years ago had some 3200 linear equations and its first run took over 19 h 50 min of central processing unit time. The Chief Economist of the organisation concerned had refused to participate even then on the ground of its impracticality and cost. Processing speeds have greatly speeded up over recent years, but the impossibility of finalising a truly meaningful task of such a scale remains, I believe, beyond us [52]. More circumscribed modelling activity, when in the hands of those who can do the mathematics, are sufficiently conversant with the relevant history and particular circumstances of – say – an industry, and have practical experience which gives some confidence in their ability to assess the current situation and prospects, may be of use. In the case of Shell this is well demonstrated in its recent modelling work, initially for its “Scramble” and “Blueprints” scenarios [53], and then for its most recent and particularly fascinating “New Lens Scenarios” (“Mountains” and “Oceans”) [54]. Martin Haigh has outlined the first model (WEM v1) in “Shell’s World Energy Model: A model developed for Shell Energy Scenarios to 2050” [55]. This model has been re-built (WEM v2) for the “New Lens Scenarios”. It is described as a comprehensive model of the world’s supply and demand for energy at a global level, integrating economic evidence on aggregate demand for energy and the choices influencing the energy mix. The possible availability, access and speed of development of different resources and technologies are also covered. Its purpose is to assess how different drivers changing over time could affect a transition to a substantially different energy system over the next five decades. The model was “integral to the development of the scenarios “Scramble” and “Blueprints”, and provided the detailed quantification underlying them.” It is relevant to note for the purposes of the present paper, however, that the model’s analysis was limited “to the energy system itself”, there was no attempt made “to model explicitly wider interactions with the economy, nor major feedback into changes in society, politics or ecosystems.” There were also around 40 inputs left to users to quantify – hopefully consistent with the scenario story being developed. Thus the modelling work carried out was used to underpin many aspects of the energy system, globally and for the top 70 countries in energy demand terms, and would seem to have served a useful purpose in helping to underpin those aspects of the scenarios’ development. But this is only part of the work required in developing scenarios – where imagination, past history, and a literary approach have profound importance. Vlasios Voudouris and colleagues who contributed the paper on “Exploring the production of natural gas through the lenses of the ACEGES model” have pointed a way [56]. This agent-based Computational Economics of the Global Energy System (ACEGES) modelling approach can also help with aspects of general scenario work and shed light on more specific issues. It recognises that the process of generating scenarios is primarily a “non-mechanistic mental process” but the model can help the exploration of plausible future developments by means of computational experiments in an interactive way. The emphasis is on historical observations, ‘forces in the pipeline’, and personal experience. It is believed this contribution by Vlasios and his colleagues is the first time the agent-based modelling framework has been used “to explore forward-looking scenarios of natural gas production.” [56, p. 125] This is not far away from the “mini-models” which Aart Beijdorff introduced into Shell’s scenario work from the mid-1970s.

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14. Conclusions From its outset this paper has expressed the need to re-think the standard approaches to energy research/analysis and appraisals of energy policy given the challenges for the 21st Century. Fundamental questions have been raised about the realism of much economic theory, standard modelling approaches, and the excessive use of mathematics in approaching energy research and policy issues. Instead we need to consider practicalities against a background of what we can usefully draw upon in history, and down-to-earth assessments of what forces are already in the pipeline and how they seem likely to impact upon our futures. Such concerns are not confined to energy research and policy issues. They are of much wider relevance. Richard Bronk in “The Romantic Economist” has challenged: “the research practices and assumptions used by most economists”; the importance of “Romanticism” in the literary tradition; and the limitations of economists’ modelling [57]. This paper, while focussed on energy matters, fits well alongside his work and thinking – including, most unusually in this day and age, the thinking of George Shackle. It ends, as does Richard Bronk’s book, by stressing that “in the language of Romanticism, all economic models – indeed all paradigms – are fragments in the search for a unified understanding.” (p. 292) He also warns that the models we use structure and distort our vision, and divert our attention away from complicating factors. It was encouraging to read in the Technical Summary of the Working Group II Fifth Assessment Report: “Increasing efforts to mitigate and adapt to climate change imply an increasing complexity of interactions, particularly at the intersections among water, energy, land use, and biodiversity, but tools to understand and manage these interactions remain limited (very high confidence)” – italics in the original [34, supra, p. 33]. But no sooner had this report been issued than the following newspaper headline appeared: “Forecasters crack formula to predict long-range weather.” [58] When will we ever learn?

References [1] For example: Ted Trainer: “Towards a Sustainable Economy: The need for fundamental change”, 1996. Sydney:Envirobook; “The Transition to a Sustainable and Just World”, 2010. Sydney:Envirobook; “Renewable Energy Cannot Sustain a Consumer Society”, 2007. Dordrecht: Springer. Charles A. S. Hall & Kent A. Klitgaard: “Energy and the Wealth of Nations: Understanding the Biophysical Economy”, 2012. New York: Springer. [2] Shackle GLS. A scheme of economic theory. Cambridge: Cambridge University Press; 1965. [3] Interview with, Ebeling R. Austrian economics newsletter, No. 4, Spring; 1983. [4] Sovacool Benjamin. What are we doing here? Analyzing fifteen years of energy scholarship and proposing a social science research agenda. Energy Res Soc Sci 2014;1:1–29. [5] (a) Tainter JA. The collapse of complex societies. Cambridge: Cambridge University Press; 1988. p. 95; (b) Yoffee N, Cowgill GL, editors. The collapse of ancient states and civilizations. Tucson: University of Arizona Press; 1988. [6] Debeir, Jean-Claude, Jean-Paul Deleage, and Daniel Hemery: “In the Servitude of Power: Energy and Civilization through The Ages”, 1986 (English translation published 1991. London: published by Zed Books), pps. xiii-xiv. The recently published: “Energy, Work and Finance”, March, 2014. Sturminster Newton (Dorset): The Corner House, also suffers from too heavy an ideological overburden in the writer’s view. [7] Odum HT. Energy, ecology, and economics. Ambio 1973;2(6):220–7. [8] Piketty M. Capital in the twenty-first century. Cambridge: Harvard University Press; 2014. [9] (a) Reinhart CM, Rogoff KS. This time is different: eight centuries of financial folly. Princeton: Princeton University Press; 2009; (b) Graeber David. Debt: the first 5,000 years. New York: Melville House Publishing; 2011. [10] Butti Ken, John Perlin. A golden thread: 2500 years of solar architecture and technology. New York: Van Nostrand Reinhold; 1980. p. 100–11. [11] Dartnell Lewis. The knowledge: how to rebuild our world from scratch. London: Bodley Head; 2014. p. 203.

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[12] A more recent summary is in, Jefferson M. Climate change: how much do we really know? London Metropolitan Business School Working Paper No. 9: Centre for International Business & Sustainability; 2010, March. [13] Rackham Oliver, Jennifer Moody. The making of the Cretan landscape. Manchester: Manchester University Press; 1996. p. 122. [14] Grove AT, Oliver Rackham:. The nature of Mediterranean Europe: an ecological history. New Haven: Yale University Press; 2001. p. 166. [15] (a) Cline EH. 177 BC: the year civilization collapsed. Princeton: Princeton University Press; 2014; (b) Abulafia David. The great sea: a human history of the Mediterranean. London: Allen Lane; 2011; (c) Paine L. The sea and civilization: a maritime history of the world. London: Atlantic Books. For support when in difficulty, Abulafia; 2014. p. 164. For support when in difficulty,; (d) Berthold, Richard M. Rhodes in the Hellenistic Age. Ithaca: Cornell University Press; 1984. p. 92–3. [16] Crutzen PJ, Christian S. Living in the Anthropocene: toward a new global ethos. [http://e360.yale.edu/content/print.msp?id=2363]. [17] For Bacon, see: Darwall, Rupert: “The Age of Global Warming: A History”, 2013. London: Quartet Books, p. 8. For Newcomen: Lovelock, James: “A Rough Ride to the Future, 2014. London: Allen Lane, p.4. For “since the 1800s” Steffen W, Jacques G, Paul C, John M. The Anthropocene: conceptual and historical perspectives. Philos Trans R Soc 2011;369:842–67. [18] Steffen W, et al. Global change and the earth system. The IGBP global change series. Berlin: Springer; 2004. [19] Bardi U. The limits to growth revisited. New York: Springer; 2011. p. 104. [20] Ayres R, Vlasios V. The economic growth enigma: capital, labour and useful energy? Energy Policy 2014;(January (64)):16–28. [21] Solow R. A contribution to the theory of economic growth. Quart J Econ February 1956;1(70):65–94. [22] Solow Robert M. Growth theory: an exposition. 2nd ed. Oxford: Oxford University Press; 2000. [23] Ayres RU, Ayres EH. Crossing the energy divide: moving from fossil fuel dependence to a clean-energy future. Upper Saddle River, New Jersey: Wharton School Publishing; 2010. [24] Robert Ayres has been writing in this field since the 1970s (for example: Ayres, Robert U.: “Uncertain Futures: Challenge for Decision-Makers”, 1979. New York: John Wiley). In Ayres, Robert U. and Benjamin Warr: “The Economic Growth Engine: How Energy and Work Drive Material Prosperity”, 2009. Cheltenham: IIASA/Edward Elgar, p. 296 there is discussion of the issues discussed in the text above. [25] (a) Cullen JM, Allwood JM. The efficient use of energy: tracing the global flow of energy from fuel to service. Energy Policy 2010;38:75–81; (b) Also in IIASA: “Global Energy Assessment: Toward a Sustainable Future”. Cambridge: Cambridge University Press (2012), p. 45 (Technical Summary) and p. 109 (Energy Primer). 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[48] (a) Loasby BF. The use of scenarios in business planning. In: Frowen Stephen F, editor. Unknowledge and choice in economics: proceedings of a conference in honour of G. L. S. Shackle. New York: St. Martin’s Press; 1990. p. 46–63; (b) Jefferson M. Economic uncertainty and business decision-making. In: Wiseman J, editor. Beyond positive economics? London: Macmillan; 1983. p. 122–59; (c) Loasby BJ. Uncertainty and imagination, illusion and order: Shackleian connections. Camb J Econ 2011;35:771–83. [49] Jefferson M. The passage of time: shackle, shell and scenarios. In: Earl PE, Bruce L, editors. “George Shackle”, great thinkers in economics series. Basingstoke: Palgrave; 2014. [50] Wilkinson Angela, Roland Kupers. The essence of scenarios: learning from the shell experience. Amsterdam: Amsterdam University Press; 2014 [see also my review (forthcoming in “Technological Forecasting & Social Change”, 2014)]. [51] Bentham, Jeremy. The scenario approach to possible futures for oil and natural gas. Energy Policy 2014;64:87–92. [52] Jefferson M. Shell scenarios: what really happened in the 1970s and what may be learned for current world perspectives. Technol Forecast Soc Change 2012;79:186–97. [53] Shell energy scenarios to 2050, 2008. Shell energy scenarios to 2050: signals and signposts: an era of violent transitions. Shell International B.V.; 2011. [54] New lens scenarios: a shift in perspective for a world in transition. Shell International B.V.; 2013. [55] Haigh, M. Shell’s World Energy Model: A model developed for Shell Energy Scenarios to 2050. Shell International B.V. [[email protected]]. [56] Voudouris Vlasios, et al. Exploring the production of natural gas through the lenses of the ACEGES model. Energy Policy 2014;64:124–33. [57] Bronk Richard. The romantic economist: imagination in economics. Cambridge: Cambridge University Press; 2009. [58] “The Times” of London, April 2; 2104, p. 1. Michael Jefferson is Affiliate Professor in Energy & Commodities, ESCP Europe Business School, and an Advisory Board Member of ESCP Europe’s Research Centre for Energy Management; a Visiting Professor at the University of Buckingham; recently an Editor of the journal “Energy Policy”, and now a member of the journal’s International Advisory Board. He was in Shell’s scenario team in the 1970s when he was the Royal Dutch/Shell Group’s Chief Economist; then Head of Planning in Shell’s European Organisation; a Director of Oil Supply and Trading in Scandinavia; and Head of Pricing in Shell International Petroleum’s Supply & Marketing Function. He later spent ten years as Deputy Secretary-General of the World Energy Council.