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Biophysical Economics:
The Science Behind Economic Growth
By: Jim MacInnes, P.E.
Re-Imagining our Economic System
MSU CCED Institute March 26, 2013
WHAT IS REAL ECONOMIC WEALTH?
•
Money can be printed, and created with the stroke of a pen… or
with a keystroke.
•
Money and even gold has little or no intrinsic value.
So, while money is a ‘marker’ for economic wealth, it is not real
economic wealth.
In 1926 Nobel Laureate, Fredrick Soddy, wrote the book Wealth,
Virtual Wealth and Debt, and argued that true economic wealth is:
1. the ability to control the flows of useful energy
2. embodied energy
•
The Biophysical Economy – Reprinted with
the permission of SUNY ESF Systems
Ecologist, Charles A. S. Hall
The Biophysical Economy – Reprinted with the permission of SUNY ESF
Systems Ecologist, Charles A. S. Hall
Energy Conservation and
the First Law of Thermodynamics
•
Thermodynamics is a natural law that deals with the relationship
between heat, work and energy
•
The First Law of Thermodynamics is about conservation of energy.
Energy can be changed from one form to another, however, it
cannot be created or destroyed.
•
Total Energy of a System = Work done + Waste Heat
•
In its simplest form:
•
Work = Force x Distance
If we want to make something, or transport people and/or freight
we must consume useful (concentrated) energy.
Entropy and the
Second Law of Thermodynamics
•
Not only must we consume energy to make things, but we
must also consume energy to keep them in good repair.
•
The second law of thermodynamics is often called Entropy,
and is an important law of nature that says everything
changes over time to a higher state of disorder.
•
Absent energy inputs, nature’s equilibrium is disorder.
•
In business, Entropy is accounted for as “depreciation
expense” and we must invest “CAPEX” to keep things
maintained.
•
Global Warming represents the entropy bill for our fossil fuel
powered industrial revolution.
“Weather-related
Events on the rise”
Reprinted from Traverse
City Record Eagle
November 18, 2012
Disasters with at least
$1 billion in damage for
the period 1980 – 2011
Energy return on
energy invested (EROI)
Energy returned to society (100 barrels of oil)
EROI =
-------------------------------------------------------------------------
Energy required to
get that Energy
(1 barrel of oil)
= 100
EROI and Net Energy diagram for building, operating and
decommissioning a power-generating project.
Reprinted with the permission of Ida Kubiszewski and Cutler J. Cleveland, The Encyclopedia of
Earth.
EROI of various electric power generators.
Reprinted with the permission of Ida Kubiszewski and
Cutler J. Cleveland, The Encyclopedia of Earth.
- EROI for other energy sources: oil and gas at 11–18 to 1; cornbased ethanol at 0.8 –1.6 to 1; and, biodiesel at 1-3 to 1.
Reprinted with the permission of Charles A. S. Hall
Reprinted with the permission of Charles A. S. Hall
Reprinted with the permission of David Murphy and Charles A. S. Hall
Energy consumption used to do “Work” causes
economic growth, not the converse
Energy is a limiting factor for economic growth.
“Best First” principle (low hanging fruit) and
history of diminishing EROI
Where could we get more energy to
power economic growth?

Increase the energy available from fossil fuels,
nuclear, wind, solar, etc.

Conserve energy by not doing something and
redirect the energy savings to other more
productive uses.

Invest in Energy Efficiency where we can do the
same job using less which releases energy for
other more productive uses
Emerging, non-OECD, economies can afford to pay more
for an incremental barrel of oil (wealth) because it offers
more incremental benefit (utility)
VW’s aero car for China:
Gas tank: 1.7 gallons
Speed: 75 mph
Mileage: 258 mpg
Selling price: US $600
Rate of Change in Global
Petroleum production
Annual Rate of Change (all petroleum liquids)
60%
50%
40%
30%
20%
10%
0%
1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
-10%
-20%
-30%
Rate of Change (all liquids)
Linear (Rate of Change (all liquids))
The Evidence:
Declining Growth Rate of US GDP
20%
Annual percent change
15%
10%
5%
-10%
-15%
Gross domestic product
Linear (Gross domestic product)
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
1945
1940
-5%
1935
0%
The Energy Trap
•The market will demand a new energy infrastructure based on non-fossil fuel
solutions.
•The construction of that new infrastructure requires not just money,
but…energy. And that’s the very commodity in short supply.
•Are we willing, in the short term, to sacrifice additional FF energy
consumption to build a new renewable energy infrastructure – effectively
steepening the decline – in order to invest in a long-term energy plan?
Reprinted with permission of UCSD Physics Prof. Tom Murphy