By Diego Ponce de Leon Barido

A first lesson, taken strictly from ecological economics and its use of thermodynamic laws, is very telling about the history of resource exploitation in Latin America and the Caribbean. Energy quality and energy surpluses often determine the development of social and cultural patterns, and the unidirectional character of energy can dictate the economic and social arrangements through which wealth accumulation occurs in society.^1,2

Consider the unidirectional flow of water (and energy) downstream. Historically, bulky raw materials such as grains, ores, and timber were ‘produced in the hinterland and sent downstream to river mouth cities where those raw materials were combined to produce more valuable goods’.^1,2 For this process of ‘upgrading’ matter into highly ordered thermodynamic structures, economic production is established, adding productive value to the economic cycle at each stage of thermodynamic progress.^3-5 Great accumulations of wealth occurred in downstream cities, but very rarely did this wealth find its way back upstream. Silver from Potosi (Peru) and Guanajuato (Mexico), gold from Ouro Preto and Minas Gerais (Brazil), sugar cane from Cuba, coffee from Colombia, precious woods (and later sugar) from the Caribbean, and bananas and fruit from the entire Western Hemisphere were sent to the United States and Europe. Resource wealth flowed in one direction, fostered industrial growth in the north, and created a Latin American and Caribbean dependence for technology and goods produced in the industrial north.^6-8

More recently it is rare earth metals, oil, and drugs that flow downstream.

The City of Potosi and Cerro Rico, Bolivia. Image Source: Andrea Marston.

Nothing has changed since the 1800’s, 1900’s, or the last two decades. Today, Chinese businessmen and Mexican drug cartels trade cash for iron ore in Michoacan, Mexico’s most violent state, to fuel industrial growth and quench demand for steel in China and elsewhere.^9,10 Mexican politicians undergo ‘reforms’, and change the constitution, to re-introduce American oil companies into the energy sector where the energy return on investment is increasingly lower, but the prices – higher.

A recent article in the journal Science, highlighted that beyond the obvious impacts of drug related violence and crime, deforestation rates in the Central American Isthmus exploded at the beginning of 2006-07 – as Mexico began waging a violent, yet largely unsuccessful, war against the drug cartels.¹¹  It is true that throughout the Isthmus, forest loss has historically been a product of weak governance, conflicting property regimes, poverty, climate change, illegal logging, and infrastructure megaprojects and agribusiness expansion. Recent evidence, however, shows that the high growth rates of new ‘deforestation patches’ can be attributed to cocaine growth (> 5 hectares), as they overlap in both space and time with drug trafficking nodes. As cartels cut roads and landing strips for their operations, they intensify preexisting pressures on forests by weakening governance structures and narco-capitalizing other trafficking agents to pillage, often at the expense of indigenous small-land holders.

Amazing places and reserves such as the ‘Rio Platano Biosphere Reserve’ (Honduras), el Petén (Mexico), and Laguna del Tigre (Guatemala) have recently been recording annual forest losses as high as 5%.

A Drug Landing Strip in Honduras. Is it be possible that scientists at Oklahoma State University can analyze drug related deforestation using Moderate-resolution Imaging Spectroradiometer (MODIS) data, yet, governments cannot locate and capture drug king pins, their money, and operations?
Image Source: Science.¹¹ Text: Author.

This way of doing businesses has been forced upon us. A few people have decided, mainly the financial, political, and academic elites, that all wealth can be expressed using money; and that endless growth is indeed, not only desirable, but possible. Is exponential, infinite wealth creation really possible? Nobel Prize-winning Chemist Frederick Soddy (1921) would suggest otherwise – compound interest does not create wealth, but endless debt.^12,13 We live in a world dominated by the economics of debt, which is nothing but a mathematical construct, and like the U.S economy would suggest, debts need nothing but higher ceilings. Wealth, on the other hand, has an irreducible physical dimension, it grows and rots. It has limits.

For businessmen, politicians, and drug cartels, the dollar cost of extracting an energy carrier, a mineral, or a drug from the crust and face of the earth can be useful. However, many would argue that the real cost can be given only in matter of energy units – and this exercise is hardly ever done.^14,15 The energy embedded in the extraction, purification, removal, transportation, construction, decommissioning, and operations of an energy carrier (plus many other matter types) minus the total useful energy delivered is the energy value of the carrier. ^14,15 Consider the polluted water of a shale gas site (for example, Oklahoma), the radioactive pollution left from uranium mines (for example, Navajo lands), transportation and energy generation related emissions in cities (for example, China), and deforestation in a ravaged forest (for example, Honduras). The only thing accruing here is physical debt – not wealth. This debt is being paid by many of us through pollution, crime, and inequality, while the creditors are syphoning the wealth away.

Protests abound in the world today.

Will it, how will it, and when will it end?

Obama, Peña Nieto, and Stephen Harper in Mexico at a recent NAFTA ‘Free Trade’ talk in Toluca.

Nothing useful came out of the meeting. Earlier, when in California, Obama golfed for hours with Big Tech Company CEOs while the state endured the most serious drought it has ever seen (golf courses can consume up to 3.8 Million liters of water/day). ¹⁶
Image Source: washingtonpost.com, Text: Author.

On a recent trip to Indonesia, U.S Secretary of State John Kerry announced to the world that Climate Change was the modern day equivalent of Weapons of Mass Destruction (WMDs). At home, however, he has yet to forbid the construction of the contentious Keystone XL project. American Style consumption levels, not Climate Change, are the WMDs. Climate Change is simply the mushroom cloud.
Images: Adbusters.org, Text and Image Composition: Author.

Sources

1. Cottrell, W.F. Energy and Society. McGraw-Hill. New York. 1955.

2. Cottrell, W.F. Technology, Man, and Progress. Merrill, Columbus, OH 1955.
3. Cleveland, Cutler J., Costanza, Robert, Hall, A.S, Charles et al. Energy and the U.S Economy: A Biophyscal Perspective. Science. 225 (4665); 1984.
4. Georgescu-Roegen, Nicholas. Energy and Economic Myths. Southern Economic Journal. 41 (3); 1975.

5. C Roberts. Energy and value. Energy Policy. 10 (3); 1982.
6. Galeano, Eduardo. Las Venas Abiertas de America Latina. Siglo XX1. Mexico City. First 1971.
7. Gunder Frank, Andre. Capitalism and Underdevelopment in Latin America, New York, 1967.
8. Furtado, Celso. La economia latinoamericana desde la Conquista iberica hasta la Revolucion Cubana, Santiago de Chile, 1969; Mexico, 1969.
9. CNN Report
10. Reuters Report: Chineseiron trade fuels port clash with Mexican drug cartel.
11. McSweeney, Kendra, Nielsen A. Erik, Taylor J. Matthew et al. Drug Policy as Conservation Policy: Narco-Deforestation. Science. Vol. 343 no. 6170 pp. 489-490.
12. Soddy, Frederick. Wealth, VirtualWealth and Debt The Solution of the Economic Paradox.
13. NY Times: Mr.Soddy’s Ecological Economy.
14. Manfred, Max-Neef, B. Smith, Philip. Economics Unmasked. Gree Books. Cambridge. 2011.
15. Lasn, Kalle (Editor). MEME Wars: The creative destruction of Neoclassical Economics. Adubsters. 2013.
16. Time: Obama Plays Water-Guzzling Desert Golf CoursesAmid California Drought.

Crosspost from dleonb.com.

The views expressed here belong solely to the author of this entry and are not representative of the position of the Energy and Resources Group, UC Berkeley.

By Ben Mandel

Syncrude Aurora tar sands mine in Fort McMurray, Alberta (source: Greenpeace/Jiri Rezac)

[Note: Original post on February 1, 2014.]

On Friday, the U.S. State Department released its Environmental Impact Statement (EIS) for the proposed Keystone XL pipeline. Its central finding—that the project would have little impact on climate change—was a disappointment to many in the environmental community. After all, the project would bring dirty oil from the Alberta tar sands (see above) to the Gulf Coast of the United States and clear the way to an even more carbon-intensive energy future for the U.S. Back in June, President Obama pledged not to green-light the project unless it was found by the State Department not to “significantly exacerbate the problem of carbon pollution.” Some viewed Obama’s punting of the issue to Kerry as a good sign for pipeline opponents, while others viewed it as shrewd posturing. Now with the cat out of the bag, those who were suspicious of Obama’s stance are looking pretty smart.

But what gives? Isn’t it “bad” to facilitate demand for a dirtier commodity than what we currently use, much less the much cleaner non-fossil transportation fuels of the future? From one perspective, the ability to extract this oil is a marvel of modern technology—engineers wouldn’t have been able to even get at the stuff just a few years ago, before technology enabled its extraction from the thick tar sands. Seen differently, the need for advanced machinery to extract each barrel of crude adds significantly to its life-cycle carbon footprint. The EIS acknowledged the added greenhouse gas (GHG) burden of heavy tar sands crude relative to the lighter crude we generally refine in the U.S. today. In picture form, here’s what the difference looks like:

Incremental life-cycle emissions (middle stack) from comparing tar sands crude (rightmost stack) relative to the crude it would displace (leftmost stack) (source: U.S. Department of State)

In State’s words, here’s an idea of what these extra emissions amount to:

“The range of incremental GHG emissions [...] for crude oil that would be transported by the proposed Project is estimated to be 1.3 to 27.4 MMTCO2e annually. [...] This is equivalent to annual GHG emissions from combusting fuels in approximately 270,833 to 5,708,333 passenger vehicles, the CO2 emissions from combusting fuels used to provide the energy consumed by approximately 64,935 to 1,368,631 homes for 1 year, or the annual CO2 emissions of 0.4 to 7.8 coal fired power plants.”

Make no mistake about it—we’re talking about an especially polluting kind of oil here. State never could have credibly denied that fact. So State’s ultimate intimation that Keystone XL wouldn’t have a significant impact on climate (though the report is pretty careful to avoid making such a definitive statement outright) is therefore a question of what it’s been compared against.

In its analysis, the State Department assumes that if the Keystone XL petition is denied by the President, the tar sands oil—all 830,000 barrels per day of it—will simply find other ways of getting from point A (Alberta, though technically the tippy top of Montana) to point B (the Gulf Coast, though technically Nebraska or Oklahoma, where it can link up with existing pipes for the rest of the journey). In the pipeline’s absence, the report explores several “no-action alternatives” that involve some combination of rail and tanker transport of oil either directly to the Gulf Coast or to the existing pipe beginning in Oklahoma. The emissions from constructing the pipeline are dwarfed by the greater greenhouse gas releases from operation of any of the no-action alternatives, which require lots of fuel to transport the oil. By contrast, Keystone would require comparatively little fuel to operate. Looking at these alternatives, it’s easy to say that a pipeline makes the most climate sense.

But at the end of the day, as with most large-scale analyses, it’s all about assumptions. Embedded in the EIS analysis is the assumption that the Gulf Coast will get all of the oil the tar sands have to offer somehow. The market assessment deems it unlikely that the denial of Keystone’s petition would impede extraction efforts in Alberta. Even if this is true, how likely do we think it is that all 830,000 barrels per day make it to the Gulf Coast without the help of this pipeline? It’s difficult to assign a value here, admittedly, but State really ought to try. Because unless it’s a proven certainty that all the oil makes the trip regardless, the emissions from the no-action alternatives should be scaled by this probability to give us an idea of the expected value of emissions. For what it’s worth, a likelihood below about 80% begins to tilt the scale in favor of alternatives.

Without an extensive and efficient pipeline with pretty low operating costs, it would become pretty costly to get one’s hands on tar sands oil. And the U.S. isn’t short on other options, at least not yet. Why would we still insist on getting our oil fix from Alberta in such a scenario? If the tar sands oil flows without having Keystone as its outlet, I’m guessing it goes to other countries. To me that means that less than 80% of full-scale tar sands production would end up in Gulf Coast refineries without Keystone.

Secretary of State John Kerry now faces the decision of how to interpret this report, and ultimately how to act on it. He could take his chances that tar sands oil production would falter without the pipeline to prop it up, and opt to reject the petition. But now that the EIS has materialized, Kerry can’t take an overly activist stance that would undermine his own department’s credibility. More likely is that Kerry is bound by State’s assumptions regarding ugly no-action alternatives, and approves the petition. And maybe that won’t be the end of the world; some have suggested that Keystone opposition is a costly way to spend scarce political will for the environmental cause anyway.

I’m guessing we’ll get the chance to find out.

Crosspost from The Big Word Blog.


The views expressed here belong solely to the author of this entry and are not representative of the position of the Energy and Resources Group, UC Berkeley.