The Net Energy Cliff

There’s a lot of talk about the US fiscal cliff at the moment. This is a pretty short-sighted problem in my view – what everyone should really be concerned about is the net energy cliff.

A report came out today called “On the Road to Zero Growth” by Jeremy Grantham. It has some pretty thought-provoking calculations, like the following for instance;

The price rise might even accelerate as cheap resources diminish. If resources increase their costs at 9% a year, the U.S. will reach a point where all of the growth generated by the economy is used up in simply obtaining enough resources to run the system. It would take just 11 years before the economic system would be in reverse! If, on the other hand, our resource productivity increases, or demand slows, cost increases may decelerate to 5% a year, giving us 31 years to get our act together. Of course, with extraordinary, innovative breakthroughs we might do even better, but we certainly shouldn’t count on that. (Bear in mind that we don’t even know precisely why the prices started to rise so sharply in 2000.) Excessive optimism and doing little could be extremely dangerous. 1 All references to GDP growth are expressed in real terms.

For those unaware – the problem is energy is that we are living at a point in time when we are having to use exponentially more energy to get the produce the same amount of energy as before.

Jg Letterall 11-12

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