In the 2010 Dodgen Lecture at the annual meeting of the Mississippi Academy of Sciences, and in the Q&A that followed, I described four principles that must be observed in order to successfully complete the transition away from a fossil-fuel based society.
1. The Right To Clean, Affordable Energy: This is a fundamental component of “Freedom from Want”. Inherent in UN’s proposed Right to Food is the right to affordable food — for otherwise we aim only for a return the the failed Roman model of “bread and circuses” handed out to a hungry population.
Inherent in the right to affordable food is a right to clean, affordable energy to convert biomass into food, and for other societal purposes. Cassava is described as a staple food of Africa, but without energy it is not food — eaten raw, it is poisonous.
Nor is raw, unprocessed wheat, sugar beet, corn or rice a food. Without energy, we cannot consume our complex assortment of foods. Without clean, affordable energy, we cannot make a sustainable model for food or any other basic societal need.
2. Energy Must Be Consumed Within The Radius That It Is Produced: Long-distance transportation systems for energy reduce sustainability imperatives to price mechanisms which cannot account for the hidden social an environmental costs of energy.
A “tyranny of distance” prevents the transparency which allows the market to drive a sustainable energy production and distribution system. We see only the price at the pump, when we produce energy and we will never see the environmental or social cost.
NIMBY – not in my backyard – is a wonderful principle when it means that unsustainable projects will not be built. Too often, though, the principle is essentially reduced to “Not in My Backyard, But OK in Yours.”
Communities that import energy priced by the marginal cost of production, rather than the full cost of sustaining the channel (for example, sustaining Middle Eastern Oil through the power of the U.S. Fifth Fleet, are the architects of an unsustainable world in which the inequities of income and energy distribution will be resolved not through markets but through politics and ultimately war.
3. An Energy Finance System Must Permit Individuals To Participate: The system must permit participation through investment, in de-risked large-scale pools of renewable energy assets.
Individual investors cannot bear the risk and lack the due diligence skills to participate directly in renewable energy investment. Private companies lack the capital structure to sufficiently de-risk asset pools of clean energy projects without government intervention to foster the creation of multinational leviathans that will have the power to distort energy markets and public policy.
If the individual family only participates in the transition away from fossil-fuel based society through higher energy prices and through investments in fossil-fuel based companies, the transition cannot succeed.
Through the creation of an international financing system which purchases the debt of completed projects, we foster pools of asset-backed securities in which individuals can participate in the transition not only as consumers, but as owners with an upside.
4. Energy Must Be Recognized As A Special Class Of Investment: It must be a special class of investment for modeling indirect job creation and economic impact of project development.
“It is obvious that energy projects keep more money circulating within a community than other projects that continually “leak” dollars to nefarious regimes through direct and indirect energy costs.
Yet energy projects are modeled on essentially the same platform, with the same multipliers, as non-energy projects.
If this is changed, we will see that locally produced energy is not only environmentally and socially sustainable — projects that violate the social compact will simply be unlikely to be built — it is economically sustainable as well, through the indirect impacts of reinvestment of dollars in the community.
For more information, check out www.biofuelsdigest.com.