Ecocentric

Innovating Our Way to Energy Abundance—and Climate Change

A simply bet made nearly 25 years ago demonstrated the power of human ingenuity to overcome material scarcity. But that won't be enough to save us from global warming

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A coal plant in China's Anhui province. The country recently announced plans to cut back on coal use

In 1980, the biologist Paul Ehrlich and the economist Julian Simon made a simple wager. Ehrlich bet that price of five common metals would rise over the next decade. Simon bet the price would fall. The loser would pay the difference in a $1,000 bundle of the five metals.

As the Yale historian Paul Sabin describes in his new book The Bet: Paul Ehrlich, Julian Simon and Our Gamble Over Earth‘s Future, each man was essentially betting on his vision of the future. Ehrlich—a neo-Malthusian best known for his 1968 book The Population Bomb, which predicted that humanity would soon run out of food and resources—believed that rising prices for basic materials would show that the world was headed towards scarcity and catastrophe. The optimistic Simon—whose views might be described as “cornucopian”—thought that falling prices would demonstrate that human creativity was finding ways to make basic resources cheaper and more widely available.

Simon won the bet—prices of the metals dropped by about 50% between 1980 and 1990, even as the global population increased by 800 million. Simon won $576.07, and for a decade at least, human ingenuity triumphed over material scarcity.

Some of that might have been due to fortunate timing—Sabin notes that when economists ran simulations for every 10-year period between 1900 and 2008, they found that Ehrlich would have won 63% of the time. Yet it’s hard to avoid the conclusion that fears of resource scarcity, which have recurred throughout history, are often overblown. Here’s Sabin in Slate:

Gloomy forecasts for soaring resource costs reveal an all-too-common tendency to overlook how scarcity and abundance relate to each other. Scarcity, by leading to increased prices, spurs innovation and investment. Efforts to locate new resources and design cheaper methods yield new technologies. New periods of abundance occur, even overabundance or a glut. We see that abundance today in natural gas markets.

(MORE: America’s Oil Boom Won’t Make It Energy-Independent From Middle East Madness)

Another example: a new report that came out yesterday from the research and consulting firm Wood Mackenzie, which estimated that there are nearly 1.4 trillion—with a “t”—barrels of oil equivalent (boe) reserves in conventional but undeveloped oil and gas fields. That includes nearly 1.1 trillion boe of “technical reserves”—a term used for resources for which there are not yet development. (For comparison’s sake, the world uses about 33 billion barrels of a oil a year.) Over half of those discoveries are classified as “good technicals,” which means they should economic to recover economically recoverable under current price levels.

That much oil and gas would be worth approximately $760 billion alone. And it doesn’t count the new sources of oil and gas that have been unlocked by innovative technologies like hydrofracking and horizontal drilling, which have helped the U.S. produce more oil than it has since 1989. “This reemphasizes that there is still plenty of growth out there remaining,” says David Highton, principal analyst of Upstream Research at Wood Mackenzie.

That’s good for the global economy, which benefits from cheaper and more abundant energy. But it also shows that when prices rise—as they have for a number of commodities in recent years, most notably oil—it stimulates companies to find new ways to get at resources that, in cheaper days, wouldn’t have been worth the trouble. As technology for locating and exploiting resources improves, prices can even drop, which is exactly what has happened with natural gas in the U.S., thanks to fracking. “In the U.S., prices for natural gas peaked at around $13 per million cubic ft. in 2008,” says Jason Bordoff, the director of the Center for Global Energy Policy at Columbia University. “They’re now at $4 to $5, and we’ll have a fairly large supply of inexpensive gas for awhile.”

(MORE: Half of 2012 Wild Weather Linked to Climate Change)

So human ingenuity conquers the natural world? Not exactly. As Sabin told me, one lesson of the Simon-Ehrlich bet is that we should have a more “cautiously optimistic” attitude towards issues of resource scarcity. But that may not apply to the biggest environmental and economic challenge facing the world: climate change. The market-driven innovation that has multiplied supplies of oil and natural gas will also make it that much more difficult to quit carbon. (It’s true that as natural gas replaces coal, it has reduced carbon emissions, but gas is still a fossil fuel.) “The flip side of this is we generate more fossil fuels and climate change worsens,” says Sabin. “It puts us in the position of making choices about what resources we want to develop and what world we want to live in.”

That’s why I was cheered by a bit of news that came out of China yesterday. The Chinese government pledged to reduce overall coal use in an effort to fight crippling air pollution. It would stop approving new coal-fired plants in industrial centers like Beijing and Tianjin in northern China, as the Yangtze and Pearl River Deltas in eastern and southern China. The government said it would reduce coal use—which now accounts for 70% of the energy mix—to less than 65% by 2017, while retrofitting existing plants to cut pollution. “The key to preventing air pollution is to curb coal burning — China burns half of all the coal consumed in the world,” the Chinese environmentalist Ma Jun told the New York Times.

It’s true that China is making this move chiefly to reduce the brutally unhealthy levels of air pollution that cloak its cities—not to so much to reduce carbon emissions. But the point is still the same. Human ingenuity has made it likely that we’ll have more than enough oil, coal and natural gas to power the world—and to cook ourselves if we let it happen. We need to choose to save ourselves.

MORE: As Obama Visits Upstate New York, the Fracking Debate Takes Center Stage