Building Limited Fossil Energy Supplies into the World Monetary System

in Peak Oil by

Abstract for
Uppsala, Sweden, May 23-25, 2002
Organized by Uppsala University and ASPO, the Association for the Study of Peak Oil

Building Limited Fossil Energy Supplies into the World Monetary System by Richard Douthwaite.

My paper will open by telling how the use of fossil energy started to change the way people lived when sea coal, collected on the beaches of Northumberland, began to be shipped to London to be burned to relieve a growing scarcity of fuelwood there caused by the expanding population. That seemingly harmless step initiated a chain of events which led to increased populations around the world, industrialization, urbanization and a massive increase in the complexity of life as measured regarding the number of different jobs people do or the range of artifacts they produced.

The paper will then look at how the economic system which emerged as a result of this increased fossil energy use will have to be modified to cope with a steadily declining fossil fuel output whether this decline is a result of restrictions imposed to slow climate change or because of resource depletion. Historically, there has been a very close link between the gross global product and fossil energy use and the current economic system needs to grow continually, consuming increasing amounts of energy, if it is not to collapse. This system will, therefore, find it tough to cope with lower levels of fossil fuel use unless renewable energy sources can not only make up for the decline in fossil fuel production but can also provide the additional energy an expanding economy requires. I will review several studies which suggest that renewables will be inadequate for this task.

The paper will argue that the reason the global economy has to expand each year is primarily due to its debt-based money system. If the economy does not expand, less borrowing is undertaken, the overall amount of debt falls, and the money supply shrinks, causing economic activity to fall and setting off a positive feedback loop which pushes the economy deeper and deeper into depression. I will suggest that a non-debt-based international money system based on carbon dioxide emissions rights would be the best way of ensuring that the global economy keeps within resource and environmental constraints while allowing individual countries and districts to continue to develop their local economies to the extent that they can do so using renewable sources of power. The paper will explain how such a system, by limiting world fossil energy demand, would prevent the oil and gas-producing countries from reaping massive profits from the growing scarcity. Instead, the financial proceeds of the competition in international markets to secure the dwindling supplies would be redistributed on an equitable basis throughout the world.

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