What the hell is it with these people trying to deploy economic arguments? The IEA now says that renewables are cheaper than fossil fuels therefore the world will move to them. At which point we get people saying that this doesn’t work. For example, this from a social geographer – social geography being presumably that qualified form of maps that doesn’t deal with maps:
Brett Christophers is professor in the department of social and economic geography at Uppsala University in Sweden
Just the person we want to be explaining economic ideas to us:
But groundbreaking recent research by the political economist Andreas Malm has refuted this orthodoxy. Steam was not cheaper. Industrial capital switched to fossil fuels in the early 19th century not on account of their cost, but because they could make production more profitable. A steam engine, unlike a waterwheel, could be put up more or less anywhere, such as where cheap labour was most abundant. The profit accrued from fossil fuels, not their cost, was the key.
But that is the statement that steam was cheaper than water. The total costs of production are the total costs of production. A higher profit given market prices for the output means that production costs are lower. This is what the statement is.
Then again Andreas Malm is what we’d call a complete and total idiot. I have actually read his latest tome. In which he thinks that a) Lenin’s War Communism worked and b) we should do it again over climate change.
“Since the 1970, critical epidemiology has agreed with critical vulnerability theory on emphasising the social over the natural: diseases and disaster as produced through processes internal to society.
Although this one might be of more interest to the economically minded:
States in advanced capitalist countries could claim to have acted on the dangers of pandemics the moment they made the following announcement: today, we are launching a comprehensive audit of all supply chains and import flows running into our country. With our amazing capacity for surveillance and data collection, we’ll shift from citizens to companies, open their books, conduct thorough input-output analyses (of the kind scientists already excel at) and ascertain just how much land from the tropics they appropriate. We shall then terminate such appropriation, by cutting off the chains that run into tropical forests and, insofar as any can be classified as “essential”, redirect them to other locations.
The man’s getting sweaty over GOSPLAN. Failing to understand why it couldn’t work. Partly because we’ve not got the calculating power other than that market, Partly because as Hayek pointed out we cannot gather the information. Or actually, entirely because of either objection, each is sufficient to kill the idea.
Back to Christopher:
To understand the economics of the energy transition, we should adopt a “profit-centric” perspective, rather than a cost-centric one. Crucially, all three companies agree that hydrocarbon production in areas such as oil remains significantly more profitable than renewable energy generation. Internal rates of return (IRRs) – the standard commercial measure of an investment’s profitability – are around 15% to 20% on hydrocarbons, or higher. Typical IRRs on renewables today are around 5% to 6%, although the majors think they can do better than existing renewables companies and lift returns to about 10%.
Well, yes. But the entire point the IEA is making is that those renewables costs are declining, in a manner that the fossil ones aren’t. Therefore the relative profitability will switch too, solving the problem for us.
The base problem here is an insistence that market solutions cannot possibly work. Everything requires the Lenin figure to force us into doing whatever. So, if a market solution is working a reason must be found to still allow the force. Not even justify it, but allow.
Come on now, think this through just a little bit. If renewables are cheaper than fossil – in that totality of costs as with steam – then in a market economy they will take over from fossils. For the profits from fossils will fall as consumers abandon that tech for the new, cheaper, one. The only reason this wouldn’t happen is if we don’t have a market economy.