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Chapter 4. The Shape of the Eco-Economy: History’s Greatest Investment Opportunity
Restructuring the global economy so that economic progress can be sustained represents the greatest investment opportunity in history. As noted in Chapter 1, the conceptual shift is comparable to that of the Copernican Revolution in the sixteenth century. In scale, the Environmental Revolution is comparable to the Agricultural and Industrial Revolutions that preceded it.
The Agricultural Revolution involved restructuring the food economy, shifting from a nomadic life-style based on hunting and gathering to a settled life-style based on tilling the soil. Although agriculture started as a supplement to hunting and gathering, it eventually replaced it almost entirely. The Agricultural Revolution entailed clearing one tenth of the earth's land surface of either grass or trees so it could be plowed. Unlike the hunter-gatherer culture that had little effect on the earth, this new farming culture literally transformed the surface of the earth.17
The Industrial Revolution has been under way for two centuries, although in some countries it is still in its early stages. At its foundation was a shift in sources of energy from wood to fossil fuels, a shift that set the stage for a massive expansion in economic activity. Indeed, its distinguishing feature is the harnessing of vast amounts of fossil energy for economic purposes. While the Agricultural Revolution transformed the earth's surface, the Industrial Revolution is transforming the earth's atmosphere.
The additional productivity that the Industrial Revolution made possible unleashed enormous creative energies. It also gave birth to new life-styles and to the most environmentally destructive era in human history, setting the world firmly on a course of eventual economic decline.
The Environmental Revolution resembles the Industrial Revolution in that each is dependent on the shift to a new energy source. And like both earlier revolutions, the Environmental Revolution will affect the entire world.
There are differences in scale, timing, and origin among the three revolutions. Unlike the other two, the Environmental Revolution must be compressed into a matter of decades. The other revolutions were driven by new discoveries, by advances in technology, whereas this revolution is being driven more by our instinct for survival.
As noted earlier, there has not been an investment situation like this before. The amount that the world spends now each year on oil, the leading source of energy, provides some insight into how much it could spend on energy in the eco-economy. In 2000, the world used nearly 28 billion barrels of oil, some 76 million barrels per day. At $27 a barrel, this comes to $756 billion per year. How many wind turbines will it take to produce this much energy? How many solar rooftops? How many geothermal wells?18
One big difference between the investments in fossil fuels and those in wind power, solar cells, and geothermal energy is that the latter will supply energy in perpetuity. These "wells" will not run dry. If the money spent on oil in one year were invested in wind turbines, the electricity generated would be enough to meet one fifth of the world's needs.19
Investments in the infrastructure for the new energy economy, which would eventually have to be made as fossil fuels are depleted, will obviously be huge. These include the transmission lines that connect wind farms with electricity consumers, and the pipelines that link hydrogen supply sources with end-users. To a substantial degree, the infrastructure for the existing energy economy—the transmission lines for electricity and the pipelines for natural gas—can be used in the new energy economy as well. The local pipeline distribution network in various cities for natural gas can easily be converted to hydrogen.
For developing countries, the new energy sources promise to reduce dependence on imported oil, freeing up capital for investment in domestic energy sources. Although few countries have their own oil fields, all have wind and solar energy. In terms of economic expansion and job generation, these new energy technologies are a godsend.
Investments in energy efficiency are also likely to grow rapidly simply because they are so profitable. In virtually all countries, industrial and developing, saved energy is the cheapest source of new energy. Replacing inefficient incandescent light bulbs with highly efficient compact fluorescent lamps offers a rate of return that stock markets are unlikely to match.
There are also abundant investment opportunities in the food economy. It is likely that the world demand for seafood, for example, will increase at least by half over the next 50 years, and perhaps much more. If so, fish farming output—now 31 million tons a year—will roughly need to triple, as will investments in fish farming. Although aquaculture's growth is likely to slow from the 11 percent a year of the last decade, it is nonetheless likely to be robust, presenting a promising opportunity for future investment.20
A similar situation exists for tree plantations. At present, tree plantations cover some 113 million hectares. An expansion of these by at least half, along with a continuing rise in productivity, is likely to be needed both to satisfy future demand and to eliminate one of the pressures that are shrinking forests. This, too, presents a huge opportunity for investment.21
No sector of the global economy will be untouched by the Environmental Revolution. In this new economy, some companies will be winners and some will be losers. Those who anticipate the emerging eco-economy and plan for it will be the winners. Those who cling to the past risk becoming part of it.
17. Total land area is 14.8 billion hectares, according to Charles R. Coble et al., Earth Science (Englewood Cliffs, NJ: Prentice-Hall, 1987), p. 102; arable land is 1.4 billion hectares according to FAO, op. cit. note 2.
18. World oil consumption and price per barrel for 2000 from U.S. Department of Energy (DOE), Energy Information Administration, www.eia.doe.gov .
19. Based on $1 million/megawatt installed cost of wind turbines and 40-percent capacity factor, and on 12.8 trillion kilowatt-hours world electricity consumption from DOE, op. cit. note 18.
20. FAO, op. cit. note 14.
21. FAO, Forest Resources Assessment (FRA) 2000, www.fao.org/forestry/fo/fra/index.jsp, updated 10 April 2001.
Copyright © 2001 Earth Policy Institute