Obama has now framed climate action and inaction in moral terms, as a betrayal of future generations. So it seemed like a good time to run this (slightly) updated repost, which explains why our inaction is indeed such a betrayal. That — and it’s my own daughter’s six birthday.

Fundamentally, homo “sapiens” sapiens has constructed the grandest of Ponzi schemes, whereby current generations have figured out how to live off the wealth of future generations. We are all in essence Bernie Madoffs (many wittingly, most not) or at least his most credulous clients.

NYT columnist Tom Friedman interviewed me for his column “The Inflection Is Near?” back in 2009:

“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.

“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate …’ Real wealth is something you can pass on in a way that others can enjoy.”

A few years ago I thought that aggressive action by governments around the world to push clean energy could spare the public dramatic lifestyle changes in the coming decades, but I have been convinced otherwise by

• the failure of U.S. leadership [thank you George W. Bush and the conservative movement stagnation and the Tea Party and the MSM and even Obama]
• the remarkable shift in our understanding of climate science in the past few years (see here)
• China’s decision to join the Ponzi scheme full throttle and emulate our rapaciousness (see here and here and here and here)
• a brilliant talk I heard.

The adults, in short, are not standing up. Sadly, most haven’t even taken the time to understand that they should.

And so every generation that comes after the Baby Boomers is poised to experience the dramatic changes in lifestyle that inevitably follow the collapse of any Ponzi scheme.

This global Ponzi scheme is not just a metaphor (see “The greatest thing by far is to be a master of metaphor”), but a central organizing narrative of how to think about the fix we have put ourselves in (see How Lincoln framed his picture-perfect Gettysburg Address, 4: Extended metaphor).

What exactly is a Ponzi scheme? Wikipedia (had) a good entry:

A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from profit. The term “Ponzi scheme” is used primarily in the United States , while other English-speaking countries do not distinguish colloquially between this scheme and pyramid schemes.

The Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The perpetuation of the high returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.

In our case, investors (i.e. current generations) are paying themselves (i.e. you and me) by taking the nonrenewable resources and livable climate from future generations. To perpetuate the high returns the rich countries in particular have been achieving in recent decades, we have been taking an ever greater fraction of nonrenewable energy resources (especially hydrocarbons) and natural capital (fresh water, arable land, forests, fisheries), and, the most important nonrenewable natural capital of all — a livable climate.

See also a new study “The Monetary Cost of the Non-Use of Renewable Energies,” which finds that “every day we delay substituting renewables for fossil fuels,” every day “fossil raw materials are consumed as one-time energy creates a future usage loss of between 8.8 and 9.3 billion US Dollars.” Oil and coal are essentially too valuable to burn even ignoring the cost of their climate-destroying emissions.

The system is destined to collapse because the earnings, if any, are less than the payments.

See, for instance (“Hadley Center warns of catastrophic 5-7°C warming by 2100 on current emissions path” and “Shocking World Bank Climate Report: ‘A 4°C [7°F] World Can, And Must, Be Avoided’ To Avert ‘Devastating’ Impacts“).

Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities.

Yes, well, the authorities (i.e. world leaders, opinion makers, the cognoscenti) haven’t been doing much interrupting over the past two to three decades since, unlike a typical Ponzi scheme, they are heavily invested in the scheme and addicted to the returns!

As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.

Well now I do think that the scheme has come to the attention of many of “the authorities,” at least to many leaders around the world and to progressive ones here at home. Conservative authorities simply have too much invested in the status quo (see here and here).

Knowingly entering a Ponzi scheme, even at the last round of the scheme, can be rational in the economic sense if a government will likely bail out those participating in the Ponzi scheme.

But Friedman quotes Glenn Prickett, senior vice president at Conservation International, explaining, “Mother Nature doesn’t do bailouts.”

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According to the latest research from Bloomberg New Energy Finance, electricity from wind power can now be supplied more cheaply in Australia than power from either coal or natural gas — and solar and other forms of renewable energy aren’t far behind.

Older coal-fired power plants from the 70s and 80s still compete at lower prices than renewables — but only because their construction costs have depreciated. For the deployment of any new power generation in Australia, renewables now appear to be the way to go.

Australia currently charges polluters $23 in Australian dollars per metric ton of carbon they emit, but the study concluded that wind power would still undercut fossil fuels even without that correction of the market’s failure to properly build in the costs of carbon pollution:

The study shows that electricity can be supplied from a new wind farm at a cost of [$80 per megawatt hour in Australian dollars], compared to [$143 per megawatt hour] from a new coal plant or [$116 per megawatt hour] from a new baseload gas plant, including the cost of emissions under the Gillard government’s carbon pricing scheme. However even without a carbon price (the most efficient way to reduce economy-wide emissions) wind energy is 14% cheaper than new coal and 18% cheaper than new gas.…

Bloomberg New Energy Finance’s research on Australia shows that since 2011, the cost of wind generation has fallen by 10% and the cost of solar photovoltaics by 29%. In contrast, the cost of energy from new fossil-fuelled plants is high and rising. New coal is made expensive by high financing costs. The study surveyed Australia’s four largest banks and found that lenders are unlikely to finance new coal without a substantial risk premium due to the reputational damage of emissions-intensive investments – if they are to finance coal at all.

Here’s a graphic of BNEF’s findings, courtesy of Renew Economy:

So the study expects both coal and natural gas to rise in cost over the next two decades. Among other things, coal power consumes more water than any other source of energy. That will drive up coal’s cost, as fresh water becomes scarcer due to the very climate change driven by coal power’s carbon emissions. And in America, at least, there’s evidence that the major proven natural gas reserves will peak out within the time frame of BNEF’s analysis, rendering the boom in that energy source decidedly temporary.

Meanwhile, while the costs of solar and other forms of renewables are currently lagging, they’re dropping fast:

BNEF’s analysts conclude that by 2020, large-scale solar PV will also be cheaper than coal and gas, when carbon prices are factored in. By 2030, dispatchable renewable generating technologies such as biomass and solar thermal could also be cost-competitive.

According to companies like Ratch Australia, the cost of deploying new solar photovoltaics is already down to between $120 and $150 per megawatt hour, suggesting it may be dropping even faster than BNEF concluded. Kobad Bhavnagri, head of BNEF’s clean energy research in Australia, expects that by 2020 or 2030 “we will be finding new and innovative ways to deal with the intermittency of wind and solar.” And since Australia is most likely set for baseload capacity until at least 2020, when solar as well as wind will be undercutting fossil fuels, “it is quite conceivable that we could leapfrog straight from coal to renewables to reduce emissions as carbon prices rise.”

The world’s biggest manufacturer of wind turbines already has 50 percent of Australia’s market, which it expects to hold. And China’s largest manufacturer is eyeing the market as well. The deployment of rooftop solar is already dramatically reshaping the energy market in southern Australia, and the Green Party in Western Australia recently proposed installing solar panels on all public housing homes.

And while a move towards renewable energy by Australia’s economy certainly won’t fix global warming on its own, it’s a step in the right direction, away from the rash of heat waves and wildfires — worsened by the climate change driven by fossil fuels’ carbon emissions — that have recently slammed the nation.

By Rebecca Lefton and Julius Fischer

Easy to read, reliable and current data can be hard to come by. The new Sustainable Energy in America 2013 Factbook produced by Bloomberg New Energy Finance (BNEF), and commissioned by the Business Council on Sustainable Energy (BCSE), provides detailed information on topics ranging from US energy consumption, to the boom in natural gas and renewable energies, the diversification of our energy sector, improved efficiency, and better air quality. The report provides a detailed account of the energy market for investors and policymakers making a strong case for the role of stable policies in leveling the playing field for clean energy technologies in the evolving energy landscape. According to the Factbook:

The US generally lacks an over-arching policy framework for furthering the deployment of sustainable energy technologies.… Still, a patchwork of federal laws and regulations and critical state-level policies has lent important and substantial support to the sector. Much to the frustration of the sustainable energy sectors, however, many of these policies, such as key federal incentives for renewables, lack permanence – creating unnecessary uncertainty in the marketplace.

A federal policy framework to promote the development and adoption of renewable energy is much needed, because even though some clean energy technologies have already taken off and don’t need incentives or policy directives to compete, many renewable technologies are not yet cost competitive. A policy like a feed-in tariff or carbon tax can provide stable incentives for these technologies to compete. Other policies such as the renewable energy Production Tax Credit (PTC), a per-kilowatt-hour tax credit for electricity generated by renewable energy resources, and the business energy Investment Tax Credit (ITC), an initial credit for capital expenditure, are important pillars of our current policy framework.

These tax credits are truly the lifeblood of the renewables industry as they allow renewable energy technologies to be more cost competitive with other sources of generation. Thus any potential expiration of these credits inevitably unsettles the industry.

Consistency and dependability of the policy framework are key to mobilize investment. An investor wants to know what the policy situation will be like in the future to calculate the return on an investment, especially if in the long-term. For example, the short and unpredictable expiration periods of the PTC (see Table) have “spooked investors and players involved in wind, geothermal, and biomass.” State level policies have been key to investment:

Support for renewables at the federal level has had its dramatic ups and downs over the past five years. At the state level, however, support has been more consistent with policy-makers, including governors from both parties, taking a longer view in their support for the sector.

Besides the PTC and ITC, the Factbook elaborates on the importance of numerous policies to allow clean energy technologies to operate in the marketplace, most notably the 2009 American Recovery and Reinvestment Act (ARRA).

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