Climate Change and Peak Oil, Two Problems with One Solution

This blog was written by Jennifer Rennicks, former Senior Director of Policy & Communications at the Southern Alliance for Clean Energy.

Guest Blog | September 17, 2009 | Climate Change, Energy Efficiency, Energy Policy

While reading about peak oil recently, it became clear to me why peak oil advocates and climate action advocates should be natural allies.  While the challenges of peak oil may be different than the challenges of climate change, the solution is the same — redefine our energy policy to promote greater energy efficiency and diversification of our energy resources.

For the past half-century, scientists and economists have wondered when we would reach and pass the peak of global oil production.  World oil supplies are finite, after all, and sooner or later we will see production peak and then begin an inevitable, perhaps precipitous, decline down to zero.

Analyses of various sources suggest the timeline may be ‘much sooner’ and that we may have already reached peak oil.  The International Energy Agency (IEA) – an intergovernmental organization based in Paris – notes that oil production in non-OPEC countries has already peaked and production in current fields is declining faster than previously predicted.  Dr. Fatih Birol, the chief economist at IEA, has predicted that global production is likely to peak in the next ten years.

Even if we haven’t quite reached the peak, the day of reckoning cannot be far off.  With world oil consumption approaching 85 billion barrels a day, it’s certain that we are sprinting towards the peak more quickly than ever.

And while peak production doesn’t mean the oil is gone, it does signal the end of easily available production.  Combine those declines with rising energy demand and peak oil will mean sharply higher energy prices for American consumers and businesses alike. Worse, once we hit peak oil, the decline in production could be steep.   Estimated reductions range from 1 or 2 percent to as much as 5 or 10 percent per year.

The threat of such drastic declines should warrant our collective attention, since anything above a modest (1 or 2 percent) annual decline will mean vastly higher oil prices and severe economic dislocation.  The impacts to oil refining and distribution after Hurricane Katrina were moderate and fairly short-lived.  On the other hand, peak oil could result in an energy-induced economic crisis along the same lines as the financial crisis we just experienced.  More significantly, this crisis wouldn’t go away — there’s no Federal Reserve balance sheet for oil, after all.  Peak oil will be a permanent part of our economic future.

Meanwhile, the scientific and environmental communities continue to call on policymakers to move quickly and enact policies to reduce man-made greenhouse house emissions.  There is more global warming pollution in our atmosphere than the earth has seen in the last 650,000 years and, as NASA’s Dr. James Hansen warns, carbon dioxide emissions must be reduced if “if humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted.”

While my organization supported the climate and energy bill passed by the House of Representatives earlier this year as a step forward, we (along with many other organizations and individuals) were hoping the greenhouse gas reduction targets, the renewable electricity and energy efficiency standards would be set higher and take effect sooner to truly begin addressing this critical issue.

As we stand at the energy crossroads where peak oil looms and the threats of climate disruption grow, I would urge peak oil and climate change advocates to join together and to press for joint solutions that address both crisis.   Need to prepare the economy for post peak-oil prices?  Adopt a meaningful renewable electricity standard.  What’s the least cost and quickest means of reducing man-made greenhouse gas emissions?  Increase energy efficiency in the electricity sector with a meaningful energy efficiency resource standard.

Diversifying our energy supply and making investments in energy efficiency would decrease our dependence on oil to match lower post-peak production while simultaneously reducing our carbon emissions.

As usual, the states are out front of the federal government on these efforts.  Currently, 27 states require utilities to obtain a certain percentage of their energy from renewable sources.  Applying similar standard at the federal level is achievable and cost effective.  As the Department of Energy reports, the United States has the ability to generate as much as 20 percent of our electricity by 2030 from wind power alone, resulting in reductions in carbon emissions, water savings as well as a huge boost in the numbers of high-tech “green” jobs.   Early action would help us transition from our declining oil supplies to more sustainable energy sources with the least economic disruption.

Meanwhile, perhaps the easiest way to address a diminishing oil supply and the potential of an energy crisis is to start using energy more efficiently.  Here, too, the states are leading by example.  Eighteen have already implemented measures to promote energy efficiency.  For example, the public utility commission in California established new energy efficiency targets for the state’s regulated utilities in response to the state’s 2001 energy crisis.  These targets are expected to result in a savings of over 16 billion kilowatt hours of electricity by 2020.

Once again, the climate change solution of promoting energy efficiency directly addresses peak oil concerns too.  According to the American Council for an Energy Efficient Economy, modest investments in energy efficiency could save 45 to 50 billion barrels of oil between now and 2030 – roughly 3 times the amount some have posited to be available in additional U.S. coastline drilling.  If a modest energy efficiency requirement, such as the one put in place in California, were adopted at the national level, ACEEE estimates that carbon dioxide emissions would be reduced by 250 million metric tons in 2020 – equal to taking 42 million cars off the road.

Taken together, policies to improve energy efficiency and promote renewable energy would have several benefits in addition to solving the problems posed by peak oil and climate change.  The solutions would result in millions of new jobs created and billion of energy dollars saved while providing significant national security implications.

Together, advocates for a peak oil solution and climate action can define the boundaries of the debate by making clear that our energy future must rely on clean, efficient, renewable energy that will strengthen our nation’s security, protect the environment and refuel our economy with sources that will create a tidal wave of new economic opportunities.

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