Several years ago I politely asked every student in my course on oil and gas economics at the Asian Institute of Technology (AIT) in Bangkok to master some important materials dealing with the availability of oil. By "master" I meant learn perfectly, assuming they preferred a passing to a failing grade. In the future I plan to practice the same approach with nuclear and natural gas.
On the other hand, I have not dealt with thermal (or steam) coal for many years, and although there are chapters on coal in my new textbooks (2015), I am actually a bit vague as to how I should approach this subject in the classroom, where it is possible to encounter environmental issues that that I might feel comfortable avoiding. One thing though is certain, which is that regardless of what people think about coal, they are going to continue to use it, and probably more than ever. They are already doing this in Germany, although cleverly concealing this fact with a symphony of lies and promises that apparently are necessary to keep the Energiwende (= Energy Transition) on the rails.
In a book I wrote on coal many years ago (1985), I predicted that under no circumstances was it likely that the price of coal would be greater than fifty dollars a metric ton (= $50/t). That is slightly under the global average price at the present time, although it has happened that the price of coal has at least touched $100/t, and now I must admit that it may do that again in the future. The explanation for the latter price, as is almost certainly well known, is an explosion in the demand for coal by China and – to a lesser extent – India over the past few decades.
Now for the term ‘game’. If you study economics for more than a year, it is almost certain that you will encounter that expression: to be precise, ‘Game as in game theory’. I have taught various amounts of ‘game theory’ in many countries, and eventually came to the conclusion that most of it is sophisticated bunkum and a waste of time, even though I occasionally like impressing my students with my ability to use and teach the algebra and elementary calculus in books on that subject. The principal thing that it has in its favor is its association with John von Neumann, often described by his peers as the ‘best brain of the 20th century’ and sometimes credited with being the founder of game theory, which may or may not be true.
In any case, together with Oscar Morgenstern he wrote Economics and the Theory of Games, which is a book read by very few, but mentioned by many. I have neither read nor wanted to read more than a few pages of that book, because I happen to know that the biggest mistake made by students of economics, and unfortunately energy economics, is their incorrect choice of reading materials, and the same is true of some of the goofy choices of their teachers where teaching tactics and strategies are concerned.
In any event, during a war-time taxi ride in London, von Neumann explained to his colleague Jacob Bronowski – as is recounted by William Poundstone (1992) – that real life game theory is not the sort of thing that you see splattered on black and white boards at Harvard and Oxford universities, but ”bluffing, little tactics of deception, and asking yourself what is the other man going to think I mean to do.” I suggest that you adjust this to ‘the other man or woman’, and add to this roster the flamboyant dissemination of lies and the promotion of misunderstandings.
The position I am approaching in this discussion is that much more of the commodity coal is going to be burned than commonly believed, and to help make this happen a game will have to be played in which there are frequent assurances by well-meaning (or slightly confused) decision makers that much of this coal will be cleaned – or for that matter will not be cleaned, but it doesn’t matter because the resort to coal is a temporary measure before there is an all-out and glorious resort to renewables. I am thinking of course of Germany, and perhaps of China.
The basic arguments here can be found in the articles of Victor and Cullenward (2007) and Victor and Rai (2009), but I do not need their arguments or those of anybody else. I know that a game is in progress, featuring the lies and deceptions mentioned by von Neumann, and also strategic considerations such as bluffing, disinformation and the systematic exploitation of options provided by prevailing attitudes and politics.
Let me extend that remark. Pollution-wise, the great coal game features a play now-pay later format, distinguished by the barely concealed hope of dominant players (and/or their advisers and supporters) that the water will not begin to rise on Canal Street (in Amsterdam) or the Reeperbahn (in Hamburg) before the music starts at the ‘end-of-century’ parties on December 31st, 2099. Of course, that date is more than a lifetime away for many voters, although I do not think I am exaggerating if I say that for most of the ladies and gentlemen in the game whose role is passive until it is time to cast a vote, it wouldn’t make any difference when the bad news arrived, as long as they are not forced to think about the downsides of an excessive consumption of coal in the near future. Unless I am mistaken, this outcome is being made possible today in Germany by a manipulation of subsidies.
Joe Hung (2010) said that coal is the most rapidly growing fuel source in the world. He also pointed out that it is broadly distributed and most important, the energy in it exceeds that of all other fossil fuels combined. If you want to prove this, I suggest using the techniques alluded to in the first chapter of my book ENERGY ECONOMICS: A MODERN FIRST COURSE. By the same token, if you are deeply interested in the longevity of actual and hypothetical energy reserves, then you should examine what you should be able to obtain from uranium and thorium reserves burned in the next generation (Gen 4) of nuclear reactors.
Johanna Rose (2010) once claimed that China opens a new coal-based electricity generating plant every week, although I suspect that this claim is slightly in error. Regardless, the Chinese, Indian, and U.S. consumption of coal, reinforced by a few other heavy consumers, will ensure that carbon dioxide (CO2) emissions into the atmosphere overwhelm any countermeasure, where one of these countermeasures is the cap-and-trade foolishness that we heard so many positive things about in the learned literature a few years ago.
What about technological countermeasures. Some of those were mentioned by colleagues at Nanyang Technological University in Singapore, and when I returned to Sweden I heard about them from Jeffrey Michel, who is a graduate of MIT and one of the most important energy commentators in Germany. The technique he focused on was ‘carbon capture and sequestration’ (CSS), which he referred to as a “thermodynamic travesty”, although ‘economic travesty’ will suffice, because adoption of this procedure will greatly increase the cost of a power plant burning coal.
Two things have interested me about CCS. The first was the so-called CCS activities of the Swedish firm Vattenfall in Germany, which was surrounded by a swarm of lies, the most grotesque of which was the so-called zero-emission operation at Schwarze Pumpe in eastern Germany, which is supposed to be a pilot operation. I prefer to think of it as a publicity stunt exploiting the naiveté of half-educated academics and journalists rather than a serious attempt to solve a weighty problem. I can also mention the explicit recognition – though not elaboration – of CCS by the editor of the site OilPrice.Com, which made it clear to me that my departure from that site should have come much earlier, because the example he cited and was impressed by involved the U.S., where CCS is generally recognized as a scam, though not on the scale of Vattenfall’s German operations, which ostensibly called for CO2 being transported about 300 kilometers, and then pumped into caverns below the surface of the earth or the Baltic Sea.
Exactly what is the point here? The point is that the games that John von Neumann was thinking of that involved lies and deceptions are the real deal, and often function magnificently, at least for a while. One of the best example thus far in the 21st century is the Energiwende in Germany, which with its increased resort to the mining and consumption of (low quality) coal is more than a scandal that will be eventually exposed. In the context of the Energiwende it is also scientifically absurd, although it will likely escape recognition as such.
References
Banks, Ferdinand E. (2015). Energy and Economic Theory: Singapore, London and New York: World Scientific.
(2015). Energy Economics: A Modern First Course. (In Process).
1985).The Political Economy of Coal: Boston: Lexington Books.
Harlinger, Hildegard (1975). 'Neue modelle für die zukunft der menshheit' IFO Institut für Wirtschaftsforschung (Munich).
Hung, Joe (2010). 'Coal: the contrarian investment'. 321 Energy (April 10).
Poundstone, William (1993). Prisoners Dilemma. Oxford: Oxford University Press.
Rose, Johanna (2010). 'Drömmen om rentkol'. Forskning & Framsteg (March).
Victor, David G. and Danny Cullenward (2007). 'Making carbon markets work'.Scientific American (March 15)
Varun Rai (2009). 'Dirty coal is winning'. Newsweek. (October 30)
Comments
Log in or sign up to join the conversation.