Growth, fossil fuels, and “green” energy

Is there a “limit to growth” as exposed in the Meadows Report? Our global system works on “growth” of production to generate employment and income, which takes several forms: wages, incomes for enterpreneurs and stock holders, capital gains, rent and interest income, which themselves finance State income (taxes!) and other institutional incomes. Private and public pension funds run on “total returns” from assets, themselves tied closely or loosely in the long run to the underlying “cake” that we all “eat”, which is also called Gross Domestic Product: the total economic value generated per year.

Grinding to a halt: Total Factor Productivity for USA, Germany, UK, France, Japan, OECD

The total “cake” we produce and consume ultimately comes from 2 broad factors:

  1. Total number of workers actively working / producing.
  2. Total factor productivity, which we can simply think of as the “efficiency” of producing economic output (value) with a certain quantity of inputs: time, energy, land, machines, infrastructure, etc.

The total number of workers actively working increases due to 1) natural demographics (more humans = more workers, all else equal), 2) immigration (same: more humans = more people working, all else equal), 3) average employment rate (proportion of all humans actually working in a given economy).

On top of the “baby boom” of industrialized countries between roughly 1945 and 1970, women arrived massively in the labour force of most industrialized countries starting in the 1970s and 1980s, and the “labour mobilization” peaked for most countries some time between 2000 and 2020. You can’t mobilize “100%” of your population for work: some are too young, some are too old, some are studying full time, some are incapable of working due to physical or psychological problems, etc.

The labour mobilization phase has “peaked” for most industrialized countries and will not get any better any time soon, as aging demographics are now adding negative pressure on the employment-to-total-population ratio and on growth. This is one force pulling GDP growth down and it will not stop any time soon.

This leaves us with productivity for growth in the long run: with a fixed quantity of people, you can indeed “produce more” per unit of time by making efficiency improvements: cooking 5 breads per day instead of 2 after getting better at it, using better tools and techniques, rearranging tasks between you are your spouse for bread production, etc.

Some historical perspective

We see that efficiency is key to growth going forward. But can “growth” go on forever? To at least have some idea of orders of magnitude, here are some interesting numbers about the place we inhabit and our place in it:

Earth is about 4,5 billion years old, “animals” started existing on Earth quite late in the game, around 1 billion years ago (sponges being among the earliest “animals”), mammals started existing roughly around 200 million years ago, dinosaurs were wiped out around 60 million years ago, Apes appeared around 55 million years ago, “Hominids” arrived around 11 million years ago (chimpanzees, gorillas, etc.), “pre-humans” arrived around 7 million years ago, tool use by pre-human hominids started around 3 million years ago, and “modern humans” exist as they are currently genetically at birth since roughly 200 000 years ago, 0.1% of the lifespan of MAMMALS… and 0.03% of the history of “animals”… and 0.01% of the history of the planet, hence humans arrived at best 1 second before midnight of a full day… “civilization” started around 10 000 years ago, and modern / complex technological society really exists only since the rise of fossil fuels and its use, which started with coal about 400 years ago and much more convincingly about 150 years ago, with the rise of oil and coal, motors, and the end of institutional slavery in the USA.

The limits to “growth”

Much like Jared Diamond’s book “Collapse”, in his short book “A Short History of Progress”, Ronald Wright describes the experiences of various selected societies of History that have collapsed and the recurring pattern seems indeed to have been that the growing society runs into “collapse” due to a combination of population growth, resource extraction, social complexity, inequality, war, and inner tensions which are fed by and feed the other problems. Most of these societies (but not all) broke up into smaller units after war and conflict, moved on to other geographies, and “started all over again”… or pretty much vanished.

The current global civilization has become much more “unequal” and has developed complexities that create divisions driven by biases, confirmation bias, echo chambers, and “tribal reflexes” that have in some cases become total distrust in otherwise respectable democratic processes and institutions, even including science from well respected peer-reviewed journals, even when there are systematic results from different qualified researchers.

When economies grind to a halt in terms of “growth” in a system that fundamentally depends on growth, you get lots of problems that can boil to major social tensions and falling quality of life. When most of the fruits of growth are barely felt by 90% of the population, you can also get social tension even when there IS “growth”, because the bulk of the extra benefits of that aggregate prosperity are barely felt by “the masses” such as 80% of people.

Wages for “the 80%” in many industrialized countries are increasing at a slower pace than food prices, rent prices, energy prices, and for the USA, also much slower than healthcare and education costs.

Hence “the 80%” are falling behind in many fundamental sectors that make quite a difference for quality of life, standards of living, and equality of chance, and people in some countries such as the USA are stressed, depressed, suicidal, overweight, unhealthy, and generally not doing great... and it was like this BEFORE the covid pandemic…

This is problematic enough, but we havent even talked about energy, resource extraction, and pollution…

Stock and flow issues

The Earth is finite. It is “big and vast” relative to us small ants, but still finite. Period. This is not a debate. It is a physical fact. For “resources” that are not recycled/renewable, there are fixed quantities of extractible ressources such as oil, coal, etc.

Humans “occupy” the land of this planet in 5 main ways:

  1. Where we live (this is a VERY small percentage of the space we occupy and indeed a negligeable land area).
  2. Where we keep our roughly 80+ billion enslaved animals worldwide, such as grazing cows, sheep, etc.
  3. Where we have our crops, most of which are fed to our enslaved animals at a significant efficiency loss, but some of which are also consumed by humans.
  4. Our various infrastructures such as roads, bridges, ports, airports, water and sewer systems, electrical lines and telecoms installations, etc., and also our transport vehicles, including planes, trains, automobiles, boats, submarines, etc.
  5. The waste of all our activity: plastics, metals, ciment, thrown-away objects, fish nets and lines, toxic waste, construction trash, household trash, industrial waste, shit and piss from our 80 billion animal slaves and ourselves, not all of which is used as fertilizer / manure, etc.

Some resources “renew” themselves. For example fish reproduce, as do all wild animals. Left alone, all these wild animals reach natural balance: the “extraction rate” of predators as well as general food and water supplies keep all populations in balance between births and deaths and food resources and water supplies. This system worked fine essentially for all of history.

Excluding the current human-induced mass-extinction, there were 5 mass extinctions in the past 500 million years. The most recent one before this human-created one was about 65 million years ago. We are currently 1) destroying habitats, 2) polluting habitats, 3) killing wild animals and plants all at a rate FAR greater than their reproductive cycles and regenerative capacities, thus inexorably leading to mass extinction of animal and plant species. But “who cares”, right? Humans are THRIVING!

Human population since Year 1000

We currently have an issue: we are “extracting, killing, and polluting” at a rate several orders of magnitude more than what “Nature” can handle. This means total stocks of animals, plants, and resources are falling, and that includes energy, which we must discuss in further detail…


The total stock of oil is now falling due to the fact that for every 5 barrels we consume, we are finding only one new barrel to add to total stock since about 2010, and this is according to the very optimistic International Energy Agency.

This means that the economy naturally seeks alternatives, and that is indeed what is happening: shale gas, natural gas, tar sands, and more. These new forms of energies have higher per-unit total cost (including State subsidies, externalities such as pollution and resource use, and indirect costs) than standard “ready-to-go” oil and coal. The very existence of these forms of energies and more importantly their rise is enough to tell us that “easy and ready-to-use” energy is falling behind, as otherwise we would simply not need to go through all that trouble if easy and efficient energy was still plentiful.

Note that we still have plenty of oil stocks for at LEAST 50 years and at least 150 years for coal, but as time goes by, that stock will deplete, even as total production and consumption keep rising for some time, because we are indeed consuming at a now faster rate than new discoveries.

The issue is obvious: the TOTAL per-unit cost of energy will rise one day, as the forms of energy become less “ready to use”, costlier to access, to process, and to transport. This means that ALL energy will necessarily have rising per-unit costs, even with considerable efficiency gains, and energy is what drives most of our economy!

But generally, if you see increasing costs, you should see increasing prices, and that is not the case in terms of final consumer prices of energy. Why? The “price” is indeed hiding in plain sight: a general loss of aggregate efficiency causes more total social resources (including State funds) to go into “energy” and less elsewhere. This weighs down on total factor productivity and creates stagnation, because it means more “resources” are engulfed into generating energy.

This is WITHOUT even taking into account the macro climate impact and other environmental issues related to continuing the use of fossil fuels without restraint, which can cause problems down the road, as is well documented by top-rated scientists worldwide.

The typical answer by economists to this problem is that as efficiency of “easy and efficient energy” drops, alternatives rise as well as efficiency gains in the USE of energy (we use less per unit of GDP output) and you get a rebalancing of the energy mix and use in the long run, so there is no problem.

Economists say that “people have been saying this forever and the “end of the world” never happens and things just keep getting better and better, so just chill man.” I am an economist and this is in part true… but what is lost in such easy responses is timescales and orders of magnitude: we haven’t been “complex and growing” and mass-using fossil fuels “forever”! In fact, on a larger historical perspective, we JUST started using fossil fuels and our population exploded essentially overnight in “Earth time”, like one second ago… not “forever”. Plus, there’s physics…


I like math and physics, as that is what I studied for 2 years in college and 4 years in university, before later going towards economics. Predicting “Peak Oil” is impossible on a precise scale due to constant adaptations of supply and demand following price and availability fluctuations , but in the long run, it is at least qualitatively sound to note that we do indeed have finite resources and we are indeed consuming many of these fossil fuels at a faster rate than new discoveries in most cases, just like we are emptying the oceans of fish at a faster rate than natural recovery rates of fish stocks, thus gradually depleting global fish stocks to the point we will see fish stock collapse within 30 or 40 years.

We ALSO have an extra constraint, which is that if we burn all currently known oil, gas, and coal, global climate and environmental disruptions will be so large as to cause enormous pressure on human systems worldwide in many complex forms, thus causing additional strains to the human system which is already under considerable pressure in many regards. This would probably be enough to “collapse” social order, disintegrate economies, and tank already-tanked government fiscal sustainability…

The efficiency of classic fossil fuels such as standard oil, coal, and natural gas is VERY HIGH compared to ALL other forms of energy, especially including “renewables.” Even costlier and more pollutant fossil fuels such as shale, tar sands, bitumen and others are quite efficient relative to other forms of energies. Why? Because they “pack” a lot of useable energy into a small space due to their carbon density.

If we burn most or all currently known fossil fuels, we would cause global climate to rise 9 celcius (17F) some time in the next century and substancial climate catastrophe even in this century, and it would render civilization as we know it impossible. Not necessarily “the end of life on Earth” and not even necessariliy “the end of human life”, but things would totally change, and not at all for the better, to say the least.

This very simple fact means we will NOT “burn all currently known fossil fuels”, much less future discoveries… THAT means we will have to “find an alternative” fast… like by 2050 (with already-cooked-in lots of climate and environmental disruption) that would power most if not all energy needs of our global civilization, with all 9+ billion humans and their crops and animal slaves, buildings, machines, transport, electricity, heating and cooling, etc.

The incredible efficiency of fossil fuels

It is important to note that an energy source is “interesting” if you must put less “energy” to produce one unit of energy than what is output in the end. Imagine a predator spending MORE calories hunting his prey than the total calories obtained from eating that prey: that predator would not stand a chance of existing in the long run, as the energy budget doesn’t add up.

To “count” the energy required to transform energy INPUTs into some quantity of energy OUTPUTS, one must take into account ALL energy sources, not just what is “directly obvious.”

For example, suppose I produce power with wind and I get a government subsidy to do so or that the prices of my wind materials and setup and equipment are all artificially low due to State subsidies. For one Kilowatt of wind energy produced, I must take into account the FULL “social cost” of that energy: the energy to build / assemble the wind turbines (and to get the primary materials for this), the State subsidy (which is essentially taking “energy” from the rest of the economy and sending it to my wind power), etc.

One barrel of oil is equivalent to about 1,4 billion calories of pure energy. From this, one must subtract the total social cost of extracting that barrel, transporting it, refining it, distributing it, and then the energy required to finally transform the final “oil product” into another form of “energy”: heat, movement, etc. This is basic thermodynamics (physics). There are debates over exact numbers, but it is very clear that when taking into account ALL social costs, transfers, etc.:

  1. Most energy forms have a MUCH lower EROI (“energy return on investment”) than fossil fuels, or said differently, nothing comes even close to fossil fuels in terms of pure energy effiency.
  2. Only nuclear power and hydro power rival fossil fuels.
  3. “Green energies” such as solar, wind, tidal, biomass, and others are quite inefficient and also much less practical, as they are diffuse and not constant, and biomass on a macro scale would require extreme deforestation and essentially “burning food” which could be used by humans instead!
  4. EROI of fossil fuels has been steadily decreasing since 1995.

This brings us to a stark conclusion, that is actually playing out in plain sight, right in front of us and that we can spell out in point form:

  1. We can’t burn all fossil fuels because we will hand over an “unliveable” planet to humans after 2100 that will not be possible to “undo” for several centuries.
  2. EROI is dropping in the highest EROI energy sources such as fossil fuels.
  3. “Green / renewable” energies have a very low EROI and there is a maximum on their EROI of these energies simply due to “energy density” and basic principles of thermodynamics. Here I mean “low maximum EROI” when taking into account ALL social costs of these energies, including State subsidies, materials, transport, maintenance, costs related to reliability, etc.
  4. Nuclear power is an almost impossible “sell” to the public and is still not fully “sustainable”, as it consumes finite materials…

Where does this leave us?

“Energy” is ultimately the source of all production. In one way or another, ALL production activity runs on “energy”. If that “energy” requires more and more resources to produce, the total social costs of this will “show up” somewhere, as this is a form of brake on productivity (you use more total “resources” (time, energy, land, pollution, taxes, etc.) to produce the basic building block of “production”: energy) and that is indeed happening: Total Factor Productivity is grinding to a halt, growth of GDP per capita is grinding to a halt, especially for “the masses” as seen in stagnant median real incomes, growth is slowing worldwide, etc.

% growth of real GDP per capita world average:

World Bank

Growth of real GDP per capita, USA:

All industrialized countries are having the same trend. As EROI falls over time, ALL countries of the world will absorb this in various ways, but one can’t simply dismiss this “big picture problem” of falling energy efficiency, as energy is (almost) everything! It will “show somewhere” and it will show more and more going forward.

Green energy does not have and will not have the efficiency required to “power” a world economy of 9+ billion humans wanting to live like high-income countries and using lots of machines and technology. By several orders of magnitude. This is not a “debate”, it is a fact of thermodynamics and the realities of “green energy” sources.

The Nash Equilibrium of this context

Facing the combo reality of falling EROI in fossil fuels, low maximum EROI on “green energy”, and increasing energy demands due to increasing world population and production even with significant energy efficiency gains, we will see 2 types of strategies by countries:

Group A: explicitly embracing renewable energy on a macro scale to supply most energy needs will significantly increase living costs and business and State operating costs, either directly and observably, or indirectly in the form of government subsidies that will drain the value-creating sectors of the economy to finance / sustain high-cost “green” energy, thus feeding the illusion that green energies are efficient and can work to “power the global economy.” If it is done directly instead of via the back door of government subsidies, taxes, and regulations, then it will be non-subsidized private sector suppliers of energy, who will naturally and rightfully charge very high prices for energy due to low EROI, thus essentially acting as a tax, further decreasing profits and living standards already hit hard by stagnation. This will generate eternal stagnation, falling purchasing power, debt, social unrest, and major public pressure due to stagnating tax incomes and perhaps also due to energy subsidies. This seems to be Europe.

Group B: explicitly rejecting renewable energy and all out embracing fossil fuels without restraint “as long as possible” to kick the can further down the road will also be possible, as the consequences of doing so within any given 4-year period will be relatively low if not nill relative to the “benefits” of NOT embracing stagnation-inducing renewable energies!

Without a very strong will to reduce long term use of fossil fuels, it seems clear to me that politics will render the use of fossil fuels quite attractive! This society will have more growth and “prosperity” at the cost of handing the real issues to future generations and double-benefiting from the DROP of global demand on fossil fuels (hence cheaper energy!) from the “green group.” This has been the USA and Canada up to now.

Mega forest fires here and there that impact a few million people of countries of 30 or 300 million people? Hurricanes and tornadoes here and there? Hot Summers killing a few hundred or even a few thhousand people? Australia fires? California fires? Heat waves? The extinction of elephants and girafes and whatever other animals? NONE of this matters for 95% of “ordinary voters”, who wake up, take their coffee, eat their toast, work and watch TV… and hence it has no impact on policies when politicians just want to get elected, which is indeed quite a hard constraint for politicians.

So you will see emerge 2 types of countries:

  1. Countries where the population insists on “green policies” will adopt these energies and technologies and will have stagnation and increasing living costs due to low EROI, with lots of frustration and social tension as well as political tension between these countries and others who go a different route. I am guessing Europe will go down this path, which will put lots of pressure on the EU and Eurozone.
  2. Countries where the population rejects “green policies” will have more growth and prosperity in any given political cycle, on average, and will of course contribute to a larger macro problem down the road, but will not pay the bill to others or to future generations. I am guessing the USA might go down this path, even under the Biden Presidency and later, but I may be wrong. China and India and Brazil and Russia will do this for sure.

In all cases, just looking at the actual hard data and projections for 2020–2050, the rate with which we are extracting and using minerals, fossil fuels, killing animals and destroying habitats, consuming water, and mass-polluting is several orders of magnitude more than the “capacity” of the Earth System to handle, especially going forward, hence at one point, the shit will hit the fan... but slowly, and that is the true problem: we are like the frog in cold water… the temperature is rising so slowly that by the time we notice we are boiling, it will be too late to hop out!

The combo of problems will take the form of falling Total Factor Productivity, stagnation, inequality, fiscal pressure, social tension, droughts, more frequent and more disruptive extreme weather events, and perhaps one day falling crop yields year after year on a global scale, which would REALLY stress societies and economies… add to this pandemics caused by our exploitation of animals, and this all eventually brings us to a culture of “Law and Order” to contain the pressure and considerable social tensions, thus paving the way to authoritarian governments.

Those looking at horizons of 30, 50, or even 100 years are extremely short-sighted and are not seeing the much bigger picture and timescale and the reality from the constraints of physics, thermodynamics, and Nature.

Human activity has often been “unsustainable” on local geographies and scales and indeed this led to “local” collapses into social tension, chaos, violence, war, and even falling populations.

But now we have a unique problem: we have the SAME problem, only on a global scale and “nowhere to go”, which means it takes WAY longer to happen and you can “kick the can down the road” quite a lot. For decades. Generations. Tehnology helps a lot, but it is obviously not nearly enough to decrease the pressure we are putting on the Earth System in absolute, and it is also allowing us to produce and consume more, more easily, and faster, even with considerable efficency gains.

But the impasse of thermodynamics is already happening now in falling EROI on fossil fuels and low maximum EROI on renewables, falling TFP, stagnation for “the masses”, excessive social and institutional complexities, falling returns on savings due to low corporate and government investments relative to global savings and demographics, and all this has just begun and will become clearer and more acute over the next 20 years.

I don’t know about you, but perhaps it may be time to at least consider some form of change of direction, because the ship is headed for the iceberg, and with such a big ship, if you care to avoid the iceberg, you gotta change direction a long time ahead! Clap, comment, and share! Regards.

Pascal Bedard

Me climbing on a beautiful face of vertical rock, in Quebec, Canada, Summer 2020

Sharing thoughts on economics, finance, business, trading, and life lessons. Founder of

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