Friday, October 30, 2015

Peak Oil + Autonomous Cars = Traffic Nightmare

Originally posted at

How you’re going to feel once peak oil and automated cars make traffic a nightmare

Autonomous Cars
For a number of years now, high-end luxury cars have had autonomous cruise control systems that use lasers or radar to maintain a set distance to the car ahead. Earlier this month Teslarolled out an autonomous driving mode in its electric cars that takes this a step further. Teslas will now drive themselves on a freeway, accelerate and decelerate on their own and maintain a set distance to the car in front. However, unlike other cars with autonomous cruse control, they will now also change lanes – if you click the turn signal the car will automatically check your blind spot and execute a lane change. This is just one more step toward a fully autonomous car that consumers can buy.
Some of the world’s largest tech companies are working on autonomous vehicles. Google has driven their autonomous prototype cars over a million miles, which have been completely accident-free, except for other human drivers crashing into them. Apple has also been hard at work on an autonomous, possibly electric, car of their own. In all, over 25 companies are currently developing autonomous cars.
Most industry experts believe that fully autonomous cars will be mainstream in just 5 years. Others predict that in 20 years most cars won’t have a steering wheel or pedals and in 25 yearsmost people won’t need a drivers license.
Speed Records
Recently Alex Roy teamed up with Carl Reese and Deena Mastracci to complete a cross-country speed record in a Tesla with the new autonomous control upgrade. Roy is best known for breaking the Cannonball Run record by driving across the United States in 32 hours and 7 minutes in a BMW M5. (This record was most recently bested by Ed Bolian in 28 hours 7 minutes with a Mercedes CL55 AMG.) Reese and Mastracci are known for previously driving the Cannonball Run route in an electric car in just 58 Hours and 55 Minutes. Using Tesla’s new autonomous mode, the trio completed the route in 57 hours, 48 minutes – over an hour faster than their previous electric car record, but still about 30 hours slower than the petroleum-powered record. For reasons I will describe below, Bolian’s record may stand for eternity as the fastest transcontinental automobile crossing. In the future, traffic may simply become so bad that no one will be able to achieve such a feat again.
The Promise of Autonomous Cars Ending Traffic
Cornucopian futurists have suggested that increased adoption of autonomous cars could bring an end to our traffic congestion woes. One MIT researcher thinks they could reduce traffic by80%. The Brookings Institute says that autonomous cars will “reduce much of the congestion and delays that make road travel so onerous.” They could even eliminate traffic in Los Angeles– arguably the world’s most car dependent city. It will be “An End to Traffic Jams Forever!”
The idea is that unlike human drivers, autonomous cars have perfect reaction times. They can follow the car in front of them with very little braking distance, matching speeds perfectly. If a group of autonomous cars gets together on the freeway they could form a “train” – all traveling in unison just inches from each other’s bumpers. It has been theorized that having just a few autonomous cars on the road could greatly reduce traffic congestion for everyone else.
The appeal of this is obvious. The average suburbanite is desperate for any news that allows them to think they can continue their “suburban, car-dependent, happy motoring living arrangement.” Driverless cars seem to offer the ability to continue living in a quiet suburban cul-de-sac miles from the nearest workplace or shop. You’d simply sit back, play around on your phone and let your robot car whisk you away to your destination dozens of miles away. “Super-commuters” (those who commute more than 50 miles to work) wouldn’t need to change a thing – they could just catch up on some shut-eye while their robot car drives them to and from work.
Peak Oil and Climate Change Legislation
Peak Oil is the point at which global oil production reaches a maximum rate and begins a permanent decline. Oil is a finite resource, so peak oil will happen – it’s just a mathematical fact. The controversy around peak oil isn’t about whether it will happen, but when, why and how it will happen: Is it happening now? Will it happen because oil gets too expensive to produce, restricting supply? Will it happen because oil gets too expensive to consume, restricting demand? How quickly will production decline after the peak? Will substitute forms of energy and transportation technologies offset the decline? No one can definitively answer any of these questions, but we do know that at some point in the future we will be faced with declining levels of global oil production. One possible outcome of peak oil is that we won’t have sufficient economic substitutes for oil and the price of oil rises significantly. Perhaps electric car production is limited by the high cost of extracting lithium for the batteries (especially since mining requires so much oil). Perhaps NIMBYism prevents us from increasing the walkabillity of our neighborhoods through the construction of public transportation routes and higher-density mixed-use buildings. In any case, in this scenario people would be stuck relying on their car, but oil prices would incentivize them to use as little fuel as possible.
Another source of higher energy prices is a potential global climate change agreement. Already 114 nations have signed the Copenhagen Accord, which states that the parties agree to limit global warming to 2 degrees Celsius above pre-industrial levels. The European Union has enacted climate change legislation. If all of the existing fossil fuel reserves that are on the books of the world’s oil, gas and coal companies were burned, it would generate more than 2.8 trillion tons of CO2 – well in excess of the 1 trillion ton “budget” that almost every country has agreed to. In order to keep that excess 1.8 trillion tons of carbon in the ground, a global climate change agreement would need to raise the cost of emitting carbon to a point where more than half of the remaining reserves are never burned. This could be accomplished through a global carbon tax or a global cap and trade program, but the result would be the same – far higher prices for gasoline at the pump. If a global climate change agreement  is reached, the average motorist will see rising fuel prices and will be incentivized to use as little fuel as possible.
The Eco Button
Many cars on the road today already have an “eco” button on the dash. The button doesn’t do very much today – it typically changes the throttle response, adjust the climate control and changes the fuel mapping a bit. In the future of automated cars, however, the “eco” button could do far more – it could pick the most efficient route to the destination (with the fewest hills and stops), it could drive at an optimal speed, and it could accelerate and decelerate at the optimal rates. Today the “eco” button gives drivers about 5-10% better fuel economy. In the future, self-driving cars could easily double your fuel economy at the simple push of an “eco” button. People today are used to hitting the “eco” button when they want to save a bit of fuel. In the future, if fuel prices are far higher and self-driving cars allow a far more impressive fuel economy improvement in “eco mode,” it seems obvious that more and more people will be pushing the “eco” button.
As gasoline prices have gotten higher over the past two decades a group of fuel maximizing techniques know as “hypermiling” have become more popular. This can involve physically modifying a car by eliminating weight and improving aerodynamics. More commonly hypermiling is accomplished through driving techniques like optimal speed management and acceleration modulation to keep the internal combustion engine at optimal stoichiometric efficiency. Colloquially this is known as “driving like a grandma.”
Today hypermilers are able to achieve some amazing feats of fuel efficiency. Hypermilers areroutinely able to get double the “sticker” fuel economy of average cars. For example, hypermilers can get 127 MPG out of a Toyota Prius, which is rated by the EPA for 60 MPG. They can get 62 MPG out of a Toyota Corolla, a car rated for 35 MPG. Even with the king of fuel inefficiency, the Hummer, hypermilers are able to get 22 MPG in a truck that normally gets 10 MPG.
Pulse and Glide Driving and the Accordion Effect
Internal combustion engines are most efficient when they are under full load at low to medium RPMs. This means when you are driving up a hill you will consume less fuel to maintain the same speed if you use full throttle in a higher gear (at a lower RPM) than if you downshifted and used less throttle at higher a RPM. This becomes evident when one looks at the brake specific fuel consumption (BSFC) efficiency contour chart for a typical internal combustion engine:
A brake specific fuel consumption efficiency contour chart
brake specific fuel consumption efficiency contour chart
Most internal combustion engine cars these days use electronic fuel injection; This allows the engine to consume zero fuel when you completely let off the throttle and coast. When driving on level ground this means the most efficient way to drive is to “pump” the throttle by accelerating at full throttle from 1500 to 2500 RPM and then coasting back down to 1500 RPM with no throttle. Hypermilers call this the “pulse and glide” technique. Unfortunately, as anyone whose been in a taxi recently can attest, this “throttle pumping” accelerator modulation is also the best way to make passengers carsick.
Besides making passengers carsick, the pulse and glide fuel saving technique also contributes to traffic through the “accordion effect.” When traffic is dense and a road is close to reaching its maximum capacity a single speed different can ripple through the crowd, causing stop-and-go traffic to pile up. This speed disruption can be as simple as someone looking down to check their phone; when they look back up the may realize they are following too closely and brake; the cars behind them see brake lights and they brake as well out of an abundance at caution; a mile back this ripple of brake lights brings traffic to a complete halt.
In the future, autonomous cars may be programmed to pulse and glide their accelerators to maximize fuel economy. As the autonomous cars coast down in speed, human drivers behind them will hit the brakes, causing stop-and-go traffic.
Speed Limits and Speed Minimums
If you asked the average person driving down the freeway to tell you the speed limit, chances are they would have a good idea. But if you asked the same people to tell you the minimum speed, I bet most would have a hard time coming up with it. In California most suburban freeways have a 70 mph speed limit and a 45 mph speed minimum. In reality this means that in the absence of traffic people in the left lane are driving 80 mph while people in the right lane are driving 65 mph. Anyone driving the speed minimum of 45 mph would be traveling at a 35 mph difference to other people on the road. Imagine standing on the side of a road and watching a car pass you at 35 mph – that’s a significant speed difference. Differences in speed cause traffic to pile up – as human drivers come up on an autonomous vehicle traveling significantly slower than they are the human drivers will hit their brakes which will cause everyone further back to hit their brakes, which will lead to the “accordion effect” of stop-and-go traffic.
If automated cars are put into “maximum economy mode” it is likely that the computer will poll its database for the minimum speed it can drive on any particular freeway and accelerate up to just that speed. Any police officer that pulled over an owner of an automated car driving the speed minimum would have hard time in court fighting a perfect computerized output of GPS coded data proving the car was following the letter of the law.
What this means in practice is that either politicians will have to raise the speed minimums of freeways or that we will have to live with traffic congestion caused by automated cars driving the minimum highway speed. My money says that very few politicians will want to go to bat for increased speed minimums.
Electric cars and “Range Maximization”
In a post-peak oil future with global climate change legislation, carbon-based fuels may be more expensive, but elections may not. If an electric car owner charges their car with electrons from solar panels on their home’s roof, they may not care as much about the cost of the electrons. But unless there is a major breakthrough in the energy density of electric car batteries, owners of electric cars will still have a major incentive to drive in a way that maximized the range of their vehicles. Importantly, the techniques used to maximize fuel economy in an internal combustion car are very similar to the techniques used to maximize the range in an electric car.
Just as internal combustion cars have an optimal speed for minimizing fuel economy, so too do electric cars have an optimal speed for maximizing range. Worryingly, the optimal speed for achieving maximum range in electric vehicles is far slower than the optimal speed for achieving maximum fuel economy in gasoline cars. According to Tesla, the range-maximizing speed for their Model S sedan is just 25 miles per hour! The current world electric car range record was set in a Tesla P85D. The drivers achieved 452.8 miles of range on a single charge by driving an average speed of 24.2 mph. If drivers push the “eco” button in an automated electric car like a Tesla, it is possible that the software would choose a route that allows it to maintain an average speed of 25 MPH. This would necessitate the car to avoid highways and use roads with lower speed limits. Most city streets, however, have speed limits of 35 MPH. Rural roads often have speed limits of 45 MPH. On many of these roads people are used to driving 5 to 10 MPH over the posted speed limit. A hypermiling automated electric car could easily be driving at 20 or 30 MPH below the average traffic speed. On a two-lane road, where it is difficult to pass, traffic would quickly back up behind such a slow car.
Tesla Range vs Speed Chart
Tesla Range vs Speed Chart
The other main difference between electric cars and internal combustion cars is the acceleration efficiency. While internal combustion cars are most fuel efficient when accelerating at full throttle, electric cars are most energy efficient when accelerating very slowly. When trying to optimize the energy efficiency (and maximize the range) of an electric car, the best technique is to accelerate slowly (like there is an egg beneath the accelerator pedal) and to decelerate slowly by leaving plenty of stopping distance and letting the motor’s regenerative braking bring you to a halt. In fact, a driver who is truly optimizing the efficiency of their electric car would almost never need to use the brake pedal. Needless to say, this form of driving – with extremely slow acceleration and leaving many car lengths of following distance to allow for slow deceleration by the regenerative brakes – can easily case traffic to pile up.
Due to the low energy density of current electric car batteries, the easiest way to maximize the range of the car is to add as many batteries as possible to the car. Unfortunately adding more batteries adds more mass. As race car teams know very well, added mass is multiplicative – it snowballs. When you add an extra thousand pounds of batteries, you need to add an extra hundred pounds to the chassis to support the batteries; a heavier chassis requires beefier suspension arms, wheels and tires; a larger overall mass requires bigger breaks to stop, which further increases the mass of the wheels, tires and suspension; and on and on. Once the car has been designed with all of the safety and comfort requirements plus the structure to hold such a large amount of batteries it can tip the scales at astronomical values. The curb weight for the new Tesla Model X SUV, for example, is 5441 lbs – that is 741 lbs heaver than the Hummer H3! What’s worse, every pound added to the car increases the amount of raw materials needed to build and increases the complexity of assembling the car; thus the current top-of-the-lineTesla costs 78% of the median home price in the United States.
Self-driving cars offer an alternative way for electric cars to have long range without breaking the bank. Instead of loading up a car with more and more batteries, a self-driving car could have fewer batteries but be able to achieve an impressive range when put in “range maximization mode.” The average American drives 37 miles per day. Currently the cheapest electric car on the market is the Mitsubishi i-MiEV, which has a 62 miles range and costs just $15,495 after rebates. Amazingly that’s just $500 more expensive than the cheapest internal combustion engine car for sale today (the Chevy Sonic). 62 miles of range is almost 70% more than the average person drives in a day. In the near future, automated car technology could become so inexpensive that even a car like the i-MiEV could become totally driverless.
Volkswagen recently got in trouble for cheating on emissions testing by designing the software of their vehicles to adjust the fuel mapping to lower emissions when the vehicle sensed it was being tested on a dyno. In much the same way, it is plausible that in the future electric car companies could design their software maximize to the range of their vehicles when they sensed they were being tested. An inexpensive electric car like the i-MiEV may be able to achieve over 100 miles of range by accelerating and decelerating slowly and capping its top speed. The car may simply engage its “eco” mode when it senses it is being tested. But of course “your mileage may vary.” In the real world, ranges would be far less – but as long as the range under normal driving conditions remained above the daily driving needs of the average American, most people wouldn’t complain. For longer trips, drivers could put it in self-driving “eco mode” and just sit back and read a book while the car putters along at 25 MPH with dozens of cars piled up in traffic behind them.
Traffic Today, Traffic Tomorrow
Too many Americans drive too much every day. Many “super commuters” travel over 50 miles each way to their jobs every day day. Heading out of their suburban and exurban homes they must contend with drowsy drivers, drunk drivers, distracted drivers texting away, and, increasingly, horrendous traffic jams. Urban sprawl has pushed people from the suburbs into theexurbs. In many places around the world individual cities have sprawled so far that they have begun to merge into megalopolises.
Autonomous cars seem to offer the perfect solution to our driving problems. Robots have perfect reaction times – no more “accordion effect” of stop-and-go freeway jams caused by drivers slamming on their brakes. Robots never get distracted – no more accidents from texting while driving; no more idiots driving too slowly and swerving out fo their lane because they’re not paying attention.
Unfortunately, the promise of a traffic-free future is a probably a mirage. Peak oil and global climate change legislation will raise the price of transportation fuels. Barring a major breakthrough, affordable electric cars will only be able to achieve long ranges through economical driving. As more and more people hit the “eco” button on their autonomous cars, roads will become increasingly jammed up by robotic cars driving like grandpa on his way home from the blue plate special. As the cost of living in walkable neighborhoods continues to rise more people may consider moving to car-dependent suburbs. Autonomous cars may make suburban commutes look attractive, but reality will be different. As autonomous car software allows more people to hypermile their cars at the push of a button, suburban commutes could become unbearable. Rather than heading towards a traffic-free future we may be headed towards a traffic jam nightmare.

Sunday, April 5, 2015

Peak Fish and Sustainable Food’s Last Mile Problem

Peak Fish
My wife and I are subscribers to a local sustainable “fish share.” It’s like a vegetable CSA except instead of getting locally-grown vegetables we get fish that have been caught off of the San Francisco Bay. The fish are super fresh and delicious. The fisheries are managed to restrict catches to a sustainable level. This type of sustainable fishery management, unfortunately, is the exception rather than the rule around the world. Globally, somewhere between 12% and 30% of fisheries have collapsed. Based on actual tonnage of fish in the sea, the world reached “peak fish in the sea” in the late 1980’s. When we analyze the tonnage of fish captured globally we see that we reached “peak fish capture” in 1996.
peak fish
Global fish capture peaked in 1996
Because population continues to rise, the date of “peak fish caught per capita” occurred in 1988. Since 1988 there have been fewer and fewer kilograms of fish caught per person living on our planet.
peak fish per capita
Global Per Capita Fish Capture Peaked in 1988
We are also seeing a dramatic “peak fish” decline due to ocean acidification. When carbon dioxide (CO2) dissolves into the water in the ocean (H2O) it becomes carbonic acid (H2CO3) and other carbonates. These carbonates lower the pH of the ocean and make it harder for calcifying organism like coral to produce their shells. This chemical reaction (CO2+H20=H2CO3) is simple and predictable. There is no question that atmospheric CO2 are levels are rising; As a result, there is no question that our oceans will continue to acidify. Simply put, as we pump more carbon dioxide into the atmosphere we kill more of the bottom of the ocean food chain. Without the bottom of the food chain, the top of the chain (the fish we eat) disappears. Our oceans are currently acidifying at a rate 100 times faster than any change that has occurred in the last 20 million years. The last time things got this bad was 65 million years ago during the Paleocene-Eocene Thermal Maximum, which resulted in an extinction event worse than the K-T Extinctionthat wiped out the dinosaurs. Unlike some of the other more complicated effects of climate change, ocean acidification is directly observable – you could literally stick some litmus paper in the ocean water outside your house and see the change over time. Here’s what the trend looks like:
Even if we stop catching fish at an unsustainable rate, ocean acidification will continue to put pressure on fisheries around the world. This means the “ceiling” for the “sustainable catch rate” will continue to get pushed lower every year. We’ve already reached “peak fish,” but these two forces will continue to push down fish capture rates, likely insuring that the peak is permanent.

Peak Oil
Besides unsustainable catch rates and ocean acidification, the third factor that will ensure the permanence of “peak fish” is peak oil. It takes an incredible amount of boat fuel to capture the fish we eat. Our current global food supply chain is woefully unsustainable and incredibly dependent on cheap oil. On average, it takes 10 calories of fossil fuel to produce and deliver a single calorie of food in the United States. A 2008 paper by Weber and Matthews found that, on average, the food we eat travels a total distance of 4,200 miles to get to our plates. Peak oil writer Jim Kunstler frequently uses the example of the “3000 mile Cesar salad” to bring attention to the food milestraveled in our current global food system. These long supply chains are especially evident when looking at fish – two thirds of the world’s fish are shipped internationally by airplane. When we inevitably reach peak oil (and peak coal and peak gas) we will have fewer calories of hydrocarbon fuel available per day for each person on earth. Unless we move our food production to a sustainable system that doesn’t rely on sunlight that was stored in the ground millions of years ago, we will have to do with fewer calories of food globally.
For fish, much of the energy expenditure comes in the form of boat fuel burned to troll the oceans and catch the fish. Here are some examples of how many liters of boat fuel are required to catch a metric ton of fish:
  • Sardines: 71
  • Skipjack tuna: 434
  • Scallops: 525
  • North American salmon: 886
  • Pacific albacore: 1612
  • Sole: 2827
  • Shrimp and lobster: 2923
One way to look at this fuel expenditure is to think about fishing on an Energy Returned on Energy Invested (ERoEI) basis. A food Calorie (big c) is more accurately called a kilocalorie as it contains 1,000 calories (small c) of energy. A “serving” of fish is about 84 grams, or 0.084 kilograms, and contains about 120 kilocalories of food energy. This means a metric ton of fish contains 1.43 billion calories of energy. Diesel fuel contains 8629.8 kilocalories per liter, so catching a metric ton of sole would require burning 2.44 billion calories of fossil energy. So if you sat by the dock and ate raw sushi fresh from the fishing boat you would achieve an ERoEI of 0.58:1. Any ERoEI below 1 is net energy negative and thus unsustainable. To put it another way, a 120 Calorie “serving” of fresh fish eaten directly from the boat required 207 Calories of diesel fuel to catch it. Your serving of fish required about half a shot glass worth of diesel fuel to catch it. Once the fish is caught it is often “flash frozen” (requiring diesel to run the generators that power the freezers on board the boats). High-end fish used for sushi is then usually sent air freight (burning jet fuel) to a refrigerated warehouse (burning coal or natural gas) where it is then picked up by a diesel-powered delivery truck and sent to the restaurant where diners arrive by gasoline-powered cars. After adding up the energy required to catch, freeze, package, ship, pick up and cook, wild-caught fish becomes severely net energy negative.

Local Food
At first glance the “local food” movement seems to fix the problem of the high-energy 3,000+ mile supply chain that delivers most of our food. If we simply purchased food that was grown locally (or better yet ate food grown in our own gardens), we wouldn’t need to ship as much food all over the world. Food could be grown organically (without fossil fuel-based fertilizers and pesticides) and greenhouses could provide us with year-round fruits and vegetables regardless of season. But unless you’re riding a bicycle down to your local farm, most “local food” still requires a tremendous amount of gasoline and diesel to transport the food from the farm to the farmers market and to transport the shopper from their home to the farmers market and back. Industrial-scale food is produced in huge quantities and shipped with semi-trucks. Local food is produced at a much smaller scale and is usually driven to farmers markets in small pickup trucks. The semi-trucks drive longer distances than the pickup trucks but because they carry more food they get much better MPG-per-ton of food. A 2008 paper studied the energy differences between the two different types of food systems in Berkeley, California and concluded on an energy consumption basis that “no statistically significant difference was found between the two food systems.” Simply put, local food, as it is currently practiced, is not more energy efficient than our “3000 mile Cesar salad” system.

The Local Food Last Mile Problem
The main problem with our “sustainable” fish share isn’t the way the fish are caught but rather the “last mile” problem of picking up the fish. I try to take the BART to work most days – not because I’m trying to be “green” but because I much prefer to read a book on my way to work than sit in traffic. However, on days when we have to pick up the fish in Berkeley, it’s necessary to drive to work so that I’m able to drive to pick up the fish share after work. I’m doing a “reverse commute,” where I live in a semi-urban area (walkscore 76) and work in suburbia (walkscore 39). Due to the crazy traffic patterns of the Bay Area, I have to drive the “long way” to work, which takes less time but requires driving a longer distance. On fish pickup days the full round-trip commute from home to work to the fish and back home requires 80.7 miles of driving. I’ve been tracking our vehicle fuel efficiency using fuelly and for this trip I get an average of 23 mpg (it doesn’t help that I’ve got a heavy foot). This means the entire trip to pick up the fish requires 3.5 gallons of gasoline. Burning 3.5 gallons of gasoline releases about 69 lbs of carbon dioxide. Peer-reviewed studies put the social cost of carbon at $43 per metric ton. So if we had a carbon tax that fully priced the externalities of climate change I’d have to pay $1.35 in carbon tax to make the trip to pick up our “sustainable” fish.
Taking the BART requires 0 gallons of gasoline because it is electric, but the BART currently isn’t connected down I-680 (because doing so would cost $5 billion), so half the trip is done on a bus. Contra Costa County uses hybrid buses. These Gillig Low Floor BRT hybrid buses get 4.0 MPG of diesel; they are often standing-room-only on the way to and from work, so with 40 passengers aboard they get 160 passenger miles per gallon of diesel. This means my entire commute takes 0.165 gallons of fuel to complete when I take public transit. That is still not a negligible amount of fuel – it would fill a “venti” coffee cup – but it is 95% less fuel than I use when I drive a car.
The really crazy thing is when you compare the fuel used to catch the fish versus the fuel use in the “last mile” for me to pick up the fish. Our usual fish pickup is about 2 lbs of fish, which is about 907 grams and contains about 1300 Calories. At an EROEI of 0.58:1, that 1,300 calories of fish requires 2,241 Calories of boat fuel to catch it. The car trip to pick up the fish requires about 3.5 gallons (13.2 liters) of gasoline which at 7594.0 Calories per liter is about 100,612 Calories of fuel. This means for each Calorie of “sustainable” fish I eat, it required:
  • 1.7 Calories of boat fuel to catch
  • 77 Calories of car fuel to pick it up
It requires about 45 times more energy for me to pick up the fish in the “last mile” than it did for the boat to go out and catch the fish. Clearly my unsustainable “sustainable” local fish share is an extreme example and most people aren’t driving 80 miles by car to do their grocery shopping. It does, however, shed light on a major gap in our society’s quest for sustainability. Much of the US population lives in suburban and rural areas and as a result many of those people live in “food deserts” where it requires more than a 20 mile round-trip by automobile to pick up groceries. The key lesson learned from all of this is that local food has the potential to make our food consumption far more sustainable, but in practice such efforts often fall short. As peak fish and peak oil limit our food options, the lessons learned (including the failure in my case) from the thousands of local food efforts around our world will become incredibly important in building more resilient and sustainable food networks.

Wednesday, March 4, 2015

Sustainable Banking

Our Fiat Currency System
As the late peak oil writer Michael Ruppert used to say, “until you change the way money works, you change nothing.” Chris Martenson does a great job in his “Crash Course” linking the banking system to peak oil. In short, our entire global fiat monetary system is dependent on exponentially-increasing levels of debt. If debt does not continue to increase exponentially, there isn’t any money to pay off the interest on the existing debt and the system seizes up. Exponentially-increasing debt is dependent on exponentially-increasing economic growth which is largely dependent on exponentially-increasing resource extraction. Of course you can’t have exponentially increasing resource extraction when you live on a finite planet with a finite quantity of resources, so eventually we will reach peak oil and “peak everything” and the whole debt-based monetary system will unravel.
Due to its basic design, our current monetary system encourages unsustainable resource extraction practices. Until we move to a sustainable monetary system, we will continue to find it extremely difficult to transition to a sustainable economy. Ultimately if we are going to live sustainably on our earth we will need to reach a sustainable equilibrium where we no longer need to extract resources from the ground and are able to provide all of our energy, food, water, housing, products, etc. from renewable energy, recycled water and recycled raw materials. Every product would be designed to be “cradle-to-cradle” with the full product lifecycle from manufacturing to recycling (or upcycling) designed for sustainability. Instead of planned obsolescence we would have products designed for multi-generational longevity (like myaluminum cornhole boards!) But in order to get to that sustainable future, we need a currency that isn’t dependent on increasing economic growth.
I see two main sustainable alternatives to the current fiat debt-based monetary system:
  1. Resource-based money
  2. Cryptocurrencies

Resource-Based Money
Before the Bretton Woods Agreement, our global currencies were resource-based. The US Dollar was backed by gold. Before that, the British Pound was backed by an actual pound of silver. Going forward, we could return to this old system by having a gold or silver-backed currency where each paper or digital dollar is backed by gold or silver held in a vault which is redeemable on demand. For years people like Ron Paul have been pushing for a return to the gold standard in the US. There has been speculation that the Persian Gulf countries have been accumulating gold in order to create their own gold-backed currency called the Khaleeji. An interesting new technological twist on the gold standard is a product by Valaurum called the “Aurum.” The Aurum is essentially a sheet of gold laminated between plastic. Instead of holding gold in a vault and printing paper notes which are claims on physical gold, people could actually hold the physical gold inside of the note in their wallets. Obviously for larger sums of money (or for digital transactions) a gold-backed currency would still require gold to be held in a vault, but for day-to-day cash transactions the value of the gold could be held in Aurum and physically transferred. Obviously, this is the way cash transactions used to happen with gold and silver coins, but the Aurum allows for a much smaller amount of gold to be held in a familiar form-factor.
Besides precious metals, governments could also back their currencies with any physical commodity. OPEC countries, for example, could back their currencies with oil. Instead of holding gold in a vault, countries could issue notes that are redeemable for barrels of oil. Someone holding 200,000 Saudi Reals could call up the central bank and arrange for the shipment of 1,000 barrels of crude oil. Obviously the main problem with this system is transparency; since the wealth of the nation would be calculated based on the recoverable reserve barrels, the reserve estimates would need to be independently-variable.

In the last few years cryptocurrencies like bitcoin and darkcoin have emerged as a new asset class which could allow us to transition to a sustainable monetary system without the need for government-backed resources like gold and silver to be held in vaults. I first started investing in and blogging about bitcoin in 2010. Since then I’ve seen the value go from $1 to over $1000 and crash back to less than $300. Obviously that kind of price volatility doesn’t make for a confidence-inducing monetary system, but as adoption widens the currency value should become more stable. The reason bitcoin could provide us with a sustainable currency alternative is that the algorithm built in to bitcoin regulates the currency supply. Over time the rate of money supply for bitcoin will slow and ultimately halt at a finite amount of 21 million bitcoins. This finite supply works exactly the same way as gold or silver. Without the ability to print more money, our governments would be required to balance their budgets and wouldn’t be able to live off the “inflation tax” they currently survive on.
One of the main problems with bitcoin is that it is “pseudoanonymous” and thus is actually far more traceable than cash if users aren’t careful. This fact came to the public’s attention recently at the trial of Ross Ulbricht, the alleged operator of the online drug marketplace Silk Road. By claiming ownership of the bitcoins that were seized by the government, prosecutors were easily able to trace all of the transactions associated with those bitcoins and prove Ulbricht’s connection to the Silk Road’s illegal activity. In June of 2014 I wrote a book called “Anonymous Cryptocurrencies” (which became an Amazon #1 best seller!) about some of the alternative cryptocurrencies that offer true anonymity. Since then darkcoin has emerged as the anonymous cryptocurrency leader, offering instant and anonymous transactions – creating the world’s first true “digital cash.” In the future we may see governments adopt darkcoin (or the technology behind darkcoin) to create a sustainable currency with a finite supply that offers their citizens financial privacy.

Sustainable Banking
Until we transition to a sustainable monetary system like a resource-backed currency or cryptocurrency, we will have to make do with our current debt-based system and attempt to make it “more sustainable” in whatever way we can. One of the simple actions people can take is to switch their checking account from a global “megabank” to a local bank or credit union. When I lived in Ithaca, we had the Alternatives Federal Credit Union which invested in local businesses and even backed the local alternative currency Ithaca HoursToday in our household we bank at San Francisco’s New Resource Bank. New Resource does a great job being sustainable with our current unsustainable monetary system. They have incorporated as a B-Corporation and as a result are able to pursue many sustainability-related efforts without needing to explain to investors why such efforts don’t have a direct financial return. They also invest locally with the goal of becoming 100% invested in local businesses that are sustainability-focused; this means that they currently invest in companies like Cowgirl Creamery and Hog Island Oysters. Local banking, however, isn’t all sunshine and rainbows. Some of the annoyances we’ve endured with our local bank include:
  • Fees – local banks typically have higher fees than megabanks.
  • Locations – New Resource Bank has 1 location. Bank of America has 5,132 locations. Obviously more locations is more convenient.
  • Hours – our bank is only open 9-5 on weekdays while most megabanks are open on weekends.
  • ATM – When we visited the bank a few weeks ago the bank’s only ATM was “permanently disabled.” Thus our only way to despot checks during non bank hours is gone.
  • Fraud Lockouts – much to our consternation, almost every time we travel and attempt to use an ATM we get locked out because the bank’s hair-trigger fraud detection system thinks our card has been stolen. The bank’s website also requires that you change your password every few weeks, which is also extremely annoying. Unlike megabanks, which can spread the risk of fraud across millions of customers, local banks need to be more careful, which means more annoyances for customers.
The most basic reason for all of these inconveniences is that local banks simply aren’t able to be as profitable as global megabanks, which brings me to my final point…

One of the main threats to local banks is the Federal Reserve’s policy of keeping interest rates at nearly 0%. When rates are this low, the traditional small bank model of taking deposits and making loans becomes impossible to sustain. Banks simply can’t find enough low-risk people and businesses to lend to at the current rates to justify the risk-return equation required to maintain business as usual. Ultimately this will mean increasing fees for depositors as banks are unable to make enough money from loans to cover all of the overhead costs associated with providing depositor banking services. Not only has the FED painted itself into a corner with multi-century low interest rates, they are starving the local banks that provide the only semi-sustainable business model that could ultimately save us from our unsustainable monetary system.