Charles Hall: Energy, Biophysical Economics and EROI

Thanks to Greenwire and reporter Nathanial Gronewold, an article on Charles Hall and the Biophysical Economics Conference appeared online in both the New York Times ("New School of Thought Brings Energy to 'the Dismal Science'") and Scientific American ("Does Economics Violate the Laws of Physics?").

Like Hall, many biophysical economic thinkers are trained in ecology and evolutionary biology, fields that do well at breaking down the natural world into a few fundamental laws and rules, just like physicists do. Though not all proponents of the new energy-centric academic study have been formally trained in economics, scholars coming in from other fields, especially ecology, say their skills allow them to see the global economy in a way that mainstream economists ignore.

Central to their argument is an understanding that the survival of all living creatures is limited by the concept of energy return on investment (EROI): that any living thing or living societies can survive only so long as they are capable of getting more net energy from any activity than they expend during the performance of that activity.

I'll add some notes from Hall's 1986 classic Energy and Resource Quality: The Ecology of the Economic Process (co-authored with Cutler Cleveland and Robert Kaufmann).

The most important point about energy and its relationship to other resources in both biological and economic systems is not that “everything can be reduced to energy” (which is false) but rather that every material (and most nonmaterial) resource has an associated energy cost, so that every potentially limiting resource is limiting in part because its energy cost is too high. (p.8)

All the creatures of the Earth face a common constraint: the total solar energy income is relatively fixed, changing little from year to year or century to century. … In some special cases animal and even plant groups are what we call energy subsidized; they are able to exploit the solar energy that has been captured over a region larger than the one in which they live. … An interesting parallel exists between a subsidized animal community, such as the oyster reef, and modern industrial society in that both depend on energy subsidies in amounts much greater than the direct solar energy available to them. (p.9-10)

Living organisms maintain their organized states by capturing high-quality, low-entropy energy and matter from their environment, using it to grow, repair damage, and reproduce, and then releasing that energy back to the environment in the form of low-quality, high-entropy waste heat. (p.10)

The basic tenet of an energy-based approach to selection is that organisms act so as to maximize their reproductive potential by selection for the largest difference between energy gains and energy losses over time. (p.12)

Particular characteristics of the environment – what we call various attributes of resource quality – influence the energy costs and gains of living. A most important attribute of this is the trophic productivity of the environment, that is, the fundamental rate of energy fixation by the green plants of that environment or the additions from neighboring environments. (p.13)

We view the course of natural selection over the past there and one-half billion years as a series of energy investments into different life possibilities. … One of the important criteria for these energy investments is that they be favorable: a favorable investment is defined as one where more than 1 kcal is returned per kilocalorie invested and where a greater return on investment is achieved relative to alternative viable choices, thus favoring the survival of the organism and, ultimately, that investment pattern. … For an organism to have energy available for maintenance, growth, and reproduction, it must obtain more energy from its food than the amount of energy it uses to capture it. (p.16)

The amount of economic work possible depends on both the quantity and quality of energy directed to the task and the efficiency of the process. The process in which society invests some of its already extracted (surplus) energy to make available additional qualities of fuel is called an energy transformation process. This aspect of fuel quality is measured by energy return on investment (EROI). EROI is the ratio of the gross amount of fuel extracted in the energy transformation process to the economic energy required to make that fuel available to society. … We use EROI and the related ideas of economic work and output per unity of energy invested as the conceptual glue to bind the chapters of this book. (p.28-29)

The ability of the human economy to convert natural resources to useful structures depends on the natural energies used in the past to upgrade these elements to natural resources and the economic energies available to convert these resources to useful goods and services. … Energy is the only primary factor of production because it cannot be produced or recycled from any other factor – it must be supplied fro outside the human economic system, Labor, capital, and technology are intermediate inputs because they depend on a net input of free energy for their production and maintenance. (p.36-40)

We view technology as simply the specific methods by which energy is applied to upgrade and transform natural resources. (p.42)

The relationship between energy and human values … is not a strictly deterministic one. … The important point is that the type, quality, and quantity of natural resources, and fuel in particular, set general but definite limits on the development of human values and the physical implementation of human ideas. (p.70)

The United States and other industrialized nations are faced with a remarkable quandary not previously encountered in human history. Natural resource shortages and energy transitions have come and gone throughout history of civilization but never before has a society with such a sophisticated physical infrastructure and a high material standard of living been so dependent on a finite store of low-entropy matter and energy.

The question before us is a simple one: Can human technologies circumvent the declining quality of fossil fuels as it did in many (but not all) past resource shortages, and thereby allow economic growth to continue at rates comparable to those we’ve experienced since the Industrial Revolution? No definitive answer is available at this time. … Yet we cannot rule out the possibility that technical breakthroughs might make such growth possible. …

The relative risk and return of the two strategies can be analyzed by applying the logic behind Pascal’s wager (Daly, 1977). We can adopt the omnipotent technology hypothesis and later find it to be false, or we can reject it and later find out that the necessary technical breakthroughs do in fact exist. …

We must realize that the remarkable social achievements of the past 150 years could not have occurred without empowering labor with greater quantities of energy, particularly fossil fuels. In the future genius must work toward replacing the bludgeon of fossil fuel with the rapier of knowledge. (p.534)