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Why Local Matters, and Why It’s Inevitable

February 5, 2015

Below are the transcript and slides from a very short (~5 minute) presentation I gave at a recent Confluence Philanthropy gathering.

[slide 1]Thank you Dana for the invitation and introduction. I want to talk a little about why place-based investing is so important. But in order to do that, I need to take us back in time a bit.

[slide 2]Something remarkable happened a couple hundred years ago, though it’s doubtful that people recognized its importance at the time. We figured out how to use this stuff.

[slide 3]The industrial revolution utterly transformed how we lived, in ways that would have been unimaginable to 18th century Britons. When we think of the industrial revolution, we tend to think of technology. But the industrial revolution was really a fossil fuel revolution.

[slide 4]Before fossil fuels, societies were powered entirely by renewable resources: wood; wind; human and animal labor. We had global trade, agriculture, the arts and science, but once we discovered how to harness the power of fossil fuels it was like Bruce Banner turning into [slide 5] the Incredible Hulk. Why? Because the amount of dense, easily transportable energy stored in coal, oil, and natural gas was simply staggering. Let’s look at oil as an example.

[slide 6]One barrel of oil contains the energy equivalent of about 25,000 human labor hours.1 So it’s no wonder why we mechanized… well, everything.

[slide 7]Why farm like this… [slide 8] When we could farm like this? Why wait until June to eat blueberries when they can be grown and shipped to you for cheap from Mexico?

[slide 9]Why manufacture t-shirts in the U.S. where we grow our cotton, when we could more cheaply have them assembled piecemeal in three different continents before selling them for $4 at Wal-Mart?

[slide 10]Why build products to last when it’s cheaper and more profitable to design them to become obsolete and easily replaced?

[slide 11]Cheap fossil fuels allowed businesses to replace human labor with machines that could be much more productive, or with cheaper labor from overseas. And it helped consolidate wealth in the hands of corporations who were the most successful at being the most efficient.

[slide 12]As trade expanded, the US economy became more oriented around the financial and service sectors. Wages stagnated and the wealth gap grew.

[slide 13]And we’ve come to discover that fossil fuels aren’t so cheap, after all. For one thing, the days of cheap and easy oil, coal, and natural gas are gone. It’s why industry is blowing up mountains to get at coal, cutting down boreal forests to scrape and cook bitumen, fracking farm land, and drilling miles down in deep water.

[slide 14]These more extreme forms of energy production are not only more environmentally ruinous, they require much more capital. Again, let’s look at oil.

[slide 15]Right now, everyone’s talking about the huge drop in oil prices that took place over the last few months. But ignored is the reality that over the last eight years oil companies have had to spend 11% more annually on capital expenditures to gain less than 1% growth in crude oil production. The drop in oil prices means they can’t afford to invest as much in future production. The environmentalist in me thinks that’s great. But the energy realist in me recognizes how much our modern life is dependent on growing supplies of oil.

[slide 16]And our vulnerability to energy constraints isn’t the only cost of the fossil fuel age. Everyone in this room is aware that the global temperatures are rising as a consequence of the burning of fossil fuels. But our growing consumption of fossil fuels has put us on an unsustainable path nearly everywhere you look. Reversing these trends is not simply a moral obligation. It’s the task of the 21st Century. It’s the task of today.

[slide 17]So where does “local” fit in? Of course, “going local” doesn’t solve everything, particularly problems—like climate change—that are global in nature. But it is a critical strategy in reversing and responding to many of our environmental, energy, economic, and equity issues.

[slide 18]By growing local, renewable sources of energy we can both reduce greenhouse gas emissions and minimize the risks of energy supply or price shocks. By growing local, organic food production we can improve health, mitigate climate impacts, and build food security. By growing the local economy we can create true livelihoods, reduce our vulnerability to global supply shocks, put ownership in the hands of employees and communities, and address economic inequality.

And finally, by re-localizing the production of energy, food, goods and services, we can build resilience to inevitable shocks and put us on a path towards true sustainability – one in which we live within nature’s budget.

[slide 19]Going Local is not the end-all-be-all, but it’s certainly the place to start. Thank you.

1. One barrel of oil has 5.7 million BTU which translates to 1700kWh. The average human works at a power output of about 70W. If you multiply that by 8-9 hour workday you get about 6/10 kWh of work per day. If you divide 1700 by 0.6 you get 2833 days. Each work year is about 250 days so about 11 years of labor. The average American salary is ~$45,000 per year so 11 times $45,000 equals $500,000.