Lithium and the New Techno-economic Paradigm

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Lithium Economics

Lithium and the New Techno-economic Paradigm

Originally published on Jan 08, 2008

Juan Carlos Zuleta*

Peak oil and climate change appear to signal the new turbulent days to come in the global economy. As a number of independent studies have recently argued, global oil production may have already peaked (or will do so in a couple of years). If this presumption is correct, oil production, which currently accounts for more than 43% of world energy consumption (and 95% of global energy used for transportation), will fall until all recoverable oil is exhausted within a few decades. Experts predict that currently known alternative sources of energy (e.g. ethanol, bio-diesel, biomass gas-to-liquid, coal gas-to-liquid, oil shale, and hydrogen) will make up for only a small part of the break between dwindling production and escalating demand. Insofar as global oil demand will continue to increase, a diminishing production may generate even higher energy prices, accompanied by inflation, unemployment, and eventually economic depression. 

To the extent that oil constitutes the main fuel of the global economy, its depletion could result in global economic catastrophe and population decline. In this context, not only oil-exporting countries may substantially reduce their sales abroad of the fuel, but also some of them may actually become net importers of it. According to a recent report by CIBC World Markets, rising oil consumption in Russia, Mexico and in several members of the Organization of Petroleum Exporting Countries (OPEC) would reduce oil exports by as much as 2.5 million barrels a day by 2010, or nearly 3% of global oil demand. Similarly, The New York Times reported in December 2007 that this change of roles had already happened in Indonesia, will occur in Mexico within five years and could be followed later by Iran, the world´s fourth-largest producer of crude oil.

However, peak oil does not necessarily mean that the world is actually running out of all the fossil fuel. There are still plenty of non-conventional sources of oil (e.g. tar sands and heavy crude) to be discovered, extracted and processed, but they are much dirtier and more contaminant than conventional oil (and natural gas) and thus pose a major threat to society and the survival of the planet. As a new investigation indicates, after more than 200 years of continuous energy consumption in the world, carbon dioxide emissions (of which oil accounts for a substantial part) increased at 1.7 percent per year (about 20 fold). As a result, the average global temperature went up by 0.75 degrees Celsius since pre-industrial times, the warmest period occurring during the last decade or so. The implications of such development are enormous. They have manifested themselves essentially in terms of shifts in the intensity and frequency of extreme weather events (e.g. storms, heat waves, cold spells, extreme precipitations, floods, hails and droughts) with high damage costs to society, both in the industrialized and the non-industrialized countries.

These two problems will force most countries to reduce both their demand for oil in response to an ever-diminishing supply and their carbon dioxide emissions to avoid global warming. This will only be possible through a major transformation in the global automotive industry: the transition to electric propulsion. Following General Motors´ announcement in January and June 2007, to launch by 2010 the first 60,000 mass-produced plugged-in hybrid cars with lithium-ion batteries, nowadays practically all major car producers in the world are engaged in a fierce competition for a share of this promising market. In this connection, lithium, a new advanced material with countless applications in different industrial sectors, may become a key factor for the emergence of a new techno-economic paradigm. The concept, coined by Carlota Perez back in the early 80s, refers to a series of fundamental changes in technology systems with far-reaching effects on the behavior of the entire economy. This type of technical change leads to the appearance of a new range of products, services, systems, and industries, affecting directly or indirectly almost every branch of the economy. It involves changes not only in engineering trajectories but also in input cost structure and conditions of production and distribution throughout the system. 

Five techno-economic paradigms have been identified in modern history: First, the industrial revolution, UK (1769-1830); second, the age of steam and railway, UK (1829-1873); third, the age of steel, electricity and heavy engineering, US and Germany to Europe (1875-1918); fourth, the age of oil, automobiles and mass production US to Europe(1908-1974); and fifth, the age of information and telecommunications, the US to Europe and Asia (1971-200??). To the extent that the main elements of each techno-economic paradigm arose in the previous one, it may be possible to identify the key features of future paradigms by looking at today´s infant industries. In this connection, some economists have recently indicated that the next techno-economic paradigm will have to do with the manipulation of organisms (and constituents thereof), information and materials through Nanotechnology, Biotechnology and Bioelectronics. This perhaps explains why the latest breakthrough in lithium-ion batteries, reported in the January 2008 issue of the scientific journal Nature, has come precisely from the field of Nanotechnology.

* Economist, M.Sc. in Agricultural and Applied Economics from the University of Minnesota and Ph.D. studies in Economics at the New School for Social Research.

jczuleta@gmail.com

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