He said that fossil fuels are 'natural capital' and unfortunately people are treating them as income items. If we treated them as capital items, he said, we should be concerned with conservation.
Schumacher clearly pointed out that modern economics does not distinguish between renewable and non-renewable materials, as its very method is to equalize and quantify everything by means of a financial tag. He also seriously questioned the idea of unlimited and uncontrolled economic growth until everybody is saturated with wealth, on two counts: the availability of basic resources and, the capacity of the environment to cope with the degree of interference implied.
Worldwide discovery of oil peaked in 1964 and has followed a steady decline since then and as a result, global oil production is rapidly approaching its peak. Although fossil fuel availability in 2008 indicates that the fossil fuel era can be extended 20 years beyond Schumacher’s prediction, his core argument is still valid and increasingly relevant. More importantly, as Schumacher quite rightly pointed out, environmental issues have now reached catastrophic proportions. If global warming it to be limited to 2 degrees centigrade, then humankind can only burn 25% of the remaining coal reserves. This implies that the fossil fuel era of the human civilization will come to an end by 2030.
Global fossil fuel consumption is currently following an 'exponential growth curve'; but what scientists suggest is a 'bell curve' for ensuring sustainability. The leaders and policymakers in the developing world are however planning to follow an 'S curve' which is unrealistic given the current levels of consumption, scarcity of resources and environmental constraints.
Sri Lanka is a lower middle income country with a population of about 20 million. Its per capita energy consumption is 0.4 toe and it is far below the average of 1.02 toe for lower middle income countries. Though there is a carbon space for Sri Lanka to emit more in the context of ecological justice, the Government of Sri Lanka has recognized the importance of deviating from the fossil fuel dominant “business-as-usual” generation expansion due to non-availability of coal reserves in Sri Lanka. It is committed to tackle climate change issue on moral grounds. Sri Lanka has expressed its intensions for bypassing carbon intensive pathways and work towards achieving sustainable development.
The electricity demand in Sri Lanka has increasing at a rate of 7% and the government target is to manage the demand to reduce business-as-usual demand increase by 10% by 2020. Further the country is planning to maintain a 40% share of renewable energy in Sri Lanka until 2020 by tapping non-conventional renewable energy resources such as biomass, wind, solar and ocean energy. Further, the government has indicated its commitment to achieve carbon neutral growth in the power sector by 2020 and to follow a carbon emissions reduction pathway after 2030.
If the government is to achieve these targets then it is necessary to remove key technical and economical bottlenecks. The key technical constraint is for the system to absorb power from most of the renewable energy sources is due to their intermittent nature. A storage mechanism is needed to address this issue and the government is seriously exploring the possibility of introducing pumped water storage power plants to Sri Lanka for removing this technical barrier. The major non-technical constraint is the widespread myth that renewable energy is expensive. Based on Schumacher's principles it is possible to prove that both renewable energy and energy efficiency technologies are economically more feasible than their fossil fuel counterparts. The ultimate solution to multiple global crises, as Schumacher pointed-out few decades back subsequent to his work in Burma as an economic consultant, is the 'middle path' or ‘Buddhist Economics” which integrates sustainable lifestyles, energy efficiency and renewable energy.