In today’s issue:
- There is no energy transition
- Can the government afford net zero?
- Will the Bank of England pay for net zero?
This Labour government looks the real deal. They’re blocking North Sea oil, which generates tax revenue. And adding to subsidised renewables instead. While complaining about the state of the budget…
But there’s a deeper problem.
Just over a year ago, I interviewed eight experts about net zero. They came from a diverse set of backgrounds, areas of expertise and had all sorts of opinions about climate change. But they all answered my questions about net zero in the same way: a big sigh.
You see, the whole project was a bit hare brained to begin with. In a surprising amount of ways. But there was one which always stood out to me. There is no energy transition. It’s not happening.
Sure, we’ve ploughed loads of money into the project. And built lots of things. Renewables are now providing an ever greater share of our electricity too.
But is any of that the point of net zero?
If you’re the cynical type, who believes net zero is a bit of a scam designed to profit large companies and politicians’ wives, your answer would be, “Yes, it’s all going according to plan.”
Well, it was until 2021, when even that began to fall apart. Renewable stocks crashed.
But let’s give the politicians some rope to hang themselves with…
The point of net zero is total emissions. Which means phasing out fossil fuels, not just adding renewables.
Of course, renewables are extraordinarily carbon intensive if you follow their manufacturing process to the source. But that’s another story – the one we focused on in The Fleet Street Letter a year ago.
Anyway, let’s look at whether we really are abandoning fossil fuels.
Call this cutting carbon?
The news promoted by the green dream believers seems quite good, at first.
Our share of electricity provided by green energy is rising steadily. Some countries have even reached 100%. The amount of renewables being installed is huge too.
Well done everyone!
But all this is a fallacy of composition. Just because the share of our power from green energy is rising, doesn’t mean our total fossil fuel use is falling. They’re not the same thing.
Unless you assume the amount of electricity we use is stable. Which seems unlikely when we’re trying to electrify everything not yet connected to the grid. Indeed, the failure to electrify our heavy emissions is a rather important part of the story. But let’s focus on electricity generation for today.
Before we get to what’s actually happening to fossil fuels, there’s another flaw to keep in mind. Sure, some countries have cut their emissions. But that’s not relevant either. Unless you think the UK lives in its own climate change bubble?
Actually, don’t answer that…
The distinction between national and global emissions is important. National emissions could be falling because we’ve exported our high emissions industries, such as mining and manufacturing, to other countries, for example. So our emissions would be going down, but we’ve actually added to the global total.
My point is, it’s all too easy to fudge the numbers by measuring them incorrectly. Perhaps deliberately, to make it look like we’re making progress.
So, what if you look at the correct numbers? The amount of fossil fuels globally is as close as we can get. And those figures suggest this ship isn’t going to miss the climate change iceberg.
It’s not just that the turning circle is too large. We haven’t even begun to turn the wheel.
Fossil fuels are booming
Total global fossil fuel use is rising, steadily. Even coal continues to grow, despite repeated annual projections to the contrary coming out each year.
That’s because total energy use is growing so fast that it offsets the impact of a rising share of renewables. In other words, renewable energy growth is faster than fossil fuel growth, but it is not offsetting it. It’s complementing it. And nothing adds emissions like a fossil fuel boom and a renewables boom at the same time.
BP is now forecasting coal demand to still be higher in 2050 than in 2000, for example. And the favourite fuel of green dream believers, gas, is soaring in use.
There are many reasons for this steady increase in fossil fuel use. The key is energy demand in the places where the West has offshored its energy-intensive industries to – places like China and India. They’re expanding all forms of energy so fast it makes our changes look boring.
That’s not an argument we shouldn’t be doing anything about pollution. It’s an argument that climate alarmists should be in an absolute panic by now. Tweeting about renewable energy’s share of electricity generation in their own country is like rearranging deck chairs on the Titanic.
But even in the green economies of Europe, things are not going according to plan.
You can take the coal out of Germany, but you can’t take Germany out of coal
After felling a wind farm and undermining the town of Luetzerath to get at the coal underneath, the German green coalition government is ready for more. Now it’s set its sights on the coal underneath the town of Muehlrose in the far east of the country.
I’d love to know what my family in Essen would think about this. They were coal miners, once. And Essen was a coal mining hub of West Germany. But the mines were shut down and the city even won an award for being the greenest capital city in Europe when I was there last.
My grandmother took me to a coal mine that’d been turned into a museum. The last thing we did together.
The German government also revealed that its commitment to phase out coal by 2030 now won’t even be backed by law…
And their decision to phase out nuclear is now looking so stupid that the German parliament has opened an investigation into the politicians who made the decision…
Germany is a clear warning for this Labour government’s energy plans. And it’s not just because of the energy itself.
The energy transition is expensive
Given the extraordinarily high correlation between electricity prices and green energy, an additional concern is emerging. If net zero is expensive, can we afford it?
The Labour government thinks so. But I’m growing increasingly worried its net zero obsession will trigger its “Liz Truss moment”. We know just how fragile UK government finances are. Can we really add hundreds of billions in debt for renewables and energy infrastructure? While also forgoing the royalties from future oil and gas production?
Energy has been a budget backing part of the UK economy for a while now. We are trying to transition to something that is the opposite. This seems to be a radical shift that isn’t priced into the UK government bond market… yet.
If it is, there will be hell to pay.
Of course, you could argue that supporting the green energy transition by printing money is just the sort of thing central bankers at the Bank of England might want to spend their time doing.
Just as the pandemic gave the Bank political cover to support the bond market in 2020, the climate crisis could allow the Bank to back the Labour government in coming years.
But you should think carefully about what this really means. Who is in charge of the country if the government can only spend money with the central bank’s approval? And what do central bankers really want the country to look like?
Hint: our Bank of England governor has been busy promoting climate action alongside double-digit inflation.
Until next time,
Nick Hubble
Editor, Fortune & Freedom
