In today’s issue:
- Governments are abandoning net zero
- Companies are abandoning net zero
- The UK is turning back to net zero
Sometimes you’ve got to see the UK from the outside to understand what is really going on.
The immigration debate that is raging across the country is a prime example. Some of the arguments look very odd for their failure to identify the UK is far from alone.
Blaming local British issues for something that so many countries face at the same time makes commentators look clueless. To figure out what’s really going, you’d need to identify what so many countries have in common. Why are they all facing the immigration issues at the same time?
So many of the supposed consequences of Brexit showed up in places like Australia and Canada too. But few pointed this out at the time.
The debate about Covid lockdowns carefully ignored the countries that disproved any given theory. In fact, not many theories of what happened fit the international data well.
But one topic dominates the delusions of the domestically challenged…
We’re going it alone
Almost two years ago, we noticed the UK government’s pivot away from net zero commitments. It was at the fringes at first. Removing commitments and targets. Delaying bans and requirements.
But the Titanic had begun to turn nevertheless. The big question back then was whether we’d miss the iceberg – blackouts, a lack of heating, fossil fuel shortages, high energy prices, and so much more.
Just as the UK led the charge into net zero with its extraordinary legal commitment in 2019, it was also leading the way back out in 2023.
Now, another U-turn. Labour is busy bringing back net zero’s long list of policies. Just as the rest of the world turns on the commitment.
Comparing the UK’s policy reversal reversal to the rest of the world really highlights just how out of step our government really is.
Better UK than me
“New Zealand scraps clean, green policies to boost economy,” reports Reuters. The list of changes is remarkable for being precisely the opposite to our own government’s reversals. New Zealand will “reverse a ban on oil and gas exploration, push the pricing of agricultural emissions back five year and encourage more mining.”
Bloomberg added this:
Wholesale power prices have more than doubled over the past month, according to data supplied by the Electricity Authority, partly because of low hydro lake storage levels. The country is also short of natural gas, and Jones said work is underway on whether to start importing liquefied natural gas or liquefied petroleum gas.
In the flood of recent elections, Europeans largely voted for more climate sceptic and fossil fuel-friendly political parties. The policies have begun to change.
The Dutch are set to reverse heat pump and road speed limit policies. The combination of changes mean the Netherlands is very unlikely to reach its net zero targets.
The German government considers abandoning nuclear power more important than cutting emissions. The next German government is even less likely to favour green policies.
In Australia, the dogmatic renewables approach is delivering opinion polls into the hands of the opposition party, which has turned in favour of nuclear.
Governments are also beginning to realise the whopping cost of electricity infrastructure if we continue to transition towards renewables. In The Fleet Street Letter earlier this year, we estimated it’s the biggest infrastructure project in history. That’s just the transmission and distribution network.
At a time when government budgets are blowing out and debts are dangerously high, it’s not clear we can afford to transition to renewables and commit to electrification at the same time. The Institute for Fiscal Studies warned about this before the election.
Meanwhile, outages and other signs of grid instability are steadily growing worse around the world. If you focus on the news within each country, this is barely noticeable. But if you use a global outlook, the stream of near misses is getting remarkable.
No doubt, when a blackout hits somewhere, everyone will blame local politics and local polices. We need to realise it’s an international problem to the extent that so many developed countries are transitioning to renewables. Who happens to go dark first hardly matters.
Vote with your heart, invest with your head
The shift away from green tech continues to show up in financial markets too. The green tech bubble burst in 2021. But the fallout continues.
Bloomberg:
The US residential-solar industry is under serious threat — a vulnerability borne out this week by the bankruptcy of SunPower Corp., one of the sector’s most venerable names.
Crucially, as one CEO explained, “The enemy is growth.” Apparently solar companies have been expanding rapidly by seeking new funding from external sources rather than the novel idea of running the company at a profit. Of course, as subsides stopped funding the growth, the truth came out.
Now we have solar companies going bust and a shortfall of production capacity to meet solar targets.
Capitalism is all about allowing profit and failure to signal where resources should be allocated. Ignoring the signals causes misallocations of capital – wasted investments. The lack of profits in the renewables space is a signal that we’ve made a big mistake.
While green tech struggles, more and more companies abandon their own attempts to transition.
Mining giant Glencore abandoned its plans to exit the coal business because it’s just too profitable. “Cash is king” explained the CEO. And, “The ESG pendulum has swung back.” Apparently, 95% of shareholders backed the decision to retain coal after all.
But here’s what makes Glencore’s reversal so intriguing:
Investors had initially supported the company’s decision to ditch coal. Now, [the CEO] said, they were strongly against it. Asked whether European shareholders differed from their American counterparts, Mr Nagle simply replied: “No.”
So coal is back by popular demand!
The likes of Shell and BP have made similar reversals in their businesses.
And the businesses that decided to divest their fossil fuel projects are regretting it. Anglo American sold its coal business, only for the new owner to ramp up production. A reminder that the whole divestment story was merely virtue signalling anyway.
A numbers game
As with the environmental, social and governance (ESG) movement, the activists who engineered the net zero efforts are having second thoughts about how it was implemented.
According to the Financia Times, Big Tech firms are lobbying to rewrite how net zero rules are implemented. They want to hide their vast emissions in the accounting of net zero.
We also saw the Guardian newspaper profile how the wood-fired Drax power station actually pollutes a vast amount more than coal in practice. The moral of these stories is that how things are measured can determine the outcome. And, surprise, surprise, big companies write the rules.
Electric vehicles continue to lead the reversal against net zero, with sales, production and investment projects falling by the wayside weekly. Lately, you can add fires and car companies’ secret schemes to inflate EV sales to the list of dramas…
Perhaps most extraordinary of all is the collapse in hydrogen. The media and corporate sector has already turned on the fuel that was supposed to get us over the line to net zero. Now we just need to wait for the politicians to admit it. And reveal how they’ll fill the vast hole it leaves.
Wherever I look, I conclude the green bubble has burst. Only the UK is an outlier…
The consequences for us could be shocking.
Until next time,
Nick Hubble
Editor, Fortune & Freedom
