Which sort of transition is more controversial these days? Gender transition or energy transition? Net zero or Tavistock?

From unquestionable orthodoxy to favourite opinion column punching bag, the worm has turned so far so fast on both issues that I’m still feeling dizzy from the sudden shifts.

Luckily, for both of us, only one of the two is within the remit of Fortune & Freedom… as far as I know, anyway.

The world has turned against net zero to the point that even Germany and France are having second thoughts. And voicing them too!

The French, on the back of banning short-haul flights to cut carbon, have announced that they won’t implement further EU energy transition policies unless other nations get their act together.

The Telegraph summed it up:

“I prefer factories that respect our European standards, which are the best, rather than those who still want to add standards and always more – but without having anymore factories,” he told the crowd this month.

Macron was underlining a speech he had made just a day earlier at the Elysee Palace. Outlining his green industrial strategy, the French president called for a “European regulatory pause”, adding: “We have already passed a lot of regulations at the European level, more than our neighbours… Now we have to execute, not make new rule changes, because otherwise we will lose all the players.”

This is a rather startling change of course.

The idea that net zero policies have costs is a real surprise to anyone who believes government figures, which claim they’ll actually increase GDP growth by 2%!

In reality, the rules risk shutting down the remaining industries not yet shipped overseas, where their emissions don’t count, but we can still buy their products.

And consider the other specific point Macron made. Until recently, the argument that we should take into account what everyone else is doing on the energy transition was supposedly a climate change denier talking point.

Many said that the UK’s emissions were such a small part of the global total that we shouldn’t undermine our economy to achieve net zero. It wouldn’t make a significant different to carbon, let alone the climate, after all.

I actually disagree with the logic. The need to do the right thing is not changed at all by other people’s behaviour on the matter, in my view. Even if it makes you less well off, you start by making your own bed, not demanding others make theirs.

Not that I believe net zero is the right thing to do for a moment, but you get the idea.

Over in Germany, the instigator of a ban on fossil fuel cars is now an opponent of the proposal. Why the change of heart? Don’t they want to save the planet anymore?

Both the French and the Germans seem to be hitting “pause” on EU level net zero policies over mere technicalities. I suspect they sense something much deeper and their publicly claimed reasons for opposing more net zero policies are just dodgy excuses.

More on what’s really going on in a second.

In Brussels, the revolt has already been noticed too. The European People’s Party has called for a moratorium on EU green laws. And they’re the leading majority!

Even in the towers of the European Commission there are rumours on such a halt.

So much for saving the planet…

The UK hasn’t quite realised that the rest of Europe has jumped off the runaway train that’s net zero. The UK government affirmed its commitment to ban sales of new petrol and diesel cars in 2030 and has no plans to even renew it after the EU had trouble passing it at all…

Over in the Telegraph, Lord Frost has jumped on the bandwagon of his close personal acquaintances in the French and German government. “Net zero zealots are treating the public like fools,” he complains.

And yet, we vote them into government!

But what does all this mean for investors?

We’re talking about a radical shift in the most radical government policy… ever.

At the moment, claims independent energy consultant Michael Liebreich, “There really is a risk of deindustrialisation, particularly in Northern Europe, South Korea and Japan. But we’re sort of pretending that there can be some kind of magic wand that can solve the problem.”

In the US, a distant presidential hopeful of the Republican party went right out and said what I suspect governments around the world have finally figured out: “The climate agenda is a lie: fossil fuels are a requirement for human prosperity.”

The man who said it was, of course, promptly censored off the platform he said it on…

But if this worm keeps turning and that line soon becomes as mainstream as saying “net zero zealots” then that’s a profound shift in the regulatory environment for fossil fuels.

I mean, the industry faces going from being the most important in the world to being phased out to being a “requirement for human prosperity” all in the space of about three years!

Can you imagine a more radical shift in prospects?

But there’s a small problem. Just as you can’t set up a net zero energy system over the course of a few decades, you can’t shift a fossil fuel energy system from expecting to be phased out back to being essential. It takes time, money and work.

Politics is a rather problematic hindrance of all three, with bureaucratic regulatory processes, ESG constraining funding requirements and disincentives to get the job done.

But the three factors are also the very definition of generating investment returns. Investors fund those willing to do the work and wait to get the returns.

What determines the size of those returns in energy markets tends to be the commodity cycle of over and underinvestment in future supply. When prices are high, it encourages investment, which leads to a subsequent glut. The resulting lower prices discourage investment, which leads to a shortage. And so we get a repeating cycle of overcorrections due to the time it takes to get supply online.

But over the past few years, the government has imposed a future supply cut with net zero motivated policies. Combine this with an unexpected surge in demand and you get quite a boom in prices.

Until next time,


Nick Hubble
Editor, Fortune & Freedom