Thanks for all the excellent feedback on our recent coverage of the green bubble. It’s great to see you’re as opinionated and thoughtful as we try to be. As well as willing to hear both sides of the argument.

My colleagues James Allen and Kit Winder remain as convinced as ever that this is the best possible moment to launch their Beyond Oil 3 summit. And they don’t want anyone to miss out on the boom which the green virus will trigger as it infects the entire economy, not just energy.

Today is, I believe, your second last chance to sign up to receive the summit videos for free.

Some of you, like this reader, can see the opportunity, through the veil of scepticism:

Hi Nick,

Thank you for giving the green brigade a right of reply.

Like yourself I am very sceptical of the global warming (oops sorry climate change) project fear mongering. I am however very much in favour of pursuing alternative energy sources purely on the basis that our fossil fuels won’t last forever.

The more energy we can produce from wind, tides, solar, and ground heat, the more we preserve our fossil fuels which we still need to produce almost everything we currently use. Our cars (including electric ones), computers, phones, washing machines, houses, televisions, and so much more, all utilise fossil fuels in their manufacturing process. Consequently, the more we are able to convert to alternative energy sources the longer our vital fossil resources will last.

The change from fossil fuels to green energy will not come cheaply and we will, like it or not, all pay the very high cost in one way or another. If we take electric motor vehicles as an example, currently electric cars are phenomenally expensive and they fall far short of the endurance and convenience of petrol or diesel cars. Here the current technology falls far short of a wholly practical transport solution and it will probably take another 10 or so years of further development to equal the fossil powered vehicles.

Also why are electric vehicles so much more expensive? It is not a case that electric vehicles are new. Earth moving manufactures have been producing diesel electric vehicles for years so the electrical knowledge is far from new. So, the only difference is batteries.

Presently there is an enormous amount of development work being carried out on the further development of batteries. The present battery technology uses highly expensive and not unlimited mineral resources in their manufacture. The cost of mining these also gallops up an abundance of fossil fuels.

Aluminium based batteries have shown promise in that they are capable of giving cars a high range but the down side is, they cannot be recharged so would have to be replaced. The good news is aluminium is easily recyclable.

As your green adversaries stated, there is without doubt enormous potential for investment. But in your preview of this you did make comment of the potential for boom and bust. If we invest in the successful developers, then there is great scope for boom. If an investment is made in the wrong one, and there will be plenty, there will be plenty of scope for bust.

I do believe we need to utilise ALTERNATIVE ENERGY (don’t like the green title because it isn’t green) in order to prolong our supplies of essential fossil fuel resources.

Thank you for your thought-provoking analysis of this issue.

I have no objection to you using all or part of the above should you so wish.

Regards,

A.A.

Good stuff, A.

As Charles Munger (long-time colleague of legendary US investment guru Warren Buffett) wrote, “show me the incentive and I’ll show you the outcome”. Well, governments are creating vast incentives to inflate the green bubble. The outcome will be a vast boom according to James and Kit – one that you can profit from.

But my fear remains my bias against government intervention generally, whatever the cause. In my opinion, anyone worried about climate change should be mortified that governments have picked up the baton.

The War Against Terror, Poverty, Inflation, Climate Change

In my opinion, if the government seeks to mitigate CO2 emissions to combat climate change, whatever policies it comes up with to achieve this will actually increase climate change. Somehow, in some way, I have complete faith in governments’ ability to achieve precisely the opposite of what they set out to do.

The EU’s diesel subsidies are just one example of how this has already happened. In fact, government support of polluting industries has been astonishingly vast generally speaking.

Now you might think the first step in “going green” and “net zero” is to end the government policies that incentivise pollution. But you’d be wrong.

The Guardian reports that, “The nations that make up the G7 have pumped billions of dollars more into fossil fuels than they have into clean energy since the Covid-19 pandemic, despite their promises of a green recovery.”

Government subsidies for, and favourable treatment of, fossil fuel energy has a long and sordid history. This is something that the green movement is adept at pointing out. The greens seem to think this is a counter-argument to those who believe green energy should not be subsidised. Because two wrongs make a right…

So, what is the solution the green campaigners pursue? It is not to cut subsidies for fossil fuels, as even the EU has suggested. Instead, it is to implement the same long and sordid future of subsidies and favourable treatment of green tech too…

Why have no government programmes when you can have two – one to subsidise pollution and one to minimise it?

There’s nothing like government to solve a government-created problem. And so we go on a never-ending merry-go-round.

Remember the Kyoto Protocol? Well, the joint implementation (JI) of the first commitment period of the protocol may have actually increased pollution. As one study notes:

The analysis indicates that about three-quarters of JI offsets are unlikely to represent additional emissions reductions. This suggests that the use of JI offsets may have enabled global GHG [Green House Gas – CO2 or carbon] emissions to be about 600 million tonnes of CO2 equivalent higher than they would have been if countries had met their emissions domestically.

The Guardian was a little more direct: “Kyoto protocol’s carbon credit scheme increased emissions by 600m tonnes’”.

Ooops!

So, what is the solution? Another government programme!

The EU’s carbon credits scheme supposedly harnessed market forces to reduce pollution. The trouble is that the price was too low. In fact, at the end of 2020 Euractiv reported “the global average carbon price is currently only $2 a tonne, which is way too low to trigger the kind of energy transformation needed to stop climate change.”

The solution? Another government programme!

In the UK, it’s likely to be a carbon tax. In Germany, they have already launched the National Emissions Trading Scheme. The EU is set to adopt it.

In France, nuclear energy is the solution to meet CO2 commitments. In Germany, the Energiewende is now all about “the shift away from nuclear”.

Lately, the green campaigners have started to realise that their policies will harm the poor disproportionately.

As the Financial Times notes:

Brussels’ ambitions risk throwing Europe’s poorest inhabitants further into energy poverty by making them shoulder the burden of the bloc’s rush towards net zero [carbon emissions].

Gilets jaunes anyone? The politicians are worried:

“We have to do the [green transition] in such a way that all income levels can maintain their lifestyles,” Mark Rutte, Dutch prime minister said after the May summit in Brussels. “If we run up costs because of plans drawn up in Brussels or The Hague, we will lose support for what we are doing. It is crucial we carry society along.”

So, what’s the solution? You guessed it, a government programme.

They fear that without an accompanying system of mass state subsidies and financial compensation, carbon pricing will be a regressive tool that will punish millions of Europe’s poorest families who live in rented or social housing and are stuck with petrol-driven cars — ultimately serving to undermine public support for the EU’s ambitious climate goals.

There’s nothing like a government programme to make energy cheaper to combat the government programme that made it more expensive.

Even the central bankers are getting on board. That lot, always inflating a new bubble to try and engineer a recovery from their last bubble bursting, have now taken to green energy too.

Funnily enough, bankers generally and Deutsche Bank in particular are warning their clients about the inflationary impact of this environmental campaign…

Still, with inflation above the mandated target in an increasing number of nations, the central bankers are busy backing green companies with quantitative easing (i.e. boosting the money supply by buying bonds from banks)…

In inflation does break out, it’ll require higher interest rates, which will require bailouts for firms that go bust, which will require bailouts of governments that go bust. Will central banks sell green energy bonds if – or rather when – they “taper” (i.e. reduce) or reverse QE purchases? Will they sabotage the green revolution? Will they value inflation over the existence of life on earth?

The cycle of problems and solutions provided by government is endless. That’s what makes it such a gravy train for many vested interests.

The list of causes to support is endless too. From terror to poverty to climate change – anything goes, and anything goes to fix the problems created by the first rounds of government policies too.

But it isn’t the green campaign itself I’m worried about. It’s the side effects and unintended consequences. The externalities of a green bubble, you might say, if you were being cheeky…

After all, if the campaign to cut CO2 emissions simply left its investors out of pocket if it turns out to be a bad idea, that’d be fine. You could just sell your Exxon shares and be done with it.

But the governments want to drag the rest of us with them, kicking and screaming if need be. That’s why it must be government programmes which make all this happen. Governments have the power to force those who disagree into compliance.

So, what are the consequences?

A familiar story

Back in 2001, American politician Ron Paul was busy explaining how the Federal Reserve’s interest rate policy would inflate a housing bubble, eventually triggering the bust of government sponsored entities like Fannie Mae and Freddie Mac. In other words, that housing bubble and bust was perfectly foreseeable, predictable and… profitable.

So, would you have invested in that housing bubble back then, knowing it was a bubble? It had another five years to run. A vast amount of wealth was created during that time.

Rumours are that American college students bought houses by lying on mortgage applications and, by the time they defaulted when interest rates had ratcheted up, the value of the house had spiked enough to pay off their college debt by selling the house.

So, perhaps the ability to spot a bubble suggests an investment incentive, not just doom mongering.

If you agree, why not check out Beyond Oil 3 now. You’ll find out how to profit from the green bubble in the ways we all wish we had profited from the housing bubble in 2001, the tech bubble in 1998 and the rest of them.

As the investment writer John Mauldin once told an audience I was in, “dear God, please let me invest at the beginning of a bubble, just once”. Well, here’s your chance…

Just don’t forget, bubbles burst. And when the green bubble bursts, it’ll have affected the whole economy, just like the housing bubbles did. Oh, and I expect it to increase CO2 emissions – so maybe you should worry about climate change now that governments are trying to prevent it…

Nick Hubble
Editor, Fortune & Freedom