We’ve seen a lot of financial fads play out over the past few decades. Tech stocks, house prices, bonds, and plenty more assets all went the way of the Grand Old Duke of York — all the way up and all the way back down again. But it’s looking like climate change is the latest bubble to burst.
The Germans are already busy felling windmills to get at the coal beneath them. And no wonder, with coal leaving wind in the dust for dominance in German electricity production after a 35% jump. It only took a few months to reverse Der Spiegel’s headline, ‘Wind Power Substitutes Coal as the Most Important Energy Source in Germany’.
The new Swedish government has abolished the Ministry of Environment, which has been around since the ‘80s. The portfolio still exists, but it’s been moved into the enterprise and energy unit. A sign of the times, and not just in Sweden.
Bloomberg reports on the UK’s latest effort to support renewable energy: ‘UK to Cap Revenues of Renewable, Nuclear Power Producers Starting in 2023’.
Yes, cap revenue, not subsidise…
But not all forms of green energy are being dragged down. Faced with a shortage of electricity in many places, one government proposal is to use some of that valuable electricity to produce hydrogen…
That’ll solve it…
Greenwashing and greenhushing have taken over from ESG as the themes most covered by the media. In case you didn’t know, because I didn’t, greenhushing is the practice of keeping your company’s environmental efforts secret to avoid any scrutiny.
How’s that for a shift!? From virtue-signalling PR stunts to undercover gardening in the space of a few months.
Of course, it’s understandable. As American philosopher Eric Hoffer famously wrote, ‘Every great cause starts as a movement, becomes a business and eventually degenerates into a racket.’
We don’t need to guess where we were at in that sequence back in 2021. Green tech investors made off like bandits. I watched them jealously. But, as every good communist knows, after the racket comes the consequences.
Bloomberg uncovered that business executives are already worried about this:
‘Survey findings suggest that the stigma of so-called greenwashing is so feared that corporate executives will do anything to avoid being accused of it.’
Anything?
Speaking of which, the West is now so desperate to encourage the use of dirty fossil fuels that its politicians have proposed oil and gas price caps.
Not so long ago, they were proposing minimum prices to disincentivise using fossil fuels…
Since announcing the policy to cap prices, European and US gas prices went negative…yes, negative.
And in the midst of the EU’s attempt to cap fossil fuel prices, the eurocrats realised that this would allow Brexit Britain and stubborn Switzerland to siphon off cheap energy from the European market. This is an epic dose of karma, given the history of negotiations over energy markets between the EU cartel and what it considers to be its dependencies.
Even more ironically, the American president is practically begging companies to produce more oil! He’s even releasing the dangerous stuff from the government’s reserves, presumably to try and fight the coming Russian winter with a little more global warming.
A popular cartoon in a German newspaper shows a German standing on a ladder using a handheld fan powered by French nuclear plants to make the local windmills turn. Cartoonists would’ve been fired for this sort of heresy just months ago.
The Germans have finally given in on boycotting nuclear power too after leading members of the governing coalition described such a policy as ‘madness’ only weeks ago…
While the French have discovered that corroded pipes will leave only half of their nuclear fleet operational. Anyone want to serve on a French submarine?
In Australia, things are just as bizarre. Western Australia is experiencing a coal shortage and may have to import the stuff for years. Other parts of Australia are worried about gas shortages. Only a civil servant could pull off this sort of thing.
In the Australian electricity market, according to the grapevine, power companies are having to make vast investments into voltage optimisation infrastructure because solar has destabilised the grid.
To sum up, it seems to me that the world’s climate change-induced trends are reversing. Or just causing more trouble than they’re worth.
So the first-order effects of truly mad energy policy are now there for all to see. But let’s consider the second-order effects…
While coal stocks and, to a lesser extent, oil stocks have outperformed their peers dramatically this year, green tech has had a very rough year in the stock market.
But it’s not actually the financial effects that I’m most interested in. It’s the social and economic changes that are happening.
CNBC reported that at the height of the electricity price crisis in the UK, ‘EV charge points in Britain are now nearly as expensive as gasoline’. Adjust for the purchase price of the car, and you get humiliation.
The need to secure energy has become a global scramble, with the EU soaking up the gas that was once meant for other places. Those places unable to outbid wealthy Western nations are now left high and dry. This is leading to serious economic and social instability.
Because energy is a crucial import for many countries and because it must be purchased in US dollars, the energy crisis has had the same effect as a foreign currency-denominated debt crisis.
I better explain that…
Because central banks can print money, investors often don’t trust governments enough to lend them money with a loan denominated in their own currency. It could just be printed up to repay the loan, leaving the lender bearing the foreign exchange losses.
In the past, countries got around this by borrowing in the currency of the lender, such as US dollars or euros. But this creates a new risk. If the country’s exchange rate falls, then the debt becomes more expensive to repay.
This can cause a downward spiral as a panic over the inability to repay the debt causes the currency to outright collapse.
If a country is forced to buy a lot of energy imports, then it faces the same scenario. The more the currency falls, the more expensive energy imports become. And the more expensive they become, the more turmoil in the economy, making the currency fall even more.
That’s why IMF bailouts of governments are running at a record clip in 2022. Countries cannot afford their energy bill.
It’s not just countries going broke. Companies are, too, across Europe especially.
But the change has been social too. Drivers are dragging protestors off their anti-emissions roadblocks. Defacing art is no longer considered acceptable for those trying to save the planet (unless the artwork is a sculpture of someone right wing and racist). And some marketing genius at Porsche just came up with an absolute masterstroke:
‘Nine of us glued to the floor and some of us on hunger strike until our demands to decarbonise the German transport sector are met.
‘[Porsche] told us that they supported our right to protest, but they refused our request to provide us with a bowl to urinate and defecate in a decent manner while we are glued, and have turned off the heating.’
It makes me warm inside. Only the Children’s Crusade ended more ignobly than that.
Worldwide, professional virtue signallers are learning that actions have consequences and policies create problems. The Titanic is turning in response. Shame we had to learn the hard way…
Until next time,
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Nickolai Hubble,
Editor, The Daily Reckoning Australia Weekend
