If you ask me, it’s impossible. And politicians know it’s impossible. But that doesn’t mean they won’t try to reach net zero anyway.
The real question for investors is how they’ll try to do it. And then how to benefit accordingly.
That was my theory, anyway. Until this week. Because Bloomberg claims to have found the answer. But it’s too terrifying to invest in.
We can achieve net zero after all, claims Bloomberg. We just need to put the entire global economy on “a war footing” to do so.
This might sound like a sensationalist headline. But they weren’t kidding. They called the piece ‘The Brutal Economics of Reaching Net Zero’ for a reason.
A lot of reasons, actually. And they are brutal for investors, car owners, holidaymakers and anyone who likes air conditioning.
You and I might read the list of sacrifices that must be made on the altar of net zero and conclude that net zero is doomed to fail. Bloomberg’s journalists closed their eyes, wiggled their noses, bent over backwards and stood on their head to reach the opposite conclusion.
We must do whatever it takes to save the planet. And whatever it takes is going to be seriously painful.
Read on and you’ll discover you shouldn’t be worried about the value of your stocks and bonds. You should be worried about your basic living standards, democracy and human rights.
Environmental masochism will ruin us
Consider the financial cost of net zero, just for a start…
‘In 2022 the global consulting firm McKinsey & Co. found that businesses, governments and households worldwide need to put forward a total of $275 trillion between now and 2050, peaking in the near term at 8.8% of global gross domestic product.
‘A new report from the BloombergNEF research group pegs the price of achieving net zero lower than McKinsey did, though still at a mind-boggling $215 trillion.’
Who is going to pay up?
One thing I’m sure of. It won’t be the corporate sector:
‘[…] the needed injection of new money amounts to $3.5 trillion per year on average, roughly equivalent to half of all corporate profits worldwide, say, or a quarter of all tax revenue.’
(It’s not clear whether this includes the profits and tax revenue generated by the fossil fuel producers which would be put out of business.)
Either way, good luck getting the bill for net zero past the corporate lobbyists running the government.
And for those of you who think we live in a squeaky-clean democracy, with a government run for the people, by the people and of the people, things don’t look much better…
Who would vote to save the planet?
When people discover the implications of trying to reach net zero, they’re unlikely to support it any longer.
We’d need to install a Manhattan-sized solar park nearly every day. And spend a trillion US dollars on wind per year.
We’d need to get rid of fossil fuel cars. And I’m sure you’ve seen on the news how EV sales are faring lately…
No doubt you’ve seen news of transmission grids getting rejected by locals and environmentalists. Well, to reach net zero, we’d need to expand grid cables by about 2 million kilometres…each year.
Don’t worry about the view outside your kitchen window though. The grid rollout won’t happen. Given that such projects can take 15 years to get off the drawing board, the annual rollout needed to hit targets in the remaining years becomes an absurdity.
The cost is equally wild:
‘The IEA estimates an annual price to upgrade the grid of more than $600 billion by this decade’s end; BNEF, working with an alternative net-zero scenario, foresees $800 billion in yearly outlays by then.’
But this is my favourite bit of Bloomberg’s maths:
‘The IEA gives more weight to behavioral changes such as driving and flying less or turning down the thermostat, noting these “achieve demand reductions rapidly and at no cost.”’
Yes, the loss of your living standards come at ‘no cost’. What a relief that is…
Unless, of course, you like living.
It’s not just Bloomberg who’s run the maths and concluded dystopia is what it takes to save the planet.
The Australian economist Steve Keen has made a name for himself calculating what it’d take to reach net zero too. His conclusions were even more alarming than Bloomberg’s.
Then there was the FIRES group of universities. They estimated what an “absolute zero” scenario would look like. If we don’t manage to offset or go carbon neutral on existing energy demand, what does our world look like?
We wouldn’t be able fly or ship goods, for a start…
All this might sound pretty awful. But when you’re trying to save the planet, anything goes.
There is only one ray of hope remaining for investors…
Mining could be the only boom
on the road to net zero
Net zero requires an eyewatering amount of mined resources to achieve. Renewables, the grid upgrade and energy storage options are all resource intense.
In fact, some have concluded it’s an impossible amount of mining.
But the clever journalists at Bloomberg are onto the problem: ‘Reaching net-zero emissions by 2050 will need more refined metals, but a decline in the total amount of extraction from the earth.’
That’s an odd combination.
So, what mental gymnastics did they need to do to reach this conclusion?
The analysis starts out fairly sensible: ‘Annual demand for energy-transition metals will grow fivefold by mid-century from 2023 levels under more aggressive action, according to BloombergNEF.’
Good luck achieving a fivefold increase.
Governments are cracking down on mining. Ore grades are falling. And mining is notoriously emissions intensive.
So a fivefold increase is going to be difficult. Especially if you’re claiming it needs ‘less extraction from earth’ to achieve it…
Anyway, here’s the first attempt to twist the laws of physics:
‘Yet that doesn’t mean we need to extract more stuff — in fact, we need less. While EVs and clean energy infrastructure will mainly consume electricity and require lots of metal, the total amount of materials the world mines will fall. Specifically, we’ll need almost no coal — which still contributes significant revenues to mining companies.’
Yes, I suppose not mining coal would reduce total mining. But our attempt to phase out coal is not going well so far. In fact, coal demand and supply are expected to continue past 2050 by some estimates.
But here’s where things get flat out surreal:
‘In fact, all the refined metals needed to reach net zero by 2050 will add up to less than the amount of coal mined in 2023 alone, according to think tank Energy Transitions Commission.’
Sounds impressive. But wait…’refined metal’? Are they saying…
Yes, they are: ‘It’s worth noting these figures do not include the full weight of extracted ore, which often contains a small concentration of metal.’
What a bunch of absolute nincompoops! They’re claiming we need to ‘extract less from the Earth’ based on the weight of post-refined metal, not the amount of rock actually extracted!
Heck, their analysis uses the weight of finished ‘steel’ and doesn’t include the ore or other inputs to produce it!
I have never seen anything as misleading…
The media used to try and hide the sacrifices we’d need to make to reach net zero. Now that they’re being more honest about the challenge, they’re fudging the analysis of how it will be done.
One simple truth remains. Any attempt to reach net zero implies a minerals mining boom of truly extraordinary proportions. Heck, mining could be the only industry left standing if the environmentalists get their way on net zero.
That’s just the first reason you need to see this presentation about the sector of the mining industry set to boom.
Until next time,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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