Guest essay by Eric Worrall

According to the AFR, “You don’t want to own a portfolio that has a high allocation to carbon-intensive companies that cannot make the transition.”. Just one problem – there will be no green energy transition.

Climate change investing: jolly green giant or next bubble?

Renewable energy assets are hurtling towards $US4 trillion following the pandemic and renewed global commitments to net-zero emissions. Avoiding harmful sectors and companies is no longer enough; investors want to back climate winners.

Tony Featherstone
ContributorMar 20, 2021 – 12.00am

Climate change investing once had a green agenda. Now it’s black-and-white: portfolios stacked with high-polluting companies risk wealth destruction and missed opportunity.

When COVID-19 erupted, climate change investing was meant to take a back seat. The opposite happened: money poured into funds that invest sustainably.

“Before these changes, it was hard for markets to fully factor carbon emissions into asset prices. There was too much uncertainty about the approach of China and the US, under Donald Trump’s leadership, towards climate-change policy. There’s far greater clarity now.”

“Investors need to act on this change. You don’t want to own a portfolio that has a high allocation to carbon-intensive companies that cannot make the transition.”

“Entire balance sheets are trying to find the best renewable assets,” says Glover. “With that comes the risk of valuation bubbles. We’ve seen a huge increase in valuations for renewable assets globally in the past six months, and clean-energy companies trading on sharply higher multiples. Some valuations are starting to become disconnected from reality.”

Tesla’s $US680 billion valuation is a prominent example. Those who believe the visionary electric vehicle company will transform energy markets over 50 years can justify its staggering valuation.

For everybody else, Tesla is wildly overpriced

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How can I be so confident stating there will be no green energy transition? The reason is, top engineers and scientists, green enthusiasts who have examined the green transition in detail, have come away utterly dismayed at what they discovered.

Can you think of a greener company than Google? Here is what top Stanford qualified Google scientists Ross Koningstein and David Fork had to say about the green transition.

What It Would Really Take to Reverse Climate Change

“At the start of RE<C, we had shared the attitude of many stalwart environmentalists: We felt that with steady improvements to today’s renewable energy technologies, our society could stave off catastrophic climate change. We now know that to be a false hope …

Renewable energy technologies simply won’t work; we need a fundamentally different approach.”

Read more:

Other engineers and scientists have come to the same conclusion.

The Limits of Clean Energy
If the world isn’t careful, renewable energy could become as destructive as fossil fuels.


We need a rapid transition to renewables, yes—but scientists warn that we can’t keep growing energy use at existing rates. No energy is innocent. The only truly clean energy is less energy.

In 2017, the World Bank released a little-noticed report that offered the first comprehensive look at this question. It models the increase in material extraction that would be required to build enough solar and wind utilities to produce an annual output of about 7 terawatts of electricity by 2050. That’s enough to power roughly half of the global economy. By doubling the World Bank figures, we can estimate what it will take to get all the way to zero emissions—and the results are staggering: 34 million metric tons of copper, 40 million tons of lead, 50 million tons of zinc, 162 million tons of aluminum, and no less than 4.8 billion tons of iron.

In some cases, the transition to renewables will require a massive increase over existing levels of extraction. For neodymium—an essential element in wind turbines—extraction will need to rise by nearly 35 percent over current levels. Higher-end estimates reported by the World Bank suggest it could double.

The same is true of silver, which is critical to solar panels. Silver extraction will go up 38 percent and perhaps as much as 105 percent. Demand for indium, also essential to solar technology, will more than triple and could end up skyrocketing by 920 percent.

And then there are all the batteries we’re going to need for power storage. To keep energy flowing when the sun isn’t shining and the wind isn’t blowing will require enormous batteries at the grid level. This means 40 million tons of lithium—an eye-watering 2,700 percent increase over current levels of extraction.

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Even iconic British presenter David Attenborough gets it, he wants a “global green energy Apollo Programme” to try to make renewable energy affordable – a moonshot to achieve a goal he knows is unachievable with current technology.

Michael Moore gets it – his investigative team set out to identify and expose the big oil conspirators working to suppress the green revolution. But Moore did not find a big oil conspiracy. What Moore claims to have found instead was a group of greedy corporate green sellouts, whom Moore claimed in his film are wildly exaggerating the potential of their expensive government subsidised renewable energy offerings.

Even countries blessed with an abundance of readily available geothermal and hydroelectric resources are struggling to make it work. New Zealand is considering rationing energy, and has been accused of cheating on their published carbon figures to inflate the alleged progress of their emissions reduction plans.

I’m not advising people ignore renewables, and simply embrace coal and fossil fuel as if the green push is not happening. Governments are heaping taxes and climate damages on otherwise viable carbon intensive industries, then in some cases panicking and handing out massive subsidies when they realise they are about to lose something important. Company valuations across a broad spectrum of sectors are increasingly set by the whim of politicians, and I have no more idea of what politicians will do next than anyone else.

An old merchant banker once told me “plenty of people have gone bust waiting for the market to make sense”. But gambling on the foolishness of others, or the fickle whims of politicians, is also a risk.

All the money in the world is not enough to fund the proposed transition to a zero carbon economy. The trillions Biden and others plan to spend will build a lot of solar panels and wind turbines – but they will not facilitate significant retirement of dispatchable power sources. It doesn’t matter how many solar panels and wind turbines you build, wind turbines need wind to operate, and solar panels need sunlight. If you have neither for an extended period, as happens a few times per year in most places, and if neighbouring states are also facing power shortages, you are out of luck.

So it seems inevitable that something is going to come unglued at some unpredictable point in the future – at some point investors, voters and politicians will realise renewables are a dead end. What happens after this moment of realisation is anyone’s guess.

via Watts Up With That?

March 20, 2021 at 12:02AM