I analyze energy economics and related public policy issues.
LONDON, UNITED KINGDOM – 2022/01/31: Protesters hold placards calling for an end to fuel poverty and … [+]SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES
Recent political events on both the EU and the US signal “peak green”. Unlike “peak oil” whose time never seems to come despite many earlier confident predictions, peak green seems to be happening now, in real time. What precisely is peak green? The beginning of the end of a period of ever-expanding and costly climate change regulations on businesses and households is as good a definition as any. There has been a succession of setbacks to the green cause on both sides of the Atlantic.
To policy makers in the developing countries of the East, representing some 7 of the world’s 8 billion people, these policy challenges faced by Western governments committed to the radical climate agenda present a unique opportunity. Developing countries now have a chance to help establish a new world order more amenable to their legitimate ambitions for rapid economic development and better living standards for their citizens.
Is the Green Movement Peaking in Europe?
A short list of key political events that suggest “peak green”, in no order of importance, would include the following. In early March, to the great consternation of the EV lobby, the EU decided to allow the sale of internal combustion engine cars using hydrogen-derived “e-fuels” technology (itself unproven at scale and highly expensive) beyond 2035 despite earlier plans for a complete eurozone ban. This followed strong objections by the German and Italian governments who were responding to their powerful automotive industry interests.
In mid-March, Dutch voters went to polls and put the populist Farmer-Citizen Movement (BBB) into the lead, ahead of the governing party, in the Senate, redefining the country’s political landscape. It put on hold, for the present at least, the government’s plans to decimate the Dutch agricultural industry, the world’s 2nd largest exporter, in pursuit of yet another environmental hobgoblin. This time, it is the nitrogen fertilizers which emit nitrous oxide (N2O), a greenhouse gas, into the atmosphere.
But nothing could be more clearly indicative of a “peak green” mood among moderate European politicians than Macron’s call last month for a “pause” on more climate regulations. In a speech to those assembled at an aluminium factory in Dunkirk, he said:
“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 any more factories…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.”
Unsurprisingly, Macron’s speech triggered outrage among European Greens and leftist politicians. One French MEP remarked: “Macron now takes up the same speech, word for word, as the European Right and far-Right, who want to kill the implementation of the rest of the European climate package.” Even Ursula von der Leyen — president of the European Commission and champion of Europe’s Green Deal objectives of “climate neutrality” by 2050 — conceded in response to Macron’s call that lawmakers needed to consider the “absorptive capacity” of states across the EU faced with reams of new climate regulations issued by Brussels.
Where It All Started
In December 1985, Joschka Fischer, without a tie and wearing sneakers, was sworn in as minister of energy and environment in Germany’s state of Hesse. A radical from the left-wing student generation of ’68, Fischer served as the foreign minister and as the vice-chancellor of Germany in the cabinet of Gerhard Schröder from 1998 to 2005. Fischer was a leading figure in the German Greens party since the 1970s and the party grew from strength to strength. The party attained its zenith as part of the current Chancellor Olaf Scholz’s ruling coalition. Economy Minister and Green party leader Robert Habeck seemed unstoppable, leading in popularity polls through the spring and summer of 2022. Habeck had made no secret of his ambition to lead his Green party to victory in the 2025 general election and become Germany’s next leader.
But much has changed in recent weeks. The latest release from the DeutschlandTrend monthly survey, conducted on June 2nd, measured voter support for Alternative for Germany (Alternative für Deutschland, AfD) at 18%, putting it on a par with Chancellor Olaf Scholz’s Social Democrats. Norbert Roettgen, a senior lawmaker for the main opposition Christian Democrats, described the poll as “a disaster” and “an alarm signal for all parties in the centre”. Under Germany’s coalition politics and system of proportional representation, the AfD’s popularity casts doubt on the ruling alliance’s mandate.
A YouGov poll published one week later (June 9th) found that 20% of German voters would give their vote to the AfD, making it the second-strongest party behind the centre-right CDU (28%) and ahead of Scholz’s SPD (19%). The resurgence of AfD, a party inevitably dubbed “far right” by the mainstream media, has been primarily at the expense of the Greens which have been sent into free fall with political scandals and increasingly burdensome climate change policies. While the latter have been a fixture in Germany’s policy landscape over the past two decades, the furore over recently announced plans by the Greens to ban new gas heating devices beginning next year in favour of expensive heat pumps has proven to be the proverbial straw that broke the camel’s back.
On May 25th, Lord Frost gave the annual GWPF lecture on Europe “getting dark”, referring to the EU sinking into “miserabilism, degrowth, and economic decline” at the altar of the proclaimed “climate emergency.” On the same day, it was reported that the German economy had entered into recession (defined as two quarters of negative growth). On June 8th, Eurostat reported that the EU as a whole was also in recession. With Europe reaping the boomeranging effects of sanctions on imports of Russian energy, leading to surging energy and electricity prices, inflation and recession, the Green movement in Europe is now in eclipse. Parties opposed to the unconstrained green climate agenda are now in governing coalitions in Finland, Sweden and Italy.
And in the USA
Across the Atlantic, there are few signs that the “whole of government” push by the Biden administration for net zero emission targets by 2050 is being seriously challenged. In August, it passed the euphemistically named Inflation Reduction Act, allocating a tsunami of subsidies and tax credits for pet green projects including EVs, renewable energy and battery technologies. Hailed by some as the “most important climate action in US history”, the Congressional Budget Office forecasts the costs of the IRA at some $390 billion over the decade 2022-31. The US Congress’ Ways and Means Committee however suggests that the real costs is likely to be triple the CBO forecast, at $1.2 trillion, given the uncapped tax credits and loose credit conditions in the legislation.
At the local level, there is an ongoing backlash in rural America against the encroachment of large wind and solar projects. Robert Bryce has been reporting on rural opposition to renewable projects in rural USA for over a decade and has maintained the Renewable Rejection Database since 2015. These rejections by local communities are at odds against the hope that the $127 billion appropriated for renewable power under the IRA will lead to a massive surge of new solar and wind projects. Land-use conflicts have hindered the growth of land-intensive renewable energy projects — both in the U.S. and Europe — for years. And as more projects get proposed, more rural communities are objecting.
But the more frontal challenge to the juggernaut of the climate industrial complex in the US has been the move by the attorneys-general in Republican states against the adoption of environmental, social, and governance (“ESG”) investment strategies by the corporate sector. In January, twenty-one state attorneys-general released a letter to the two largest proxy advisory firms, Institutional Shareholder Services (ISS) and Glass, Lewis & Company, which dominate the US proxy advisory market in the US. They hold great leverage over how institutional shareholders vote on company resolutions across the country. In the letter, the attorneys-general warned of possible violations of both fiduciary duty and anti-trust laws. Proxy advisors could have violated their legal and contractual duties to their clients by discriminating against fossil fuels and by colluding with each other in this sector-wise discrimination.
In the face of potential litigation on fiduciary duty and anti-trust grounds, powerful ESG-pushers forcing behavioural change in the corporate sector such as BlackRock’sBLK -1.2% CEO Larry Fink have now mellowed out. As the self-styled prophet of the business world, he had implicitly warned in his letter to CEOs in 2020 of his vote against corporate directors and management executives who didn’t diligently report on “plans to achieve net zero by 2050”. Running the world’s largest investment fund with $8.5 trillion assets under management, he now modestly admits that “it is for governments to make policy and enact legislation, and not for companies including asset managers to be the environmental police”.
After the ESG backlash in the U.S., at least seven members (including five of the eight founding signatories) of the Net-Zero Insurance Alliance setup by U.N. climate envoy Mark Carney have now left the group. Europe’s largest insurers such as AXA, Allianz, Swiss Re, Munich Re, Zurich Insurance and Hannover left the group under threat of anti-trust litigation. In September, major Wall Street banks threatened to leave the net zero financial alliance, also founded by Mr. Carney, over legal risks. Morgan StanleyMS -1.1%, JPMorgan and Bank of AmericaBAC -0.6% are among the leading banks “weighing an exit as they fear being sued over the alliance’s stringent decarbonisation commitments”. The green movement in the US shows signs of peaking at least with respect to the momentum achieved by its ESG Trojan horse.
Developing Countries: Where Do They Stand?
From the earliest UN negotiations starting in 1992 at the Rio de Janeiro “Earth Summit” under the Framework Convention on Climate Change (UNFCCC), leading developing countries such as China, India, Brazil and South Africa adopted the ‘Third World’ position. Developing countries carried “common but differentiated responsibilities“. This meant that the developed countries (primarily the West, but also its allies including industrialized Japan and South Korea) adopted binding commitments to reduce carbon emissions by specified amounts over a specified period (allegedly dictated by “the science”). The developing countries not only did not have any binding policy commitments but were expected to receive considerable support in “climate finance” to assist mitigating and adapting to climate change.
Preparatory talks concluding this week in Bonn for this year’s COP28 climate summit to be held in the United Arab Emirates was “consumed by a power struggle” according to a Politico report. In veiled comments critical of the UAEUAE +1%, U.N. Secretary-General Antonio Guterres said on Thursday that countries must start phasing out oil, coal and gas. He demanded that fossil fuel companies “cease and desist” measures that aim to hobble progress on the issue. The UAE, it should be noted, is the world’s 7th largest oil producer and has ambitious expansion plans for its oil and gas sector. As host to COP28, it will try to balance the overheated rhetoric of the Western climate zealots with the bottom line: the world, whatever the West and its allies desire, will be using fossil fuels for decades to come.
Africa’s top energy official, Amani Abou-Zeid, the African Union Commissioner for Infrastructure and Energy, said at last year’s COP27 summit held at Sharm El Sheikh in Egypt that African countries advocate “a common energy position that sees fossil fuels as necessary to expanding economies and electricity access”. African countries, like their counterparts in Asia and Latin America, will not be thwarted in their climb up the very same energy ladder from wood and coal to refined oil and natural gas that the West used in its ascent to human betterment.
Carbon imperialism, the corollary of the climate alarmist Net Zero movements that have reigned in Western capitals over the past three decades, has long been challenged by the developing countries. But now, citizens of the Western metropoles are increasingly aligning with their counterparts in the East, united against Green ideology and its pernicious effects on human flourishing.
Follow me on Twitter.
I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past… Read More