🔋The Real Climate Catastrophe Pt. 3

The current ESG narrative is a product of easy money and short-term thinking which is not a prosperous or realistic path forward.

May 11, 2022

This is the third of a three-part series where I argue the bigger climate catastrophe is the reaction to the problem, not the problem itself. This week I expand on the tie between economics/ESG and conclude that ESG in its current form is not a productive, prosperous, and realistic path forward. If you press the heart button above or below I would greatly appreciate it!

Part 1

Part 2

Part 3

The 1920s tractor bubble. - Neil Dahlstrom — Tractors revolutionized farming and replaced the horse as primary means of horsepower. Learn about the 1920s tractor bubble.

Last week I connected our economic structure to the current ESG narrative. In its current form it looks like wind/solar/batteries with absolutely no nuclear or fossil fuels. The point of the piece was my hypothesis that the current ESG narrative is likely a malinvestment funded my easy money and is unrealistic if we want to maintain current standard of living without serious negative consequences. I ended it by saying the consequences of this malinvestment directly effects energy production, which is a primary input to life.

It is theorized that of the unfathomable quantity of cellular organisms, the ones that first developed mitochondria (energy production) paved the way for evolution of more complex organisms. The amount of energy coincides with how productive you can be, and from first principles this makes sense. If you are a farmer, you can plow a field faster with a horse and plow, or even faster with a tractor than you could ever hope to by yourself. Each previous energy transition has resulted in more excess energy available for the same input cost which always resulted in further innovations and increase in standard of living.

Energy is the lifeblood for human life to survive, but also for human ingenuity. In order to create better things, we must use energy constructively to overcome entropy and uncertainty. This is the hero’s journey — the transformation of chaos into order by bravely entering unknown territory. For many people this comes in the form of securing food for their families such that they can make it to the next day. For many fortunate others this comes in the form of educating others, engineering marvels, or scientific breakthroughs. The more energy one has the easier it becomes to solve larger challenges. The more energy one has to waste, the higher standard of living we have. With less energy for the same cost, we stand a grim chance of maintaining the life of luxury currently possessed in the west.

The ESG narrative claims that wind/solar are already cheaper than fossil fuel generation. Lowering costs of renewables has contributed to their rise in popularity. However, globalization and lowering input energy costs (primarily fossil fuels) have contributed to a significant portion of the reason of this. In “Bretton Woods III” which I believe we are entering, de-globalization, less trade, and commodities like fossil fuels becoming scarcer and more expensive will threaten those precious energy input costs. Over the last year polysilicon, aluminum, steel, and battery metals have all exploded in price negating years of price reductions in the sector which was the backbone for an effective renewable takeover. Prices may equilibrate, but I suspect at a much higher price than we’ve been accustomed to.

Additionally, the current ESG narrative claims that since fossil fuels are primarily responsible for emissions, they should be terminated as quickly as possible. This is why we are seeing mandates to reduce fossil fuel energy sources, renewable energy targets, ESG scores, emission tracking, natural gas pipelines being blocked, and other combative policies. The problem is we will never eliminate fossil fuels and retain the quality of life we currently have. They provide so much economic wealth, are used in so many day-to-day products, are vital in global food production, and are used by countries and jurisdictions detached from US control. Furthermore, it is unrealistic to expect the use of fossil fuels globally to reduce by much (or at all) based on history because we have always continued to use just as much of the “old” energy sources even after we have transitioned to a better one.

The issues with wind and solar are obvious and well documented, but nonetheless important not to be understated. Wind turbines and solar power are ugly to most people and take up vast areas of land. If we plan to be efficient with energy transport, they will have to be relatively close to urban and suburban locations too. These technologies use a tremendous amount of copper, steel, aluminum, and rare earth metals. Mines to produce materials make a significant environmental and emissions impact. These along with the transmission costs are often not considered. Furthermore, recycling of broken wind/solar infrastructure is another cost factor often overlooked. Intermittency requires energy storage costs to be considered. With the push for EVs where there will be a priority for Li-ion batteries (LIB). Adding LIBs to the grid would only add pain to already increasing battery costs. A non-LIB grid storage battery with a different material set or superior tech like solid-state would have to emerge.

Production of natural gas as a replacement for coal has reduced emissions more than anything else in history. In some perfect world where we produce as much domestic natural gas as possible to create cheap energy for Americans, all while exporting the excess which contribute to reducing global coal emissions and funding transitions to superior and clean nuclear energy sources. Once polysilicon and other mineral production infrastructure is re-shored, solar may be added to roofs other wasted space to provide a decentralized energy network. Wind/hydro have their place as well but would be less important with nuclear providing a plethora of energy. In this scenario, supply constraints should limit LIBs to primarily electric/hybrid vehicles until other battery technologies are viable.

You hear terms like save the planet, climate catastrophe, and that we need to do everything in our power to save the planet. This last piece is the dangerous part. Energy is life and if as a world we have less energy to waste and it becomes more expensive, then will have a harder time paying for food, shelter, and security. People will suffer and even die depending on how far it goes. If we are not careful, we run the risk of dispensing with human life by forcing energy restricting measures. Fossil fuels are cheap and structure our lives as we know it. People without abundant energy are concerned with necessities, not climate — the more people under the threshold of caring about climate, the more climate policy is merely a coercive force. Would it be justified to take away someone’s ability to heat their home in the name of saving the planet? How do you think that person would come to view the climate expert imposing the policy?

The ESG narrative is a product of easy money and short-term catastrophizing which will cause more harm than good in the long run if brought to fruition in its current incarnation. I am not arguing climate change, I am arguing the path function from here to climate-saved future is vitally important. I see zero action and the current ESG narrative as two extremes. Each will cause the least fortunate in the world to suffer, whether it be from effects of climate change or rising prices of energy and goods driving people to the brink. A world with more people, more energy, and more wealth is a world I would like to grow old and start a family in and there is a prosperous way forward that won’t boil the oceans if we choose to accept it.