One of ESG’s selling points was that coal would become a ‘stranded’ (and thus valueless) asset, but this was nonsense.
Back in October, Britain closed its last coal-fired power station amid much self-congratulation by the country’s climate clerisy. Lord Deben, a former politician whose tatty collection of achievements includes having been Britain’s longest-serving environment secretary, was at hand to rejoice and to boast that Britain was showing the world how things should be done:
I think it’s made a big difference, because you need someone to point to and say, ‘There, they’ve done it. Why can’t we do it?’
At the time, I suggested that no one outside the U.K. cared that Britain had done this, and cited some of what Bloomberg’s Javier Blas has written about coal production elsewhere in the world.
King Coal has moved, like some itinerant Habsburg, to new domains, but is far from dethroned.
I discussed coal’s resilience in a Capital Letter in August, beginning as follows:
Wicked, grubby old King Coal, they said, was on his last legs.
Weeks before the signing of the Paris Climate Accord at the end of 2015, Carbon Tracker (“aligning capital market actions with climate reality”) estimated that if the world was to meet the climate target set out in the agreement, then, according to the International Energy Agency’s “450” scenario, “the production from . . . existing coal mines is sufficient to meet the volume of coal required . . . It is the end of the road for expansion of the coal sector.”
Previewing the ESG mania to come, Carbon Tracker advised institutional investors to “derisk [their] portfolio by identifying companies which are aligned with a 2℃ demand scenario or engage with those that are in the danger zone.”
But if anyone was in a danger zone, it was people who had retained investment managers who took such obviously unrealistic thinking seriously.
And plenty did. One of ESG’s selling points was that coal would become a “stranded” (and thus valueless) asset, an overly simplistic argument that made little sense, but which could be farmed for profit by those marketing ESG. Like so many of their arguments, it was nonsense.
In a new article for Bloomberg, Blas looks back to the day that Deben believed was of such significance:
The UK celebrated Oct. 1 as the first day in nearly 150 years when its power plants didn’t burn a single lump of coal to generate electricity. The moment was hailed by politicians as a sign of the progress against fossil fuels. It was also completely irrelevant. . . .
As the IEA [International Energy Agency] puts it, “coal is often considered a fuel of the past, but global consumption of it has doubled in the past three decades.” Worse, not only has usage grown a lot — particularly in China and India — but demand will keep rising for the foreseeable future.
A key culprit is, awkwardly, the energy “transition.”
Blas:
The energy transition requires electrifying everything. Renewables are doing some of that job, but coal remains, the go-to fuel to power the energy transition. Worse, the IEA revised higher its historical data, so the increase comes from a significantly higher baseline than before. The world is consuming a lot more coal than we thought — and therefore, it’s polluting the atmosphere a lot more than we thought, too.
A classic feature of central planning is that, in the absence of the discipline brought about by the market, the order in which things should proceed becomes hopelessly jumbled, instead of c following b following a, a might follow c, and b will precede them both. The relative inefficiency of solar and, above all, the steampunk junk technology better known as wind, means that the “cure” for climate change is, in many respects counterproductive, at least for now. The money could have been better spent elsewhere.
One hallmark of fanaticism is the way that adherents of a cult tend to engage in a relentless pursuit of purity — the perfect becomes the enemy of the good. Climatists have done their best to disparage and discourage the use of natural gas (they don’t even like the term, too cuddly) when, as we know from the U.S., it can contribute immensely to the reduction of emissions from coal. Nuclear is another alternative. Building nuclear power stations takes time and is expensive but imagine if work on expanding the nuclear fleet had begun instead of ploughing — I’m not going to use the word “invest” — all those billions into wind energy. Germany, of course, not only squandered billions on wind energy, but shut down the nuclear power stations it did have, for reasons only attributable to superstitious dread. Instead of pushing back against it, Angela Merkel, the scientist, who knew better, played along for political reasons.
Blas:
While last year the IEA initially estimated consumption in 2023 at 8,563 million tons, it pegs it now at 8,687 million. The difference equals roughlythe annual demand of Japan, the world’s fourth-biggest coal consumer.
The IEA is trying to paint an optimistic outlook about the future. But the numbers say otherwise. In rose-tinted prose, the agency says that global coal demand could “plateau” over the next three years. Well, that’s if you don’t mind that the plateau is uphill rather than fairly level. In reality, the IEA forecasts fresh records for coal demand in 2025, 2026 and again in 2027. . . .
The IEA has been calling for a peak in coal use, particularly in China, for more than a decade. Considering that record of wrong calls, it would be prudent for the agency to err on the side of caution. Flagging higher demand isn’t cheerleading fossil-fuel consumption — it’s candidly conceding to reality. . . .
The biggest problem is China. The country, worshiped by some green enthusiasts thanks to its embrace of electric vehicles, wind turbines and solar panels, is the world’s big polluter. China alone consumes nearly 30% more coal than the rest of the world together. That’s not ending anytime soon. Now, the IEA assumes that Chinese coal demand will set an all-time high every year until at least 2027. For Beijing, coal is energy security. It’s time to acknowledge that. And acknowledge that China’s promises to reduce its coal consumption any time soon just don’t stand up to scrutiny.
No they don’t. And those such as John Kerry who have spent so much time promoting the notion of China as a climate “partner” should be ashamed, as should Michael Bloomberg, whose news outlet (with distinguished exceptions such as Javier Blas) spends so much time talking up China’s supposedly stupendous contribution to the fight against climate change. Then again in 2019 Michael Bloomberg, an individual with, as he has repeatedly demonstrated, a strong authoritarian strain, refused to accept that Xi Jinping was a dictator.
In August, I wrote this. I’ll stick with it:
China has good scientists. If Beijing thought that climate change represented an existential threat, it would not be making the trade-offs it does. Its enormous investments in green technology primarily reflect two objectives. The first is to boost self-sufficiency, a long-term preoccupation of the ruling regime. The second is to use its domestic market as a proving ground for the development of green industries, manufacturing products — from solar panels to wind turbines — that will yield healthy export revenues and geopolitical clout.
China never had a strong hand to play in the global energy market, but now, with its position in renewables reinforced by a mercantilist pricing model that has destroyed much of the West’s capacity in this area, it has. Better still for Beijing, the West’s reckless “race” to net zero is trashing its own energy advantage, and looks likely to damage its economic growth, acts of self-harm facilitated by enticingly cheap Chinese renewable technology. To repeat an observation I made in an earlier post, Lenin (reportedly) said that “the Capitalists will sell us the rope with which we will hang them.” The Chinese regime is subtler and more cost-conscious. It is selling the West the rope with which it will hang itself. Many in the West regard climate change as an existential threat. To Beijing it is a business and strategic opportunity.