Our Take, with Doug Sheridan
The FT writes, the world needs a “reality check” on its move from fossil fuels to renewable energy, J.P. Morgan has warned, saying it may take “generations” to hit net-zero targets.
Our Take, with Doug Sheridan
The FT writes, the world needs a “reality check” on its move from fossil fuels to renewable energy, J.P. Morgan has warned, saying it may take “generations” to hit net-zero targets. Changing the world’s energy system “is a process that should be measured in decades, or generations, not years.”
It added that investment in renewable energy “currently offers subpar returns” and that if energy prices rose strongly, there was even a risk of social unrest.
The bank forecasts that the world will need 108mn barrels of oil a day in 2030, and that building more wind, solar and EV capacity could add a further 2mn daily barrels to this total.
“We are at a tipping point in terms of demand,” Malek said. “More and more of the world is getting access to energy and a greater proportion want to use that energy to upgrade their living standards. If that growth continues it puts huge pressure on energy systems and on governments.”
Peter Martin, Wood Mackenzie’s chief economist, said “the increased cost of capital has profound implications for the energy and natural resource industries,” and that higher rates disproportionately affect renewables and nuclear power because of their high capital intensity and low returns.
Wood Mackenzie added that many companies in the oil and gas industry had low levels of borrowing and would be relatively unaffected by higher rates.
Our Take 1: Good for JP Morgan, Wood Makenzie, and others for (finally) showing the courage to say what they and anyone willing to take the time to examine the claims around net zero understood years ago. Progress, we guess, comes in many different forms.
Our Take 2: The next "reality check" is to critically examine what the world has gotten in return for its tens of trillions in clean energy infrastructure investment and subsidies. Based on reports from the IPCC and others who regularly track the rise in CO2 in the atmosphere, it's been much less than what net zero evangelists say is needed. That's not a good return on investment.
Our Take 3: Buried in the numbers of clean energy investment and the resulting global emissions is a story of massive misallocation of capital. It's time to stop it... in its tracks.
It would not only take generations to reach net zero, if ever, depending on how you define it; there will be generations of subsidies in the US, because the so-called Inflation Reduction Act provides for subsidies for renewables until net zero is reached. There is no cut-off for ongoing subsidies.