Saturday, February 13, 2021

GWPF Newsletter: Russia will replace all the U.S. oil Biden wants to ban


State-owned fossil fuel firms' plan to invest $1.9tn could destroy climate hopes

In this newsletter:

1) Russia will replace all the U.S. oil Biden wants to ban
Bloomberg, 9 February 2021
2) Replacing the West, state-owned fossil fuel firms' plan to invest $1.9tn could destroy climate hopes
The Guardian, 9 February 2021

3) Daniel Turner: Joe Biden Wants to Make America Energy Dependent Again
Real Clear Energy, 11 February 2021
4) Germany faces energy emergency after offering US 'dirty deal' for Russian pipeline
Daily Express, 10 February 2021 
5) Net Zero U-turn: UK Govt to slash Green Home Grants by £1.5 billion
Money Saving Expert, 10 February 2021
6) Vijay Jayaraj: Wary of the new green wave, India continues to increase its coal capacity
GWPF Energy, 12 February 2021 

7) John Constable: U.S. offshore wind prospects: Overblown promises and blown-up costs
National Review, 11 February 2021
8) And finally: The political economy of mass hysteria & panic
Ivan Jankovic, American Institute for Economic Research, February 2021

Full details:

1) Russia will replace all the U.S. oil Biden wants to ban
Bloomberg, 9 February 2021
(Bloomberg) –U.S. President Joe Biden’s push to slash carbon emissions may inadvertently give a short-term boost to energy companies in one of the world’s biggest polluters.

Investors are betting that Russian oil giants such as Lukoil PJSC, Rosneft PJSC and Tatneft PJSC will rally as they mop up market share from rivals in the U.S. and and other countries seeking to switch to clean energy. An index of Russian energy stocks has returned 8% in dollar terms so far this year as crude prices rallied, compared with 2% for European oil and gas companies.
“Governments will likely limit global companies’ capacities to drill and extract resources,” said Eduard Kharin, who helps oversee $1 billion of assets at Alfa Capital Asset Management in Moscow. “The global majors are entering a new market, a new industry where there are a lot of unknowns, and the return on capital is unclear.”
Russia is the world’s fourth-biggest carbon emitter, but unlike other major polluters, the government doesn’t have a plan to transition away from fossil fuels. Instead, its state-owned energy companies benefit from some of the world’s lowest production costs and tax breaks, making them well placed to gain in the short term.
Global oil companies will stop investing in exploration and shift to clean energy, “but somebody still needs to produce oil,” said Ekaterina Iliouchenko, a money manager at Union Investment Privatfonds GmbH in Frankfurt, who increased exposure to Russian oil stocks last year. “That’ll be the Russians and Saudi Aramco.”
Rosneft and Lukoil have been among the best performers in Russia’s benchmark equity index so far this year, handing investors total returns of 15% and 12% in dollar terms. They’ve also outperformed an index of global energy stocks.
Full story
2) Replacing the West: State-owned fossil fuel firms' plan to invest $1.9tn could destroy climate hopes
The Guardian, 9 February 2021

Oil projects over the next decade would destroy hopes of meeting Paris climate goals, thinktank warns

The world’s state-owned fossil fuel companies are poised to invest about $1.9tn (£1.4tn) in the next decade in projects that would destroy any prospect of meeting the Paris agreement climate goals.
A large proportion of these investments are likely to become stranded assets, with at least $400bn unlikely to be profitable if the world sticks to its promises to hold global heating to less than 2C (3.6F) above pre-industrial levels, according to a report from the Natural Resource Governance Institute thinktank.
Oil prices collapsed last year to about $40 during the Covid-19 pandemic and lockdowns but have since recovered some ground to about $60 a barrel, and many fossil fuel companies are expecting a return to business as usual this year or next, and are planning for future expansion.

David Manley, the lead author of the report and a senior economic analyst at the thinktank, said: “A lot of the oil industry wants one last party, and they are going to invest trillions. We are worried about how long that party will continue. If the energy transition [away from fossil fuels and into clean energy] is to be fast enough to meet the Paris agreement, the party needs to be over very quickly.”
In the report, entitled Risky Bet: National Oil Companies in the Energy Transition, the authors made the dilemma clear: “Either the world does what’s necessary to limit global warming, or national oil companies can profit from these investments. Both are not possible.”
National oil companies (NOCs) produce about two-thirds of the world’s oil and gas and own about 90% of reserves. They are rarely scrutinised, however, as their state ownership means they can operate secretively, without publishing much detail on their finances or operations, as publicly listed oil companies such as Exxon, BP and Shell must.
Full story
3) Daniel Turner: Joe Biden wants to make America energy dependent again
Real Clear Energy, 11 February 2021
At this rate, we’ll go from American energy independence to Chinese energy dominance in four years.

Source: Michael Meidan, Glimpses of China’s Energy Future (Oxford Institute for Energy Studies: 2019).
 President Biden’s executive orders have received much media attention. Killing 11,000 jobs on the Keystone Pipeline, opening the U.S. borders to unlimited illegal crossings, allowing biological boys to compete in girls’ sports – it’s a progressive dream, without even a drop of pesky congressional debate. One order that didn’t get the attention it deserved is the president’s decision to rejoin the Paris Climate Agreement. The fallout from this move is much greater than most people realize.

On the campaign trail, Biden pledged to cut all greenhouse gas emissions from America’s electricity sector by 2035 and make the country carbon-neutral by 2050. He is framing America’s reentry into the climate accords as a crucial first step toward achieving these goals. The reality is different. Senator Ted Cruz more accurately frames the situation: “By signing this order, President Biden indicates that he’s more interested in the views of the citizens of Paris than in the jobs of the citizens of Pittsburgh.”

It may be even more accurate, and more ominous, to say that Biden is favoring Beijing over Bakersfield. The Covid-19 pandemic has already taken a heavy toll on America’s oil refineries.

Late last year, the International Energy Agency reported that about a dozen refinery closures had been announced in the past few months, with the bulk of capacity closures – over 1 million barrels per day – happening in the U.S. These closures are resulting in massive job losses, made even worse by the nature of refining jobs, which have a 10x–25x multiplier effect. So the net loss of 3,500 jobs translates into the loss of at least 35,000 jobs.

President Biden should be supporting a major industry that employs millions of Americans and generates billions of dollars in revenue. Instead, he is weakening this industry, to the benefit of our greatest international adversary.

Energy experts believe that China will outpace America in refining capabilities this year, for multiple reasons. The communist state bolsters the oil industry to artificially drive down costs, as it does with other industries, such as manufacturing. This policy attracts foreign business. Crude, even American crude, will inevitably become cheaper to send to China to refine, returning to us as gas, propane, jet fuel, or other products.
If you find it hard to believe that it could be cheaper for our American oil to be refined thousands of miles across the ocean than to be refined here at home, take a look at where most of the goods in your house are made. Oil is no different than TVs or clothes or furniture when it comes to China’s aggressive actions to dominate the market.

There’s another reason why refining in China will be cheaper. There’s no Michael Bloomberg-funded Sierra Club filing lawsuits against the industry. There are no phony pipeline “protesters” blocking construction. There’s no Environmental Protection Agency, no OSHA, no child labor laws, no labor unions threatening strikes, no government program offering subsidies to your “green” competition. Greta Thunberg, noted child environmental activist, hasn’t made it to China, though China is the world’s largest polluter. Why? Because she knows that she’d be arrested and put into a camp, along with the paid-for protesters. 
Full post
4) Germany faces energy emergency after offering US 'dirty deal' for Russian pipeline
Daily Express, 10 February 2021 
Angela Merkel could find herself dealing with an immediate energy emergency if the Russia-backed Nord Stream 2 pipeline project is cancelled, it has been claimed.

The German government offered former US President Donald Trump financial support of up to €1billion (£875million) in a bid to prevent Washington from imposing sanctions on the controversial Nord Stream 2 pipeline, according to documents published by the non-profit Environmental Action Germany (DUH).
The pipeline, which is nearing completion, would double the amount of natural gas delivered annually from Russia to Germany. According to a document, German Finance Minister Olaf Scholz offered the funds for the import of US liquefied natural gas in a personal letter addressed to his then-counterpart Treasury Secretary Steve Mnuchin.

Sascha Mueller-Kraenner, the DUH executive director, described the move as a a "scandal" and as a "dirty deal at the expense of third parties".
According to the paper, the German government offered to invest in developing LNG terminals in Wilhelmshaven and Brunsbuettel on Germany's North Sea coastline. In return, the US was reportedly asked to permit the "unhindered construction and operation of Nord Stream 2".

The pipeline is intended to carry 100 billion cubic metres of natural gas a year from Russia to Germany, but work was halted in December 2020 following the threat of sanctions from Washington.
The US and several European countries have said the pipeline will increase Europe's energy dependence on Russia, bypass Ukraine, and deny Kiev a lucrative source of transit revenue.

In a recent report, the head of Oxford-based think-tank Euro Intelligence Wolfgang Munchau argued that what "all this is telling us is that Germany is desperate, very desperate, to commission Nord Stream 2" and that "the coalition will go to great lengths to make it happen".

One of the reasons behind this desperation, Mr Munchau noted, might be the fear of having to deal with an “energy emergency”.
He explained: "Tagesschau [a German news show] is reporting that if the project were cancelled, Russia would retaliate by reducing existing exports of oil and gas to Germany, which would trigger an immediate energy emergency.
"You do not want the lights to go off in an election year.... The energy crisis looms in Germany, and the country is suddenly open to blackmail.
see also Biden vs Merkel: the battle over Russian gas is heating up
5) Net Zero U-turn: UK Govt to slash Green Home Grants by £1.5 billion
Money Saving Expert, 10 February 2021
Funding for the Green Homes Grant voucher scheme is set to be slashed by around £1.5 billion from April, it’s been revealed. 

The Government had set aside a total of £2 billion for the initiative, under which homeowners in England can get up to £5,000 in vouchers to make their homes more energy efficient. £1.5 billion of this was earmarked for households, with the other £500 million going to local-authority led schemes. 
When it first launched in September 2020, there was a tight six-month deadline to get any work done, but this has since been extended until 31 March 2022.
But it’s now been revealed in a written answer by Anne-Marie Trevelyan – the minister of state for business, energy and industrial strategy (BEIS) – that the original £2 billion in funding is only to be used in the 2020/21 financial year and any leftover cash won’t be rolled over. As of 26 January, just 17,618 vouchers had been issued to households, accounting for just £73.1million of the cash set aside to fund the scheme. 
Only £320 million of funding has been set aside for the scheme in 2021/22.
Full story
6) Vijay Jayaraj: Wary of the new green wave, India continues to increase its coal capacity
GWPF Energy, 12 February 2021

The next four years will be crucial to the prospects of poverty reduction in the developing world, and it remains to be seen how the leadership there will react to the barrage of anti-fossil darts from the West.


A steady stream of anti-fossil policies has been introduced across the world since the inception of Paris agreement in 2016. Be it the reduction in consumption of fossil fuels in some countries or the rapid increase in renewable installations across Europe and Asia, the changes forced by those policies have been quite tangible.

There were some major exceptions to this movement. Trump’s stance against anti-fossil energy policies, Australia’s continued export of coal, India and China’s unbreakable reliance on fossil fuels, and Japan’s shift from nuclear to fossil fuels were some of those glaring anomalies in a world where politicians were anti-fossil by principle during the past 4 years.

But in 2021, even those anomalies appear to be challenged by geopolitical developments. EU’s border carbon taxes and Biden’s Clean Energy plan are well on track to disrupt the global fossil fuel sector in a big way. Biden, for example, has cancelled permits for new oil and gas drilling in U.S. (unless the land belongs to Native Americans). Biden has also made the U.S. rejoin the Paris agreement, thus helping the cash-strapped Paris agreement to regain financial support from the U.S.

Inevitably, these factors will embolden those in Paris to exert further pressure on fossil-fuel dependent developing countries. For developing countries like India, it means more trouble as they are already stretched between meeting the energy demands of power-hungry industries through fossil fuel and increasing the dependency on highly unreliable renewable tech to satisfy their friends in Paris.

India is an important player in the global discussion on renewable tech transition as they are one of the largest consumer of fossil fuels and a key importer of clean coal from Australia. The rankings for fossil fuel consumption names India in the top 3 and together with China it makes up around 3 billion of the global population, representing the biggest fossil fuel consumption hotspot in the world.

India has never concealed its displeasure in accommodating the climate interests of those in Paris, Brussels, and D.C. In 2017, India’s chief economic adviser, termed the constant pressure for de-carbonization from the Western powers as “Carbon Imperialism.” For a country that had been in centuries of Imperial rule, invoking the concept of Imperialism does not come that easily. The Western powers have now touched the backbone of the Indian economy – the Energy Sector. India is predominantly fossil fuel dependent and to restrict the very same energy source that is propelling the country out of poverty is indeed a form of carbon imperialism.

The irony is that those nations which are exerting such undue de-carbonization pressure on India had used the very same fossil fuels in the 19th and 20th century to achieve the economic success and reached the developed economic state that they are in today. To ask India to forgo fossil fuels is suicidal. And the recent developments in 2021 is likely to usher in an epoch of Carbon Imperialism, not just in India, but in every developing country that is struggling to reduce the poverty rate.

India alone has 300 million under the poverty line, nearly the entire population size in the U.S. It was estimated that a further 104 million more people in India could fall below the World Bank-determined poverty line due to the COVID-19 lockdowns in 2020. But reducing poverty would be impossible if the fossil-fuel dominated energy sector is compromised by increasing the dependency on wind and solar. Besides, energy poverty and inability to provide uninterrupted electricity is a real concern in India. Despite significant improvement, an average Indian household received 20.6 hours of power supply from the grid per day. Daily power supply in rural households of some states in the Northern part of the country was only around 18.5 hours in 2020....
Speaking at an event last week, India’s Coal Minister Pralhad Joshi reiterated that Coal will remain the primary energy source of the country, calling the coal sector as “backbone of the country” and assuring that the government will offer “full support.” That is understandable, for the country’s peak demand is predominantly met by coal and government recognizes it to remain their priority even by 2030.

Full post
 see also Energy Justice

7) John Constable: U.S. offshore wind prospects: Overblown promises and blown-up costs
National Review, 11 February 2021

When it comes to the supposed strength of renewables, nature cannot be fooled.
In energy policy, it is physics that matters above all else. Executive Orders from the Oval Office, Directives of the European Union, or Acts of Parliament driven through with fanfare by Her Majesty’s Government in London may give the plausible appearance that wishes are horses and beggars may ride, and in comfort too, but it is no more than appearance. As Richard Feynman, the great laughing natural-philosopher of our age, observed with savage economy after the Challenger disaster: “For a successful technology, reality must take precedence over public relations, for nature cannot be fooled.”
Physics matters. It was not a random or arbitrary fluctuation, much less political favor or the power of vested interest, that led coal to dominate British energy supply as early as 1700, eroding the status of a deeply resistant landed aristocracy and gentry. It was not thanks to politicians that in the following centuries coal, oil, and gas established an overwhelming position in global energy supply. On the contrary, it was the intrinsic physical properties of those fuels that led to their preferment, properties which can be summed up in a single term: Fossil fuels are of low entropy. They are, in the technical, thermodynamic sense, highly improbable, being dense stocks of energy, the improbability of which can be rendered in a multitude of changes to the world in accordance with human wishes, improbable changes that we call wealth. And if the low-carbon candidates to replace those fossil fuels do not have similarly favorable or superior physical properties, no amount of policy support will be able to compensate for the deficiency. Nature cannot be fooled. Reality matters.

But what is the reality of renewable energy? In one of his first actions as president, Mr. Biden has expressed the wish to “double” offshore wind in the U.S. by 2030, an ambiguous phrase that probably means he and his advisers wish to see twice the current development portfolio of offshore wind capacity to be operational within a decade, or 18,000 MW rather than the present 9,000 MW in an advanced stage of preparation. The attraction is easily explained. The U.S. already has a great deal of onshore wind power, 112,000 MW, subsidized through Production Tax Credits and mostly located on and around a line running from North Dakota to Texas, a broad belt characterized by strong winds, cheapish land, and low construction costs.
Unfortunately, it is also distant from the main corridors of demand on the East and West coasts. Offshore wind along the coasts therefore seems like a tempting option for expansion, but is it wise? [...]

Real-world experience in the U.K. and indeed in Denmark, a country also analyzed in great detail in the Hughes study for REF, presents a stark warning to the United States; the costs of wind power have not been falling over the last heavily subsidized decade. Indeed, they remain very high, particularly for offshore wind, with operational expenditure actually rising sharply.
While only now beginning to enter public-policy debate, these points are in fact understood by many market and financial analysts, with fragments of the information circulating in confidential newsletters. The markets know, however obscurely, and Mr. Biden should bear that in mind before putting the U.S. consumer and taxpayer on the hook for a large expansion of offshore wind. This will be very expensive electricity, even before the cost of managing an increasingly stochastic grid network is taken into account.

The real puzzle here is how first-class scientific nations could have gone so far down a road that is intrinsically, physically, without strong promise. Why did any policymaker think that it would be cheap to convert the high entropy, almost random heat of wind flows into the low entropy of the improbable, reliable and timely electricity supply required by a sophisticated economy? Large capital expenditure and operating costs, as well as significant grid costs, are inevitable if governments insist on making the sow’s ear of wind into the silk purse of modern energy.

This planning failure is more than a question of painful domestic economics and inadequate climate policy. The broader hazards of driving the U.S. towards renewable energy are brought into sharp focus by increasingly intense competition from a China whose president has admitted that its emissions from low entropy, but high emitting, fossil fuels will continue to rise until 2030 and remain substantial for some considerable time thereafter, with the country only aspiring to become carbon neutral in 2060.

If China fulfils that aspiration, it will be on its own terms and no other: There is every reason to think that Beijing is making an end run around renewables, dressing the window with what are, for that gargantuan national system, mere traces of wind and solar, while in reality concentrating on the accumulation of great wealth from fossil fuels, now rendered cheap by coerced exclusion from the Western markets. With that wealth in hand, China will deploy advanced nuclear to generate both electricity and hydrogen on the largest possible scale so as to honor its longer-term climate change promises while simultaneously securing its economic, military, and geopolitical preeminence. A nuclear China would be richer, stronger, and cleaner than any of its competitors.  The engineer bureaucrats of Beijing know nature far too well to think that she can be fooled. The lawyers and ideologues in the White House take a different view, for now.
Full post
8) And finally: The political economy of mass hysteria & panic
Ivan Jankovic, American Institute for Economic Research, February 2021
The situations of collective insanity characterized by mass hysteria and panic are almost impossible to handle reasonably in a democratic society. A positive feedback loop between media “reporting” on disasters, real or imagined, the sense of dread, panic and urge to do something by the public and the response of the politicians to satisfy this collective demand for ritual action make calm and rational handling of the situation all but impossible. 


The optimal level of risk is never zero. Otherwise, nobody would ever get up in the morning. But even staying in bed is risky (people die in their sleep). When you drive from home to work your risk of dying is nonzero. When you fly from New York to Los Angeles your risk of dying is nonzero. When you cross a traffic-heavy street your risk of dying is nonzero. When you ride a bike your risk of dying is nonzero. 

Why, then, do most of us act in these types of situations as if the risk were indeed zero? The answer is because it is sufficiently low, that for practical purposes we can act as if it were zero, although we know that theoretically it’s not. After all, people die in car crashes and as pedestrians every day, they also die, although much less often in plane accidents, and some of them (hundreds) even perish from being hit by lightning every year! 
Seven people in the US die of bubonic plague annually! 
Yet, we don’t get scared every day of going out because we might get hit by a car, or by lightning, or fall from a bike and die from a  concussion, or end up like 14th century Europeans, decimated by plague. In most everyday situations individuals are good at managing the risk level of their own behavior. 
However, it is much more interesting to study what happens when the risk is unclear, when the information about relevant circumstances affecting the risk level is highly uncertain and incomplete, or at least more complicated to assess. In these situations, human society, especially when politics gets involved – and this politics is a democratic one – tends, as if almost by rule, to make horrible and self-destructive decisions, all of which create and perpetuate irrational panic and excessive risk aversion. 
People act excessively scared and do many stupid and irrational things to alleviate unnecessary fear that they feel. There are multiple psychological and political mechanisms that create this dynamic that could be described as “the political economy of hysteria and panic.” It involves psychological mechanisms of availability bias, action bias, broken window illusion, as well as the widespread ethical view of pathological altruism and political dynamics of democratic shortsightedness. All these factors often conspire together in a sinister fashion to create a hysterical and irrational frame of mind towards risk, leading to wildly irrational decisions. 
Let’s start with availability bias. You are probably familiar with opinion polls reporting that climate is changing faster than any time in history, and that natural disasters are getting bigger and more frequent; that we have more hurricanes, droughts, floods, earthquakes. You might be one of the people who believe this yourself. Yet, it is not true. All reports compiled by the UN Intergovernmental Panel on Climate Change (IPCC) and other scientific organizations show that most natural disasters are not getting worse, and some are getting less severe. 
Why then do all too many people believe the very opposite? The answer is that the media is obsessively pushing the stories about disasters every day. In the age of satellite television and the internet there is no global disaster or catastrophe that is not immediately made visible to anyone with access to modern technology – hurricane, earthquake, forest fire – everything is immediately broadcasted and always accompanied by dramatic, often catastrophic messages of gloom and doom. 
One hundred years ago a big hurricane in Florida would be in the news on page 2 or 3 of the New York Times and that would have been it. People in the directly affected region would suffer and think about it, the rest of the country and the world would just continue with their lives as if nothing had happened. Today, when a big hurricane threatens Florida, first, five days in advance meteorologists on TV are following its strengthening, changes in its path, categorizations (category 5, be scared, be very scared), all followed with the scary (satellite!) images of the eye of the storm, doing their best to scare the daylights out of everybody. 
You cannot turn on the TV or even social networks without being bombarded with the fear mongering about the hurricane. Governors and local mayors would be evacuating everybody for days before the hurricane strikes to the delight of the media, further fueling the panic. There would be little else the media would talk about for a week. When the storm finally hits Chris Cuomo of CNN would stand in the rain to demonstrate how tough he is and also how frightening the storm is. The same applies in different degrees to every other disaster in every other country: it becomes major news instantly and stays such for a long time.
It should not shock you then that most people would think that disasters like hurricanes are much more prevalent than they are and that they are getting worse. It’s a known cognitive illusion everyone is susceptible to, to consider things directly visible and observable to be more prevalent and in a sense more real than those you see less often. […]
The situations of collective insanity characterized by mass hysteria and panic are almost impossible to handle reasonably in a democratic society. A positive feedback loop between media “reporting” on disasters, real or imagined, the sense of dread, panic and urge to do something by the public and the response of the politicians to satisfy this collective demand for ritual action make calm and rational handling of the situation all but impossible. 

The demand for action creates the pressure to avoid being perceived as weak and indecisive on the part of politicians, while the information asymmetry between the visible, concentrated and identifiable benefits of “action” and delayed, speculative and more distributed costs of action, makes irrational and ineffective but ritualistic policies much more likely. Policies adopted to deal with the Covid-19 pandemic illustrate very painfully these truths.
Full essay

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at

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