In this newsletter:
1) Cold feet: BlackRock, Citi CEOs won’t be returning to UN climate talks
Bloomberg, 12 October 2022
Bloomberg, 12 October 2022
2) Europe faces winter(s) of discontent with high energy prices here to stay
Deutsche Welle, 12 October 2022
3) China's cheap coal advantage: European wind industry ‘struggling’ with rising costs
Financial Times, 11 October 2022
4) Ralph Schoelhammer: Germany’s ‘Mittelstand’ is being killed off
Unherd, 13 October 2022
5) Chevron chief blames western governments for energy crunch
Financial Times, 13 October 2022
Deutsche Welle, 12 October 2022
3) China's cheap coal advantage: European wind industry ‘struggling’ with rising costs
Financial Times, 11 October 2022
4) Ralph Schoelhammer: Germany’s ‘Mittelstand’ is being killed off
Unherd, 13 October 2022
5) Chevron chief blames western governments for energy crunch
Financial Times, 13 October 2022
6) Government drops appeal over Net-Zero High Court ruling
The Times, 13 October 2022
The Times, 13 October 2022
7) Toby Young: Will I be PayPal’s downfall?
The Spectator, 15 October 2022
The Spectator, 15 October 2022
Full details:
1) Cold feet: BlackRock, Citi CEOs won’t be returning to UN climate talks
Bloomberg, 12 October 2022
Bloomberg, 12 October 2022
Efforts to fight greenhouse gas emissions appear to be faltering. Instead, attention has shifted to navigating the fallout from war, energy shortages, inflation and the threat of recession. BlackRock Inc. CEO Larry Fink won’t be at the COP27 summit in Egypt next month and will instead attend a meeting of the firm’s board of directors, according to people familiar with his plans. Citigroup Inc. CEO Jane Fraser will also stay away, as will Bill Winters of Standard Chartered Plc, spokespeople for the banks said. All three made a point of attending in 2021.
They lead a long list of top-level executives giving this year’s summit a lower priority, according to responses gathered by Bloomberg News based on current plans. BlackRock and others will instead be sending delegations consisting of lower-tier representatives, according to spokespeople for the firms. Standard Chartered will send its chief sustainability officer, Marisa Drew.
Citi will send a team that includes Jay Collins, vice chairman of the firm’s banking, capital markets and advisory division as well as Julie Monaco, head of the global public sector group inside its investment banking division.
BlackRock, which has yet to settle on who will be going, said it “looks forward to having a meaningful, senior presence at COP27 to engage with key stakeholders on one of the biggest themes for our clients,” in an emailed statement.
Fink was the star appearance last year as the heavyweights of big finance made their way to COP26 in Scotland to declare their commitment to slashing emissions. Former Bank of England Governor Mark Carney had predicted that sustainable finance would make the leap “to the C-suite” and, as if to prove him right, Fink made a big impression at COP26, donning a polkadot tie and brown hiking boots as he discussed the dangers of greenwashing.
A key milestone of last year’s COP was commitments secured by the Glasgow Financial Alliance for Net Zero, to which BlackRock, Citi and roughly 500 other financial firms are signatories. With more than $135 trillion in assets, GFANZ was supposed to be the planet’s ticket to a more climate-friendly form of finance. But a year later, it’s unclear how members will live up to their promises. (GFANZ is co-chaired by Carney and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.)
Instead, attention has shifted to navigating the fallout from war, energy shortages, inflation and the threat of recession. Efforts to fight greenhouse gas emissions, meanwhile, appear to be faltering. Scientists estimate that the world is on track to warm by 2.7C, based on current policies. That’s close to double the critical 1.5C threshold beyond which climate catastrophe looms.
BloombergNEF estimates that COP27 only has a 43% chance of success. Billed as the “implementation of COP,” it “won’t command the same fanfare” as last year’s event, BloombergNEF’s Victoria Cuming said on Wednesday.
This year’s COP also takes place against a very different political backdrop. More than a dozen Republican-led states in the US have sought to ostracize banks and asset managers deemed hostile toward the fossil-fuel industry.
BlackRock, in particular, has been singled out as a target of GOP ire, with Fink’s previous comments on climate risk providing fodder for attacks. That’s led the world’s largest asset manager to embark on a PR-campaign to try to dispel any notion it’s withholding support for oil and gas.
In a recent statement, BlackRock said “we do not boycott the energy industry” and pointed to $170 billion in investments in US public energy companies as proof.
Full story
They lead a long list of top-level executives giving this year’s summit a lower priority, according to responses gathered by Bloomberg News based on current plans. BlackRock and others will instead be sending delegations consisting of lower-tier representatives, according to spokespeople for the firms. Standard Chartered will send its chief sustainability officer, Marisa Drew.
Citi will send a team that includes Jay Collins, vice chairman of the firm’s banking, capital markets and advisory division as well as Julie Monaco, head of the global public sector group inside its investment banking division.
BlackRock, which has yet to settle on who will be going, said it “looks forward to having a meaningful, senior presence at COP27 to engage with key stakeholders on one of the biggest themes for our clients,” in an emailed statement.
Fink was the star appearance last year as the heavyweights of big finance made their way to COP26 in Scotland to declare their commitment to slashing emissions. Former Bank of England Governor Mark Carney had predicted that sustainable finance would make the leap “to the C-suite” and, as if to prove him right, Fink made a big impression at COP26, donning a polkadot tie and brown hiking boots as he discussed the dangers of greenwashing.
A key milestone of last year’s COP was commitments secured by the Glasgow Financial Alliance for Net Zero, to which BlackRock, Citi and roughly 500 other financial firms are signatories. With more than $135 trillion in assets, GFANZ was supposed to be the planet’s ticket to a more climate-friendly form of finance. But a year later, it’s unclear how members will live up to their promises. (GFANZ is co-chaired by Carney and Michael R. Bloomberg, the founder of Bloomberg News parent Bloomberg LP.)
Instead, attention has shifted to navigating the fallout from war, energy shortages, inflation and the threat of recession. Efforts to fight greenhouse gas emissions, meanwhile, appear to be faltering. Scientists estimate that the world is on track to warm by 2.7C, based on current policies. That’s close to double the critical 1.5C threshold beyond which climate catastrophe looms.
BloombergNEF estimates that COP27 only has a 43% chance of success. Billed as the “implementation of COP,” it “won’t command the same fanfare” as last year’s event, BloombergNEF’s Victoria Cuming said on Wednesday.
This year’s COP also takes place against a very different political backdrop. More than a dozen Republican-led states in the US have sought to ostracize banks and asset managers deemed hostile toward the fossil-fuel industry.
BlackRock, in particular, has been singled out as a target of GOP ire, with Fink’s previous comments on climate risk providing fodder for attacks. That’s led the world’s largest asset manager to embark on a PR-campaign to try to dispel any notion it’s withholding support for oil and gas.
In a recent statement, BlackRock said “we do not boycott the energy industry” and pointed to $170 billion in investments in US public energy companies as proof.
Full story
2) Europe faces winter(s) of discontent with high energy prices here to stay
Deutsche Welle, 12 October 2022
Deutsche Welle, 12 October 2022
OPEC's decision to cut oil production has put the cat among the pigeons for EU and US policymakers facing a winter of energy shortages, rising prices and slowing growth. What happens next is anyone's guess.
The decision by OPEC+ to cut oil output has exacerbated an already perilous energy security situation in Europe
A barrel of European Brent crude cost around $94 (€95) this week, after rising 4% to a 5-week high of $98 per barrel last week on news that OPEC+ (OPEC plus a handful of other oil producers led by Russia) had agreed to cut production by 2 million barrels per day, about 2% of global supply, from November.
On Tuesday, US President Joe Biden said there would be "consequences'' for Saudi Arabia following the Riyadh-led alliance's move to cut oil production. While he remained vague about specifics in an interview with CNN, he suggested he would act soon. White House officials said the administration would reevaluate its relationship with the Saudi Kingdom.
The cut comes as the EU prepares for slowing growth due to higher energy prices, with recessionary fears competing with inflationary ones as the key issue facing policymakers.
"This shows that the energy crisis in Europe is threatening to escalate into a global price war," German business paper Handelsblatt put it, suggesting it pits Europe and the US against OPEC, its partners, and large oil importers like China and India.
While oil prices have fallen from highs of $130 per barrel in the summer when Western nations first imposed sanctions on Russian oil, most observers don't see it going much below $100 over the next 12 months.
As for gas, the European benchmark rose to a record high of €335 ($337) per megawatt-hour (MWh) in the spring. Since then, prices have — as with oil — fallen, back to about €225 per MWh, though are still up 300% since the start of 2022. Gas prices are directly linked to electricity prices, so if they stay high, electricity prices follow. The European Commission has announced reforms of the electricity market that would see a decoupling of gas and power prices, but the timing for that is not clear.
Kremlin-controlled energy giant Gazprom has said European natural gas prices could climb by another 60% this winter. In retaliation against sanctions following Russia's invasion of Ukraine, Moscow cut the flow of natural gas to Europe via the Nord Stream 1 pipeline to 20%, sending prices rocketing.
What's keeping prices high?
Energy price hikes in the past year — 60% for oil and 400% for natural gas — have been driven by rising demand as the coronavirus pandemic wound down and lower supply mainly due to disruptions caused by Russia's attack on Ukraine.
Three factors have cut energy supplies from the market and pushed prices higher: The first is OPEC's production cut. OPEC+ supplies around 40% of the world's oil consumption. The second is the US Strategic Petroleum Reserve releases being wound down. And thirdly, the likelihood of disruptions to Russian supplies.
Adi Imsirovic, a senior research fellow at the Oxford Institute for Energy Studies, adds to the list two demand-side factors: the economic situation in China and the likelihood and extent of a global recession.
"Gas is particularly prone to spikes due to weather and tight supplies. My guess is that gas should trade on average at around €160/MWh with spikes in the winter of over €200. Oil should average around $100 for the next 12 months," Imsirovic said.
Bram Claeys, a senior advisor at the Regulatory Assistance Project (RAP), a non-partisan organization focused on the green transition, says gas prices are likely to stay high for the next few years.
"I doubt, but can't be certain, that prices will ever come back to the level they were before. If only because, presumably, Europe will structurally shift away from Russian pipeline gas, towards more LNG, which is inherently a more expensive product," he said.
Prices next year could remain very high given that Europe will need to fill its storage without most of the Russian gas, says Anna Mikulska from the Baker Institute Center for Energy Studies at Rice University.
"The EU imperative to fill storage to 90% will be pushing prices up through the year. In addition, there will not be that much new LNG supply coming online next year — next to nothing really, which will potentially tighten the markets, especially if China resumes industrial activities," she said.
The weather and other contributing factors
The severity of the coming winter is another factor, as is how quickly French energy giant EDF manages to get its nuclear fleet back up and running. Another is the success of governments in reducing demand in industry and households through energy savings and faster roll-out of renewables.
Full story
3) China's cheap coal advantage: European wind industry ‘struggling’ with rising costs
Financial Times, 11 October 2022
The decision by OPEC+ to cut oil output has exacerbated an already perilous energy security situation in Europe
A barrel of European Brent crude cost around $94 (€95) this week, after rising 4% to a 5-week high of $98 per barrel last week on news that OPEC+ (OPEC plus a handful of other oil producers led by Russia) had agreed to cut production by 2 million barrels per day, about 2% of global supply, from November.
On Tuesday, US President Joe Biden said there would be "consequences'' for Saudi Arabia following the Riyadh-led alliance's move to cut oil production. While he remained vague about specifics in an interview with CNN, he suggested he would act soon. White House officials said the administration would reevaluate its relationship with the Saudi Kingdom.
The cut comes as the EU prepares for slowing growth due to higher energy prices, with recessionary fears competing with inflationary ones as the key issue facing policymakers.
"This shows that the energy crisis in Europe is threatening to escalate into a global price war," German business paper Handelsblatt put it, suggesting it pits Europe and the US against OPEC, its partners, and large oil importers like China and India.
While oil prices have fallen from highs of $130 per barrel in the summer when Western nations first imposed sanctions on Russian oil, most observers don't see it going much below $100 over the next 12 months.
As for gas, the European benchmark rose to a record high of €335 ($337) per megawatt-hour (MWh) in the spring. Since then, prices have — as with oil — fallen, back to about €225 per MWh, though are still up 300% since the start of 2022. Gas prices are directly linked to electricity prices, so if they stay high, electricity prices follow. The European Commission has announced reforms of the electricity market that would see a decoupling of gas and power prices, but the timing for that is not clear.
Kremlin-controlled energy giant Gazprom has said European natural gas prices could climb by another 60% this winter. In retaliation against sanctions following Russia's invasion of Ukraine, Moscow cut the flow of natural gas to Europe via the Nord Stream 1 pipeline to 20%, sending prices rocketing.
What's keeping prices high?
Energy price hikes in the past year — 60% for oil and 400% for natural gas — have been driven by rising demand as the coronavirus pandemic wound down and lower supply mainly due to disruptions caused by Russia's attack on Ukraine.
Three factors have cut energy supplies from the market and pushed prices higher: The first is OPEC's production cut. OPEC+ supplies around 40% of the world's oil consumption. The second is the US Strategic Petroleum Reserve releases being wound down. And thirdly, the likelihood of disruptions to Russian supplies.
Adi Imsirovic, a senior research fellow at the Oxford Institute for Energy Studies, adds to the list two demand-side factors: the economic situation in China and the likelihood and extent of a global recession.
"Gas is particularly prone to spikes due to weather and tight supplies. My guess is that gas should trade on average at around €160/MWh with spikes in the winter of over €200. Oil should average around $100 for the next 12 months," Imsirovic said.
Bram Claeys, a senior advisor at the Regulatory Assistance Project (RAP), a non-partisan organization focused on the green transition, says gas prices are likely to stay high for the next few years.
"I doubt, but can't be certain, that prices will ever come back to the level they were before. If only because, presumably, Europe will structurally shift away from Russian pipeline gas, towards more LNG, which is inherently a more expensive product," he said.
Prices next year could remain very high given that Europe will need to fill its storage without most of the Russian gas, says Anna Mikulska from the Baker Institute Center for Energy Studies at Rice University.
"The EU imperative to fill storage to 90% will be pushing prices up through the year. In addition, there will not be that much new LNG supply coming online next year — next to nothing really, which will potentially tighten the markets, especially if China resumes industrial activities," she said.
The weather and other contributing factors
The severity of the coming winter is another factor, as is how quickly French energy giant EDF manages to get its nuclear fleet back up and running. Another is the success of governments in reducing demand in industry and households through energy savings and faster roll-out of renewables.
Full story
3) China's cheap coal advantage: European wind industry ‘struggling’ with rising costs
Financial Times, 11 October 2022
European wind turbine manufacturers are financially struggling and cutting jobs, putting them at risk of losing market share to Chinese competitors, despite the energy crisis, major industry players have warned.
Turbine makers General Electric Renewables and Siemens Gamesa both announced job cuts in recent weeks, and European manufacturers were “all financially struggling,” Jon Lezamiz Cortázar, global head of public affairs at Siemens Gamesa, told the Financial Times.
“Everything is getting much more expensive in an already stretched wind industry supply chain,” he said. If the situation did not improve, “it may happen that the European Green Deal is installed with non-European technology”.
The Global Wind Energy Council said it was likely to downgrade its forecasts for the amount of new capacity added this year globally from around 101 gigawatts to 94-95 gigawatts. This amounts to almost no growth since last year, with 2021 being a peak year for offshore wind installation.
The challenging picture comes even as European leaders scramble to boost their supply of domestically produced renewable energy in the context of a global energy crisis fuelled by Russia’s invasion of Ukraine. The EU wants to increase its target for renewable energy from 32 per cent of total power production to 45 per cent by 2030.
“Companies are laying people off, at a time when the supply chain should be ramping up,” said Ben Backwell, chief executive of the Global Wind Energy Council.
Inflation and the rising cost of key materials, such as steel and copper, have pushed up the cost of making turbines. But long lead times and turbine prices that are locked in by customers years in advance have made it difficult for manufacturers to pass on higher costs. Many have now started raising prices and renegotiating contracts with customers.
The industry is also grappling with supply chain delays, already strained by the lockdowns during the pandemic and exacerbated since the war in Ukraine. That put companies at risk of having to pay so-called “liquidated damages” to customers, or compensation payments related to project delays, analysts said.
Vestas Wind global head of marketing and public affairs, Morten Dyrholm, said the current situation amounted to “a pretty critical period in time for the supply chain”.
Shares in Vestas, turbine maker Nordex and offshore wind farm developer Orsted have all been sliding since their peaks in early 2021.
Vestas missed analyst expectations for its second-quarter results, posting an underlying operating loss of €182mn, while Siemens reported its first quarterly loss in nearly 12 years.
Morningstar analyst Matthew Donen said western companies were at risk of losing out to Chinese competitors, many of which were more financially resilient and could build turbines for less.
“The threat of Chinese competition is increasing,” he said. “They can match now the western turbine manufacturers, which hadn’t been the case in the past.”
Full story
4) Ralph Schoelhammer: Germany’s ‘Mittelstand’ is being killed off
Unherd, 13 October 2022
Turbine makers General Electric Renewables and Siemens Gamesa both announced job cuts in recent weeks, and European manufacturers were “all financially struggling,” Jon Lezamiz Cortázar, global head of public affairs at Siemens Gamesa, told the Financial Times.
“Everything is getting much more expensive in an already stretched wind industry supply chain,” he said. If the situation did not improve, “it may happen that the European Green Deal is installed with non-European technology”.
The Global Wind Energy Council said it was likely to downgrade its forecasts for the amount of new capacity added this year globally from around 101 gigawatts to 94-95 gigawatts. This amounts to almost no growth since last year, with 2021 being a peak year for offshore wind installation.
The challenging picture comes even as European leaders scramble to boost their supply of domestically produced renewable energy in the context of a global energy crisis fuelled by Russia’s invasion of Ukraine. The EU wants to increase its target for renewable energy from 32 per cent of total power production to 45 per cent by 2030.
“Companies are laying people off, at a time when the supply chain should be ramping up,” said Ben Backwell, chief executive of the Global Wind Energy Council.
Inflation and the rising cost of key materials, such as steel and copper, have pushed up the cost of making turbines. But long lead times and turbine prices that are locked in by customers years in advance have made it difficult for manufacturers to pass on higher costs. Many have now started raising prices and renegotiating contracts with customers.
The industry is also grappling with supply chain delays, already strained by the lockdowns during the pandemic and exacerbated since the war in Ukraine. That put companies at risk of having to pay so-called “liquidated damages” to customers, or compensation payments related to project delays, analysts said.
Vestas Wind global head of marketing and public affairs, Morten Dyrholm, said the current situation amounted to “a pretty critical period in time for the supply chain”.
Shares in Vestas, turbine maker Nordex and offshore wind farm developer Orsted have all been sliding since their peaks in early 2021.
Vestas missed analyst expectations for its second-quarter results, posting an underlying operating loss of €182mn, while Siemens reported its first quarterly loss in nearly 12 years.
Morningstar analyst Matthew Donen said western companies were at risk of losing out to Chinese competitors, many of which were more financially resilient and could build turbines for less.
“The threat of Chinese competition is increasing,” he said. “They can match now the western turbine manufacturers, which hadn’t been the case in the past.”
Full story
4) Ralph Schoelhammer: Germany’s ‘Mittelstand’ is being killed off
Unherd, 13 October 2022
The problem is that the current recession and its driver, a serious lack of energy, is part of a massive wave of deindustrialisation across the continent.
The International Monetary Fund has recently updated its world economic outlook, predicting a global growth rate of only 2.7% (compared to 6% in 2021). One of the worst performers is the Eurozone, which is expected to grow by only half a percentage point — and even that prediction could turn out to be too optimistic.
The problem is particularly acute in Germany, where borrowing costs are beginning to rise and the markets are noticing. The backbone of German innovation and a major source of future growth are its small to medium sized businesses. Almost 40% of total corporate turnover is generated by these enterprises, and they account for 55% of value added in the German economy. They also train the future industry workforce, and are responsible for 1.3 million of the 1.5 million training places in German companies.
Keen innovators, smaller companies are often investing twice as much in research and development as their larger competitors. Unfortunately, the current crisis is hitting precisely this sector of the economy hardest, driving up insolvencies among Germany’s so called ‘Mittelstand’.
The tragedy is that the government in Berlin is doing next to nothing to reassure investors. Current proposals are not addressing necessary steps to maintain the country’s industrial base, but instead consist almost entirely of throwing money at the problem. The government wants to spend up to €200bn (almost 5% of GDP) to “shield” enterprises from energy shortages, but it is becoming increasingly clear that no money in the world can increase the supply of energy if, simply, there is not enough. The most important step would be to ramp up domestic energy production, but neither the Social Democrats nor the Greens have any realistic plans in this regard, with the exception of more wind and solar farms, which will not save Germany’s industry.
The problems in Germany go much deeper. As this paper shows, Germany is losing its competitive edge across the spectrum; from education where outcomes are stagnating to entrepreneurship where the number of startups is declining. German universities, once the envy of the world and the role model for America’s Ivy Leagues, have fallen well behind.
So, who will be the future investors in an economy that is losing its entrepreneurs? The answer for many Germans seems to be the state, in the hope that every problem can be papered over by massive government spending, entirely ignoring that more spending with less production will lead to ever more inflation.
But this is not the 1870s or 1930s, where, despite the economic depression, German companies founded in the 19th century maintained their innovative edge. The problem is that the current recession and its driver, a serious lack of energy, is part of a massive wave of deindustrialisation across the continent. That will be difficult to unwind, making this recession unique. Unless a significant course correction takes place, it will be the final one before a descent into a world of permanent European stagflation and economic decline.
5) Chevron chief blames western governments for energy crunch
Financial Times, 13 October 2022
“The reality is, fossil fuel is what runs the world today. It’s going to run the world tomorrow and five years from now, 10 years from now, 20 years from now.”
Western governments have made a global oil and gas crunch worse by “doubling down” on climate policies that will make energy markets “more volatile, more unpredictable, more chaotic”, the head of US supermajor Chevron has warned.
Mike Wirth, Chevron’s chief executive, said a premature effort to transition from fossil fuels had resulted in “unintended consequences”, including energy supply insecurity from crisis-hit Europe to California.
Despite heavy global investment in renewables in the past 20 years, fossil fuels still met about 80 per cent of global demand, and governments had to hold an “honest conversation” about the scale of the energy challenge, Wirth said.
“The conversation [about energy] in the developed world for sure has skewed towards climate, taking affordability and security for granted,” Wirth said in an interview at the company’s headquarters in San Ramon, California.
“The reality is, [fossil fuel] is what runs the world today. It’s going to run the world tomorrow and five years from now, 10 years from now, 20 years from now.”
The supermajor boss’s comments come as western governments’ climate commitments clash with an energy crisis following Russia’s invasion of Ukraine, which has sent inflation soaring and threatens to topple the world into recession.
Last week, Russia and its ally Saudi Arabia also agreed to begin cutting oil production next month, a sign that Moscow’s energy war on Europe was taking on a global complexion.
But Wirth said the source of the energy crunch predated Russia’s invasion and followed years of under-investment in new oil supply. Annual capital spending on oil and gas projects was now about half the rate seen in years before the pandemic, he said, even though demand for the energy has continued to rise.
Meanwhile, spending on alternatives to oil and gas was “woefully short, trillions of dollars short”, Wirth said. The mismatch “illustrates the risk in moving from a system that keeps the world functioning today aggressively to another system, and shutting down nuclear, shutting down coal, discouraging oil and gas”, he added.
Wirth’s comments are likely to draw criticism from environmental campaigners who believe oil groups are seizing on the energy crisis to deepen dependence on fossil fuels despite the urgent threat of global warming.
Chevron is the world’s second-biggest supermajor by market capitalisation, after ExxonMobil, and produces almost 2 per cent of the world’s oil.
Wirth was among energy executives called to testify in Congress last year as part of an investigation into what lawmakers described as “Big Oil’s disinformation campaign to prevent climate action”.
Chevron last year announced plans to spend $10bn over seven years on low-carbon technologies, and has an “aspiration” to reduce its operational emissions to net zero by 2050, although this does not include pollution from the products it sells. Total capital spending this year would amount to $15bn, including $800mn on its low carbon business.
“The IPCC [UN climate report] concludes that anthropogenic climate change is a real thing and that the use of fossil fuels has contributed, and so we accept that,” Wirth said.
But he rejected the blame attributed to oil companies for providing “a legal product that complies with all the laws”, and for which there was still consumer demand — and reiterated his pledge that Chevron would continue to increase oil supply.
“If people want to stop driving, stop flying . . . that’s a choice for society,” he said. “I don’t think most people want to move backwards in terms of their quality of their life . . . our products enable that.”
The US Congress recently passed sweeping new climate legislation, including $370bn worth of subsidies for clean energy, designed to accelerate an energy transition in the US.
But the Biden administration has also pushed for more immediate solutions to drive down the soaring US petrol prices that have dented the president’s approval ratings. Last year, Biden took aim at “potentially illegal conduct” by companies such as Chevron and ExxonMobil and clashed with Wirth this summer after telling the supermajors their record profits were “not acceptable”.
The administration has also released oil from its emergency stockpiles, loosened anti-smog rules and considered cutting fuel exports from the US in a bid to shelter domestic consumers from crude price rises.
Since Russia’s invasion of Ukraine, the White House has also called for US shale producers, including Chevron, to increase domestic supply, although producers are increasingly eschewing pricey new drilling campaigns in favour of bumper dividends.
Full story
The International Monetary Fund has recently updated its world economic outlook, predicting a global growth rate of only 2.7% (compared to 6% in 2021). One of the worst performers is the Eurozone, which is expected to grow by only half a percentage point — and even that prediction could turn out to be too optimistic.
The problem is particularly acute in Germany, where borrowing costs are beginning to rise and the markets are noticing. The backbone of German innovation and a major source of future growth are its small to medium sized businesses. Almost 40% of total corporate turnover is generated by these enterprises, and they account for 55% of value added in the German economy. They also train the future industry workforce, and are responsible for 1.3 million of the 1.5 million training places in German companies.
Keen innovators, smaller companies are often investing twice as much in research and development as their larger competitors. Unfortunately, the current crisis is hitting precisely this sector of the economy hardest, driving up insolvencies among Germany’s so called ‘Mittelstand’.
The tragedy is that the government in Berlin is doing next to nothing to reassure investors. Current proposals are not addressing necessary steps to maintain the country’s industrial base, but instead consist almost entirely of throwing money at the problem. The government wants to spend up to €200bn (almost 5% of GDP) to “shield” enterprises from energy shortages, but it is becoming increasingly clear that no money in the world can increase the supply of energy if, simply, there is not enough. The most important step would be to ramp up domestic energy production, but neither the Social Democrats nor the Greens have any realistic plans in this regard, with the exception of more wind and solar farms, which will not save Germany’s industry.
The problems in Germany go much deeper. As this paper shows, Germany is losing its competitive edge across the spectrum; from education where outcomes are stagnating to entrepreneurship where the number of startups is declining. German universities, once the envy of the world and the role model for America’s Ivy Leagues, have fallen well behind.
So, who will be the future investors in an economy that is losing its entrepreneurs? The answer for many Germans seems to be the state, in the hope that every problem can be papered over by massive government spending, entirely ignoring that more spending with less production will lead to ever more inflation.
But this is not the 1870s or 1930s, where, despite the economic depression, German companies founded in the 19th century maintained their innovative edge. The problem is that the current recession and its driver, a serious lack of energy, is part of a massive wave of deindustrialisation across the continent. That will be difficult to unwind, making this recession unique. Unless a significant course correction takes place, it will be the final one before a descent into a world of permanent European stagflation and economic decline.
5) Chevron chief blames western governments for energy crunch
Financial Times, 13 October 2022
“The reality is, fossil fuel is what runs the world today. It’s going to run the world tomorrow and five years from now, 10 years from now, 20 years from now.”
Western governments have made a global oil and gas crunch worse by “doubling down” on climate policies that will make energy markets “more volatile, more unpredictable, more chaotic”, the head of US supermajor Chevron has warned.
Mike Wirth, Chevron’s chief executive, said a premature effort to transition from fossil fuels had resulted in “unintended consequences”, including energy supply insecurity from crisis-hit Europe to California.
Despite heavy global investment in renewables in the past 20 years, fossil fuels still met about 80 per cent of global demand, and governments had to hold an “honest conversation” about the scale of the energy challenge, Wirth said.
“The conversation [about energy] in the developed world for sure has skewed towards climate, taking affordability and security for granted,” Wirth said in an interview at the company’s headquarters in San Ramon, California.
“The reality is, [fossil fuel] is what runs the world today. It’s going to run the world tomorrow and five years from now, 10 years from now, 20 years from now.”
The supermajor boss’s comments come as western governments’ climate commitments clash with an energy crisis following Russia’s invasion of Ukraine, which has sent inflation soaring and threatens to topple the world into recession.
Last week, Russia and its ally Saudi Arabia also agreed to begin cutting oil production next month, a sign that Moscow’s energy war on Europe was taking on a global complexion.
But Wirth said the source of the energy crunch predated Russia’s invasion and followed years of under-investment in new oil supply. Annual capital spending on oil and gas projects was now about half the rate seen in years before the pandemic, he said, even though demand for the energy has continued to rise.
Meanwhile, spending on alternatives to oil and gas was “woefully short, trillions of dollars short”, Wirth said. The mismatch “illustrates the risk in moving from a system that keeps the world functioning today aggressively to another system, and shutting down nuclear, shutting down coal, discouraging oil and gas”, he added.
Wirth’s comments are likely to draw criticism from environmental campaigners who believe oil groups are seizing on the energy crisis to deepen dependence on fossil fuels despite the urgent threat of global warming.
Chevron is the world’s second-biggest supermajor by market capitalisation, after ExxonMobil, and produces almost 2 per cent of the world’s oil.
Wirth was among energy executives called to testify in Congress last year as part of an investigation into what lawmakers described as “Big Oil’s disinformation campaign to prevent climate action”.
Chevron last year announced plans to spend $10bn over seven years on low-carbon technologies, and has an “aspiration” to reduce its operational emissions to net zero by 2050, although this does not include pollution from the products it sells. Total capital spending this year would amount to $15bn, including $800mn on its low carbon business.
“The IPCC [UN climate report] concludes that anthropogenic climate change is a real thing and that the use of fossil fuels has contributed, and so we accept that,” Wirth said.
But he rejected the blame attributed to oil companies for providing “a legal product that complies with all the laws”, and for which there was still consumer demand — and reiterated his pledge that Chevron would continue to increase oil supply.
“If people want to stop driving, stop flying . . . that’s a choice for society,” he said. “I don’t think most people want to move backwards in terms of their quality of their life . . . our products enable that.”
The US Congress recently passed sweeping new climate legislation, including $370bn worth of subsidies for clean energy, designed to accelerate an energy transition in the US.
But the Biden administration has also pushed for more immediate solutions to drive down the soaring US petrol prices that have dented the president’s approval ratings. Last year, Biden took aim at “potentially illegal conduct” by companies such as Chevron and ExxonMobil and clashed with Wirth this summer after telling the supermajors their record profits were “not acceptable”.
The administration has also released oil from its emergency stockpiles, loosened anti-smog rules and considered cutting fuel exports from the US in a bid to shelter domestic consumers from crude price rises.
Since Russia’s invasion of Ukraine, the White House has also called for US shale producers, including Chevron, to increase domestic supply, although producers are increasingly eschewing pricey new drilling campaigns in favour of bumper dividends.
Full story
6) Government drops appeal over Net-Zero High Court ruling
The Times, 13 October 2022
Jacob Rees-Mogg has dropped plans to appeal against a High Court ruling that found the government’s plan to reach net zero was unlawful.
The business secretary’s decision means the government must now draw up a new net-zero strategy by March.
Campaigners said that the climbdown was embarrassing but welcome, and urged ministers to flesh out how legally binding carbon targets would be met with more ambitious action.
The existing strategy was hailed by Boris Johnson as the “greatest opportunity for jobs and prosperity” since the industrial revolution. However, the plan did not set out the emissions savings for individual measures, such as backing a new nuclear power station or stimulating the uptake of electric cars.
That led to a legal challenge brought by the civil society groups Friends of the Earth, the Good Law Project and ClientEarth against the government in June. The case revealed that the government would fall short on its mid-2030s carbon targets by ten million tonnes of carbon, and government lawyers were unable to provide extra detail on how targets would be met.
In July, Mr Justice Holgate ruled that the strategy was unlawful because it failed to meet two obligations in the Climate Change Act 2008. One was that ministers did not have enough information to know carbon targets would be met while the other concerned a lack of detail on emissions savings, rendering public scrutiny impossible. The judge imposed a new deadline of the end of March next year for a revised strategy.
The government applied for permission to fight the decision but in a letter seen by The Times, officials said: “We confirm that the new secretary of state has made a decision not to pursue the application [for permission to appeal].”
What a new net-zero strategy will look like remains to be seen but the numbers for emissions reductions will now need to be put on individual policies. The Times understands that the government holds a spreadsheet containing those figures but has repeatedly refused freedom of information requests to release the document.
A report by the Tory MP Chris Skidmore, due by the end of the year, is likely to influence a new strategy.
A government spokesman said: “The net-zero strategy remains policy and has not been quashed.”
The Times, 13 October 2022
Jacob Rees-Mogg has dropped plans to appeal against a High Court ruling that found the government’s plan to reach net zero was unlawful.
The business secretary’s decision means the government must now draw up a new net-zero strategy by March.
Campaigners said that the climbdown was embarrassing but welcome, and urged ministers to flesh out how legally binding carbon targets would be met with more ambitious action.
The existing strategy was hailed by Boris Johnson as the “greatest opportunity for jobs and prosperity” since the industrial revolution. However, the plan did not set out the emissions savings for individual measures, such as backing a new nuclear power station or stimulating the uptake of electric cars.
That led to a legal challenge brought by the civil society groups Friends of the Earth, the Good Law Project and ClientEarth against the government in June. The case revealed that the government would fall short on its mid-2030s carbon targets by ten million tonnes of carbon, and government lawyers were unable to provide extra detail on how targets would be met.
In July, Mr Justice Holgate ruled that the strategy was unlawful because it failed to meet two obligations in the Climate Change Act 2008. One was that ministers did not have enough information to know carbon targets would be met while the other concerned a lack of detail on emissions savings, rendering public scrutiny impossible. The judge imposed a new deadline of the end of March next year for a revised strategy.
The government applied for permission to fight the decision but in a letter seen by The Times, officials said: “We confirm that the new secretary of state has made a decision not to pursue the application [for permission to appeal].”
What a new net-zero strategy will look like remains to be seen but the numbers for emissions reductions will now need to be put on individual policies. The Times understands that the government holds a spreadsheet containing those figures but has repeatedly refused freedom of information requests to release the document.
A report by the Tory MP Chris Skidmore, due by the end of the year, is likely to influence a new strategy.
A government spokesman said: “The net-zero strategy remains policy and has not been quashed.”
7) Toby Young: Will I be PayPal’s downfall?
The Spectator, 15 October 2022
The Spectator, 15 October 2022
Dan Schulman, the president and CEO of PayPal, gave an interview earlier this year entitled: ‘The thing that separates good companies from great ones: trust.’ He told the audience that companies need to do more than deliver an outstanding product to build trust. In addition, they need to ‘stand up for social issues that are important’ and ‘do the right things to help create a better world’. Ironically, it is precisely because PayPal has been energetically pursuing this agenda that trust in the company is beginning to evaporate.
I don’t think it’s too vainglorious to say that PayPal’s current difficulties began in the middle of last month when, without any notice, it closed the accounts of the Free Speech Union and the Daily Sceptic, both of which I run, as well as my personal account. Getting any coherent explanation out of the company as to why it had done so proved difficult – it kept coming up with different reasons. The nearest I got was when someone in the company’s ‘executive escalations’ department – a name straight out of a dystopian thriller – sent me a message that contained the following sentence: ‘PayPal’s policy is not to allow our services to be used for activities that promote hate, violence or racial intolerance.’ He didn’t give any examples, so it was impossible to mount a defence. Had someone at Pay-Pal decided the Free Speech Union’s defence of people challenging fashionable orthodoxies, like J.K. Rowling, was promoting ‘hate’?
A week later, after the company’s decision to de-platform me had been almost universally condemned, with Jacob Rees-Mogg citing it as an example of ‘cancel culture’, all three accounts were magically restored. But the damage had been done: how could PayPal’s customers trust the company not to do to them what it had done to me, only without the happy ending?
Then the company did something very odd. A few days after releasing me from PayPal jail, it doubled down on its social activism, publishing an update to its Acceptable Use Policy whereby customers were prohibited from using its services to, among other things, post ‘objectionable’ content or ‘depict, promote or incite hatred or discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race, religion, gender or gender identity, sexual orientation, etc)’. Not only that, but if any of its customers committed these sins, PayPal granted itself the right to fine them $2,500 ‘per violation’, which would be deducted from their accounts. In effect, PayPal would become a digital version of the Taliban’s religious police, issuing swift, on-the-spot beatings for the propagation of virtue and the prevention of vice.
Was this announcement a response to the company’s climbdown in my case? PayPal’s lawyers may have advised the CEO that I could sue for damages if my accounts weren’t restored, so if he wanted a freer hand in future he’d need to put this more draconian policy in place. Or perhaps PayPal’s restoration of my accounts led to a backlash among the company’s twentysomething employees and this was designed to quell the revolt. Or maybe it was just a coincidence.
Not surprisingly, the threat of PayPal helping itself to $2,500 from its customers’ deposits – ‘per violation’ – caused widespread panic and people began to close their accounts in droves. Indeed, last weekend #boycottpaypal started trending on Twitter and even Elon Musk, one of the company’s founders, popped up to stick the boot in. PayPal launched into damage-control mode and claimed – rather implausibly – that the update ‘went out in error’ and included ‘incorrect information’. Ironically, one of the sins the company said it would punish people for was promoting ‘misinformation’. So will it now fine itself $2,500?
It remains to be seen whether this ‘clarification’ will be enough to stop the exodus. How can PayPal’s customers trust the company again? It has only said it won’t fine people if they promote ‘misinformation’, with the penalty remaining in place if you commit any of the other sins. When trading opened on Wall Street on Monday, shares in the company fell by 6 per cent. By the time you read this, the $110 billion behemoth may be a smoking ruin – the biggest casualty yet of ‘Go woke, go broke’.
I feel ambivalent about this. On the one hand, PayPal’s demise would send a message to the financial services sector that trying to police your customers’ speech is a terrible idea. But on the other, lots of small depositors would lose their money. As always when big companies fail, it’s the little guy that pays the price.
I don’t think it’s too vainglorious to say that PayPal’s current difficulties began in the middle of last month when, without any notice, it closed the accounts of the Free Speech Union and the Daily Sceptic, both of which I run, as well as my personal account. Getting any coherent explanation out of the company as to why it had done so proved difficult – it kept coming up with different reasons. The nearest I got was when someone in the company’s ‘executive escalations’ department – a name straight out of a dystopian thriller – sent me a message that contained the following sentence: ‘PayPal’s policy is not to allow our services to be used for activities that promote hate, violence or racial intolerance.’ He didn’t give any examples, so it was impossible to mount a defence. Had someone at Pay-Pal decided the Free Speech Union’s defence of people challenging fashionable orthodoxies, like J.K. Rowling, was promoting ‘hate’?
A week later, after the company’s decision to de-platform me had been almost universally condemned, with Jacob Rees-Mogg citing it as an example of ‘cancel culture’, all three accounts were magically restored. But the damage had been done: how could PayPal’s customers trust the company not to do to them what it had done to me, only without the happy ending?
Then the company did something very odd. A few days after releasing me from PayPal jail, it doubled down on its social activism, publishing an update to its Acceptable Use Policy whereby customers were prohibited from using its services to, among other things, post ‘objectionable’ content or ‘depict, promote or incite hatred or discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race, religion, gender or gender identity, sexual orientation, etc)’. Not only that, but if any of its customers committed these sins, PayPal granted itself the right to fine them $2,500 ‘per violation’, which would be deducted from their accounts. In effect, PayPal would become a digital version of the Taliban’s religious police, issuing swift, on-the-spot beatings for the propagation of virtue and the prevention of vice.
Was this announcement a response to the company’s climbdown in my case? PayPal’s lawyers may have advised the CEO that I could sue for damages if my accounts weren’t restored, so if he wanted a freer hand in future he’d need to put this more draconian policy in place. Or perhaps PayPal’s restoration of my accounts led to a backlash among the company’s twentysomething employees and this was designed to quell the revolt. Or maybe it was just a coincidence.
Not surprisingly, the threat of PayPal helping itself to $2,500 from its customers’ deposits – ‘per violation’ – caused widespread panic and people began to close their accounts in droves. Indeed, last weekend #boycottpaypal started trending on Twitter and even Elon Musk, one of the company’s founders, popped up to stick the boot in. PayPal launched into damage-control mode and claimed – rather implausibly – that the update ‘went out in error’ and included ‘incorrect information’. Ironically, one of the sins the company said it would punish people for was promoting ‘misinformation’. So will it now fine itself $2,500?
It remains to be seen whether this ‘clarification’ will be enough to stop the exodus. How can PayPal’s customers trust the company again? It has only said it won’t fine people if they promote ‘misinformation’, with the penalty remaining in place if you commit any of the other sins. When trading opened on Wall Street on Monday, shares in the company fell by 6 per cent. By the time you read this, the $110 billion behemoth may be a smoking ruin – the biggest casualty yet of ‘Go woke, go broke’.
I feel ambivalent about this. On the one hand, PayPal’s demise would send a message to the financial services sector that trying to police your customers’ speech is a terrible idea. But on the other, lots of small depositors would lose their money. As always when big companies fail, it’s the little guy that pays the price.
The London-based Net Zero Watch is a campaign group set up to highlight and discuss the serious implications of expensive and poorly considered climate change policies. The Net Zero Watch newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.netzerowatch.com.
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