Are we heading for a net zero crash?
By Paul Homewood
Rupert Darwall on the dangers of messing around with the world’s financial system:
So far, the big message from the Glasgow climate conference is the role of finance in decarbonising the global economy. It’s a dangerous development. In his speech to COP 26 last week, the Chancellor, Rishi Sunak, pledged action to ‘rewire the entire financial system for Net Zero.’ Finance has taken centre, stage in large part because of inadequate government policies.
According to the United Nations Environment Programme, around two-thirds of global emissions are linked to private household activity. Reducing them requires major changes in people’s lifestyles, UNEP says.
So, rather than imposing carbon taxes that really hurt – the Intergovernmental Panel on Climate Change estimates a minimum of $135 (£100) a ton, rising up to $14,300 (£10,600) a ton in order to hit net zero in 2050 – governments prefer to outsource the heavy lifting to the world of finance in the hope that it will provide a pain-free path to the net zero goal. Financial institutions signed up to the Glasgow Financial Alliance for Net Zero hold assets worth over $130 trillion (£100 trillion). ‘This is an historic wall of capital for the net zero transition around the world,’ Sunak declared.
Sunak might well have been speaking from a script provided him by Mark Carney, former Governor of the Bank of England and instrumental in bringing together the Glasgow Financial Alliance. ‘We must build a financial system entirely focused on net zero,’ Carney says. Though billionaires and multimillionaires they may be, oligarchs of finance are custodians of other people’s money.
What’s missing in the craze for net zero and ESG (environmental, social and government) investing is B – as in B for beneficiaries. A financial system wholly geared to financing net zero isn’t one focused on savers and investors. Pension funds exist to generate secure incomes for pensions; insurers need to be solvent to pay out against insurance claims. Neglecting the B is a formula for financial ruin.
A financial system wholly geared to financing net zero isn’t one focused on savers and investors
Carney puts the net zero financing requirement at around $100 trillion (£75 trillion). ‘If there’s a revenue stream, then the funding is infinite,’ Bank of America chief executive Brian Moynihan told the Wall Street Journal. It should set alarm bells ringing when bankers stop talking about risk and prudence and start talking like Buzz Lightyear.
These revenue streams don’t currently exist, but one way or another, they will be created – juiced up and supported by governments and multilateral aid agencies such as the World Bank. On the other side of the ledger, returns on investment in the production of hydrocarbon energy needed to keep the lights on and economies moving are to be suppressed, pushing up their cost. The day Sunak spoke, low wind speeds necessitated paying coal-fired power stations thousands of pounds per megawatt hour to help keep the lights on.
Ultimately, the revenue streams Moynihan and other bankers lend against come from taxpayers and consumers. Higher energy costs and supply disruptions would make it harder to service purportedly low-risk net zero financing. When bankers talk of the social value of bank lending, it has all the makings of a systemic financial crisis.
In 1987, shortly after the Reagan administration’s botched Savings & Loan (S&L) deregulation, University of Chicago economist Sam Peltzman warned of the dangers to bank capital when banks are induced by governments to channel credit to socially ‘worthy’ sectors like housing. There followed the S&L meltdown, which cost American taxpayers up to $124 billion (£90 billion). Two decades later came an order-of-magnitude larger financial crisis, also with its origins in housing finance. Using the global banking system to cross-subsidise net zero risks a financial crisis that would make 2008 look comparatively minor – much the way the S&L meltdown looks to us today.
Such thoughts must have been far from Sunak’s mind as the Glasgow COP’s host singled out British business for special treatment and announced that the U.K. will become the first ever ‘Net Zero aligned financial centre.’ That vision could see businesses being forced to file net zero transition plans policed by an independent task force. We live in a global, interconnected world.
About 62 per cent of the revenues of Financial Times Stock Exchange-100 companies are generated outside the U.K. Unilaterally imposing net zero on U.K.-listed companies inflicts a climate tax on them, forcing them to cede market share and profits to their non-U.K.-listed competitors.
As a former Goldman Sachs banker, Sunak knows this full well, but a costly soundbite at a UN climate conference is evidently worth the damage to British businesses. ‘Over $130 trillion (£100 trillion) of private capital waiting to be deployed; and a greener financial system, under way,’ Sunak boasted, displaying a habit acquired from Tony Blair of speaking in sentences without verbs.
Indirect climate policies are not a substitute for direct government action to suppress consumer demand for greenhouse gas-emitting activities. Using the financial system as the principal policy instrument of decarbonisation will have unintended consequences and create immense distortions that threaten global financial stability and the functioning of a commercial society.
Historian Adam Tooze calls the energy transition a ‘historic experiment.’ The climate crisis enters a new, dangerous phase as finance ministers, central bankers, and financial leaders all look to save the planet – with other people’s money.
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NOT A LOT OF PEOPLE KNOW THAT 
Nobody elected Carney.
Nobody has voted to have him do anything.
This is the UN circumventing national democracies in order to implement extraordinarily far-reaching policies with reckless speed and zero responsibility.
If we don’t want it, how do we stop it?
Those comments can also be applied to net zero, the Paris climate agreement and anything that may be agreed in Glasgow.
We don’t want them, didn’t vote for them, but there seems to be no way to stop them.
Those comments also apply to net zero, the Paris climate agreement and whatever may be agreed in Glasgow.
We don’t want them, didn’t vote for them, but seem unable to stop them.
“If we don’t want it, how do we stop it?” We deliberately crash the system to wake up the masses. A few days, even weeks, without a functioning electricity generating and distribution system will certainly focus the minds of enough people to make a difference. It can be done surprisingly easily.
Phoenix44,
the answer is easy, doing it is the difficult bit. Defund the U.N., Donald Trump made noises towards that when he was in power.
I have commented on here and other sites for the last few years about Carney’s efforts via the BIS to hardwire this into financial and insurance decision making globally.
This is the way the likes of BlackRock etc make $trillions at the tax payers expense, and with little or no risk.
Its fascism on steroids, happy-clapped on by the idiot willing idiots of the western middle classes.
Its so embedded now its difficult to see how its stopped, elections etc will have no effect.
Sadly, I have to agree with what you say.
Yet another total misunderstanding of what NET-zero really means?
What is net zero?
“Net zero means not adding to the amount of greenhouse gases in the atmosphere. Achieving it will involve reducing greenhouse gas emissions as much as possible and balancing out any that remain by removing an equivalent amount.”
Last year the equivalent amount would have been close to 40,000 million metric tons (40 gigatonne) that were added. Currently, the CCS technology is taking out and storing only 40 million tons annually. Lowering emissions takes none out.
You can’t fix stupid?
All seems skewed against “The Poor Bloody Infantry” yet again
I’d like to see a study of who is making money out of all this net zero stuff. I read that David Cameron’s father was (is?) making £1,000 a day out of windmills. I should think the Royal Family/Crown Estate is doing pretty well. There must be many others earning huge amounts.
My comment on the Speccie website:
I was corrected by someone suggesting that ‘tries to’ be deleted and ‘destroy’ changed to ‘destroys’.
I’ll go with the “someone” that made the suggestions.
Let’s go Someone!
UN Agenda’s 2021 & 2030! Two years ago I thought I might be a Conspiracy Theorist, now I am certain that this is the path being taken.
In 2030, when even more hysteria is being generated, the UN will meet and demand that they form a world government to save the planet, Socialist of course, Russia and China would not accept Capitalist Governance!
Anyone doubting me? The evidence is all there on the UN Website!
No, Andrew neither Russia nor China would be interested in any form of world government. Nor I suggest would the US – or Iran, Saudi or any of the Gulf states … etc. South Korea? Turkey? Kazakhstan? It’s a non-starter. Thankfully.
At the domestic level, the UK Climate Change Committee (CCC) has proposed that dwellings without an Energy Performance Certificate level C can be neither bought, sold nor rented.
This is, perhaps, a naive question, but, given the probability of millions of dwellings being affected and, I assume, rendered worthless, will this not wipe out the balance sheets of mortgage lenders, plunge borrowers into abyssal negative equity and precipitate an overnight financial crash? Or will some sort of legal sharp practice give affected properties a deemed value to allow the unelected but ludicrously influential CCC more time to press on with its iniquitous agenda?
It will also force large numbers of people onto the street.
Exactly, provoking civil unrest at an unimaginable scale!
Social Engineering, Environmentalism & Globalization . . . A New World Order
The Irony Revealed
The duty-bound lawmakers in every effort to wisely clean up the World . . . have inadvertently robbed their most strident supporters of their very existence. Those once powerful Union Jobs in some of the most powerful industry groups in the World are gone to third world countries at one quarter the price! Total Union membership today is at its lowest point since collective Bargaining was legalized almost 100 years ago. No concessions were ever considered to save jobs by sharing the costs of Scrubbers and Electrostatic Precipitators to clean up the Pollution. That would have meant lying in bed with the very Industrialists the Egalitarians had so stridently fought against and Defeated. So, the Mills, the Mines, the Production of Widgets and the purveyors of human usury were shut down. All hail the Champions of the Underdog, the Down Trodden and Society’s Victims. As for the Industrialists, more money could be made abroad, with less effort, in Autocratic Regimes. Supported by Globalization, Environmentalism and Social Engineering for the 21st Century.
How Ironic !
Is there a court that would award the Chinese damages for the pollution entailed in shifting the mines, mills and factories to the East to meet the needs and desires of Western consumers?
Is there a court that will compensate the Chinese worker for his work schedule of 9:00 am to 9:00 pm, 6 days per week; i.e. 72 hours per week?
Is there any way that one can bring to book the countries whose currency is used to finance trade globally, that is not tied to a store of value like gold?
ESG looks very much like the Tulip craze and the South Sea Bubble. It’s got to end badly. Its only a matter of time.
Did the UN create the climate emergency? OK, there is no emergency but the IPCC switched from saying there was not an emergency to saying there was at the time of the release of the report for policymakers. The BBC immediately adopted the policy that words like emergency and crisis could be used without constraint. Just a week or two before that, I had received a grudging admission from the BBC that they were wrong to use such words in their news bulletins. This was in response to a complaint that I took to the second level.
The UN agencies include the WMO which reports on the state of the climate, the IPCC which is effectively in charge of the climate research funded by governments and the WCRP which runs the CMIP coordination project for climate models. The models that run hot compared with reality and result in the climate alarm, the crazy range of equilibrium climate sensitivity values and the RCP values chosen for the model runs are all within the influence of the UN.
The UN clearly increased the alarmism in the run up to COP. We know that the UN uses climate change as the vehicle for wealth redistribution between the wealthy Western countries and developing nations. It seems to me that this Un project is now completely out of control and hijacked by a number of interested parties keen to exploit the financial implications.
I recall Mark Twain’s advice “Buy land, they’ve stopped making it” as an investment guide and suggest that coal-fired generation may well have a profitable future. I’ve seen reports that the 2 (previously shutdown) units at Drax are now running flat out producing electricity at £4,000 per MWh.
Mind you, the other 4 units burning imported wood are probably doing as well. So it seems the best investment might be in existing plant capable of generation whenever the wind doesn’t meet political targets.
“‘Over $130 trillion (£100 trillion) of private capital waiting to be deployed; and a greener financial system, under way,’ Sunak boasted”
Net Zero Money is the reality. All these big numbers are hilarious. Economic suicide does not produce big money.
Private capital is free to go anywhere. Looks like GB is the LAST place it will go.
“The Chancellor, Rishi Sunak, pledged action to ‘rewire the entire financial system for Net Zero.’”
The financial system will go elsewhere. UK is free to do whatever it wants; the rest of the world is not going to play along. The Net Zero Show is clownish. Sunak is going to rewire the entire financial system? Rilly?
How do we know how much CO2 is added to the atmosphere by human activity and how much from natural causes. Without knowing this any target is irrelevant. Sunak said last week that he wanted get to NetZero carbon. Does he have any grey matter ?.
The amount of stored carbon that is bound to iron and gets converted to CO2 when released is estimated to be somewhere between two and five times the amount of carbon released annually through anthropogenic fossil fuel emissions.
https://www.sciencedaily.com/releases/2021/02/210209113807.htm
Plus from melting Glaciers, Plus from Volcanoes above and below the oceans . . .
But hey the Total Out-put, the total blame is from burning fossil fuels . . .Give me a break !!