The Looming, Quixotic End of 'Net-Zero'

When The Pipeline was launched four years ago, it was a modest critical voice in opposition to an all-but-unquestioned global orthodoxy that diagnosed the main problem facing the world as a "climate emergency” and the necessary solution to it as Net-Zero carbon emissions. This orthodoxy had the support of almost all the world’s establishments, political parties, corporations, media, and cultural institutions—not excluding "the Science” of course—and those few independent minds and national bodies that contested the orthodoxy were easily dismissed as "climate deniers.”

That remained the situation until the day before yesterday. Indeed, if you look only at the formal statements of governments and global institutions, it is still the situation today. But one of the iron laws of politics holds that: "the more votes of confidence a political leader receives, the closer he is to resignation.”

The climate emergency and Net-Zero continue to receive official support from all over. Too much rhetoric and prestige have been invested in them to permit their being lightly tossed aside. But at every level we can see they’re being postponed, delayed, qualified, and redefined to mean something else as their horrendous practical consequences—immiseration, higher taxes, soaring energy prices, deindustrialization, etc., etc.—are accelerating down the track towards companies and electorates.

For instance, the consultancy Carbon Trust recently reported that more than a quarter of 400 companies in the U.K., Germany, Sweden, the Netherlands. and Mexico were postponing action on "climate change" because of what the Trust called “analysis-paralysis” which led in turn to “greenstalling.”  In everyday language, it seems that company managers wanted to do the right thing by climate change but that making green targets a priority clashed with other management priorities and might hinder the growth of their business—or even its continued existence. So, well,  they dithered.

Dream on.

As it happens, "green-stalling” and ”analysis-paralysis” may not be the ideal responses to this dilemma—see how BP has lost investors to companies that pay higher dividends by trying to pursue two contrary business strategies simultaneously -- but they are probably better than jumping headlong into a completely different business. That’s not the opinion of Marta Iglesias, a director at the Carbon Trust, however. She told the Telegraph:

The fossil fuel economy does not have a long-term future, so to survive and thrive, businesses need to decarbonise their value chains. This requires a fundamental and strategic assessment that goes well beyond optimising current operations and requires leadership, long-term vision, commitment, and calculated risk-taking.

Ah yes, leadership, long-term vision, commitment, and calculated risk-taking . . . these are all very desirable qualities. But how likely is it that a company’s calculated risks will turn out well if it’s dealing with matters that go well beyond optimizing its current operations or anything else of which it has specialized knowledge?

As for long-term vision, that too is a sometime thing. After all, Ms. Iglesias bases her advice on the confident prediction that ”the fossil fuel economy does not have a long-term future.” The ”dirtiest” fossil fuel is coal which the recent international COP28 conference just decided to ”transition” away from in one of those historic agreements that never quite reach a climax. So Ms. Iglesias has both the international community and historical inevitability on her side. Yet as the International Energy Authority pointed out in he same week:  Global demand for coal will hit a record high of 8.5billion tons in 2023 because of rising demand for coal in China, India, and South East Asia which now account for three-quarters of global consumption, exceeding for the first time that of the U.S. and the E.U.

Fossil fuels look like remaining highly profitable for many years yet whereas many of the energy innovations promised by green governments have yet to stagger off the drawing board.

A future you'll never live to see.

It’s not surprising therefore that companies are greenstalling in the face of such uncertainty—especially when other companies did leap into what governments told them was the future and now regret it. That future was the inevitable triumph of the electric car, in which major auto manufacturers invested massive sums of cash, including huge government subsidies, in the prospect of green jobs and and lower carbon emissions.

With what results? As Matthew Lynn records it:

Renault, despite the programme of state support, has this week scrapped the separate listing of its EV unit Ampere, which has been scheduled for the first half of the year. It was a “pragmatic decision” . . .  falling sales for EVs across Europe meant the market was more challenging than forecast. Likewise, Volvo announced that it would stop funding its EV unit, Polestar, and might even offload its 48pc stake on other shareholders, including China’s Geely. Last September, Volkswagen said it was cutting production of two of its flagship EV models . . . while in November, Ford said it was scaling back its battery plant in Michigan.

Lynn does not blame EVs—for which he sees a smaller market niche than did governments and the United Nations—for these failures. He sees them as the latest confirmation that a state-led industrial strategy never works: the state backs the wrong industries; then over-invests; and finally distorts the market with subsidies:

Governments start out spending a few billion on new EV factories, then they have to start subsidising the EVs so that people actually buy them, then they have to impose tariffs and quotas to stop imports from countries where other government have invested too much.

All these practicalities—economic, political, technological—point in the same rational direction: abandon the delusion that fossil fuels can be replaced entirely by ”renewables"; give up utopian exercises in worldwide state planning; return decision-making from remote post-national bureaucracies to national democracies; and move towards an energy mix of nuclear power, clean natural gas, market-led technical innovations, and—yes—renewables when they are the cheapest, cleanest, and most efficient ways of keeping people warm, well-fed, and within easy distance of good jobs.

What obstructs these policy shifts is the climate orthodoxy that still wobbles upright despite its occasional concessions to economic reality. Public and private policy-making grow ever more schizophrenic as the overall aims of Net-Zero are continually reinforced in speeches while the tough measures needed to get there are regularly sidelined.

The Germans say nein.

We have had a textbook example this week. On Monday, the Commission in Brussels published its new and tougher Net-Zero target: a pledge to cut the EU’s carbon emissions by ninety per cent from their 2015 levels by the year 2040. At the last minute, however. a change had been made:

A previous draft of the EU target, seen by Reuters, had said agriculture would need to cut non-CO2 emissions 30% by 2040 from 2015 levels to comply with the overall climate goal. That pledge was removed from the final draft.

The reason why was obvious: farmers across Europe in France, Germany, the Netherlands, Spain, and elsewhere had been protesting against Net-Zero by blocking the roads with their tractors, besieging  cities, dumping manure over town halls, and plausibly theatening to elect Euroskeptic parties in next June’s European elections. Net-Zero will have to be achieved without their help. The irresistible force of European integration has finally crashed into the immovable object of French farmers. And as a result...

It is the policy of Europe to be firmly committed to reaching Net-Zero targets and it always will be.