The “transition to net zero” isn’t happening and “green energy” has long generated red ink. When will the herd finally acknowledge reality?
“Investors can’t ignore a megatrend that’s transforming consumer, corporate and government behaviour worldwide,” Michelle Lopez asserted three years ago (see “The energy revolution is happening whether we want it or not,” 10 May 2021). Arian Neiron, VanEck’s CEO & MD, Asia Pacific, dialed the hyperbole even higher: “almost every country on the planet,” he grossly exaggerated, “has formally recognised the climate change crisis.”
The truth is very much otherwise: according to Wikipedia, just 46 of the world’s 195 countries, of which 26 are members of the EU and none rank among its most populous, have in one form or another declared a climate crisis, emergency, etc. Moreover, most (30) of these nations have done so only “partially;” that is, one or more (but usually a minority) of their sub-national and local governments have declared emergencies.
Only 16 national parliaments – just 8% of the world’s total – have made such declarations. That’s nowhere near “almost every country on the planet”!
“Governments and businesses,” Neiron also alleged without citing a source, “are investing trillions of dollars to reduce and eliminate carbon emissions in order to halt global warming.” “The long-term growth potential for investors,” he concluded, “is as significant as the opportunity to help prevent environmental disaster” (see The Global Megatrend Investors Can’t Ignore, 26 March 2021).
Several years ago, claims like these were highly questionable (see, for example, Decarbonisation: A doubter’s guide for conservative investors, 16 May 2022). They’re even more dubious now. In this article, I demonstrate that:
- Globally, and as the UN defines it, the “transition to net zero” simply isn’t happening. At best, it’s unfolding at a snail’s pace: at its current rate, reaching something close to “net zero” will take 400 years!
- Charitably, on a worldwide basis the odds of reaching “net zero by 2050” are very long. Realistically, planet Earth won’t come anywhere near it. Indeed, it’s more likely that during the next quarter-century the polar opposite will occur: it will transition away from “net zero.”
- On current trends, the Albanese government will fail to reach its “renewable energy target” (82% of the country’s electricity generated from intermittent and thus unreliable sources such as wind and solar by 2030).
- Even if it succeeded, it wouldn’t matter: neither in Australia nor globally can electricity from either intermittent or nuclear sources achieve “net zero by 2050.”
- Australia‘s energy transition, as opposed to its electricity transition, isn’t occurring. Politicians will therefore abandon it – and their Paris, COP28, etc., commitments – as their miniscule benefits and immense costs become apparent to the general public.
- The trillions of dollars which governments and businesses have (in Neiron’s words) “invested to reduce and eliminate CO2 emissions in order to halt global warming” are thus a colossal waste. As such, this so-called mega-trend clearly offers no “long-term growth potential to investors.” Quite the contrary: over more than 15 years “green energy investments” have generated almost continuous – and cumulatively massive – losses.
Empirically, the “global energy transition” isn’t happening. Logically, what isn’t occurring and is highly unlikely to transpire obviously isn’t a megatrend. For investors who continue to ignore and deny these fundamental truths, the “transition” will remain what it’s always been: a “mega-trap.”
Leithner & Co. has already seen this show – not just once but twice. The mania over the past several years about the so-called energy transition and “net zero” has created – as did the tech mania during the Dot Com Bubble and the residential real estate mania which preceded the GFC – grave risks for the credulous crowd including major institutional investors. It’s also creating opportunities for conservative contrarians who, unlike the emotional herd, adhere strictly to logic and evidence.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so” goes an adage commonly attributed to Mark Twain that was cited in the movie The Big Short (2015). In that film, which was based upon Michael Lewis’ book (The Big Short: Inside the Doomsday Machine, W.W Norton, 2010), small, isolated and contrarian groups of “outsiders saw the giant lie at the heart of the economy, and they saw it by doing something (that nobody else ever) thought to do: They looked.”
In this article, I do what these troublemakers (from the point of view of the mainstream’s consensus) did before the GFC: I analyse the most valid, reliable and publically-available data, test these data against the mainstream’s key assertions, think independently and draw justifiable conclusions. On one key point Neiron is correct: “never has it been more important … to be vigilant, seek out the facts and avoid greenwashing.”
The chasm between these conclusions (based upon evidence) and the mainstream’s convictions (based upon blind faith) is wide and deep. That important, vocal and great numbers of people ignore or reject these conclusions doesn’t matter: adherence to current fashion is no substitute for justifiable principles, reasonable premises, valid reasoning and hard evidence. What does matter – greatly, and as Benjamin Graham wrote in The Intelligent Investor – is that YOU must think rigorously and dispassionately.
Specifically, you must “have the courage of your knowledge and experience. If you have formed a conclusion from the facts and if you know your judgment is sound, act on it – even though others may hesitate or differ. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right” (see also Why value investors should doubt “climate science,” 5 September 2023).
Today’s Conventional Wisdom …
“Given the heavy investment in wind, solar and other renewable (which is actually intermittent and thus unreliable) energy by the United States and other countries, as well as the private sector,” reported The New York Times on 6 December 2023, John Kerry, at the time President Biden’s “special envoy for climate change,” “said it was inevitable that the global economy would move away from fossil fuels. ‘We will get to a global low-carbon, no-carbon economy. The only question is: Will we get there in time to avoid the worst consequences of this (climate) crisis?’”
Chris Bowen, Australia’s Minister for Climate Change and Energy – note the order of the words, which reflects their order of importance in Canberra – agrees. “Fossil fuels have no ongoing role to play in our energy systems, and I speak as the Climate and Energy Minister of one of the world’s largest fossil fuel exporters … We don’t need to end fossil fuel emissions: we need to end the use of fossil fuels in our energy systems … “ (see “Alarm at Bowen’s ‘End Fossil Fuels’ Call,” The Australian (12 December 2023).
Kerry’s, Bowen’s and many others’ blithe determination to eliminate the production and consumption of oil, natural gas and coal reflects their fanatical devotion to “net zero.” In 2021 the United Nations asked: “what is net zero?” In its words, and “put simply, net zero means cutting greenhouse gas emissions to as close to zero as possible, with any remaining emissions re-absorbed from the atmosphere, by oceans and forests for instance.” Their rallying cry, “net zero by 2050,” thus comprises two key demands:
- By 2050, the world’s production of fossil fuels, and thus their emissions of CO2, must collapse “as close to zero as possible;”
- By 2050, output from “zero-emissions” sources (particularly wind and solar, but potentially also nuclear) won’t merely skyrocket: it’ll replace fossil fuels.
… versus Today’s Reality
The Statistical Review of World Energy compiles a wealth of data regarding the production and consumption of energy, by type and on global, continental, national and regional (e.g., European Union, etc.) bases. According to Nick Wayth, CEO of The Energy Institute, which produces it, the Review “has been providing timely, broad-ranging, and objective data to the energy community since 1952.”
Incongruously, however, the Institute is also part of “the climate consensus” – and what I’ve dubbed the “climate-industrial complex” (see Why value investors should doubt “climate science,” 5 September 2023).
According to its president, Juliet Davenport, “we have seen further and ever more dangerous impacts of climate change across all continents. And despite broad consensus on the need to reach net zero, global energy-related greenhouse gas emissions are still heading in the wrong direction.” Using data from the Statistical Review of World Energy, Figure 1 plots the world’s consumption of electricity, by source as a percentage of the total, from 1985 to 2022. (The 2024 edition of the Statistical Review, which will be published on 20 June, will provide data on global energy production, consumption, trade and emissions for CY2023.)
Figure 1: Global Consumption of Electricity, by Source as a Percentage of Total, 1985-2022
Four crucial facts emerge from Figure 1.
First, an “electricity transition” has occurred over the past 15 or so years. Crucially, however, it bears little resemblance to the one that its advocates insist is occurring and must continue to occur.
The percentage of the world’s power generated from intermittent (solar and wind) sources has risen. It’s increased from effectively 0% in 2009 to ca. 10% today. Clearly, though, intermittent sources of electricity have captured market share not from fossil-fuelled generation, but to a small extent from hydro and to a large extent from nuclear power: the latter’s share of global generation has halved from ca. 20% in the late-1990s to 10% in 2022.
Secondly, on a global basis, the bulk of “renewable” power generation derives not from solar and wind but from water – that is, hydro-electricity. Its current share of total generation (16%) remains well above solar and wind’s combined percentage. Thirdly, fossil fuels’ share of global generation has fallen since 2007 (68% then versus 61% in 2022) but since 1985 (63%) it’s hardly budged. Fossil fuels remain today what they were 40 years ago: by far the world’s most important source of electricity.
Finally and most importantly, it’s obvious that at current rates of change the world’s power sector won’t transition anywhere near net zero – as the UN defines it – by 2050.
It’s not just indisputable; it’s also such simple a fact that the dullest child can readily comprehend it: all electricity is energy, but not all energy is electricity. A closely-related fact is as easy to understand:
Electricity is a minority of energy (in major and developed countries, its consumption ranges from ca. 17.5 to ca. 22.5% of all energy consumed); solar and wind produce no other form of energy than electricity; hence “renewables’” share of energy is always considerably less than their share of electricity.
Again using data from the Statistical Review of World Energy, Figure 2 plots the world’s consumption of energy (as opposed to electricity), by source as a percentage of the total, from 1965 to 2022. It shows clearly that the world remains today what it has long been: overwhelmingly fossil-fuelled. All other sources are merely also-rans.
Figure 2: Global Consumption of Energy, by Source as a Percentage of Total, 1965-2022
“The transition from fossil fuels around the world,” The Australian editorialised on 4 April, “is well under way.” That’s highly doubtful.
The global percentage of energy derived from coal, gas and oil has declined very slowly over time – from 92% in 1965 to 82% in 2022. That’s 0.18% per year. At that rate, approaching “net zero” (say, reducing fossil fuels’ share by 72 basis points to 10%) will take a mere 72 ÷ 0.18 = 400 years! Moreover, the rate of decline has been no more rapid over the past decade than it was in the 1970s. Accordingly, it’s implausible to contend that “green energy” policies – a phenomenon of the past 10-20 years – are causing a glacial phenomenon that’s been evident for more than 50 years.
Whatever the cause of this slow movement of global energy’s tectonic plates, should be obvious to anyone who looks that at current rates of change the world’s consumption of energy won’t transition anywhere near “net zero” by 2050.
A Brief Digression
“In recent years,” The Wall Street Journal recently observed (see “Climate Politics Neuters an Energy Watchdog,” 24 February 2024), the International Energy Agency “has succumbed to politicization. In 2020 the IEA bowed to enormous pressure from climate activists and ceased publication of oil and gas demand forecasts … Green groups had been angry over IEA baseline forecasts showing what the activists regarded as too much oil and gas demand.”
“This,” WSJ continued, “was because these baseline forecasts assumed only the laws currently on the books and didn’t engage in conjecture about future green policies. As a result, IEA’s influential demand forecasts now reflect wishful thinking about the timing and cost of a peak in oil and gas consumption.”
“The world has enough climate NGOs,” it concluded. “What it needs … is an impartial and respected energy agency. The U.S. and other (members of the IEA) should urge the Agency to resume producing unbiased forecasts. The IEA … should follow the example of the U.S. Energy Information Administration and make all taxpayer-financed data, assumptions, and methodologies available to the public.”
The EIA’s Projections to 2050
The Energy Information Administration (EIA) is a principal agency of the U.S. Federal Statistical System and a part of the U.S. Department of Energy. It’s responsible for the collection, analysis and dissemination of information, and the promotion of sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment. EIA released its most recent data – and their assumptions and methodologies – in February (see its International Energy Outlook 2023).
Most importantly, these data assume that all currently-existing international agreements (such as the Paris Climate Accords of 2016, 2023 United Nations Climate Change Conference, etc.) remain in place. Ditto national legislation such as Joe Biden’s absurdly misnamed Inflation Reduction Act. Equally importantly, EIA’s projections to 2050 don’t assume – as many climate pressure groups demand – that current projections must incorporate the additional and much stricter agreements will allegedly come into force.
Figure 3: Global Consumption of Energy, by Source, Actual and Projected, Quadrillion British Thermal Units
Given this and a great number of other assumptions, which EIA details, Figure 3 plots the world’s actual (2022) and projected (2025, 2030, …, and 2050) consumption of energy, by source and measured in quadrillion British Thermal Units (BTUs).
Four inferences from Figure 3 are inescapable:
- The consumption of fossil fuels rises from ca. 510 quadrillion BTUs (QBTUs) in 2022 to 600 QBTUs in 2050. That’s a compound annual growth rate (CAGR) of 0.6%. The consumption of energy from renewable sources including hydro increases from ca. 100 QBTUs in 2022 to ca. 200 in 2050. That’s a CAGR of 2.5%.
- Accordingly, fossil fuels’ share of total energy consumption falls from 80% (2022) to 70% (2050); renewables’ share including hydro lifts from 16% (2022) to 26% (2050).
- Clearly, then, if EIA is correct then in 2050 the world will remain what it is today – overwhelmingly fossil-fuelled.
As a result, fourthly and most importantly, by the EIA’s projections and the UN’s definition the world will transition AWAY FROM Net Zero by 2050.
The climate-industrial complex simply ignores these projections. “By early 2025,” The Weekend Australian quoted Chris Bowen, “renewable energy will surpass coal as the planet’s largest source of energy, while coal, gas and nuclear will all shrink their market share” (see “Proponents of Nuclear Power Are Peddling Hot Air,” 24-25 February 2024). Andrew McKellar, CEO of the Australian Chamber of Commerce and Industry, concurs: “we would expect there will be some level of residual fossil fuels use for the foreseeable future, even out to 2050,” he told The Australian (12 December 2023).
In response, the most charitable thing I can say is that either (a) Bowen and McKellar are wrong or (b) the Statistical Review of World Energy and the Energy Information Administration of the U.S. Department of Energy are wrong. I know whom I regard as the more reliable; you can decide for yourself.
What about Australia?
Using data from the Statistical Review of World Energy, Figure 4 plots Australia’s consumption of electricity, by source as a percentage of the total, from 1985 to 2022.
As it is globally, so it is in Australia: an electricity transition has occurred over the past 15 or so years. Here too, however, its energy transition bears little resemblance to the one that its advocates insist is occurring and must continue to occur.
The percentage of Australia’s electricity generated from solar and wind has increased – from essentially 0% in the first decade of the century to almost 30% in 2022. And fossil fuels’ share of generation has ebbed from 90% in the early years of the century to less than 70% in 2022. Equally, however, fossil fuels – particularly coal – remain today what they’ve always been: by far this country’s most important source of power.
Figure 4: Australia’s Consumption of Electricity, by Source as a Percentage of Total, 1985-2022
Finally and crucially, it’s clear that at current rates of change the Albanese government will fail to achieve its “renewable energy target” (82% of the country’s electricity generated from intermittent sources such as wind and solar by 2030).
This inference is no longer controversial. “Few credible experts now expect the Albanese government has any prospect of meeting its legislated target,” concluded the lead editorial in The Australian (6 March 2024). “That (failure) mirrors what is happening in other parts of the world, where the results have often been less than expected despite (sic, I’d say “because of”) the very large investments being made in wind farms and other technologies. Subsidies are bigger and reliability is less than promised …”
Figure 5: Australia’s Consumption of Energy, by Source as a Percentage of Total, 1965-2022
Even if the government achieved its intermittent-unreliable electricity target, it wouldn’t matter: it’d still miss its “net zero by 2050” target by a country mile. Again using data from the Statistical Review of World Energy, Figure 5 plots the world’s consumption of energy (as opposed to electricity), by source as a percentage of the total, from 1965 to 2022.
It demonstrates that Australia remains today what it’s long been: overwhelmingly fossil-fuelled. As it is globally, so it is in Oz: all other sources of energy are merely also-rans. Australia‘s energy transition, as opposed to its electricity transition, isn’t occurring in any meaningful sense. At current rates of change, this country’s consumption of energy won’t transition anywhere near net zero in 2050.
What says the U.S. Energy Information Administration? Its International Energy Outlook 2023 includes projections for most major and developed countries. It combines Australia and New Zealand; Figure 6 plots the results.
Figure 6: Consumption of Energy, by Source, Actual and Projected, Australasia, Quadrillion British Thermal Units
The situation in Australasia doesn’t differ fundamentally from the global one. In absolute terms, the consumption of fossil fuels in these two countries increases (from ca. 5.9 QBTUs in 2022 to ca. 6.5 in 2050) and the consumption of renewable energy rises more quickly (from ca. 0.8 QBTUs in 2022 to ca. 2.6 in 2050).
Consumption of fossil fuels rises in absolute terms but falls in relative terms; intermittent energy’s share of total energy rises from 19% (2022) to 29% (2050). In 2050, renewables remain what they are today: a growing but nonetheless minority source of energy. Australia and New Zealand won’t merely fail to reach net zero by 2050: they’ll transition away from Net Zero by 2050.
Why Neither Nuclear nor Intermittent Power Provide a “Path to Net Zero”
In some quarters, nuclear power is emerging as a “solution” to the “transition to net zero.” “Studies confirm that the goal of global net zero carbon emissions can only be reached by 2050 with swift, sustained and significant investment in nuclear energy,” the International Atomic Energy Agency stated on 1 December 2023. Peter Dutton, the leader of the Liberal-National coalition, “is right to include a net zero plan that includes nuclear,” The Australian editorialised on 6 March 2024.
I agree that nuclear plants safely generate reliable power – and in principle (and in practice in Canada, France, the U.S. and elsewhere) do so economically. However, I reject the contention that nuclear power can beget “net zero.” That’s because a realistic “net zero plan that includes nuclear” – or solar and wind – doesn’t exist. It’s trivially easy to see why.
Figure 7 plots France’s consumption of electricity, by source as a percentage of the total, from 1985 to 2022. It’s well known that it derives the world’s largest share of its power from nuclear generators; less known is the fact that over the past 20 years this percentage has sagged – from ca. 80% at the turn of the century to little more than 60% in 2022. Combined with hydro and wind, in 2022 “non-CO2-emitting” sources generated almost 80% of France’s power. Hence France has already reached Australia’s 2030 target.
Figure 7: France’s Consumption of Electricity, by Source as a Percentage of Total, 1985-2022