Published on January 14th, 2017 | by Zachary Shahan0
The Totally Insane Carbon Bubble
January 14th, 2017 by Zachary Shahan
As the cleantech transition speeds up, many of us are jumping for joy. Trump may be king of tweetland, but he and his oil & gas buddies can’t stop renewables or electric robotaxis. They know that.
Their goals are pretty clear, though: pump up the carbon bubble as much as possible, stuff as much cash into their own bank accounts before it pops, and hopefully retire and die before the whole global economy is brought down with the the thin soapy liquid that was probably much prettier as a bubble.
(Okay, I’ll admit it — Trump probably doesn’t realize there’s a carbon bubble and that cleantech is ready to pop it, but plenty of his hired henchmen certainly do.)
Photo by the Kremlin
I’m not the first to point out this issue. A few years ago when I was here in the UAE for Masdar’s Abu Dhabi Sustainability Week, Andrew Winston was in our media group and kept asking basically anyone with influence, “What do you think of stranded assets?” He didn’t really need — and didn’t get — answers. The question delivered the point well enough. In simpler terms: “Renewable energy — great, fun! Our whole economy collapsing when trillions of dollars of assets quickly turn into useless pieces of junk and liabilities — uh oh.”
Someone else coined the term “carbon bubble” a few years earlier (perhaps Bill McKibben). Alex Steffen recently wrote a great piece on that topic as well that was widely loved and shared. Some researchers have tried to quantify the carbon bubble and put it at $20 trillion, while others put it at $100 trillion. Whatever the total amount of the bubble is, it isn’t small.
The carbon bubble has long been clear, but it is becoming almost palpable … especially here at a renewable energy summit in the oil-rich Middle East.
But before discussing that oddity, let’s take this threat to its logical economic conclusion: If the investment community puts trillions of dollars into the coal, oil, and gas industries expecting many trillions more in returns, and then these industries collapse, the global economy is going to come crashing down as well. We got a short preview of that with the US housing bubble and the “dot com” bubble. A short preview.
Wait, actually, as Alex Steffen pointed out, it’s not the point of collapse that will bring the whole thing down — it’s the point at which the investment community stops acting psychotic and decides it’s time to get out of fossils. When investors really start to bail, well, we know how prone investors and traders are to bipolar swings.
As I said, the thing that struck me today — at the International Renewable Energy Agency’s General Assembly — is that this coming pop, this explosion of the carbon bubble, this ensuing global disruption, is becoming palpable.
One of the world’s top renewable energy experts expressed a bit of bewilderment on the sidelines when I asked him what he thought of some of the hydrogen-related comments that had just been made by Engie and Statoil — he noted, in what seemed like slightly confused surprise, that there had been several other comments about hydrogen today and yesterday already — unlike in previous years. What’s up with that? Where did that come from? Hydrogen? Didn’t we debunk the “vast potential” of that option years ago? (Yes, I’m projecting a lot and don’t fully know what this expert thought of it all.)
There was a focused repetition on the extremely low cost of renewables in various sessions and several of the industry leaders’ and political leaders’ statements, but certain players kept hyping hydrogen.
In a sense, it is odd — we have electric vehicles that hydrogen vehicles will never be able to compete with, we have batteries and pumped storage that will provide most storage needs much more cheaply and cleanly than hydrogen could, and hydrogen has long been identified as an overhyped joke. But the hydrogen focus is not odd at all. I’ll come back to why in a minute. …
The other focus time and again was natural gas — from the head of the International Energy Agency (IEA); from Statoil’s passionate and thoughtful exec; and even from forward-focused Engie’s Thierry Lepercq, Executive Vice President of Research & Technology, who presented some stunningly bullish and passionate projections about electric vehicles, batteries, and renewables. Practically every claim about natural gas seemed like it came packaged with a twitch of guilt — statements about it being flexible generation, claims that natural gas is relatively clean, and emphasis on coal being the real enemy (yes, Statoil’s exec explicitly said this). No, natural gas is not clean energy and it is not needed at a massive scale as claimed.
My friend and amazing energy journalist Karel Beckman highlighted this widespread industry and political obsession with the “future promise of natural gas” in 2015 after attending the World Gas Conference in Paris. He could apparently taste the carbon bubble in the room back then, and he thoroughly and eloquently demolished the false hope in a superb article I still highly recommend. Here was the opening line: “They are the biggest companies in the world and they are making a huge bet: they are staking their – and our – future on natural gas.”
Back to hydrogen, the Statoil exec spelled it out (she was quite a direct communicator): You can create hydrogen by splitting water with electricity, but that’s expensive. Just reform some natural gas and you get your hydrogen cheaply, and the CO2 on the side can be simultaneously captured and stored (she seemed to sheepishly and guiltily note that bit). Well, that’s the idea.
The point of it all should be clear to everyone by now. We can basically sing it together:
Natural gas and hydrogen are the fossil industry’s last gasp, and the industry is begging for a lifeline in order to live in gold-plated castles another generation or so.
Some of the people near the top of this world have pivoted, but not 100%. The executive director of the International Energy Agency, Fatih Birol, had some beautiful statements about the cost-competitiveness of renewable energy, the need for renewables in order to stop global warming, and the vast health benefits from cutting pollution. But as I turned my camera on him, he reverted to highlighting the benefits of natural gas and the need for this cleaner, flexible fuel.
No, technically and financially, we don’t need natural gas. Natural gas is being hyped because it’s all the fossil industry and its backers have left.
It’s not just the dark and sinister fossil industry, though — an industry that is easy to demonize since pushing pollution, creating mass suffering, sending millions of people prematurely to their deathbeds, and societal collapse are basically evil epitomized. No, the threatened population is also a gigantic chunk of the global investment community and the global economy. The heads of most major countries want to very slowly put the industry down rather than body slam it, since the stability of their countries (our countries) is at jeopardy. If there’s one economic reality we should all know by now, it’s that if a major industry and its investors go down, they take much of society with them.
The US housing bubble? Child’s play. The carbon bubble? This is big, and scary, and ready to take a lot of casualties with it.
Technological innovation and the semi-free market will pop the beast nonetheless. There’s no stopping the march of better technology. The economy is amoral. But remember, it is also built by humans who are all too frequently willing to push morals under the rug in order to make another buck. Just look at the psychopathic mafia kings running some of the world’s largest governments.
Speaking of the US, how does this all tie in with the home of both Exxon and Tesla, Chevron and First Solar, GE’s natural gas arm & GE’s wind energy arm? In my humble opinion, the taste of a popping carbon bubble is practically in the air in the United States as well. Top CleanTechnica commenter “neroden” recently hypothesized that former Exxon CEO Rex Tillerson may not do much to really help Exxon if he is appointed as Secretary of State. It may just be a rosy exit plan for Rex so that he can get out before the whole Ponzi scheme implodes. I personally think Rex will do what he can to extend Exxon’s lifeline so that his buddies on the board can “die in peace,” but I don’t think he’s ignorant to the fact that the oil industry is not a good place to start a new career.
Donald Trump’s ambitions to wean the US off of Middle East oil, to pull oil from Russia’s tundra, and to put a genuine Putin buddy in power, on the other hand, are a case of missing the forest for the trees. (Come on, Donald, go back to tweeting about Robert Pattinson’s love life.) Pumping up the bubble and making it more American (or American + Russian) isn’t going to protect the country. In fact, the pop will probably just splatter more dramatically on us.
If Donald just wants to stick it to Middle East countries, he should accelerate the transition to electric vehicles with a national zero-emission-vehicle mandate (for automakers), greater fuel efficiency standards, continued work on Obama’s initiatives — a national EV charging network, battery R&D initiatives, loan guarantee programs, EV hackathons, and extensive public-private partnerships. Alas, that’s unlikely, because Obama did those things, but we’ll see if Trump catches on at all from a few Elon Musk comments.
As I was sitting outside at the IRENA General Assembly’s elegant outdoor dinner reception and typing the beginning of this article, I looked up and noticed a man in a suit looking around — one of hundreds of men in suits at the summit. He seemed to have an expression on his face that said he was there trying to climb a career ladder. We all do it or have done it, right? Where’s the next rung of the ladder to climb up to get more income, a nicer home or electric car, more social status and prestige, more respect from the family? But reflecting on this brought me back to the story.
The people who rule this world have climbed that ladder, many of those ladders, the tallest ladders. The people at the top of the oil & gas industry are some of the richest and most powerful people in the world. The people who hold the most stock in these industries are as well. The world’s political leaders have climbed more ladders than Trump Tower has stairs, with support from these industries and often based on relative stability in these industries. These “leaders” don’t want to see their worlds collapse, don’t want to find out that their ladders were stacked on top of bubbles. And so they pump more air into the giant, insane carbon bubble.
Some of the most accomplished people at the General Assembly were full of one of two things: denial or spin. Either they really don’t understand that the bubble is on the verge of popping, or they understand this very well and are trying to spin the story enough that it doesn’t pop on their dime.
The carbon bubble isn’t insane because of how it got started. We got started on fossil fuels to improve our lives. Heck, we really started the whole thing way, way back by burning sticks and leaves in order to create heat and light. But the industry eventually outgrew its usefulness and became a nuisance. We are on the cusp of a monumental shift that fundamentally changes our approach to energy — moving from a fire-based energy world to a cleantech-based energy world. Yet, people continue to pump trillions of dollars into out-of-date industries that are threatening the survival of our own human species. They are doing so because … well … because those are the industries of the past and it’s sometimes easier to look backward than forward. To some degree, though, that’s insane — since investing is inherently supposed to be about looking forward. Sooner or later, the investment world will catch on.