Yves here. This post makes one of the several points that Green New Deal and other Disney-colored no/low pain energy transition types pointedly avoid: that rising energy costs are not only unpopular but also cause political instabilty. Normura looked at food and energy costs as a percentage of total household costs in the Middle East around the time of Arab Spring, and them rising to an unaffordable level for too many on the bottom was a good predictor of large-scale protests.
Here, Larry Fink of BlackRock points out that greener energy sources are often higher cost in to less affluent citizens and countries. Even if the running rate might be cheaper, the cost of new equipment, starting with electric vehicles, is a hurdle many can’t surmount. And as we saw before UK energy subsidies kicked in, the cost of charging a car in the UK was higher at points in later 2022 than gassing up its internal combustion engine counterpart.
Mind you, yours truly is no fan of BlackRock. But Fink has been attempting to be out in front of the so-called ESG (Environmental, Social, Governance) investing fad. And as a fund manager, running overwhelmingly index funds.So BlackRock gets fees and is agnostic as to what it owns. If the end investors want a simple index, BlackRock can sell them that, or it it wants one with a tilt, such as fossil fuel companies excluded, BlackRock can make that for them too.
Fink uses the example of emerging economies likely to use more coal rather than convert much to green energy at current cost levels. He also alludes to the fact that one of the reasons the expected energy crunch didn’t materialize last winter was many households in Poland used their coal burning stoves….and apparently burned even more wood and other combustibles than usual. Note that in Poland, until 2022, the government subsidized newer gen coal stoves as environmentally friendly. Admittedly, households that took up the Clean Energy program were more likely to convert to gas furnaces and heat pumps, but still…
The article also depicts the EU as more able to bear the [presumed higher until Something Is Done] costs of clean energy which is narrowly true but conveniently sidesteps the big cost, that of deindustrialization. And there is seldom enough talk of current inadequate grid capacity and the question of the environmental costs of battery storage and other critical components of the presumed green buildout.
By Julianne Geiger, a veteran editor, writer and researcher for Oilprice.com. Originally published at OilPrice
There will be no energy transition unless we can find new technologies that bring down the cost of renewables, BlackRock CEO Larry Fink told Bloomberg’s Dani Burger on Friday at the Berlin Global Diague forum.
“We are not going to have a transition unless we can find technologies to bring down the competitive cost of renewables. We cannot do that.” Fink said, adding that BlackRock conducted a survey that showed 57% of their global investors are planning to put more money into decarbonization technologies.
“We saw what happened with elevated energy prices just two years in Germany and in Europe. You can’t have a transition.” Fink argued that when energy prices go up, emerging nations use more coal—because “life is more important than the future.”
“We need to reimagine finance,” Fink said, so finance can find ways of bringing billions and even trillions to emerging nations to help them decarbonize.
On the point that energy insecurity can be impossible for emerging nations to manage, other financial firms seem to agree. In late 2022, during Europe’s energy crisis, Europe’s energy security issues drove near energy poverty in the emerging world, Credit Suisse energy analyst Saul Kavonic said. While European countries and others may be able to pay a premium for energy, emerging nations cannot, and some already choose blackouts on a fairly regular basis because they can’t afford even today’s energy prices. And if they can afford some form of energy, it’s the lowest cost energy, such as coal, despite any green ambitions they might have.
Larry Fink oversees $10 trillion in assets for BlackRock, the world’s biggest asset manager. BlackRock was ridiculed by some late last year for calling on companies to invest through an environmental, social, and governance lens.