Dumb, Dumber, and Dum-dee-dee-dum

Denial, disinformation, and doublespeak. That’s how a group of Democrat legislators in the U.S. Congress dubbed a Senate budget committee hearing that took place this week.

Here’s the full name: Denial, Disinformation, and Doublespeak: Big Oil’s Evolving Efforts to Avoid Accountability for Climate Change. Passionate, right? Righteous. Highly impressive. And the result of an “investigation” into Big Oil that started three years ago.

The conclusion of that investigation? Big Oil is bad because it knew about climate change and didn’t tell the whole kindergarten, and also Big Oil doesn’t love the climate and wants the planet to burn. You might think I’m oversimplifying to mock and deride the investigators but here’s a quote.

Among the assertions made by one of the legislators partaking in the hearing party were the following: “Big Oil continues to conceal the facts about their business model and obscure the actual dangers of fossil fuels, including natural gas, in order to block the climate action we need.” Same thing, only said in pompous language.

The legislator, by the name of Jamie Raskin, seems really passionate about the climate. “Despite knowing about the devastating effects of their oil and gas products on the planet for decades, the industry has always prioritized its bottom line and chosen low-road PR tactics over a high-road commitment to addressing the crisis.” Yep. That’s real passion right there. Too bad passion rarely keeps company with reason.

Big Oil’s reaction to the latest round of blame-flinging and name-calling was one of exasperation, with the exception of Shell, which had this to say about the documents waved around as evidence of knowing about climate change and hiding it for profit. These documents, a spokesman said, “are evidence of Shell’s efforts to set realistic targets, hi-grade its portfolio and meaningfully participate in the energy transition.” 

Speaking of Shell, the company had an eventful week that also happened to be highly amusing for me. First, there was the report that a group of 27 institutional shareholders had called on Shell’s other shareholders to vote for a resolution demanding more of what everyone calls “climate action” as if that phrase means something.

The group, which together has 2.5% in Shell, said in its letter to their fellow Shell-holders that the company had to do more about cutting emissions because Paris Agreement strategy alignment was “essential to preserve the health of the global economy”.

You’d no doubt be shocked to learn that the originator of the letter-writing effort was none other than Follow This, the activist shareholding scheme that has been filing resolutions against Big Oil for a decade and has recently started to experience some pushback as Big Oil started making Even Bigger Money. This has not made Follow This a happy scheme.

Just a day after the news about the shareholder letter broke, Shell reported a net profit of $7.7 billion for the first quarter of the year, beating analyst forecasts by over $1 billion. It also said it would buy back $3.5 billion worth of shares over the next quarter. Now, who are those shareholders going to listen to — Follow This or the company that pays them for their generosity in buying shares in it?

Regrettably, the answer to this question may not be as straightforward as it seems, based on that letter that features among its signatories entities such as Amundi and AXA. Apparently, the idea that reason rules in the financial world is a huge illusion.

While asset managers with Shell holdings fret about the health of the global economy, which apparently depends on Shell’s production plans, a California court — I repeat, a California court — just killed a kids’ climate lawsuit. I guess even evil climate deniers need a bit of good news once in a while.

Anyway, that court, the 9th Circuit Court of Appeals in San Francisco, dismissed the case, brought in by a group of 21 children on the grounds that, per Reuters, “courts could not mandate broad policy changes that are better left to Congress and the executive branch.”

The kids, gently guided in their righteous battle by Our Children’s Trust, which you’ve probably heard about because having children sue various governments is all it does, initially wanted the court to make the U.S. federal government say Mea culpa, self-flagellate, change its energy policies and phase out “subsidies” for oil and gas production. That was back in 2020 and the 9th Circuit Court promptly dismissed the case.

But Our Children’s Trust doesn’t give up that easily. After that first dismissal, they changed the tune, now only wanting a declaration that these policies were wrong. An Oregon district judge obliged and gave the lawsuit a second chance of life. Well, that ended this week, for good this time.

You’d think Our Children’s Trust would give up and go home but you’d be wrong. There’s this to be said about fungal infections and climate litigators: they are stubborn little things. So now the case is going in front of an extended panel at the 9th Circuit Court in hopes 11 judges would rule differently from three. Because they so did back in 2020, when OCT did the same after the initial court ruling, as in, they didn’t.

"This is a tragic and unjust ruling, but it is not over," one OCT attorney said in comments following the ruling. Ominous words, I’m sure. Maybe it would make her feel better if she knew that other climate crusaders had much bigger, much more serious problems than her. Because tragic and unjust as that ruling may have been it pales in comparison to the tragedy and unjustness that the Basel III banking framework is about to unleash on the energy transition. Allow me to take a moment to compose myself.

Okay, so. Remember the 2008 financial crisis, right? Remember how no one went to prison for it but regulators rushed, nay, scrambled, to make new rules to prevent that kind of thing from happening again, right? Well, the result is the Basel III framework, which in very crude terms will require large banks to hold more capital as buffer against potential crises. Guess what that means.

Why, it means banks won’t be able to be as generous with wind and solar projects as they have been so far. As illustration, CNBC related this week the tragic and unjust story of one solar developer who said that “the proposed rule “potentially makes projects unfinanceable with the implied costs” and that he’s already heard from bankers who have said they won’t be able to continue funding renewable energy projects.”

If you just laughed, may Jamie Raskin come down upon you like a sack of organic fertiliser. Shame on you. Unfortunately, there’s more shameful laughter-inducing news. It’s not just raining bad news for the transition this week, it’s pouring.

Denmark’s Orsted this week warned that costs for wind projects will remain elevated until central banks start cutting rates. “The longer interest rates stay high, the longer prices in [renewable energy] auctions will stay high,” CEO Mads Nipper told the FT and if you’re laughing now, that’s just heartless.

So, wind and solar are going to remain costly because of interest rates (and nothing else at all) and banks will become less generous because they’d be obliged to keep more money at home. Can the future get any bleaker?

Of course it can. The UK’s Prime Minister just played a cruel joke on all the righteous defenders of Mother Earth in the country. You know what this man has done? He’s gone and allowed drilling for oil and gas at offshore wind sites. The Guardian is in understandable pieces about it.

I would like to share with you the comments that a former climate official with the Sunak government, Chris Skidmark — I mean Skidmore — had for the Guardian: “Instead of wind powering new oil, the investment should instead be in more wind and renewables. More fossil fuels will only create stranded assets and stranded jobs at a time when demand for oil and gas is falling.” Who wants to tell Chris about Basel III? And oil demand, too.

Thickening the gloom, Wood Mackenzie this week issued its own warning, saying that a five-year delay in the energy transition “could see the global average temperature rise to 3-degree Celsius above pre-industrial levels.” May the original Wood Mackenzie and its valuable analysis rest in peace. Someone would have to tell the new, crusader-friendly, Wood Mac about Basel III, too. And maybe about the reliability of a concept as abstract as a global average temperature.

To end on a positive note, the G7 shook hands on a 2035 phaseout of coal power and I can’t wait to see this implemented. I also can’t wait for the new coal consumption data from Asia once the G7 begins the phaseout in earnest. The other thing I can’t wait for is the inevitable news that AI data centre operators are moving their operations to Asia where the electricity supply is reliable. Imagine that.