Past peak pathetic

On the first day of September and the start of the most beautiful time in the northern hemisphere — the Time of Months Ending in -Ber — let’s play a game. It’s called “Imagine” and it’s lots of fun.

Imagine you’re a government — an ambitious government with huge big plans for a fairer, greener, more just future of harmony with nature.

Because you are certain your ambitions will lead your country into a better direction than it has followed previously, you are really generous with financial support for your ambitions.

But then, out of the blue, totally unexpectedly, in a way nobody could have ever anticipated and for reasons nobody could have predicted, your industries start accusing you of being inadequate. Why? Because you have refused to subsidise energy prices for those same industries.

That’s exactly what happened in Germany last month. After the Scholz government refused to provide state support for the electricity consumption of heavy industries, said industries warned that this will lead to an exodus to lower-cost jurisdictions.

Of course, the Chancellor himself sees absolutely nothing wrong with this refusal to provide support for the industries that some like to call the backbone of the German economy.

Of course, he’s right — the Germany of today has repeatedly demonstrated it does not need a backbone. It still needs gas, though, and is spending billions on long-term supply. When it’s not dismantling wind turbines to expand coal mines, that is.

Now, imagine you’re a human rights specialist (That’s how the FT put it, not me). Imagine you’re working for the UN.

In the course of your life and career you have come across a country called Saudi Arabia. You may have even heard this and that about its human rights track record but it has never been really important because you have always had other priorities and anyway you’re not the one setting your own agenda.

One fine day, an environmentalist group called ClientEarth sends a complaint to the UN, where you work. ClientEarth says that Saudi Arabia is violating human rights. Because it produces large volumes of crude oil thereby aggravating climate change.

Suddenly, you have all the time in the world for Saudi Arabia and its human rights track record — well, the part that has to do with the climate, at least. You and a few colleagues are hit by a bout of indignation so righteous you take the time and effort to write to the banks that Saudi Arabia works with to warn them of their possible role as accessories to climate murder.

“The alleged involvement of financial institutions in the financing of Saudi Aramco’s activities could be in violation of international human rights law and standards,” is how you put it and you’re rightly proud of yourself.

If you can’t get them through activist shareholders, you’ll get them on human rights violations. Serves them right for killing the climate. Yeah, they may be killing people from time to time, too, but they’re just some desert nomads, perhaps a dissident or two, and won’t make a splash in the media. Killing the world through climate change is another matter. A winning matter.

Now, imagine, in case you’re not tired of imagining things, that you are an asset manager. You are a huge asset manager with a lot of power over national and international politics.

You are also a huge fan of the energy transition because the governments at your service are very eager for a radical change in how they run the world. And that change could bring in more money.

You sign up for the transition. You make pledges. You have your shareholders vote for activist resolutions aimed at accelerating that transition. Then one day you discover that this transition thing may be hurting your business. Forget the maybe, these activists are now trying to tell you how to run your business.

You can’t have that, so you stop having your shareholders vote for the activists’ resolutions. You declare that you no longer support them "Because so many proposals were over-reaching, lacking economic merit, or simply redundant, they were unlikely to help promote long-term shareholder value and received less support from shareholders than in years past."

That’s exactly what BlackRock said in a recent report and lo and behold, just a few days later Vanguard followed. What a truly amazing development that nobody could have foreseen.

In case you haven’t yet left to have a beer or a cold shower, here’s another one. Imagine you’re an oil supermajor. You are being pressured from all sides to stop being an oil supermajor and do other things that are less harmful to the climate because as all the important people in the world keep telling us the climate is the most important thing in the world. Which it is.

The shrewd business that you are, you start looking for new opportunities that would help you shut your critics up (not happening but hey, a business can hope) and maybe make a few bucks in the process.

You set your sights on carbon offsets. You pledge to invest $100 million every year to build your own carbon sinks and then monetise them by issuing up to 120 million carbon offsets a year and selling them on what should be a thriving global market before too long.

Then you catch a whiff of something smelly. The more you sniff, the smellier that something gets. People are starting to question carbon offsets. None other than The Guardian comes out with an investigation that says a rather large portion of the carbon offsets sold globally are not worth the paper they were written on if they were, indeed, written on paper, which I doubt. Deforestation and all that.

And it is precisely deforestation that these carbon offsets — all duly certified by a very special company — are not preventing despite claims and certifications to the contrary. A scandal is brewing. Traders are in a rush to get rid of these offsets. You quietly nix your carbon offset plans.

That’s exactly what Shell did as heavyweights such as Nestle decided they’d rather cut their own emissions than offset them by buying dubious carbon credits.

And one last one, I promise. Sticking with Big Oil, imagine you’ve decided to bet on offshore wind power to get those pesky environmentalists off your back. Tough luck because you’re actually getting more environmentalists on your back whining about a few whales that have died somewhere around offshore wind farms.

Even tougher luck awaits, however, because you have just won a tender for building not one, not two, but three massive wind farms off the coast of New York. You have won because you’ve offered the lowest future electricity price. Let the subsidies flow in!

Flow in they are supposed to but you suddenly, totally unexpectedly notice that your cost projections have been very, very optimistic. With absolutely no warning and with no discernible reason your raw material costs are soaring, interest rates are higher, there’s talk of shortages, and you find out, stunned, that the low prices you offered and won the tender with will no longer be high enough to make you a profit.

What do you do? Why, you ask for a 54% increase in subsidies to keep the three projects profitable. That’s exactly what BP and Equinor did with New York authorities this week.

The two complained of "rampant inflation, global supply chain disruptions and soaring interest rates associated with the COVID-19 pandemic, the Russia-Ukraine conflict and the increasing pace of the energy transition."

Oddly enough, it happened in the same week that Danish Orsted said it could suffer impairment charges of $2.3 billion from its U.S. operations because see above paragraph.

It was never supposed to be this way. Things were supposed to happen the way that Germany, the UN, those BackRock activist investors and Big Oil/Net Zero hopefuls wanted them to happen.

Reality could be such a female dog sometimes, can’t it?