We're investing in things that will have little value if we move off fossil fuels.
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Why our continued use of fossil fuels is creating a financial time bomb
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So the concept here is that apparently no one has recognised that as we move away from fossil fuels, investments will have a finite life?
Entire countries are aware that fossil fuels will not last forever, which is why they are diversifying away from them.
Every company will calculate the rate of return on an investment based on how long it thinks it will generate a return for.
The only issue with "stranded assets" is if the pace of change happens far far more rapidly than was considered when investment decisions were made.
If you aren't smart enough to capture limited lives in your rate is return calculation you deserve to lose money.
The middle East is trying to diversify economies. 76% of coal plants owned have been cancelled since 2015.
Germany's payment of coal plants was to speed up the shutdown, so the calculations were based on known data and the owners got compensated because the government adjusted is approach, and that's where the compensation element comes in.
Companies are well aware that what they are investing in will have no residual value, and they make those decisions in that knowledge.
In the UK, gas pipes where replacements are needed are being done with hydrogen ready pipes so that they can... use hydrogen.
Planes are testing biofuels to replace current fuels, made in a greener way (although will generate emissions when burned).
This article seems to paint a picture that no one has considered we will have a bunch of infrastructure with no value. Only idiots aren't considering that when making decisions, and people are planning around it since it's a known factor.
Entire countries are aware that fossil fuels will not last forever, which is why they are diversifying away from them.
Every company will calculate the rate of return on an investment based on how long it thinks it will generate a return for.
The only issue with "stranded assets" is if the pace of change happens far far more rapidly than was considered when investment decisions were made.
If you aren't smart enough to capture limited lives in your rate is return calculation you deserve to lose money.
The middle East is trying to diversify economies. 76% of coal plants owned have been cancelled since 2015.
Germany's payment of coal plants was to speed up the shutdown, so the calculations were based on known data and the owners got compensated because the government adjusted is approach, and that's where the compensation element comes in.
Companies are well aware that what they are investing in will have no residual value, and they make those decisions in that knowledge.
In the UK, gas pipes where replacements are needed are being done with hydrogen ready pipes so that they can... use hydrogen.
Planes are testing biofuels to replace current fuels, made in a greener way (although will generate emissions when burned).
This article seems to paint a picture that no one has considered we will have a bunch of infrastructure with no value. Only idiots aren't considering that when making decisions, and people are planning around it since it's a known factor.
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This is a totally niave question but are there non-burning uses that fossil fuels can be used for that allow some of these assets to continue being used without polluting and allowing more of a soft landing as these assets depreciate. For instance what is the carbon impact of using oil for durable plastics relative to burning it for heat?
I also imagine that there will be some uses of fossil fuel that are easier to move off of than others. Cars will go electric well before airplanes for example. So it doesn’t seem likely that the stranding problem will come as a single hit that the economy needs to absorb all at once, but rather fossil fuel industries will move off fossil fuels sequentially stranding the least productive assets over time.
Of course… the other possibility is that we just don’t strand any of these assets at all because we’re dumb as a species and let global warming run its course and then we’re fucked…
I also imagine that there will be some uses of fossil fuel that are easier to move off of than others. Cars will go electric well before airplanes for example. So it doesn’t seem likely that the stranding problem will come as a single hit that the economy needs to absorb all at once, but rather fossil fuel industries will move off fossil fuels sequentially stranding the least productive assets over time.
Of course… the other possibility is that we just don’t strand any of these assets at all because we’re dumb as a species and let global warming run its course and then we’re fucked…
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Fossil "Fuels". There are a lot more uses than energy production for oil (petrochemical materials, pharmaceuticals and so on). Consider that while we don't burn wood as a primary source of heat anymore, it is still a fundamental component of building and creation of artifacts (furniture, books, etc)
It is true, that the transition may make some of the investments mal-investemetns, but 'little value' is overly pessimistic.
It is true, that the transition may make some of the investments mal-investemetns, but 'little value' is overly pessimistic.
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I used to think that capitalism could coexist with a sustainable civilization, given adequate regulation.
Increasingly, it seems unlikely that I was correct. Though, to be fair, we haven't really tried anything close to adequate regulation.
Increasingly, it seems unlikely that I was correct. Though, to be fair, we haven't really tried anything close to adequate regulation.
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I’ve been an extremely avid reader of science and technology news since I was in middle school. One thing that I’ve noticed in the decades since ~1982 is this constant refrain about the consequences of climate change, as if it’s suddenly news now. It wasn’t even “news” in 1982, scientists had been talking about it, and researching it, before then. In 1997 this article’s very topic was brought up in a physics class I took in college.
So we see states like Texas threatening banks that divest themselves of fossil fuel investments.
NPR
That type of deliberate inaction is the main reason we’re in this boat. It’s like having cancer and refusing treatment. Eventually the problem will force you to do something, but then it’s more expensive and less likely to help!
So we see states like Texas threatening banks that divest themselves of fossil fuel investments.
NPR
That type of deliberate inaction is the main reason we’re in this boat. It’s like having cancer and refusing treatment. Eventually the problem will force you to do something, but then it’s more expensive and less likely to help!
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I'm a fan of capitalism, but the harms caused have to be included in the price of goods, or it morphs from an engine of prosperity into a waste of time or even a way to transfer wealth from victims to owners, with in this case the majority of victims in the future and thus unable to defend themselves without time machines. I'm not saying that we deserve a bunch of Arnold clones showing up, but I would understand...
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So, the've enriched themselves polluting the lanet and now we're supposed to pay them to stop.
Yeah.. Right. Do they also want my first-born?
Fuck right off. Everyone who got rich destroying the planet MUST now pay back, but we know ain't going to happen.
This is going to be much much worse before it gets better, because only violence will force "the powers that be" to act in time.
Yeah.. Right. Do they also want my first-born?
Fuck right off. Everyone who got rich destroying the planet MUST now pay back, but we know ain't going to happen.
This is going to be much much worse before it gets better, because only violence will force "the powers that be" to act in time.
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"if we decide to get serious about addressing climate change"
There's the escape clause for this conundrum.
There's the escape clause for this conundrum.
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Plastics store carbon long term, so it will not enter the atmosphere.
They are also, however, a pending ecological catastrophe in their own right, and cleanup is likely to be difficult.
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no one is going to ship oil to mars any time soon. i mean, it might make sense theoretically in a computer game.. but seriously. it'll take a lot of rockets to make a difference.
oil is far too useful to just burn, they'll change their process into make something other than fuel. though one would imagine things will be scaled down when they change fuel making into production of other chemicals.
the problem to solve is still reliable storage for "renewables" on a national scale and obviously not enough progress on expanding the generation side either..
oil is far too useful to just burn, they'll change their process into make something other than fuel. though one would imagine things will be scaled down when they change fuel making into production of other chemicals.
the problem to solve is still reliable storage for "renewables" on a national scale and obviously not enough progress on expanding the generation side either..
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You're assuming that them thinking about it means that they're making good decisions, and I've gotta say that every market crash that has ever happened (and there have been many) begs to differ.
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The sooner we get serious about pricing carbon, the sooner market forces will begin to innovate and develop alternatives faster, and will essentially make the decision of buying that new gas stove or an electric one a no-brainer.
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We had the perfect, once-in-a-civilization opportunity in March of 2020 to buy the entire US fossil fuel industry for fractions of a penny on the dollar. We then could have proceeded to unwind the industry assets over the next 10-15 years as we rapidly transitioned away from carbon-based energy.
I know what you're thinking: how would we have paid for that?
But that's the wrong question. The better question is: why are we the consumers and taxpayers now going to pay many times more money for exact same outcome from private industry, just so they can leach trillions of dollars in unrecoverable "profit" before we are forced to pay them to shut down?
State ownership of an industry is typically bad for growth and innovation, but we're not looking to grow or innovate with fossil fuels or the various plastics they're polluting every living organism on Earth with. We're looking to manage the wholly unprofitable dissolution of a 150-year-old industry whose corrupting influence runs from small town council members to the authoritarian rulers of nuclear-armed nations.
But, you know, whatever - the window closed, and it's too late to buy up the negatively valued assets of the industry. Instead, we'll have to wait until they've added even more artificially inflated terminal assets before we can shut them down - probably with another bailout or two before then, because that's The American Way.
I know what you're thinking: how would we have paid for that?
But that's the wrong question. The better question is: why are we the consumers and taxpayers now going to pay many times more money for exact same outcome from private industry, just so they can leach trillions of dollars in unrecoverable "profit" before we are forced to pay them to shut down?
State ownership of an industry is typically bad for growth and innovation, but we're not looking to grow or innovate with fossil fuels or the various plastics they're polluting every living organism on Earth with. We're looking to manage the wholly unprofitable dissolution of a 150-year-old industry whose corrupting influence runs from small town council members to the authoritarian rulers of nuclear-armed nations.
But, you know, whatever - the window closed, and it's too late to buy up the negatively valued assets of the industry. Instead, we'll have to wait until they've added even more artificially inflated terminal assets before we can shut them down - probably with another bailout or two before then, because that's The American Way.
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Hence my including examples of where people have been doing that and saying those that aren't doing it deserve to lose money.
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Ah, yes, let's pay them to stop destroying the Earth. What a healthy use of our money.
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All "new" plastics, should they be able to be actually recycled, should come from carbon extracted from the atmosphere - not pulled from the ground. Of course, plastics recycling is a dubious venture, since apparently very little ever makes it to recycling, and much of what does isn't actually broken down into useful elements. And we're so far from being able to do atmospheric carbon extraction at a useful scale that the better industry solution is to develop alternatives materials that do the same job. Not every use of plastic can be replaced, but a great many can be replaced with something as infinitely renewable as paper (the ad campaigns of the 80s and 90s designed to discourage use of paper because it was harmful to trees? More propaganda sponsored by fossil fuels.)
Besides, as I understand it, you can't even convert an entire barrel of oil into plastic. Only some of that barrel, if it's of the right type of crude, can become plastic. Basically, single-use plastic subsidizes our gasoline.
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The real issue is the politicians’ addiction to money PLUS the waning fossil fuels industries’ executives making the calculation that it’s easier, cheaper (in their quarterly-constrained “vision”) and simpler to throw money snd lobbyists at the politicians to make any “green” push go away long enough for the executive to retire with his/her millions.
Many of these executives own Teslas and luxury hybrids, have solar installed on their second and third homes.
Your kidding yourself if you believe this is because they (the execs) don’t see the writing on the wall; they just want to get their wealth and get out before the painful challenges and the piper come calling.
And the politicians are more than happy to play along because their “vision” is limited to the next election.
Many of these executives own Teslas and luxury hybrids, have solar installed on their second and third homes.
Your kidding yourself if you believe this is because they (the execs) don’t see the writing on the wall; they just want to get their wealth and get out before the painful challenges and the piper come calling.
And the politicians are more than happy to play along because their “vision” is limited to the next election.
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We should correct the price of oil, natural gas and coal to accelerate better decisions. Very practical to implement - assess the fee at the source - ports, refineries - and pay it back to every citizen in equal monthly payments. It's revenue neutral, so, hypothetically should appeal across the political spectrum.
It's already a bill: https://energyinnovationact.org/
And has a large volunteer group actually lobbying for passage: https://citizensclimatelobby.org/
There's probably a local group near you. if not, start one!
It's already a bill: https://energyinnovationact.org/
And has a large volunteer group actually lobbying for passage: https://citizensclimatelobby.org/
There's probably a local group near you. if not, start one!
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I doubt governments will do much until we cross a threshold where climate effects are 'catastrophic' AND 'frequent'
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Ok so we’ll reduce by 90% instead of by 100%. Everything still holds: most — almost all — fossil fuel assets will be stranded.
Also a fair bit of that is that fossil feedstocks are cheap. Remove much of the demand and now the few users will need to pay all the costs; likely some will discover that other feedstocks are now economical.
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And not even then.
Our generation has gone through two economic crises and a world pandemic, now ask yourself, what did the governments do?
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This is a dumb article on a number of fronts.
1) industry in place is largely amortized away on a realistic scale. The larger problem is that we replace it the right way that's environmentally, socially and economically stable.
2) honestly, I don't think change will happen until we get shock to the system. I think it'll take Katrina being a yearly experience, ecosystems dying off in the public eye, before decisive action is taken. And by then it'll be too late.
1) industry in place is largely amortized away on a realistic scale. The larger problem is that we replace it the right way that's environmentally, socially and economically stable.
2) honestly, I don't think change will happen until we get shock to the system. I think it'll take Katrina being a yearly experience, ecosystems dying off in the public eye, before decisive action is taken. And by then it'll be too late.
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You have my upvote at least. I'm pretty sure the keyboard I'm typing on, the mouse I'm using, the screen I'm staring at, the chair I'm sitting in, the computer I'm using, the shoes I'm wearing and the ibuprofen I'm taking are all made from petroleum.
And yes, I understand we would need fewer refineries (or fewer new ones anyway) if less transportation relied on oil, but I feel this story makes it sound like it's all just going to be shelved someday.
Check on who's building new refineries (the Chinese) and what they're being built for. It's not for transportation, it's to make more plastic.
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I just listened to an interesting episode of Odd Lots podcast (from Bloomberg) which was an interview with Javier Blas who is a commodities expert. He said that the main reason that coal and oil are so expensive right now is that nobody wants to invest in them precisely for the reasons mentioned in this article. It looks like inflation will be the price we have to pay for the transition to clean energy. I am personally ok with this as it sends a strong price signal in favor of investment in EVs and renewable energy. But a lot of angry people are going to vote on this later this year.
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Capitalism thats been raping the planet for profit might implode due to greed? An absolute win. I'll get the gas cans and road flares.
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90% of fossil fuels are combusted, and that’s what we’re trying to remove.
Try getting a loan to sell into a market that is predicted to shrink by an order of magnitude and see how far you get.
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This is a fantastic article. Others may have already considered this issue, but I'll be honest, the full impact was not clear to me before.
Thank you Ars for the original reporting.
Thank you Ars for the original reporting.
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switching to the crap you will have to give up, it's not that big a deal in most cases..
I live in a very walkable town and through remote working, and a little discipline, I have been able to reduce my driving to ~400 mile / year. My eBike (a radwagon cargo bike) however, has another 1200 miles on it.
FWIW, the SUV gets approximately 450 miles to the tank in city driving, so one fill up per year. I was going on 13 months, but then the gas prices started rising quickly...
Another "experiment" was to check out some options for cooking. I have always been a fan of gas stoves. I prefer the control you get over the cooking temps. But holy schiettt, inductive cooking is amazing. I bought a inductive countertop cooking plate and wow.. what a huge difference in cooking. My next stove appliance will have induction cooking elements.
Anyhow, moving off fossil fuels is going to take more than government mandates and policy changes. It will take individual efforts to make it happen. And that's not hard when you look at all the money your saving
I live in a very walkable town and through remote working, and a little discipline, I have been able to reduce my driving to ~400 mile / year. My eBike (a radwagon cargo bike) however, has another 1200 miles on it.
FWIW, the SUV gets approximately 450 miles to the tank in city driving, so one fill up per year. I was going on 13 months, but then the gas prices started rising quickly...
Another "experiment" was to check out some options for cooking. I have always been a fan of gas stoves. I prefer the control you get over the cooking temps. But holy schiettt, inductive cooking is amazing. I bought a inductive countertop cooking plate and wow.. what a huge difference in cooking. My next stove appliance will have induction cooking elements.
Anyhow, moving off fossil fuels is going to take more than government mandates and policy changes. It will take individual efforts to make it happen. And that's not hard when you look at all the money your saving
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At this point, we are so screwed. It's a Roland Emmerich plot. I pity the young that will bear the brunt of what's coming.
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Wow you seem to be deluded that you aren't benefitting from that every day of your life.
Or do you really believe that the price you pay in the shops for food is the 'real' price and not the heavily subsidised by CO2 pollution price?
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I thinks that is a true statement because we are already there and still waiting for significant action from any nation level government. I'm not sure how anyone can look at the increased frequency of wild fires, drought, super storms, etc. and not think we're already past the "'catastrophic' AND 'frequent'" metric.
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Well, we've seen exactly what many governments have done with migrant crises: they militarize the borders. From my armchair the most likely course of human history is a continuation of the status quo, in that the global south in its entirety will simply become even more of an "economic sacrifice zone".
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The vast, vast majority of houses built in the USA in the last 40 years can support overnight charging of 2 BEVs, and many of those built before have been updated to 200+A system (including my 70 year old house)
What needs a zoning change or a change to building standards, to ensure apartment dwellers and condo owners have access to some kind of overnight charging.
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