Dunkelflaute, COP and Trump – Where Does Climate Change Go From Here?
Blain’s Morning Porridge 11th November 2024: Dunkelflaute, COP and Trump – Where Does Climate Change Go From Here?
“It would be interesting to know what the Frog was thinking..”
This morning the wind is blowing again in the UK. In Baku they are preparing for the gabfest that will be COP29. In Florida, Trump is getting ready to withdraw from the Paris Agreement on Climate Change. As the planet experiences its warmest year on record, and chaotic climate events multiply – where do we go from here in climate finance?
This morning I looked out the window and for a second caught sight of a star behind the clouds. Fantastic. It means the blocking high that’s left much of North West Europe covered by dull, grey, windless skies for the last 2 weeks has finally broken. It’s called a “Dunkelflaute”: an energy market term describing zero power generation from solar or wind renewables when the skies are dark and the wind don’t blow. Nary a wind turbine blade has stirred, nor a photo-voltaic panel gleamed. Renewable power generation tumbled off a cliff. (I was reminded of the term by my chum Adrian Jones, probably the best infrastructure financier on the planet.)
I recently read there are more solar panels installed in Belgium than there are in the whole of Africa. Have you ever been to Belgium? It rains a lot, and is even more grey and dull than the UK. Imagine how much more effective all these solar panels would be under African skies?
While Dunkelflaute conditions prevail… economies dependent on wind and sun for power… will struggle. Energy is lifeblood of modern economies – without they will wither, but energy comes with enormous costs. Other renewables are available, like Tidal or Nuclear… but they are costly and too difficult in the race to replace fossil fuels. What’s the alternative? Drill baby drill, and fire up the power stations!
Last week a report from the European Union’s space programme, Copernicus, said it is “virtually certain” 2024 will follow 2023 as the warmest year on record. Temperatures will hit 1.5C higher than levels before the industrial revolution (the average between 1850-1900). I am even more worried by rising ocean temperatures – which are driving unprecedented storms and weather conditions.
Meanwhile, nobody seems much bothered or interested by COP29 – the UN backed “Conference of Parties” to discuss climate change and how to avoid/mitigate/ignore it. (Delete where applicable). Even as it kicks off this morning in Baku, the oil-town capitol of Azerbaijan, everyone is waiting for a Day 1 President-Elect Trump executive action re-withdrawing the US from the Paris Accords and further discussion on slowing down global warming.
Azerbaijan, I am told, is a fascinating place. The original petrostate and still 90% dependent on exporting fossil fuels. The climate protest lobby is furious – after Dubai for COP 28, they see a theme of burying discussions on the transition of future energy. Perhaps the grungies should not be so angry – the last 40 years of climate awareness of and efforts to reduce the pace of emissions has had positive effects. Studies show the Earth may see climate increases limited to just 3% instead of 5%! The problem is, we are already at +1.5C now, and that’s creating unpredictable climate chaos as warmer oceans fuel more violent weather conditions. It will get worse as stored solar energy in the oceans generates more unpredictable events.
The problem is no one is listening as the planet screams its multiple warnings. To the use the term “ESG” in finance is now career-suicide. I will always consider good Corporate Governance (the “G”) to be about the most important indicator of a sustainable, successful company or government. The mistake was linking protection of the Environment (“E”) to “Social” (“S”) aims, which are now seen as equivalent to the kind of “Wokery” that was so conclusively overturned by the US election result. I’ve always counted myself an environmentalist but I’m anti-woke – which is probably why I was so seldom asked to present at ESG conferences.
The excellent John Authers points out in his Bberg commentary this morning, Trump will bury ESG. It already became a greenwashing scam. Blackrock is being investigated in France for the fact 18 of its “sustainable” funds were investing in fossil fuels. Standardising reporting requirements has been quietly abandoned in the US. Investors have lost interest in Green investments. In Europe, Green investment is mired a complex taxonomy that requires a degree in Euro-bureaucracy to comprehend.
Belief in Climate Change has become binary. It’s either a hoax or the “biggest scam in history”, according to President-Elect Trump, or its real. While the evidence clearly shows the planet is getting warmer, the polarisation comes from why and what it means. If the planet is going to get warmer or colder because that’s what it naturally does (which scientist acknowledge in long-term cycles), then what’s the point of committing economic suicide by constraining growth? That’s a perfectly rational question to ask, and then accept the science, which shows a strong-correlations between the swift rise in Co2 levels in the atmosphere and unprecedentedly fast rising temperatures since the onset of industrialisation.
In a rational economy, that would be end of issue; the global economy would go on a crash course to lower and stop CO2 emissions, create a whole new clean energy ecosystem, and move forward. But we don’t live in a rational society or one that is capable of taking difficult global decisions. Instead, we are choosing to address global warming and its’ consequences, by ranting about it on social media, and playing it for political and self-interested purposes.
Why do today what you can put off till tomorrow?
This has been the problem at the heart of all common goods since the beginning of human society – who should pay? President-Elect Trump sees it in terms of global competitiveness. Why should the US suffer economic hardship by cutting its use of fossil fuels to lower emissions, when it’s a global problem requiring shared global solutions. China is now the largest polluter and emitter of CO2 – therefore it’s as much their problem to solve. (The UK is very earnest about CO2 reduction and mitigation, but who cares when the UK is responsible for about 1% of global emissions?)
However miserable the non-summer in the UK was, the science shows the planet is heading for a record temperatures. I will get a screed of emails on that demanding I prove it. I won’t. I will just refer the deniers to the science, which they will deny because that truth is not their truth. Meanwhile, on the Spanish Mediterranean Coast the rescue team are still digging out bodies from the cars trapped in underground car parks when the floods hit. Typhoons and storms are still hitting where they shouldn’t. Floods and droughts abound.
This year’s COP 29 is expected to focus on money – focusing on how to ensure money flows from Rich North to the Poor South to drive energy transition. There is a clear opening for China to export and run solar farms across Africa – western investors are unwilling to finance development in Africa for a host of reasons except at usurious rates of interest.
The aim of the Baku COP29 will be to agree a new collective quantified goal (NCQG) on climate finance, to enable capital to flow from the richest nations to poorer ones to cut emissions, with the additional benefit of creating growth. The only previous agreement on money was a pledge for $100bln of finance to the developing world made in 2009, which took till 2023 to deliver!
UN estimates are that some $2.5-4 trillion of climate mitigation aid is required to decarbonise the Poor South. COP29 will probably agree some $400-600 bln of new funding by 2035. Much of the required capital could come from redirecting flows and investment in the current $3.5 trillion global energy sector. Rather than building solar farms in the Belgium, build and operate them in the poor south, with the added advantage of increasing the Earth’s Albedo by reflecting solar energy back into space.
The main issue that’s going to become acutely apparent at COP29 and next year at COP30 in Brazil will be the increasing polarisation. The USA is not going to fund global climate mitigation – that’s clear. The political shift rightwards in Europe means its more focused on internal issues. The opportunity – for an opportunity it is – is for an increasingly prosperous Asia, including China and India, to finance, build and operate a new wave of renewables across the Poor South, reaping not just returns, but increasing geopolitical influence.
The problem might be we’ve talked climate change and mitigation to death. Time for some action instead…
Out of time, and back to the day job..
Bill Blain
Author of the Morning Porridge, founder of Wind Shift Capital