Green Dreams, Inflationary Realities

Global policy and politics, particularly in the high-income world, have been obsessed with dreams of a green economy. Imposing ever-more rigid methods to reduce greenhouse gas emissions as the way to “save the planet” is almost unchallenged in the media, academia, and corporate boardrooms of the developed world. The results on the ground have been less convincing, as the price of everything—from energy and food to construction costs—rises to unsustainable levels and international trade slows as global recession looms. Billions now face immiseration, malnutrition, or starvation. Economist Isabel Schnabel calls this process “greenflation”—companies’ efforts to reduce emissions have driven up prices, particularly since the Russian invasion of Ukraine.

This has caused tremendous price pressure on rare earths, copper, and other materials critical to the production of batteries. The green lobby and its media supporters, meanwhile, like to claim that renewable energy is now economically competitive. But in places where strict green energy policies have been introduced, people end up with skyrocketing energy costs. In California, residents pay up to 80 percent above the US national average for electricity. Reliance on wind power has made even Texas’s grid vulnerable. Rather than learn from these experiences, other states, notably New York, have decided to adopt similar policies.

The biggest losers from greenflation are predominately the largely powerless working class and the denizens of developing countries. But even energy rich and historically prosperous countries like Australia face severe price hikes and shortages, as do Canada and the US. Economies have been severely impacted, particularly the agriculture and manufacturing sectors. In the developing world, where environmentalists have been working to block fossil fuel plants for years, over 3.5 billion lack reliable access to electricity. Greenflation has incited a new wave of political instability, as seen most recently in the meltdown of Sri Lanka.

Looking backwards

Before the Industrial Revolution, human civilization invariably used animals and slaves as its primary source of energy. Change started in the late-18th century in the United Kingdom with the discovery of mechanized spinning, steam power, and iron production. Writing in Das Kapital in 1863, Karl Marx reflected on the change brought about by the introduction of the steam engine in comparison to the inconsistent and uncontrollable nature of water and wind power:

Wind was too inconstant and uncontrollable, and besides, in England, the birthplace of Modern Industry, the use of waterpower preponderated even during the manufacturing period. In the 17th century attempts had already been made to turn two pairs of millstones with a single waterwheel. But the increased size of the gearing was too much for the waterpower, which had now become insufficient, and this was one of the circumstances that led to a more accurate investigation of the laws of friction.

The move to denser forms of energy such as fossil fuels precipitated the Great Decline in poverty, childhood mortality, starvation, and the eventual rise of democratic nation states. Now, the Western obsession with net zero energy could reverse three centuries of progress. “Energy equals quality of life and we intervene there only with the most convincing of cases,” cautions Prof. Michael Kelly at the University of Cambridge’s Electrical Engineering Division.

Trillions have been spent on green energy over the past 20 years, notes energy entrepreneur and investor Brian Gitt, but the percentage of global power generated by fossil fuels has barely declined from 85.54 to 82.28 percent; the bulk of reductions have come from replacing coal with natural gas. A critical turning point was the 2011 Fukushima nuclear accident: Japan stepped away from nuclear power, and now suffers energy shortages as well as rising inflation and a declining economy. Germany also accelerated its Energiewende—an ambitious program aimed at expanding solar and wind capacity, while phasing out its remaining coal and nuclear power plants—with disastrous results.

Reliance on natural gas imports and an irrational fear of nuclear power have left most European countries in a difficult situation. As the physical constraints of intermittent power supply settled in, Germany found itself increasingly dependent on natural gas—by the end of 2021, over 55 percent of its imports came from Russia. The environmental benefits are difficult to assess: just before Russia’s invasion of Ukraine, Germany announced it would be phasing out three of its six remaining nuclear power plants. Six months later, the Germans joined the Dutch and Austrians in burning more coal to survive the EU energy crisis. Household energy prices before Russian’s invasion of Ukraine had already risen by more than 50 percent across Europe, most notably in Italy, Spain, and the UK.

The high cost of energy is one of the main reasons Germany reported its first trade deficit since the fall of the Berlin Wall, while the country’s largest landlord announced a restriction on heating homes at night. Due to the zealotry from Brussels, the entire EU is faced with energy rationing and as sanctions against Russia may be backfiring, the EU has seen its currency trading weaker than the dollar for the first time in 20 years. Inflation has jumped to 8.3 percent in the Eurozone and 9.1 percent in the United Kingdom—the highest level in 40 years. Energy rationing may also be imminent in the UK. The percentage experiencing “food uncertainty” there has also doubled to twice the pre-COVID rate.

In an act of desperation, the EU regulators recently announced that both gas and nuclear power can now be classified by investors as part of the new green taxonomy—an effective admission that the current energy crisis stems largely from an unrealistic attempt to decarbonize the grid by 2050 with wind and solar energy alone. Nuclear may be making a comeback as France has decided to renew its once-vibrant industry.

A changing political equation

In 2016, the United States elected Donald Trump who had run on a slogan of burning “clean coal.” Trump clearly spoke to the devastated communities of the American heartland which are likely to be the biggest losers in a rapid transition to net zero. These communities have seen many of their manufacturing jobs outsourced to factories in the developing world, notably China, Brazil, and India where regulatory enforcement is less strict.

High energy prices and related inflation profoundly unsettles countries, and stokes class divisions. Real incomes are falling not only in Europe’s Mediterranean south but also in Germany, the UK, and France. Nearly two years after the Paris Climate Agreement, Emmanuel Macron’s government raised the tax on diesel in an attempt to curb carbon emissions. This led to the rise of the gilets jaunes, who adopted the slogan, “Les élites parlent de fin du monde, quand nous, on parle de fin du mois”—“The elites talk of the end of the world when we talk of the end of the month.”

Unrest is not confined to France. In June 2021, Swiss voters rejected a key referendum proposal to curb CO2 emissions on car and air travel, with most of the support coming from the countryside. Today, Dutch Farmers are protesting the government’s attempt to impose emission and fertilizer reductions threatening farms that have been in operation for generations. Recently, they have been joined by their Spanish, Polish, and Italian counterparts.

The political damage is already evident. Greenflation has contributed to the ousting of Boris Johnson in the UK, the resignation of Mario Draghi in Italy, the fall of Estonia’s government, and Emmanuel Macron losing his absolute majority in the French parliament. US President Joe Biden has suffered a poll decline as he doubled down on the green policies he adopted when he took office. His regulators are even threatening the Permian Basin, the world’s richest oil field and source of 40 percent of the nation’s oil and gas, while the administration begs for additional supplies from autocracies like Venezuela and Saudi Arabia and promises more liquified natural gas to Europe.

Throughout the West, divergence between elite opinion and that of the vast majority is clear. Climate change activists, backed by the media, tech, and Wall Street elites, and numerous celebrities, may drive coverage and academic discourse, but Gallup notes that climate change ranks as the top priority issue for just two percent of Americans. Inflation leads economic fears with 18 percent, followed by the economy in general with 13 percent. Five percent are most concerned by gas prices. Now, nearly half of all small businesses say they fear inflation will force them into bankruptcy.

Longtime Democratic analyst Ruy Teixeira links the Biden administration’s obsession with climate to the President’s low approval ratings. Overall, barely a third of Americans, according to one recent survey, support the Biden energy polices; the fact that electricity shortages are expected across much of the country won’t be of much help in the November elections.

Crisis in the developing world

Greenflation has hit the developing world hardest where fuel riots are already common, as evidenced by the Arab Spring in 2011. It is now driving tens of millions more towards starvation during the worst food crisis in a half-century. Today, there have been fuel riots in Kazakhstan, Ecuador, South Africa, Senegal, and Ethiopia. Even before the imposition of bans on fossil-fuel financing, energy supply in most of Sub-Saharan Africa was completely inadequate to address basic needs. Even the renewable-sponsored PV Magazine now admits that despite the drop in the cost of solar panels, full electricity in Africa cannot be achieved with renewables alone.

The environmental impacts of the energy ban are rarely considered. Up to 40 percent of the African continent still relies on deforestation for its basic energy needs with nearly four million hectares of forest being cut down every year. Burning coal would reverse deforestation as it did in India and China over the last two decades, and also address the dangers posed by indoor cooking—a contribution to half of all childhood pneumonia deaths worldwide.

Unsurprisingly, leaders in countries like India tend to be more concerned about the availability of energy than about reducing greenhouse gas emissions. During the IPCC Glasgow conference, India’s prime minister Narendra Modi said that India will not address climate change until 2070, a remark in line with the Indian Energy Minister’s comment in 2015 that the country must resist “Western carbon imperialism.” There is a clear rejection of favored sustainable development models peddled by the West, or what Austin Williams has described as “neo-colonialism gone green.”

Africa is particularly exposed. The UN projects that Africa’s population will be as large as Asia’s by the year 2100, yet institutions like the World Bank have pledged to stop funding fossil-fuel projects despite rising demographic-driven demand. In 2015, African leaders began speaking out against Western-enforced green policies. The president of the African Developmental Bank stated that “Africa cannot function because we have no power” and affirmed the continent’s need for “renewable and conventional” energy, including “natural gas and coal.” African presidents and energy ministers in Senegal, Nigeria, and South Africa have also spoken out against harsh and uncompromising environmental policies.

Ironically, Europe—long the epicenter of ultra-green sentiment—has reversed course for their own purposes and rushed to buy gas from Africa and other impoverished countries, even as they balk at funding projects that might keep the energy closer to home. Then there is the tiny island of Sri Lanka, which saw the first attempt to implement modern monetary policy and the “sustainable” ideas of the Davos-inspired Great Reset. Predictable inflation, a ban on non-organic farming, and fuel rations were not about to deliver a Green Utopia, which is why the tiny island nation saw protestors charge the presidential palace and bathe in the oligarch’s swimming pool.

China, on the other hand, is too rich and powerful—not to mention self-interested—to allow greenflation to dampen its economy. Instead, despite emitting more GHG than the EU and the US combined, the Middle Kingdom had the chutzpah to criticize the US Supreme Court’s overturning of the Obama-era power regulations while they plan to build more coal power stations. Unconcerned about angry greens, the CCP also injected $440 billion aimed at expanding the nuclear energy fleet with plans to build 150 new reactors in the next 15 years.

An unpalatable religion for most

China’s financing of new energy and mining operations in developing countries comes with minimal concern for the environment, corruption, or long-term financial viability. Nevertheless, these countries may consider themselves far better off with Chinese rapacity than with fashionable de-growth notions fostered by Western governments, investment banks, and non-profits. Under Western domination, saving the planet means greenflation; for greens, high energy prices are generally not seen as a problem, but something that should be actively encouraged.

One reason for this indifference, observes Joel Garreau, lies in how environmentalism has become what novelist Michael Crichton once called “the religion of choice for urban atheists.” Although many green predictions dating back to the late 1960s have turned out to be exaggerated or even plain wrong, this does not seem to trouble climate activists. Although natural resources did not run out but became more abundant, this did not shake the faithful. A 2021 paper by Carnegie Mellon University researchers David Rode and Paul Fishbeck tracked apocalyptic predictions dating from the first Earth Day in 1970. Across half a century, 61 percent of the forecasts of planetary collapse have come and gone. Notes analyst Rupert Darwall, “We know, because we’re still here. In most fields, a record so far of 100% successive failure would induce a degree of cynicism, not least to say reasoned skepticism.”

Like Medieval Catholicism, the green faith foresees impending doom caused by human activity. In the Middle Ages, wrote Barbara Tuchman, “apocalypse was in the air.” The Final Judgement, brought about by human sin, was not only real but imminent. St. Norbert in the 12th century predicted that the event would occur within the lifetime of his contemporaries. Fueled by the same certainty, the greens have no more desire to debate policy than Medieval clerics.

The oft-repeated notion that “the science is settled” is profoundly unscientific, but endlessly reported. This seems a poor way to tackle a complex scientific issue in which open inquiry and debate are essential, observes Steve Koonin, President Obama’s undersecretary of energy for science. Koonin, remains skeptical about the ability to scale up “green energy” in the short run, and suggests accelerating “the development of other low-emissions technologies and in cost-effective energy-efficiency measures.” He argues that well-informed public discussions on policy “should not be sidelined.” In any complex system, serious concerns, such as sea-level increases due to rising temperatures, need to be studied in the context of complex weather cycles, the fluctuations of which may not be as extreme as the more sensational reports have suggested.

The bleak worldview of the climate activists seems to owe more to Medievalism than to the Enlightenment. As much as 15 percent of the population in preindustrial Europe is estimated to have been permanently celibate. Like the sex-hating Christian militants, today’s greens tend to be hostile to the idea of procreation, particularly in wealthy countries. Family-oriented people may also object to Ecotopia-like calls for restrictions on having children due to their “carbon legacy,” a proposal already endorsed by climate researchers at Sweden’s Lund University and Oregon State University in the US.

Clearly, the future being offered is not better for most—it is a future marked by downward mobility, less travel, and more crowded living conditions under perpetual greenflation. Eric Heymann, a senior economist at Deutsche Bank Research, may be an advocate of the “Great Reset” (or something like it), but he still warns that Europe’s Green Deal and its goal of climate neutrality by 2050 threaten a European mega-crisis which may well lead to a “noticeable loss of welfare and jobs.” We will even need to change how we eat: Some scientists suggest we will have to shift from hamburgers to such delightful concoctions as “maggot sausages.” Another has suggested that we recycle ourselves and discover the finer points of cannibalism.

The need for autocracy

Since these policies are unlikely to be popular, many greens propose what Heymann describes as “an eco-dictatorship.” There is broad support among influential voices like budget advisor Peter Orszag and journalist Thomas Friedman for the post-democratic notion of handing over power to credentialed environmentally oriented “experts” in Washington, Brussels, or the United Nations. Some greens have seized on the arbitrary “top down” restrictions associated with the pandemic as a “mass experiment” showing how to impose draconian edicts that would have trouble getting through elected legislative bodies.

This is not a fringe view. “Democracy is the planet’s biggest enemy,” announced a headline in Foreign Policy magazine in 2019. Jerry Brown, former governor of California, boldly suggests applying “the coercive power of the state” to achieve environmental goals and has even recommended the “brainwashing” of the uncomprehending masses.

As during the Middle Ages, such an autocratic approach has little room for freedom, increasingly focused as it is on the enforcement of climate orthodoxy. Not only energy companies but think tanks and dissenting scientists have been targeted for criminal prosecution. Dissidents, some suggest, should be jailed, and uncooperative companies should be stripped of their assets or, perhaps, simply dropped into the media memory hole. Even highly credentialed skeptics, including those who see climate change as an important issue—scientists like Roger Pielke and Judith Curry—have been marginalized for deviating from what Curry has described as an overly “monolithic” approach to the issue of climate change.

Now, in a particularly Orwellian step, Google has announced a “crackdown” on climate policy skeptics, including well-known scientists. This has been eagerly embraced by the EPA’s director, Gina McCarthy. As environmental activist Michael Shellenberger has pointed out, social media censorship avoids challenges to any misleading statements from Biden’s energy and environmental “brain trust,” which is overwhelmingly made up of climate zealots.

Potential divisions in the green movement

There are of course those who benefit from greenflation, including investment bankers, venture capitalists, and makers of approved products, like EVs, whose growth will further tax the already stressed grids in many countries. After all, subsidies to fight climate change have made Elon Musk the richest man in the world. The shift to net zero policies allows investment banks to benefit from the dissolution of fossil fuels even if the society in general suffers the consequences. As in the Middle Ages, the upper classes urge everyone else to cut back on consumption, while they purchase indulgences with carbon credits and other virtue-signaling devices.

Often the most frenzied cries for austerity come from the richest and most energy-hungry who seek to save the planet in style. They see no contradiction in convening squadrons of GHG-spewing private jets in Davos to discuss the environmental crisis. Few of the high-profile climate activists, including high-living celebrities, seem anxious to give up their multiple houses, yachts, or fleets of cars. Indeed, the private jet used by US climate czar John Kerry uses 30 times more carbon than the average car, even as officials consider restricting air travel for the masses.

This all reprises the clerical hypocrisies of the Middle Ages, when the Church promoted the virtues of poverty while bishops lived in luxury “loaded with gold and clad in purple,” as Petrarch put it. In the later part of the Middle Ages, this divergence between preaching and actually practicing austerity sparked rebellions and the Reformation. As the consequences of greenflation grow, it may become more difficult for environmentalists to excuse the excesses of their ultra-rich supporters.

After decades of steady agitation, extremism is already rising. Despair tends to stoke fanaticism. Among young Americans, the vast majority believe they face an imminent environmental catastrophe. The student movement around Swedish teenager Greta Thunberg recalls the youthful fanaticism of the Medieval sanctus puer or “holy children” who rampaged through Europe in the 13th century, or Mao’s Red Guards unleashed during the “cultural revolution” in communist China during the 1960s.

In the future, we can expect more ecotopian shock troops and semi-theological chanting. The middle class is also a target: militants in Germany and Britain now disrupt normal commutes and commerce for the sake of teaching the masses a lesson in climate rectitude. And as with all religious movements, there are the crusaders like the fanatical Sweden-based activist Andreas Malm who coined the idea of “blowing up a pipeline,” effectively justifying sabotage when democratic discourse fails.

The adaptive alternative

With their eyes on the apocalypse, environmentalists often seem less concerned with adapting to climate change than waxing hysterical about it. Yet the current greenflation crisis could bring a better appreciation of the consequences of draconian and often ill-thought-out policies. Like any critical issue, climate change should be tackled with pragmatic measures that also take the needs of human society into account. Climate change could well be a contributor to crop failures, hurricanes, floods, unusual weather patterns, and even war. But attempting to solve the problem by discouraging family formation or reducing living standards, as is often proposed, will only disrupt society and prove politically unfeasible.

There are some signs—particularly in the wake of inflation and the Russian invasion of Ukraine—of a slow turn away from irrational fundamentalism to a more nuanced, Fabian approach. The current energy shortages are hailed as spurring a greater commitment to “green” energy, but it seems more evident, at least in the short run, that greenflation is forcing government to awaken from their “dogmatic slumbers,” as evidenced by the European re-evaluation of nuclear and natural gas, and Germany’s shocking revival of coal.

Even President Biden, facing a disastrous inflation-driven midterm, has shown willingness to allow drilling in the Gulf of Mexico and Alaska to the predictable horror of the greens. He has green-lit a new LNG plant in Louisiana primarily to export to Europe. Even California, ground zero for environmental zealotry, has decided to delay shutting down nuclear and gas plants in order to avoid disastrous blackouts while Australia’s new green government has decided to start subsidizing fossil fuels as a way to ensure that the renewable transition does not undermine the country’s energy sector.

Ultimately, the world has to find a way to adjust and adapt its environmental policies without causing massive inflation, dislocation, and worsening class warfare. If climate policy is hampered by economic concerns and continued GHG-spewing patterns in China, India, and other developing countries, perhaps more emphasis should be placed on adapting to changing natural conditions. In the Netherlands, for example, catastrophic flooding in the 16th century prompted an extensive and successful expansion of coastal berms to prevent future floods.

Humans may be the prime culprits of climate change, but they must also be part of the solution. The best way to address greenflation lies in pragmatic steps like greater investment in nuclear power, well-regulated oil and natural gas, and investment in new energy innovations to make renewables more reliable. As we seek to make an “energy transition,” we must find ways to do so without incurring devastating inflation, greater class division, the immiseration of the middle class, and the destitution of the poor, particularly in the developing world.