–It’s not the real world causing climate inaction; it’s the sorcery
Commentary by MATHEW CARR
May 25, 2022 — The fossil-fuel producers get most of the blame for climate inaction. Saudi Aramco, Shell, Exxon.
They don’t deserve it. Not the share they get of it, at least.
Businesses surrounding the crude oil, natural gas and coal industries and the flawed basis of much of the capitalist system — they are what’s really to blame.
Returning back to the orginal idea behind capitalism, where the best ideas and collaborations win, will help save the climate.
It’ll help protect us from ourselves.
New guardrails are needed to stop us from believing the dangerous make believe.
The free hand of the market needs to be tamed.
Greed has turned the “fictions” — this sorcery — into massive inequality and unrest. Look at Sri Lanka for a glimpse of your future.
The drive for wealth has turned companies, trade and economics against nature.
See the crude-oil market.
The value of oil needed each day is about $10 billion, or 100 million barrels at $100 each (I’m rounding).
That’s small beer. That’s the tip of the Iceberg of Self Interest.
On Chicago, U.S.-based CME, the biggest exchange for crude trading, the value of that buying and selling of futures and options has almost doubled this year to $240 billion per day (based on back-of-the-envelope maths — 2.4 billion barrels per day with $100 / barrel crude being the proxy energy contract).
While volumes rose only 6% on CME year-on-year through April, the value of each barrel has surged to $100 because of the Ukraine war, from about $55 at the same time last year. (Again, I’m rounding).
This crazy richness is a far cry from the California Gold Rush in the mid 1800s, which everyone wanted a piece of even though output of gold rose from “only” $5 million in 1848 to only $55 million in 1851 (Wikipedia).
In this year’s case, instead of yellow gold there’s a series of paper trades based on black gold, or super-cooled cargoes of over-engineered natural gas that could be delivered in three months or three years, pretty much anywhere on the planet.
Anyway, it’s in the ballpark.
It’s an overwhelming amount of money.
It’s $88 trillion a year, just shy of the global GDP, at $94 trillion. (I’m not saying trading futures and options contracts adds much to real GDP, but exchanges and brokers take their fees, banks finance the trades, media companies provide news and data, index trackers track. The fakers cash in. That’s the point. Much of it is insurance against moving prices and gambling.)
But it still has a big cost ($20 trillion?) and who pays for all this? You do. That’s a big part of why your energy bill is sky high.
What’s worse, the markets are rigged because politicians can’t be bothered to properly resist cartels and monopolies, usually controlled by billionaires.
And what happens when we electrify the global economy (as we should have two decades ago)? All this fossil-fuel-fakery vanishes into increasingly thick air.
Note, much of the heat-trapping gases we’ve produced the past 100 years stay around for another century — give or take. Our kids won’t be thanking us.
These paper trades can only happen because the seller and buyer have the implicit trust that the barrel of black gold exists in the real world, and that it translates into money in their bank accounts.
The interests associated with this money — that’s what’s really driving climate inaction.
The flawed media messaging. The selective data. The implied threats. The self censorship. The silos designed to create plausible denial for the climate damage. The secret lobbying. The deliberate complication.
The wizardry is the biggest part of the iceberg — less seen because it’s below the waterline and so it does not get the attention of environmentalists. It’s cleverly and deliberately made perplexing, indeed boring even, to keep it out of sight.
In his 2011 book, “Sapiens”, Yuval Noah Harari points out that the constructs of trade, companies, markets and business models were designed to help people trust each other and get stuff done that makes life better, more comfortable, more tasty, more entertaining.
I include a couple of page snips below from the “graphic” (2021) version of his novel. (It might be a slightly tricky read for those viewing on their phone, so apologies for that).
Trusting Strangers Enough to Trade With Them
The Manlion – More Powerful Than a Brainy Cat
These totems – from USD, Brent crude futures, Apple Inc – are not real.
They are ways people who supply goods and services find customers.
The totems value our labor and provide a way for our employer to value us. Once the money is in our account, we trust the system will indeed deliver us that plastic widget we probably don’t really need, but requires crude oil to be burned. (I’m not judging. I’m one of the worst.)
But the trust in that system is evaporating and at a fundamental level.
Take auto company Peugeot, one of the world’s biggest carmakers.
Even if all its employees were dismissed or killed, shares sold, factories burned, the company itself would remain intact, Harari said.
So, Peugeot is a “legal fiction.” And a limited liability one at that.
Limited liability companies are among humanity’s most ingenious inventions, he said. Companies that are legally independent of the people who set them up can do untold damage — and no one is held to account.
The real animals, the plants, the climate are all threatened because of the resulting recklessness, as people choose material self interest to protect the cash-generating wizardry over collaboration and social wellness.
They cut down forests. Burn pretty much everything, everywhere, all the time.
Take another totem — the mining giant BHP.
It’s among large corporates calling for action, because much of its very existence is under threat.
See this chart, which shows its value could halve or double, depending on what governments do to control the climate transition during the next 30 years.
Existing markets seem to be pretending all this recklessness will carry on.
If the International Energy Agency forecast above for oil demand in 2026 is accurate and met, I can’t see how global temperature rise can be limited to 2C. It already may be too late.
That’s why the rules of capitalism need to change now, why polluters need to pay, why climate injustice needs to stop.
I hope the people meeting in Davos this week (and those meeting beyond that) can begin a genuine rewriting of the rules, instead of protecting their own turf / money.
And there is evidence this week that capitalism is indeed pivotting.
See these G7 / G20 negotiations:
See this decision:
See this on making polluters pay:
Michael Grubb, the University College London professor, tells me business, market and industry modelling wizardry is much less crap than it used to be.
“Zero-emission technologies and systems can be cheaper and perform better than those based on fossil fuels, and can become increasingly so over time. Low-carbon transitions have the potential to provide net economic gains to societies (even aside from the benefit of avoiding dangerous climate change),” he and other authors concluded in the report reproduced below.
Yet the fraught geopolitics, the war, the multilayered frenemies, the military industrial complexes make it seem unlikely that humankind is anywhere near its peak.
THAT might be nonsense, I hope.
We’ve forgotten why Sapiens rule the earth — we “can cooperate in extremely flexible ways with countless numbers of strangers,” according to Harari.
So why does everyone seem to hate everyone else so much?
It’s because of our key weaknesses:
Disclaimer: The author is in a 2-year + legal dispute with his former employer Bloomberg LP. For more information, see this and this.
NOTES:
ONE
LEGAL AND GENERAL INVESTMENT MANAGEMENT / BHP REPORT
TWO
CONSORTIUM REPORT
I think we were all caught by surprise. Not just the producers and business owners. Growing up in the fifties and sixties we were all happy about our industrial growth. Increasing production of automobiles and miles driven were good and to be proud about. So was the growth of subdivisions, long commutes and waiting in traffic. If the businessmen were blind do were the consumers. I still know consumers who deny human activity is causing climate change, and those who don’t demy but still consume as if their little purchasers will not matter. bWill they become educated and convinced in tome to avoid collapse. I don’t see much to generate a lot of hope.
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