RUTHFULLY YOURS

JP Morgan Chase — it’s hard to find a more “woke” company than that one. Under celebrity CEO Jamie Dimon, JPM in its corporate pronouncements consistently positions itself at the most exquisitely correct end of the politically correct spectrum.

But reality can be tough. In its email of a couple of days ago, the Global Warming Policy Foundation links to JPM’s 2021 Annual Energy Paper. The Paper comes from JPM’s Asset and Wealth Management Group. The lead author is a guy named Michael Cembalest, who appears to have his ear right down on the ground of the global energy business. The bottom line is that all the talk about “deep de-carbonization” of the world economy any time soon is a ridiculous fantasy. Fossil fuels are not going away for a long time, if ever. Carbon emissions into the atmosphere are increasing? You’d better get used to that.

Once again, this “deep de-carbonization” thing is a case of the really “smart” people deceiving you, or maybe themselves; or more likely, both.

For starters, let’s consider some of the extreme wokeism that issues from the executive suites in JPMville. This is not limited to matters of “climate,” but extends as well to other usual topics, like for example “systemic racism.” On that subject, here is JPM CEO Jamie Dimon, as quoted in Forbes in October 2020:

“Systemic racism is a tragic part of America’s history. We can do more and do better to break down systems that have propagated racism and widespread economic inequality, especially for Black and Latinx people. It’s long past time that society addresses racial inequities in a more tangible, meaningful way.”

Meanwhile, over in the climate arena, JPM’s high-level pronouncements totally buy into the idea that we’re going to save the planet by financing a bunch of wind turbines, or something. Last October, JPM put out a big statement with the pompous title of “How one of the world’s biggest banks plans to tackle climate change.” Excerpt:

Climate change is among the most urgent problems facing humanity; businesses and governments have an imperative to act. Achieving the goals of the Paris Agreement, which aims to restrict a rise in the world’s average temperature, would enable us to take a giant step towards a safer, greener, more sustainable future. . . . For the world to achieve net-zero greenhouse gas emissions by 2050, there needs to be an acceleration of emerging technologies that are not yet widely commercially available or economically viable. . . . Our company, JPMorgan Chase, announced this month that we will start aligning our financing portfolio to meet the Paris goals.

Then just a couple of weeks ago, on April 15, JPM followed up by announcing a big new plan to “Advance Climate Action and Sustainable Development” with some $2.5 trillion in investments:

JPMorgan Chase aims to finance and facilitate more than $2.5 trillion over 10 years – beginning this year through the end of 2030 – to advance long-term solutions that address climate change and contribute to sustainable development. . . . This long-term target complements the firm’s Paris-aligned financing strategy and will help accelerate the transition to a low-carbon economy by encouraging actions that set a path for achieving net-zero emissions by 2050

Wow, that sounds great! Or is it all just a cynical grab for some of the upcoming gusher of government subsidies, with no detectable effect at all on the climate, or even much effect on the use of fossil fuels? For some insights, let’s look at that 2021 Annual Energy Paper. The document is not short (42 pages), and certainly does not fall in the category of “climate skepticism,” but it does contain some notable doses of hard-headed realism that are normally completely lacking in this field.

From the Executive Summary:

Our main focus this year: why is the transition [away from carbon-based fuels] taking so long? Deep decarbonization plans assume massive changes in electric vehicles, electricity transmission grids, industrial energy use and carbon sequestration, but each faces headwinds often not accounted for by energy futurists. As shown below, many prior forecasts of the renewable transition were too ambitious since they ignored energy density, intermittency and the complex realities of incumbent energy systems. . . .

Maybe those “energy futurist” people are just kidding themselves?

President Biden just announced a new GHG emissions target: a 50% decline by 2030 vs a 2005 baseline. This very ambitious target implies a decarbonization pace in the next 10 years that’s four times faster than in the last 15 years. Even with the amount of money the administration plans to dedicate to the task, it’s an enormous hurdle. . . .

The even more important and larger question: even if the US succeeds, what about everyone else? Over the last 25 years, the developed world shifted much of its carbon-intensive manufacturing of steel, cement, ammonia and plastics to the developing world. . . .

Loudly proclaiming that you have achieved some (small) decreases in carbon emissions while offshoring most of your energy-intensive manufacturing — That’s one good way to fool yourself.

The world gets more energy efficient every year, but levels of emissions keep rising. . . .

It’s those pesky Chinese and Indians and Africans who think they ought to be able to have electricity and cars and air conditioning just like you do.

How is the global energy transition going? Taken together, the aggregate impact of nuclear, hydroelectric and solar/wind generation reduced global reliance on fossil fuels from ~95% of primary energy in 1975 to ~85% in 2020. In other words, energy transitions take a long time and lots of money. . . . [T]he IEA still projects that 70%-75% of global primary energy consumption may be met via fossil fuels in the year 2040. Why don’t rapid wind and solar price declines translate into faster decarbonization? As we will discuss, renewable energy is still mostly used to generate electricity, and electricity as a share of final energy consumption on a global basis is still just 18%.

Yes, all those thousands of wind turbines and solar panels blanketing the landscape are at best hoping to replace a minority of a sector that itself only represents 18% of energy use to begin with. Why are we spending (wasting) these many trillions of dollars again?

Getting beyond the Executive Summary and into the details of the Paper, there are many great tidbits. A section on “Transmission Realities” shows how bringing “renewable” power to where it’s needed runs into the same roadblocks from environmentalists as all other energy development:

While MIT and Princeton assume rapid growth in transmission infrastructure, actual development can be a hornet’s nest of siting challenges and legal costs even when projects are eventually built after years of planning. Let’s start with HydroQuebec’s plan to sell hydropower to the US. . . . Take Northern Pass, a 1.1 GW transmission project to bring hydropower from Quebec to the Northeast through New Hampshire (80% via existing right-of-ways or underground lines). . . . [A] New Hampshire siting committee blocked Northern Pass. . . . Now Massachusetts is trying to import Canadian hydropower through Maine (“New England Clean Energy Connect”) but has already run into an injunction due to opposition from environmental groups. . . .

And so on and on and on.

Then there’s the Holy Grail of carbon capture and storage, sometimes known as CCS. Hey, why not just take all of this dangerous CO2 and bury it somewhere in the ground? The Paper looks at some of the practical realities:

After 20 years of planning and conjecture, by the end of 2020 carbon capture and storage (CCS) facilities stored just 0.1% of global CO2 emissions. . . . The highest ratio in the history of science: the number of academic papers written on CCS divided by real-life implementation of it. . . . The Princeton CCS buildout, just to sequester an amount equal to 15% of current US GHG emissions, would require infrastructure whose throughput volume would be higher than the volume of oil flowing through US distribution and refining pipelines, a system which has taken over 100 years to build. . . . Sequestering 25% of global CO2 through direct air capture would require 25%-40% of the world’s electricity generation plus 11%-17% of its primary energy.

And then there’s my favorite line in the whole Paper, from page 28:

We recommend that investors stick with oil & gas for now.

That’s my plan. And by the way, JPM’s plan to end “systemic racism” isn’t going any better.