Escaping before the fuel bill hits the fan

Today’s Exponential Investor was inspired by Grant Williams of Things that Make You Go Hmmm.

In his latest newsletter, Grant gave his readers a global tour of social unrest in 2019. The common thread, on the surface, was energy prices. They’d spiked in the countries that saw protests, often due to environmental campaigns. As Grant sees things, this was the straw which broke the camel’s back.

But what if it really was energy prices? And the idea that people should be impoverished to save the climate?

Does that bode ill for the UK’s ambitious (and expensive) emissions targets?

Let’s quickly review the data before we answer that question, explain my odd headline and dig into how you can profit from all this.

In France, the Gilet Jaunes protest was all about reversing diesel subsidies. They’d been put in place to reduce carbon emissions, but this turned out to be bunk science. By the time it realised this, France had become addicted to diesel. And so reversing the policy and making diesel expensive triggered a protest.

Of course, most things do trigger a protest in France. But this was not exactly in isolation.

The governments in Haiti, Sudan, Egypt, Iran and Ecuador all faced extraordinary backlashes when they raised fuel prices. The Ecuadorian government had to do a runner and move to another town to escape the chaos.

And that’s why the House of Lords might head to York. Because Britain’s attempt to combat climate change is about to lead to an increase in fuel prices. And the people are not going to like it…

The backstory for each place protests broke out is fascinating. But let’s not dig into that here. The point is that when environmentalism is expensive, it leads to backlashes. Violent, impressively large and persistent protests.

Going emissions neutral by 2050 is going to cost money. That’s clear. The question is who will pay for it.

There are plenty of ways to go about this. The economists, politicians and scientists all have different answers. Carbon taxes, carbon offsets, emissions trading schemes, emissions targets, subsidies, nuclear power, renewable energy and everything else.

Some of these present investment opportunities to you and me. Some represent increases in the cost of living.

But my point today is that all of this is an artificially created market. A political game. And that does not bode well for anyone involved, unless you’re related to a politician.

If the future attempts to tackle climate change turn out to be as misguided as the diesel subsidies were, how will people react? How will people react to the policies on offer given their lack of trust in politicians to get these things right?

I think the government is going to struggle to pitch whatever it has planned to reduce emissions…

As an aside, the government needn’t get involved at all. If people behaved as though climate change was a big issue and offset their emissions, purchased different items from different companies based on climate change concerns, or otherwise altered their behaviour, then we could tackle climate change without the government mucking things up.

But instead, the climate warriors insist on using government power to make change happen. Convincing people to do the right thing is just not self-important enough. They must seize the power of the state to force compliance with their views.

Usually, this just makes them look like hypocrites, which is fun. Davos is the textbook example. But this misses just how conceited such people are. They know better to the point where they should make decisions for others, by force of law.

Think about the sorts of solutions the overpopulation scientists of the past proposed. The idea that people shouldn’t be left to decide for themselves what the merits of climate change are, and act accordingly, is downright dangerous.

The other problem is that this power tends to ruin whatever initiative it takes up. Making drugs and alcohol illegal doesn’t make them less available. Higher taxes lead to more tax evasion. Subsidising insulation leads to house fires. A lack of forest burn-offs leads to bigger fires. Higher taxes to reduce income inequality lead to higher wealth inequality.

Eventually, people get sick of the government’s failures, like they recently did for the war on drugs. But I’m not sure if climate change has got much more room to run.

The world’s busybodies at Davos are busy coming up with ways to solve the climate problem. Well, they’re busy coming up with ways to force other people to solve it while they fly their wine to the events where they make such decisions. But I can’t think of a group of people who voters will be less receptive to…

Click here to watch The Daily Blitz

So, how do you profit from all this?

Well, I’d avoid investing in any government-backed initiatives seeking to save the world. You’re much better off seeking disruptive tech that can make a change which is not reliant on a political cause to be viable. In fact, focus on the tech that governments don’t like because they’re so powerful they’re downright dangerous.

Things like this.

If you bought a diesel vehicle before “dieselgate”, this advice will make intuitive sense to you.

Well, more and more people around the world will have been negatively impacted by such policies. And in 2019 they began to fight back.

The reflex action of the future will be anti-climate change solution, just as it was anti-EU before that. And people won’t be able to explain why, only that they’ve been duped one too many times.

Until next time,

Nick Hubble
Editor, Southbank Investment Research

Category: Energy

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