The ESG recession

Europe is in the midst of an energy crisis.  The U.S. and the rest of the world are paying greatly increased prices for gasoline and other forms of energy.  Two billion people rely on wood or dung for heating and cooking.  Cheap, reliable energy is becoming a thing of the past.  And this is leading to a worldwide recession.

Why are there such problems in the energy sector?  The ESG movement and related anti–fossil fuel movements have promised to run the fossil fuel industry out of business and discouraged investment in growing the fossil fuel industry.  The ESG movement sees no benefits coming from the use of fossil fuels and sees no downside to closing down the industry and seeking to replace it with wind and solar energy.

However, wind and solar energy have proven to be unreliable and to drive up the cost of electricity.  This is because the electricity producing companies in the developed world must also build 100% back up for wind and solar (for when the wind isn't blowing, and the sun isn't shining) to ensure reliable energy.  Having 100% back up means increased costs.

The installed economic infrastructure relies heavily on fossil fuels to operate.  Undependable expensive energy drives up costs in all industries, but especially in agriculture and distribution/logistics.  This is showing up in the tragedy in Sri Lanka.  All of this is driving up food costs.

The E.U., led by the Germans, has striven hard over the last couple of decades to build up their wind and solar energy industries, which caused E.U. nations to depend on Russian oil and gas to drive their backup capacity.  President Trump warned the Germans about their reliance on Russian natural gas and they laughed at him.  Today, the Germans are in an energy crisis and are moving to start burning coal again to provide electricity and power this winter.

The ESG movement in Europe and the U.S. has worked to end the fossil fuel industries.  The result has been reduced investment in these industries and reduced infrastructure.  The supporters of the ESG movement believed there would be no downside to punishing these industries.

Today, we are seeing some of the downside of eliminating fossil fuels.  Energy poverty.  Likely shortages of food.  Higher prices of both.  We will see declining economic activity as people must focus more obtaining food and electricity.  Declining economic activity and inflation means recession and stagflation.

This is the ESG recession.  If the world continues to punish the fossil fuel industries, it will make things worse.

Photo credit: Rawpixel, public domain.

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