Green Shorts

Saturday-Sunday, October 26-27, 2024

Green Shorts

Bloomberg News is flummoxed by the hedge fund investors and their heavy bets against green energy. (A podcast intro to the reporting is here.) Instead, they say, hedge funds are betting on fossil fuel energy companies.

Considering the amount of effective political support—that is, support with real substance—for green energy sources, that is remarkable news. The stock-market gambling community isn’t always right, but it has a good sense of where things are going. While I am very skeptical that so-called green energy can hope to live up to its promise, the politically active classes, including wealthy advocates like Michael Bloomberg, are spending their own money to propagandize for improperly named “renewable energy” investments like wind and solar generation capacity. Just satisfying the energy needs of modern civilization would require ruining the natural ecosystems of large chunks of the planet to install so much generating capacity, meaning that saving the earth would be a goal to pursue even as it ruins life on it. Crazy town.

The political euphemism of the Inflation Reduction Act mandated unimaginable gobs of money and regulatory advantage to investors wanting to install more of these structures. Meanwhile, the current administration does all it can to make investments in fossil fuel extraction as onerous and risky as possible. That is, they use the federal agencies to make mining permits unobtainable, to thwart natural gas pipelines, they even like to talk about making it a crime to advocate for alternative views to the bizarre carbon-dioxide-drives-climate theory. Permits are doled out like candy to green energy investors, by contrast, even to the point that NIMBY movements are getting officially snubbed anytime they try to block solar or wind farm construction just because local communities find them hideous rather than attractive.

The reality is that fossil fuels will be necessary even while the green energy sources are given preferential treatment. Power grids can’t be allowed to crash, but green energy on its own would lead to brownouts and blackouts on an inconceivable scale. Backup power (known as baseload) for when the wind doesn’t blow and the sun doesn’t shine, has to run constantly in the background. Why would hedge funds gamble against fossil fuels? They surely know that they cannot be removed from the system without throwing civilization back to the quaint living conditions of the 14th century, when the bubonic plague helped to reduce excess human population. Gambling against fossil fuels would be akin to gambling against gravity. When the government starts mandating levitation, the hedge funds might gamble against that, too. Or so you’d hope.

Anyhoo, here’s how the (paywalled) report begins:

Despite vast green stimulus packages in the US, Europe and China, more hedge funds are on average net short batteries, solar, electric vehicles and hydrogen than are long those sectors; and more funds are net long fossil fuels than are shorting oil, gas and coal, according to a Bloomberg News analysis of positions voluntarily disclosed by roughly 500 hedge funds to Hazeltree, a data compiler in the alternative investment industry.

The findings provide a glimpse of how the most rarefied corner of finance has cooled on the investment prospects of a green transition that scientists, along with many policymakers as well as company executives and economists, argue is critical to avoid the most devastating impacts from global warming.

The article gasps at a lot of things that look obvious to some of us. When an industry is only sustainable because it gets subsidies worth multiples of its value and receives crippling obstacles placed on its more efficient competitors, one must wonder if it has any longterm profitability. Relying on overextended government finance can’t be a viable source of perpetual profits.