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Karma Is About To Slap Climate Destruction Profiteers In The Face
$554 billion worth of environmentally destructive investments are set to become worthless.
For decades, a select few have greatly benefited from the destruction of the planet. Their oil-driven businesses and investments paid out billions of dollars, while the pollution, destruction and climate mayhem they caused went unpunished. For years, it seemed like this myopic greed and disregard for planetary health would be unstoppable and propel us into a climate apocalypse. But it appears that the Vedic notion of Karma still holds merit, as these profiteers are now set to lose billions of dollars and, possibly, their way of life. But how?
This climate karma is most apparent in a recent report on the steel industry. You see, the steel industry is responsible for around 5% of CO2 emissions in the EU and 7% worldwide. This puts it firmly in the sights of governments looking to cut back their emissions to meet climate targets. As such, the steel industry is under massive pressure to shift away from coal furnace technology to far cleaner Electric Arc Furnace (EAF) technology over the next 5 to 10 years.
Currently, only 30% of steel is produced with EAF technology. By 2050, this proportion needs to rise to 53% in order to meet emissions targets. The rest will use primarily carbon-neutral hydrogen-fuelled furnaces, which are yet to be fully developed and rolled out.
But just last year, this massive growth seemed doubtful. In 2022, only 33% of the planned steel capacity was set to use EAF, whereas 67% planned to use coal. This means that while the steel industry is adopting lower-carbon technology, it is expanding its carbon-intensive technology far quicker, taking it further away from its emissions targets.
However, a new report from the Global Energy Monitor (GEM) has highlighted a significant shift in the steel industry. In 2023, EAF makes up 43% of planned steel capacity, while just 57% is planned on using coal. That’s a vast change from just a year ago. Sadly, this means that the steel industry’s carbon emissions are still set to grow as coal development is still outpacing EAF. But according to GEM, this marks a pivotal move by the steel industry, as it shows they are rapidly trying to move away from coal power. If this rate of change keeps up, it won’t be long before the steel industry adopts EAF technology fast enough to significantly reduce emissions. So while the industry is a way off actually having any meaningful change to their climate impact, the signs are there that they are about to change their ways.
This is where Karma comes in.
Investors were planning to see far greater coal furnace expansion in the steel industry and far slower adoption of EAF. This is why, in 2023, about 368 million tonnes per annum of coal-based steelmaking capacity is under development in countries with net-zero carbon commitments, such as the EU and US. This is a 7 per cent increase in planned coal-based steelmaking from 2021 to 2022.
All of this costly new infrastructure has two massive problems. Firstly, it won’t be able to operate for its whole commercial lifespan. As coal furnaces are so carbon intensive, they must be closed down over the next two decades to meet net-zero emissions targets, and governments will force their closure, meaning these new ones will only operate for a few years and overall not make much money at all. Moreover, they also represent overcapacity, as the steelmaking world is currently building too much supply for forecasted future demand.
Both of these factors mean that these new coal-based steel mills will be commercial dead ends and potentially not even turn a profit or, worse, create significant losses for investors. In the world of finance, this is known as assets being “stranded”, and right now, according to GEM, around $554 billion of coal-based steel assets are at risk of becoming stranded.
This means the old guard, which has profited from decades of rampant climate-destroying steelmaking, is carrying on as if there is no looming climate threat. As such, they are setting themselves up to lose hundreds of billions, possibly even more, if coal expansion continues over the foreseeable future. That is enough to bankrupt even the hardiest fossil fuel investor and could spell the end of their investing carrier. If that isn’t a splash of Karma, I don’t know what is.
However, this isn’t just happening in the steel industry. The same is true for many industries, such as the energy industry, where 41% of planned investment from now to 2050 is for fossil fuel-derived energy, despite the fact that fossil fuel energy will only make up 5% of our energy mix by 2050. As such, trillions of dollars worth of fossil fuel assets are likely to get stranded.
As such, any economy, company, hedge fund, bank or individual investor heavily invested in fossil fuels will see some gob-smacking losses over the coming years. It might take five to ten years, maybe more, for these losses to hit home, but nonetheless, their reckoning is coming.
The time of climate destruction profiteering is drawing to a close, and a new era of planetary responsibility is dawning. Unless investors and financial institutions change their habits, they aren’t going to survive to see this new era. While this might sound like a good thing (and I think it is), we have to be wary. When rich and powerful people start losing money and influence, they resort to all manner of tactics to turn the tides in their favour. So either we have to make it easy for them to phase their investments to better clean ones to appease them, or we have to be prepared for some nuclear-grade anti-climate action propaganda in the coming years. Personally, I don’t mind fighting this fight and seeing those who drive the destruction of the planet take a well-deserved loss.
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