This Week in Energy: Virtue Signals vs. Market Signals

I’ve meant to do at least a weekly item on top energy news, but there is so much that I usually overwhelmed. Let’s look at two news items from just today.

It seems that all those grandiose net-zero, climate-friendly pledges that traditional energy companies make are not merely virtue-signaling, but already being thrown over the side in the face of a reality that is biting hard. For example, Royal Dutch Shell, which, like BP before it, has been promising essentially to go out of business as an oil and gas company for 20 years now, is reversing course:

Shell’s new CEO said the London energy giant will ratchet back low-profit clean-energy investments while pumping out more fossil fuels, a pivot from a period when the biggest European producers emerged as enthusiastic champions of renewable-energy sources.

Investors on both sides of the Atlantic in recent months have rejected a buffet of climate pushes. Instead they have preferred the gushers of cash generated by record profits that have been fueled in part by Russia’s invasion of Ukraine.

That thirst for cash has coincided with continued strong demand for fossil fuels, emboldening Shell and London-based rival BP to defend oil production and dial back aspects of the clean-energy focus they embraced with fanfare just a few years ago.

Turns out for-profit energy companies actually have to pay attention to, you know, profits. Funny how market signals work that way. It’s almost like market signals are stronger than virtue signals! Who knew?

And then there’s Germany. Today from Doomberg:

Germany Set to Weaken Climate Targets For Dirtiest Industries

Germany is set to water down emissions goals for the most polluting industries, in a move that’s been criticized as another blow to the country’s climate plans.

Starting next year, the country’s coalition government wants to track progress on emissions by focusing on economy-wide figures instead of the current sector-by-sector goals. The new approach will allow less-polluting industries to compensate for dirtier ones.

The move has been criticized by climate experts, who have warned that the reform will make it even harder for Germany, one of Europe’s biggest polluters, to meet its emissions goals.

When you can’t even get your dirtiest industries to cut back, you know it is a virtue-signaling farce.

Related—Guess who gets a higher ESG (environment, safety, and governance) rating: tobacco companies, or Tesla?

How Tobacco Companies Are Crushing ESG Ratings

S&P Global made headlines this month when it gave Tesla, the world’s largest manufacturer of electric cars, a lower environmental, social, and governance score than Philip Morris International, the maker of Marlboro cigarettes.

The electric car company, whose CEO, Elon Musk, has become a culture-war lightning rod, earned just 37 points on the 100-point scale compared with the cigarette giant’s 84. . .

How could cigarettes, which kill over eight million people each year, be deemed a more ethical investment than electric cars? It may have something to do with the tobacco industry’s embrace of corporate progressivism.

Companies like Altria have gone out of their way to emphasize the diversity of their corporate boards and the breadth of their social justice initiatives, from funding minority businesses to promoting transgender women in sports. But Tesla, whose executives are overwhelmingly white men, has resisted that bandwagon, going so far as to fire its top LGBT diversity officer last year.

In other words, virtue-signaling is the most heavily weighted factor in your ESG rating. That’s all you need to know. I think I’ll take up cigarette smoking to help save the planet and promote “equity.”

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