By Larry Bell
A group of 450 financial firms attending the U.N.’s COP-26 climate conference in Glasgow have generously pledged $130 trillion in capital to finance a global transition to obtain net-zero carbon emissions. That’s more than 135 percent of the world’s gross domestic product in 2021.
They’ve made this commitment in the expectation that government mandates, handouts, and incentives will force fossil fuel and nuclear energy industries out of business, to be replaced by politically favored wind and solar, and artificial demand created for electric vehicles, which currently constitute only 3 percent of automotive sales.
This big government spending switcheroo from free market capitalism to corporate socialism, or state capitalism, doesn’t come cheap.
Climate Policies, Higher Prices
As winter heating requirements are beginning to rise, natural gas prices begin are up 100 percent in the United States and more than 600 percent in Europe. Oil prices are at their highest point in a decade.
This should come no surprise. Our recently energy-independent nation went woke under the present Democrat administration, which has worked aggressively to accomplish American energy poverty.
During his first days in office, President Joe Biden cancelled the Keystone XL pipeline, instated a moratorium on new oil and gas leases on federal lands, halted drilling permits in the Arctic National Wildlife Refuge. Simultaneously the Biden administration, gave Russian President Vladimir Putin a pass to complete the Nord Stream 2 pipeline to sell Russian gas to Europe.
In response to politically painful U.S. pump and electricity prices, rather than reopening the domestic spigots, the Biden administration has, climate be damned, gone hat in hand to OPEC, pleading with it to boost oil production.
Showing a complete lack of self-awareness, White House officials recently asked oil and gas industry executives how best to moderate price increases.
‘Magic Wand’
During a Nov. 5 interview, Energy Secretary Jennifer Granholm, a former Michigan governor, declared it “hilarious” to think the White House could bring down energy prices.
“Would that I had a magic wand,” Granholm mused.
Many asset managers, banks, and rent-seeking crony capitalists take the magic money being waved around at them by the administration very seriously.
Wall Street Journal writers Joshua Rauh and Mels de Zeeuw recently observed, “[a]ny government mandate that a large amount of capital must be swiftly retired and replaced creates a tremendous opportunity for financiers, no matter what the underlying reason.”
Their point is the government created artificial demand for renewable energy and electric cars “distorts the efficient allocation of capital and comes at a great cost to economic prosperity.”
The existence of “free” money from government sheds light on why Rivian, an electric truck maker startup that has produced only 156 vehicles, is worth $120.5 billion, making it the world’s fifth largest automaker based on hypothetical market value.
By comparison, GM recorded $122 billion in revenue and 6.8 million vehicles last year.
Rivian’s prospectus provides a clue to this monetary marvel, stating, “regulatory requirements and incentives” as well as future bans on internal combustion engines are a business “tailwind.”
In short, the company’s value appears less a reflection of investors’ confidence in the company’s product, than confidence that a government bent upon forcing customers to buy electric vehicles (EVs) won’t let it fail.
Their confidence seems well-placed. For example, Democrats’ proposed $4 trillion spending bill, includes a 30 percent business tax credit for EVs, a subsidy that will handsomely benefit Amazon which has ordered 100,000 Rivian vans.
EV consumers can also pocket a $7,500 tax credit for pickup trucks, vans and SUVs, along with an additional $4,500 bonus tax credit for EVs produced in unionized U.S. factories.
Then there’s Tesla, a company whose stock market capitalization just reached $1.03 trillion … exceeding the next nine largest auto makers combined.
The House reconciliation bill would extend the existing $7,500 EV tax credit through 2031 and remove the 200,000 car per-manufacturer cap, which both GM and Tesla have hit.
Supply Chain Problems
What could go wrong with this guaranteed government gravy train?
For one thing, the plans rely upon China for essential rare earth materials and computer chips to make it happen.
China’s cooperation is no sure thing.
China owns or controls 80 percent of the rare earth minerals on the planet needed for manufacturing batteries for all those EVs.
Biden announced his administration is considering a 20-year delay of new rare earth mining operations in northern Minnesota.
Such a postponement will make communist China richer and Americans poorer … exacerbating a dependence that is far greater than any America ever had on oil from the Middle East.
China is also an important source of semiconductors which underpin everything from EVs and mobile phones to artificial intelligence and advanced military weapons.
Ninety percent of global chip exports now come from East Asia, primarily from Taiwan (which is under Beijing threat), China, South Korea, and Japan.
Pennsylvania Democrat Sen. Bob Casey has co-sponsored legislation to screen outbound U.S. investments and the offshoring of critical supply chains and tech-industry resources to adversaries like China and Russia.
“For too long corporate interests have prioritized their bottom lines without regard to the broader American economy or our national security,” Casey said describing the need for his bill.
The same can be said for all post-capitalist economists — government included — who believe the free market choices should be replaced by socialistic politically-driven command-style edicts.
Larry Bell is an endowed professor of space architecture at the University of Houston where he founded Sasakawa International Center for Space Architecture.
This is a modified version of an article originally published by Newsmax and is reprinted with the permission of its author.