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I’m sure this is not a headline you expected to see here but bear with me and it will all become clear. “Assassin’s Creed” is a 2016 adaptation of the same-name videogame series, in which the Order of the Assassins fights with the Knights Templar for control of the Apple of Eden, a powerful weapon that can strip humankind of its free will. The Assassins want to hide the Apple so we retain our free will. The Templars want to deploy it because a society without violence is a much better one and apparently free will and the propensity for violence are connected.
Part 1: Hell and its low-carbon pavement
The proverb about the road to Hell and good intentions is normally used to mean that it is not enough to want to do something good — you need to also act on this intention. But this does not apply to entities such as the European Union, the International Energy Agency, the World Economic Forum and, to date, scores of banks and asset managers. They all want to do good by building a cleaner world for all of us and they are certainly acting on it.
The first results are in: the power shortage in Europe has so far cost it soaring household and business electricity bills, the demise of more than 30 power distributors in Britain, doubts about the survival prospects of thousands of small businesses and slashed production of aluminium across several large smelters because of high electricity prices caused by the crunch.
Aluminium is a very versatile metal and shortages would hit a lot of industries. In the meantime, the struggle for households across the continent with soaring energy bills remains despite milder weather that should have reduces demand and greater wind power output. What’s more, the price spikes have reached Norway, which is almost 100% powered by hydro and a major gas producer. Why? Because electricity exports have become extremely lucrative.
Of course, plans to tackle the crisis and insure the continent against a repeat focus on building more wind turbines and more solar farms (and battery storage). I’ve been writing about this ad nauseam but here’s something fresh: these plans depend entirely on substantially increased supply of certain metals and minerals, and when I say substantially I mean that the IMF has forecast we’d need 3 billion tonnes of metals. But let’s hear it from the authority itself:
A typical electric vehicle battery pack, for example, needs around 8 kilograms (18 pounds) of lithium, 35 kilograms of nickel, 20 kilograms of manganese and 14 kilograms of cobalt, while charging stations require substantial amounts of copper. For green power, solar panels use large quantities of copper, silicon, silver and zinc, while wind turbines require iron ore, copper, and aluminum. Such needs could send metal demand and prices surging for many years, as we outlined in a recent blog based on our research for the October World Economic Outlook and a new IMF staff paper.
Indeed, this will, rather than could, send prices surging for many years because the EU has nowhere near sufficient local supply of any of these minerals and metals. And it is quite unlikely to ever have it because of its own stringent environmental standards that would discourage any miner from even trying. Also, to make life even more challenging for miners and battery makers, it has proposed a sort of carbon footprint certification for battery cells entering the union.
For a glimpse at just how bad the metal and mineral supply situation is, here’s this news report from last year: EU pins hope on Norway raw materials discovery. At the time, I had the pleasure of interviewing the CEO of the company that made the discovery and he was really enthusiastic about it. What he was not enthusiastic about was EVs and energy storage. Not that he was the opposite — the gentleman simply brushed off EV and energy storage questions, focusing instead of the discovery’s biggest potential, which was as source of phosphates, used in the fertiliser industry.
In other words, in its struggle to reduce its dependence on Russian gas and dirty coal, Europe is enthusiastically making itself dependent on metals and minerals suppliers from around the world, including — hilariously — Russia.
To make things even more interesting, the global mining industry is not exactly capable of snapping its fingers and delivering these 3 billion tonnes of new metals and minerals like this. The global mining industry has been struggling with falling ore grades, which I mentioned in my previous post, I think, and with making the most of what it was finding. And unlike oil and gas companies, which constantly improve their extraction technology to reach even the farthest corners of oil-bearing rock and do it cheaply, miners don’t have the luxury of a full-service industry at their side, so tech improvements are coming more slowly.
In the meantime, Europe’s major industries, which happen to be also its major emitters, are fighting another battle that it doesn’t look like they’d win. Here’s a post from a fellow Substacker that provides a clear and comprehensive explanation of Europe’s carbon trading scheme and why it will cost the EU further dependence on foreign suppliers and producers.
I highly recommend you read the whole post but here’s just a quick and crude summary. Europe is mandating businesses to buy permits to emit carbon dioxide. Yet it is constantly reducing the supply of these permits while at the same time tightening emission allowances. In other words, it is applying twin pressure on emitters through the shrinking availability of permits and the lowering of emission levels they are allowed to generate — fertile ground for soaring permit prices. And, as Doomberg notes, the stage is set for a huge speculative market and it is already in operation, at the expense of all these businesses and the end consumers of their products.
Of course, Europe is not the only example of just how destructive good intentions can be but it is the best example because it’s way ahead of its partners on the low-carbon energy quest. Still, for the sake of variety (and amusement), here’s an example of how decision-makers are handling the metal and mineral supply situation in the United States. I’ll paste the quote from Reuters for time efficiency reasons.
Biden in August issued an executive order aimed at making half of all new vehicles sold in 2030 electric.
Washington so far has offered confusing guidance to its mining industry. For example, the U.S. Fish and Wildlife Service is poised to label a rare flower found on a handful of acres at ioneer’s Nevada lithium mine site as endangered, a step that could impede permitting. At the same time, the U.S. Department of Energy is deciding whether to lend the company more than $300 million to build the mine.
The Biden administration’s infrastructure bill that is currently, again hilariously, held back by a single man (though I’m sure we will before long hear revelations that Joe Manchin’s being paid by Putin or Beijing to do this) envisages billions in spending on projects that would lead to a huge increase in demand for metals and minerals. For EV batteries alone, the bill has allocated $6 billion.
But these metals and minerals are likely not coming from U.S. mines because opposition against new mines is about as fierce as opposition to new oil and gas pipelines. And this means more imports and greater vulnerability to another government’s priorities, which do not always coincide with U.S. priorities. For the commoners that we all are, this spells out higher prices.
To sum up, there are good intentions on both sides of the Atlantic to usher in a new, cleaner energy era that will make everyone happier, just like the Templar party in Assassin’s Creed had the good intention of eliminating violence in humans for a more peaceful, more organised world. Yet as it all too often happens with good intentions of this caliber, unintended consequences tend to be of the same caliber and almost invariably adverse.
P.S. My husband and daughter (who’s the author of the header image) are huge fans of Assassin’s Creed. I’m a fan of watching them play because of the glorious settings and brilliant graphics. I didn’t know about the central plot story until I watched the movie. It is quite sad we will not be getting a second part but I understand Disney (they’ve bought every other filmmaker, right?) is too busy churning out Star Wars after Star Wars and who cares about the importance of free will anyway.
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