This material is provided as a courtesy and for educational purposes only from Olde Raleigh Financial Group, A member of Advisory Services Network and should not be construed as investment advice. All information contained in this video is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed in this video are solely those of the presenter and do not reflect the views/opinions held by Advisory Services Network, LLC. Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

Meet the Masters – Is the U.S. giving up some economic advantage, some leadership and stability by jettisoning carbon from the energy mix? 

Most of us who live in Raleigh, NC take our energy for granted. We go about our day effortlessly, clicking on light switches, cell phones and TV’s rarely contemplating the complexities that fuel all of it. Only recently we were reminded that the wonder that is reliable energy can be scuttled by the world outside Raleigh when the Colonial Pipeline Ransomware Attack caused panic buying shortages up and down the east coast. Steady supplies of energy help companies forecast, innovate and create shareholder value. So, by extension, steady energy must be in place to fuel your retirement lifestyle and financial plans.

Olde Raleigh Financial is exploring the realities of changing the U.S. energy mix and this interview with Rupert Darwall is number two in a series on this really important topic – check out this interview with Bill O’Grady from Confluence Investments. Regardless of where one stands on their beliefs on global warming, it would seem the trend towards decarbonizing the U.S. economy and culture is gaining tracking both in corporate boardrooms and politically. Mr. Darwall is a London-based business strategy consultant and policy analyst who takes a more critical view of global warming and the costs of decarbonization.

Key Points

  • British Experience w/Green Economy. Acceleration of British Industrialization decline?
  • The German Greens and what they say about Europe Energy Outlook
  • The Effects Renewables of Economics of the Grid.
  • What will be the costs and effects of decarbonizations on a global scale?
  • Is decarbonization a U.S./Western Europe issue and not really an issue for the rest of the world?
  • Are we giving up our cheap energy advantage to China and the developing world by decarbonizing?
  • Are batteries and their supply chain actually a net environmental threat and may more importantly be more disruptive to global wealth distribution and pollution than oil? What’s going on with Rare Earths?

Hey everybody.  This is Trevor Chambers with Olde Raleigh Financial Group here in sunny North Carolina.  I was – just arrived at the office and we’re getting near lunch time and we’re here on Edwards Mill and Char Grill was grilling up, if anybody knows that area.  It’s starting to get going and serve customers and just that awesome smell coming in.  It’s just great to see life getting back to normal around here.  So, a shout out to Char Grill.  But once again, my friends, we add another episode, another song if you will to the soundtrack. The podcast Soundtrack to an Advisors Life. And what we do is we listen for stories that are shaping the world that we live in both here in Raleigh and around the world.  And these are the stories and conversations that help shape our outlook as a firm.  Olde Raleigh Financial Group is a wealth advisory firm.  And how we invest and why we invest for the long-term.  And, you know, how do we – how we help manage our clients’ investments over the long thing.  Mostly it’s me babbling between some smart person talking.  So today, I’ve got – I’ve got one of those guys.  I’ve got a gentleman named Rupert.  Rupert Darwall.  First of all, I love the name.  Where did that come up from?  Where did you get that one?

DARWALL:   I – Trevor, great to be joining you.


DARWALL:   I have no idea.  I have no idea where that –

CHAMBERS:   I got it.

DARWALL:   — I have no idea.


DARWALL:   I have a suspicion.  I have a suspicion.


DARWALL:   I think it’s – I might be Dutch or Belgium.  You know, Duvall? You quite often see Duvall so I think it may have — but I’ve done no research.  Absolutely no research.

CHAMBERS:   But what about Rupert?

DARWALL:   That’s my mother’s – that’s my mother – she had this thing about Prince Rupert of the Rhine who was in the English civil war on the side of the Royalists.  So, she has this –

CHAMBERS:   Got it.  Oh, very cool.  See this is why I have smart people on.  Okay, cool.  Well –

DARWALL:   My mother was the smart one.

CHAMBERS:   Good.  Clearly.  I have a very English name.  Trevor Chambers.  I mean if that – if I don’t get into the club with that name, I don’t know, you know.  It’s Irish.  A little bit Irish.  Okay.  Alright, we’re going to keep things moving along, my friend.  Rupert, are you ready?

DARWALL:   Sure.  Let’s go.

CHAMBERS:   Okay, cool.  In ten second or so intervals, I’m going to ask you a series of questions.  Who are you?

DARWALL:   My name is Rupert.  I am a strategic consultant.  I worked in the city briefly.  The city of London in finance.  I was in the government as an advisor to the Chancellor of Exchequer briefly.  And since the early 1990’s I’ve been freelance strategy consultant and also writing a lot on climate change and energy.  

CHAMBERS:   Fabulous.  Who are your clients?  Like investment people or governments or –

DARWALL:   Mostly corporate.  So, I’ve done quite a lot of work – I did quite a lot of work with Richard Branson and the Virgin group on their rail franchises, on apple regulation and on the rail franchises was a big deal.

CHAMBERS:   That’s a great example.  Perfect.  Thank you.  Let’s see, where are you from?

DARWALL:   Where am I from?  My family originally is from Devon, which is in the southwest of the Country of England, I should say.  And, but I live in London and I have done so all my adult life.

CHAMBERS:   Got it.  Thank you for that.  Who do you love?  Real quick, who do you love and then what’s your favorite meal?

DARWALL:   My family. My wife. 

CHAMBERS:   Awesome. Yeah, good, smart.  Perfect.  And then, what’s your favorite meal?  And we’re going to get — 

DARWALL:   Actually, I’ll tell you my favorite meal is what I had the other night which my wife threw me a birthday dinner and we had –

CHAMBERS:   Happy birthday.

DARWALL:   — yeah, we had bricks and crab and the most delicious hake and then a — this white fish was, oh Trevor, you would just –

CHAMBERS:   What?  Wait, wait.  What, hake?  What are you talking about?  What is – crab what?  What are you talking about?  What the hell did you just say?  Go.

DARWALL:   Crab, you know –


DARWALL:   — bricks and crab from Devon.  Fresh –

CHAMBERS:   Bricks?  I don’t even – bricks – okay.  That sounds awesome?  And a white fish?

DARWALL:   And then hake is a white fish.  It’s a delicious white –

CHAMBERS:   Got it.  Okay.

DARWALL:   — it’s like halibut or one of those fishes.

CHAMBERS:   Got it.  Got it.  Oh, those are so rich.  Got it.  Okay.  Cool.  I like it.  Well, happy birthday.  We won’t discuss your age.  Well, thank you for taking care of all the introduction because mostly I find when I try to do that, I like stumble over my words and I can’t, you know, so it’s better to just have you people do it because you’re as I said, a lot smarter.  Okay, we’re going to get right into the actually meat and potatoes of this lovely discussion and try to make sense of something.  And I don’t want to get too political.  I gotta (sic) be honest.  I want to keep this more of a, if possible, more or a quantitative discussion and more of an overall like that.  Let’s just – let’s just –

DARWALL:   Okay.

CHAMBERS:   — because I gotta (sic) look at this thing and again I run a Soundtrack to an Advisors Life podcast.  I want to – I want to get it, you know, so a totality of what we’re going to talk about today which is essentially decarbonization.  I know it’s an area that you’ve written about, talked about and all that.  And here’s really what I want to narrow in on.  What I would like to explore is the west, especially the US giving them some industrial might, some economic advantage, some leadership, some stability by genociding (sic) carbon from the energy mix in such a rapid fashion.  I don’t want to, you know, ultimately is decarbonization worth it, you know, or – I should say, what are the cost benefits?  I should really say that.  Is the UK a test case?  You know, let’s talk about that.  So, I kinda (sic) want to start there.  You have seen green energy politics emerge in your home country.  What at least in these early stages, I would consider, right of this change, it’s so – it happens.  As we think it might or not, I don’t know.  But is it impacting British industrialization?  Is it in decline and what evidence do you have for that?  Because I want to see Britain as kinda (sic) a test case for us, if you will.

DARWALL:   Yeah, I want to get a bit, if I can, a bit further back because –

CHAMBERS:   Please do.

DARWALL:   Global warming, climate change was first mentioned, first came on into world of politics.  It was introduced by Sweden, if you can believe it in the early 1970’s.   And there was a reason for that which is the Swedish government wanted to build a chain of nuclear power stations.  And nuclear power was very unpopular so what they said was if we don’t have nuclear power, we’ll have to have coal power and Sweden has no indigenous coal and they made a big deal.  But first of all, there was acid rain and then there was global warming.  And Olaf Palme, the prime minister – then prime minister of Sweden said that the climate change would be the big issue at the end of the 20th century.  And he made this prediction in the early 1970’s.  In 1974, to be exact.  So that was a really big – that was a big call.  And when climate change came on the scene internationally, which was 33 years ago, in 1988, the expectation was that nuclear power would be the way that you would decarbonize the electrical grid.  And there was a lot of sense in that.  A great deal of sense.  But then something happened along the way and that was the rise of the German greens.  And the German greens came into – into being as a reaction against the German governments attempt to have a nuclear power program in the late 1970’s and the greens were formed in 1980.  And they have changed.  They were into renewables.  They were into wind power and solar and of course they hated more than global warming and hydrocarbons.  They hated nuclear power and it’s for cultural philosophical, frankly irrational, to call them reasons isn’t the right word.  So, we’ve gone down the course of not decarbonizing through nuclear power which would have had a great deal of rationality about it.   But through renewables which frankly doesn’t.  I mean, the various claims are made about the economics of it but they basically leave out two things.  First of all, the very low energy density of wind and solar and secondly the intermittency problem.  So that’s – so that’s if you like the prehistory.  Now you come on to the effect on Britain of decarbonization.  And in a sense, we had a bit of an easy ride because we, like the US we – there was a big switch from coal to natural gas, which is a painless, pretty painless unless you’re a coal miner, of reducing CO2 emissions.  But we’ve also had a very large – we’ve had a very big public program to subsidize wind power in particular and that is done through price supports.  Basically, you’re given – you’re either – there have been two programs.  Either you have to buy renewable energy certificates or you have to – or you’re given guaranteed prices.  Wind farms are given a bit of a guaranteed prices.  And the result of that is Brittan has some of the highest electricity prices in Europe and I did a calculation – I can’t remember the exact numbers but a manufacturer in Birmingham, England is paying around about three times the wholesale price for electricity as a manufacture in Birmingham, Alabama.  It’s something like that.  Now the impact on the manufacturing sector we’ve seen aluminum – the aluminum sector basically disappear.  You’re seeing steel making become completely uncompetitive because it’s very energy intensive.  And while, for example, the US is seeing a lot of reassuring of manufacturing and we’ve seen an increase in manufacturing jobs.  In Britain it’s basically been flat.  So, we haven’t had the meltdown of manufacturing yet but we haven’t had a resurgence of manufacturing.  So, basically, you’re having – over time you’re having a hollowing out of top end blue collar employment, I’d say.  

CHAMBERS:   So, what are the effects on the renewables – the economics of the grid?  Let’s talk about the economics of the grid a little bit, if you would.

DARWALL:   Well –

CHAMBERS:   Because the grid is – it’s no different than over here.  A grid’s a grid’s a grid, right?  And we all gotta (sic) mix it up to make it work –

DARWALL:   I think –

CHAMBERS:   — so you can click on the lights.

DARWALL:   The impact on the grid is twofold.  First of all, there’s the physical operation of the grid and we had a – the grids definitely become more fragile, the margin has gone down and we had a power outage a couple of years ago, which shouldn’t have happened if we’d had – if we’d had far more dispatchable capacity you know, coal, gas generation on the grid and it’s to do with – it’s not just to do with the amount of the power going through the grid.  It’s also to do with – it’s not just the voltage, it’s also the frequency, maintaining frequency within those tight limits.  And spinning turbines, particularly gas or sorry coal fired stations have a lot of spinning and (inaudible) in there which help stabilize the grid.  And you lose that with wind and solar.  So that the grids become more fragile and because over time, we’re becoming more dependent on electricity as we start decarbonizing transportation and heating and so forth.  It will become more so.  But the other effect is on the economics of the grid.  And if you like, we’re living off depreciation.  We’ve been living off depreciation so you’ve had – you have had coal fired power stations being cut down but – shut down but you’ve also had them – you’ve had them light up when there’s no wind.  And coals being – coal will be banned from the gird; I think it’s in a couple of years’ time.  So, what will happen then because no replacement dispatchable capacity is being built.  That’s the big problem.  That’s why I say, effectively we’re living – the grids living on depreciation.  Because you’re just basically using sunk assets with the grids stability and it – generating capacity depends on what’s already there.  And the problem with wind power of these intermittent renewables is that they destroy the economics of building new dispatchable capacity.  So, you — what happens is to get the dispatchable capacity you have to – you end up subsidizing everything.  So, you have a capacity market and there has been.  The capacity market hasn’t incentivized the capacity they wanted.  It’s basically a lot of diesel generators, peak diesel generators.  So, you’ve actually got this really weird – you got lots of wind turbines but you’ve also got lots of diesel generators which aren’t, you know, are incredibly polluting compared to, you know, compared to burning natural gas and highly inefficient.  I mean they’re good for peaking but not for, you know, for –

CHAMBERS:   Strategic energy source for long periods of time.

DARWALL:   It’s insane.

CHAMBERS:   Got it.  So let me ask you this.  Like, how much right now, I don’t know if you know these statistics but I suspect you have a ballpark.  How much of the grid is supplied by renewables in –

DARWALL:   Well, it depends.  It can – the problem –

CHAMBERS:   In your country.  In Brittan? 

DARWALL:   Yeah, it can go from virtually, you know, 80 percent down to zero.

CHAMBERS:   Got it.  It’s that far along?

DARWALL:   Oh no.  It could be – it could be – it could be – I mean you’ve had times where the majority of, I mean, but that’s not peak demand, is it?  You know, that’s not a time peak demand.


DARWALL:   So, it’s – the problem is not – is not the maximum that renewables can produce.  It’s the variability.

CHAMBERS:   Yeah, I get it.

DARWALL:   You can’t bank on it.

CHAMBERS:   Right.

DARWALL:   That’s the problem.  So, you have to have, they call it back up, but basically you have to have two sets of generating capacity.  You have the intermittent stuff and then you have lying idle or your gas fired power stations. 


DARWALL:   Which is why it’s so expensive.  It’s – I think in this – this time of ultra-low interest rates, this will, you know whether we’re filled with crazy money if you like.  We can get away with it because capital’s costing nothing.  But in a world where you have capital, where capital costs something and you can feel the cost of capital.  That’s the thing becomes far more difficult.


DARWALL:   You need to have – you need to have basically two lots of generator capacity.  You need the wind and the solar, the intermittent stuff.  And you need the dispatchable stuff.

CHAMBERS:   Right.

DARWALL:   We brought in, you know, very simply you need twice as the amount of capital at which can perhaps work, you can perhaps get away with it when interest rates are ultra-low and you have very accommodative manager policy.

CHAMBERS:   That’s right.

DARWALL:   But far, far, far more of a problem when interest rates, you know, at some point they will normalize.  So that’s a big problem.  And even then, even with ultra-low interest rates you don’t have a business case to build gas fired power stations without some form of government support.  Without some kind of government guarantee.  So that’s where you get capacity markets.

CHAMBERS:   Yeah, and that’s really, you know, sometimes is the role of government to kinda (sic) do those things to get industries stood up but it is very interesting and people should listen to this.  

DARWALL:   Well, when you say –

CHAMBERS:   Interest – yeah, go ahead.

DARWALL:   I was just saying – what I say, Trevor it’s the spar of intervention.  What it is is the government intervenes to subsidize renewables and it sets up – it causes distortions in the market such that it has to make another intervention, another intervention.

CHAMBERS:   Right.  Of course.

DARWALL:   So basically, therefore end up with a completely government mandated market or government – the government prescribed market and therefore so, you actually ask yourself the question, why have private capital at all?  Why not the government just – you know, the government controls the damn thing, why not just have it on the governments balance sheet? It would actually be a hell of a lot simpler.

CHAMBERS:   And do you agree with that?

DARWALL:   Well, I think there is fundamentally a choice between the market or the state running things, fundamentally.  

CHAMBERS:   Yeah, of course.  And it’s – what are your internal –

DARWALL:   It is much better to have the market running things and –

CHAMBERS:   Yeah, I concur.

DARWALL:   The state is bad at running things but what we – when you get the state intervening so much there’s in effect it’s running things but it’s hiring private capital for this kind of –


DARWALL:   — this craziness.  You have – you have in many ways.  In my view you have the worst of both worlds.  So where we are now in Brittan, I would say bring back the central electricity generating board because you’d have much greater coherence in terms of planning and so forth and you’d have a lower cost of capital, et cetera, et cetera.  But obviously, there – when the British electricity system was privatized in the early 90’s, it released a huge, I mean, huge amounts of inefficiency were uncovered.  There was a dynamism, et cetera, et cetera, et cetera.  So, I’m not in favor of nationalization.  What I’m saying is that where we are now is far worse than what you had in the days of nationalization.

CHAMBERS:   Yeah.  Well, you know, I want to go back to a point that you made earlier.  In an era of low interest rates, this kind of – this helps to make this work but as soon as they rise, it’s going to be a problem and, you know, people that we help – we help manage money, that’s a perfect example of, you know, you think interest rates.  Okay, somewhat of an abstract thing but it’s not.   It has huge implications to the cycle, right?  And –

DARWALL:   Yeah.

CHAMBERS:   — things like this, like you don’t think that, you know, you don’t think all my energy – interest rates rise and now my energy is going to go up?  Or like or not work?  You know what I mean?  It’s like wow, okay.

DARWALL:   Well, the other thing is that happens, normalized interest rates impose capital discipline and that old thing that when you have very low interest rates you get mass capital misallocation.  And arguable that’s what we’re seeing.

CHAMBERS:   Yep.  Yeah.  I – you know, and I also think, not to go too deep in this but, you know, there’s also political – you keep these interest rates long, for so long, if you have assets – you and I probably have – I’m sure you have assets.  So, risk assets when interest rates go down, increase in value.  Well, if you don’t have those risk assets, like a home or equities, you don’t have them, you’re behind the eight ball.  And so, there’s a lot of people across your country and my country that don’t have them and so I think it’s – eventually these interest rates are going to rise and it’s going to become politically unattainable not to have that happen.  But who knows?  And there’s going to be wide ranging effects so it’s an interesting thing to look at and keep an eye on.  All right, I’m going to keep things moving along here.  Sorry to go down a worm hole.  So ultimately, two broad questions.  I’m going to start, are we giving up the farm to emerging markets like China?  Not that China’s an emerging market anymore but because of this, are we giving away strategic energy advantage in the West to companies like – or countries like China?

DARWALL:   Well, I think in Europe, you would – one would say that, I think the dynamics in Europe are very different from the United States.  If we take Europe first, what we do see is Germany – Germany’s heavy dependence on natural gas supply by Vladimir Putin’s gas law.


DARWALL:   So, there’s that dynamic.  For the United States, if you think the United States since the first oil shark in 1973 has been – I mean Nixon (inaudible) project independence, you know, to make the United States energy independent.  As did President Carter.  So, for decades you had American presidents going on about the importance of energy independence.  You had George W. Bush say we gotta (sic) kick our habit on, what did – he compared it to a drug, you know, an addiction.  I mean, you – I shouldn’t say you’d know that.  But, you know, you get the point.

CHAMBERS:   Yeah, I got it. Yeah, yeah, yeah.

DARWALL:   I’m – all of a sudden, thanks to American capitalism, American technology developed hydraulic factoring and all of a sudden America becomes the worlds hydrocarbon super power and the – the – so geostrategic terrain on the energy side is completely transformed.  America is – became the swing oil producer.  The Gulf becomes less important.  Society becomes less important, blah, blah, blah.  I mean a huge massive change and also it — for American in terms of the economy, in terms of job creation and, you know, the recovery in the Obama years was pretty feeble.  Were – and had it not been for the energy boom, essentially it would have been a not a pretty picture at all.  And so, what you have, the US has attained its new position and it’s going to be – it’s going to give it up.  It’s going to give it up and you’re going to say, well what’s it been given up for?  And the answer is really for nothing because China is going to continue carbonizing.  It is building loads of coal fired power stations.  India – India’s electricity consumption per head is 1/5th of that of China.  And the idea that you can go say to 1/3rd that of China on the basis of wind and solar is – is a (inaudible).  It will need to burn more coal.

CHAMBERS:   Wait a second.  I thought China was cutting back on coal?  It’s not?  No, I mean that’s – now, there’s a lot of information out there.  There’s a lot of information.  And it could be that – it could be people could construe that that’s what they’re doing.  But that’s not what they’re doing.  So, it’s a US – this is a US created problem.  The US and the west.

DARWALL:   That is correct.

CHAMBERS:   This is – and we’re going to drive this whole thing?

DARWALL:   Well, when you say drive the whole thing, the west can only drive itself.  It can’t drive the whole world.

CHAMBERS:   Right.

DARWALL:   And that’s the distinction you have to make.

CHAMBERS:   Yeah.  Okay.

DARWALL:   But the west emissions of carbon dioxide from energy, from burning hydrocarbons and from cement manufacturer around about 24 percent.  Sorry, 26 percent of global emissions.  So, it’s – the last time that the wests emissions were higher than the rest of the world was in 1981.


DARWALL:   And, so the west, it’s a very kind of provincial view when you hear people saying, we’ve got to do this.  We’ve got to do the other.  Who is we?  Because unless we includes President Chi of China, it’s –


DARWALL:   — it makes no odds.  The math just doesn’t – is against you so.

CHAMBERS:   Yeah.  And you know — but surely, he does, you would think or the party or – truly doesn’t want to ruin the – the, you know, they want to be – their environment.  They don’t want to ruin their environment.  I mean, they are making strides to try to make it a little cleaner environment over there.  I would imagine, right?  Or do they just not care?  I mean.  I mean, because you know don’t strike me as a guy that – you strike me as a guy that like, hey guys, I want the water and air to be clean too, right?  I mean, you want that?  I mean, this isn’t a question of that.  It’s just like, you know, China’s going to keep rolling no matter what and they’re going to do whatever it is to be the low-cost guy, right?  I mean —

DARWALL:   Yeah.

CHAMBERS:   — to keep their energy?  That’s it.  That’s all you gotta (sic) know, unfortunately.  Right?

DARWALL:   The – my understanding is that coal fired power stations they’re building have scrubbers and, you know, the super critical —


DARWALL:   — but they burn coal at a much higher temperatures which means that they’re more clean burning and less polluting.  I mean, to your point, I mean when I was last in Beijing, some time ago, I mean it is true, the air was just, you know, everything was gray and –


DARWALL:   — you had this dry hoarse throat from it.  Terribly unpleasant.  And when Chi became general secretary of the Chinese communist party, he didn’t say we – Chinese won’t have a better environment.  But it’s a mistake to think that that is synonymous with emitting less carbon dioxide.  I mean carbon dioxide, except in the Supreme Courts definition, you know, in Massachusetts versus EPA, that case.  But basically, CO2 is not a pollutant as traditionally understood.  It’s not something that makes your eyes stream or your throat sore or gives you cancer or whatever, so.  And it doesn’t – it doesn’t lead to – to streams and lakes becoming – killing off fish and whatever.  So, it’s not – and in fact it is, in terms it actually leads to the greening of the biosphere, so.  It’s kinda (sic) not your traditional pollutant.

CHAMBERS:   Leads to the greening of – yeah.  And do you want to talk about that a little bit or not?

DARWALL:   Well, we can talk – no I mean it does, it’s irrefutable that carbon dioxide – high levels of carbon dioxide increase plant growth because plants are made of carbon and they get the carbon from the air.  They use the energy from the sun to strip the oxygen molecules off the carbon.


DARWALL:   Out of the carbon.  And, you know, then they keep the carbon and that’s what they use it to build and grow.


DARWALL:   So, yes you have seen a greening of the biospheres as a result of higher CO2 levels.

CHAMBERS:   Yeah.  The thing about it is, you know, it’s – I don’t know – I don’t know.  It’s a theory.  I don’t know.  I mean, the problem is the globe is such a complex thing.  We’re just scratching a surface and understanding.  I mean, and the other thing is there’s lots of historical evidence of global changes going on throughout the history of mankind that have shifted the politics and has shifted resources and all that.  I mean, this happens.  Does it not?  This happens.

DARWALL:   I think – I think Trevor, I think you’re quite right and the other thing that put a big question mark in my head about this is that the science from very early on has been politicized.  And it has been. And what climate scientists were telling us in public isn’t what they think in private and that – that was brought home to me when I wrote my first book. I was researching my first book of the age of global warming and then there was the – in 2014 there was the American Physics Physical Society had – held a climate workshop with three consensus supporting scientists and three skeptical scientists.  And it was moderated by a former Obama administration official, Steve Koonin who’s a theoretical physicist and been in the energy department in the Obama administration and he moderated it.  And what those scientists were saying in that session, in those nearly eight hours, is very very different from what is publicly said.  And the way the computer models can’t replicate the past.  I mean, this is so fundamental.  You can’t check the future.  You can’t check a projection of the future.  I mean, this is like in finance.


DARWALL:   You know, you can’t get the past right, there’s a problem.  And typically, what they can’t do Trevor, is there were two warmings in the twentieth – in the last century.  There was the one we all know about, which began more or less in the early 70’s and – but there was one that began in 1910 and peaked in 1944.  And the models can’t replicate the magnitude of that first warming.  So, and then they tune the models to get the results they want.  The best place to go for that is Steve Koonin’s book.  He wrote a book which is published this year (inaudible) and I recommend anyone whose got an open mind and wants to understand what’s going on, to read that book.  It’s a fantastically, well written book for the intelligent layman.  So, anyone whose financially sophisticated will have no problem in reading it.

CHAMBERS:   Right.

DARWALL:   Great book.  

CHAMBERS:   All right, well thank you for that recommendation.  I appreciate it.  You know, and honestly I don’t’ know, like I said earlier, I don’t know.  So, I want – I wanted to bring you on because I just – you’ve done a ton of research into this, basically.  And it’s just like, listen, you know, let’s hear it.  Let’s hear about it.  Let’s listen to the guy that’s on a fairly high stage on this stuff and to hear what’s going on from the other side because sometimes you just got a myopic message.  So, I appreciate it.  I really do.  I want to just ask you one last question.  Batteries?  Batteries, it’s kind of interesting, you know.  One of the things I think, are batteries actually going to cause not only more environmental destruction, because again, going back to point.  Nobody here wants to see the environment get destroyed.  That’s not what we’re talking about.  But our batteries and all the supply chain of batteries and the disposal of batteries actually going to cause more issues on the planet if we go down that route?  And I don’t mean to spring this question on you but rare earths?  I mean all over the news.  Rare earths.  China, China, China’s got rare earths and we don’t and we gotta (sic) develop our rare earths, supply chain and all that stuff.  It’s all tizzy, you know, and –

DARWALL:   But –

CHAMBERS:   I wonder like, where are we at with batteries, you know?

DARWALL:   Well, this is – this – I think you put your finger on what I would say is the crisis of environmentalism.  Because environmentalism grew out of a movement which began in the early 20th century which is conservationism or preservation or whatever.  And more often, particularly in the 90 – from the 1960’s onwards it changed in something different which wasn’t about preservation and conservation of habitats and so forth.  It was much more ideological and it was more about changing human societies than it was about preserving landscapes.  Because if landscapes and habitats matter to you, you do not cover hillsides in – in very large wind turbines, which you have to count long big roads through them and because the turbines are so big that they can’t – you can’t maneuver around so they have to be pretty straight and then you build concrete bases and then you find that they kill a lot of insects because you put them on hills where the – where you get insects micro bating, then you kill.  You find a lot of raptors being killed.  So, the idea that wind farms preserve nature, no.  


DARWALL:   It doesn’t –

CHAMBERS:   That’s interesting.

DARWALL:   And your point about batteries.  So, let’s look at the economics.  First of all, batteries don’t generate electricity so if you’re talking – you’re already talking about the costs of – the high cost of wind power.  Then you have to add on the storage cost –


DARWALL:   — which is in addition.  Then you look at the environmental footprint of this.  The environmental footprint of windfarms scattered across the landscape and then the environmental impact of mining cobalt and whatever in West Africa using child labor.  I mean, yeah.


DARWALL:   We’re talking about a very big negative footprint there.  Which of course environmental movement as a whole prefers to ignore.  Now that’s why Michael Moore’s movie, Planet of the Humans is – was really interesting.

CHAMBERS:   Yeah, tell us about that.  Because I saw you or I heard you mention that before in another interview I was watching.

DARWALL:   Yeah, he’s basically arguing that there’s cooperate – to use shorthand, there’s cooperate environmentalism which is people like Al Gore.  And it’s about, if you like the industrialization of the environment and Michael Moore’s saying this is actually hideous.  This is against what preserving nature should be about and his answer to that is to shrink – to – basically we have to consume less and just (inaudible) live quite so mean, horrible lives, you know.  But he points out to the fundamental contradiction of modern environmentalism in which its enormous environmental impact.  Take out CO2.  Take out the CO2 from it and you’ve got a massive expansion of the environmental footprint to generate energy from wind and solar.  And that’s a fundamental contradiction of it all.


DARWALL:   And the refusal to acknowledge that trade off.  Because if you really did want to shrink the footprint – your footprint of generating energy, go back to where we started off, which is nuclear power.


DARWALL:   It’s a tiny footprint.


DARWALL:   The environmentalists hate nuclear above all else.

CHAMBERS:   You know, that’s very interesting.  I went to an environmental science at Forestry School in Syracuse New York.  I got a degree in paper and pulp science.  Okay, so basically, I had a chemistry background.  They had an environmental science department.  A very good environmental science department.  It’s a state school for New York.  It’s one of the state schools.  And there was a bumper sticker on the door of one of the key people in that department that says an environment – another environmentalist for nuclear power.  Just thought that was kind of interesting, you know what I mean.  But, you know, also I kinda (sic) thought some totalists (sic) think – I don’t think that side’s going away.  I don’t think your arguments going away.  Somewhere in the middle, right, generally speaking we will reside on this.  And it’s going to require some sort of technological breakthrough if you – of some sort.  You know, I guess and that’s kind of what we do.  Especially in the west and increasingly across the globe is for technocracies.  So, and I don’t know the answer.  I don’t know the answer but it just seems like – I do know this –

DARWALL:   Can I just –

CHAMBERS:   Yeah.  Yeah, yeah.

DARWALL:   — just because – because what we haven’t – you just touched on it.  Because when we talk about renewables, what one tends — one just thinks of big wind and solar but under the European and British definition it also includes cutting down and burning trees from –

CHAMBERS:   Yeah, tell me about that.

DARWALL:   — from your part of the country.

CHAMBERS:   Yeah, that’s kind of knuckleheady (sic).  Go ahead.

DARWALL:   Yeah, it is. I mean, because trees are renewable, they count as a renewable so the – the EU is spending about ten billion – between ten and twelve billion dollars a year subsidizing the implication of wood pellets from the United States and from around the world.  And the idea that because – but of course you cut down a tree and you burn it.  It releases carbon dioxide.  It’s not immediately replaced by another tree the same height.  It takes – it takes decades and decades for it to store the — so that – it –

CHAMBERS:   That’s a funny story.

DARWALL:   — it’s –

CHAMBERS:   It’s a power plant in Britain that runs on, what?

DARWALL:   Yeah.

CHAMBERS:   Wood pellets.

DARWALL:   Wood pellets.  On wood pallets imported from Canada and the United States.

CHAMBERS:   And shipped over?

DARWALL:   Yeah.

CHAMBERS:   And processed and shipped over?

DARWALL:   So, I say sometimes on Twitter, I say to these guys, wouldn’t it be better to burn coal and plant trees rather than cut trees down and burn them?


DARWALL:   The – the power plant is called Drax which is in Yorkshire and it’s –


DARWALL:   — Europe’s largest – it was Europe’s largest coal fired power station.  It’s been converted to burning wood pellets.

CHAMBERS:   So, okay.  Yeah.  Well, and it’s a funny world out there, is it not?  It’s a funny, funny world.

DARWALL:   You can’t – if you step back and look at it there is no rational explanation for where – how you end up at a point like that, where you cutting down trees to –


DARWALL:   — generate electricity.

CHAMBERS:   Well, there’s contradictions on all sides of, no matter where –

DARWALL:   And you’re basically paying, to give you an idea, you’re paying something of the order of about 180 dollars a megawatt for that electricity.

CHAMBERS:   Yeah, that’s – and really is kind of why I think we explored and what I really wanted is to talk and is, you know, at the end of the day we gotta (sic) have power and so when we flip that switch to turn on the factory or turn on, you know, whatever –

DARWALL:   Yeah.

CHAMBERS:   — it’s gotta (sic) be there and when we, to your point, it’s going to be interesting to watch and what – maybe we can do this again in another six months or a year.  But like, where – as we get closer to that threshold of when the system fails, what happens?  Because I gotta (sic) tell you, I’m thinking pretty sure that people who don’t have power, they’re not digging it and if it really effects enough of the populous it’s going to be a problem.  And they’re going to be like all right, I don’t care what you gotta (sic) do.  Turn on whatever and that’s causing more of the problem.  You know?

DARWALL:   Well, you had a bit of that – you’ve had already a bit of that in Texas where –

CHAMBERS:   There you go.  Exactly.

DARWALL:   — and you’ve had the renewables lobby saying, well because it was – because it was forecasted there wouldn’t be much wind.  Wind was actually reliable but the problem with Texas has got is it’s massively overinvested in wind power and underinvested in coal and gas, so you’ve got – you’ve got a very fragile grid and this was an accident waiting to happen.  And more broadly you’re brought back when you flip a switch you expect – you expect the lights to come on or whatever.  But what they’re saying now is because of smart grids.  So, you have demand side response, DSR, so that when there isn’t enough wind or sun, various things will get shutdown in your home or – so there’s a program in the United States where by factories can bid so that when there’s not enough electricity, they’ll close down.  They will use less power.


DARWALL:   Which is a very expensive – and you think they’re slightly not as you’re actually going to turn off production so that – because you’re not generating – I mean it’s just –


DARWALL:   — it’s like subsidies to burn wood pellets.  This is where the thinking becomes upside down.  It’s kind of this in its own bureaucratic way, it makes sense but you stand back and look at it and you say, no this isn’t – this is nonsense.


DARWALL:   This is how economies actually sink with this kind of level of insanity.

CHAMBERS:   I don’t know what the total losses were because of that blackout down there in Texas but I gotta (sic) tell you, it wasn’t small.  That – I mean it hit their GDP as a state and it certainly reflected problems in the GDP number for us across the board.  There’s no doubt when that stuff happens like that, so.  Yeah, you know, if only we could just find something that had the energy density of oil.  We could all move on with our lives, right?  That didn’t emit so many, you know, that is relatively clean, you know.  We have an ACOs we follow that helps us manage money and he’s like don’t count on – he kind of brought up this idea that the batteries are actually probably going to be more problems than they’re worth, you know.  And he’s like don’t count on hydrogen.  Now of course there’s a huge psychological leap to get there but he’s like don’t count it out.  I’m like, that’s kind of an interesting point, so.  What else do we need to cover, my friend, Rupert?  What else we got?  Is there anything – is there anything that you want to share that you’re working on new in research or whatever.  Like what – what’s going on in the mind of Rupert?

DARWALL:   Yeah, I’m doing quite a lot on ESG at the moment.  So, I –

CHAMBERS:   Okay.  Do you want to give us a preface on that?

DARWALL:   Yeah, I produced a report for the RealClear foundation.  Brought on a senior fellow and it’s called Capitalism, Socialism and ESG.  And it basically makes – the two basic arguments, first of all, the idea that ESG is, you’re doing well by doing good, is just not supported by the idea that you make more money by imposing constraints on yourself as an investor, so.  For – by limiting – by shrinking the universe of investments by 75 percent, then you actually will consistently outperform is counterintuitive to say the least.  The other leg of it, so that’s the financial.  The other one is that, and I think the thing that hasn’t really been as – is only beginning to get understood is that this is no time to form a governance that bypasses what the American Constitution has set out so that it’s democratic in the countability and accountable.  That laws are passed by congress and so forth.  And what – what you’ve – what you’re ending up with ESG is your ending up with some very large, see as a very large firm management companies such as, mostly the big three.  Index trackers basically taking societal decisions.  Taking political decisions.  And they call that inclusive capitalism.  I’d say that’s not inclusive at all.  It’s actually the definition of it inside of capitalism is for exclusive.  It’s actually – it’s actually excluding people from political decision making and I think that’s deeply problematic.  And basically, it’s unsustainable.  It takes the legitimacy away from the political process.

CHAMBERS:   You know, one thing is, one of the comments my partners – one of my partners made was the companies that are ESG are generally the better performing companies anyway. They tend to be the ones like in the – especially during COVID, you know, google, for example did really well.  All the tech companies did well.  Generally speaking, if you – and through the frame work of what we consider ESG, they – they’re not only ESG because they just don’t – they don’t leave as much as a carbon footprint as others.  And they’re — and they perform better.  I mean, I don’t know –

DARWALL:   There’s – there’ this study –

CHAMBERS:   — maybe they’re diverting off the – yeah, go ahead.

DARWALL:   Yeah, there was a study which I – there was a study by Elizabeth Demers of Waterloo University in Canada saying, I think the title is roughly, “Did ESG insulate stocks from COVID.”  And it did a study which looked at – it basically said, you know, if you look at the things that drive value and you – and it came to the answer that yes, the stocks that outperform – when you normalize those for other factors, actually the ESG factor didn’t explain very much.  So –

CHAMBERS:   It’s just the – the company was in the right spot with the right with the right (inaudible) at the right time.

DARWALL:   Yeah, the things that drove – the things that drive resilience, they’ve overwhelmingly drive resilience through the COVId sell off and the ’08 crisis was cash leverage so the – and internally generated intangible assets.


DARWALL:   So, if you’re looking at a company like google, clearly there’s a huge amount of internally generated –


DARWALL:   — assets.

CHAMBERS:   That are increasingly on – that are increasingly on, at least people think on the balance sheet.

DARWALL:   Yeah.

CHAMBERS:   Right?

DARWALL:   But walk out every evening.

CHAMBERS:   Yeah, exactly.  Go work for — yes, I’ll take that signing bonus and yes please throw in the Ferrari.  Yeah.

DARWALL:   Yeah.

CHAMBERS:   Yeah, interesting.  It’s been a pleasure.  I really had a great time talking with you.  You know, I like the discussion.  I like to open this so that and like I said, we’re all just trying to figure this out.  Again, by no means, I don’t think my friend Rupert and I are in any way trying to say we would like to destroy the environment.  We just want to know – I’m just trying to get to what makes sense.  What makes sense, you know what I mean?  Right?  And what can we expect and what has your country learned from this?  I gotta (sic) tell you the statistic that blew me away there is that 80 percent, but not counting peak, but just – 80 percent renewables.  It’s very interesting.  I never knew it was —

DARWALL:   Yeah, but remember that includes converting Europe’s largest coal fired power stations burning wood pellets.

CHAMBERS:   Okay.  Not – yeah, shipped, harvested –


CHAMBERS:   — in the US.  Shipped –

DARWALL:   Dried.

CHAMBERS:   Dried.

DARWALL:   You have to dry them.

CHAMBERS:   Cutting down trees that filter out carbon, yeah.  It’s – that’s – I’m not laughing at it so much as like I’m sure there’s other things that are sensible research that’s going on out there.  And technologies that could solve the problem and I – great.  But stuff like that, you do have to kind of step back and say, you know, but anyway.  Well, it’s been great.  We could go on forever.  I think we could go on forever. I want to do another one of these.  I’ve so enjoyed it but I need to get back – you back to your evening.  And, now let me ask you something.  There’s a good English – is there a good English pub around the corner from you, that you perhaps – I don’t know if you’re a drinker or not but is there one that perhaps you go to?  What is its name?  What’s it’s – like, what’s your favorite little water hole around there?

DARWALL:   My favorite – my favorite one here is The Bull and Last on Highgate Road.

CHAMBERS:   Wow.  The Bull and what?

DARWALL:   Last.  The Bull and Last.  The last is, you know, as in, you know, as in (inaudible).

CHAMBERS:   That must – that place must be – they know you.  When you walk in, they’re like hey, what’s up Rupert, or what?  What’s up?

DARWALL:   We’ve been banned from going to – we’ve had the COVID lockdowns for months and months.

CHAMBERS:   Oh, of course you – okay.  But are – don’t they have outdoor seating?

DARWALL:   They do but I’m not into that.  I don’t’ want to sit outside.

CHAMBERS:   Yeah, you want to sit –

DARWALL:   I want to go up to the bar and get a drink.  I don’t want to have – I don’t want to have to sit down, gotta (sic) come in in a mask and, you know.

CHAMBERS:   Yeah.  You don’t need that.  So, where were we at over there?  Like how far, I mean, I know you – like, you’re in London.


CHAMBERS:   And what’s – when are you guys going to take the mask off?

DARWALL:   The final phase the masks come off on the 19th of this month.

CHAMBERS:   Okay.  And so, then vaccine – how are the vaccination rates, you know, we’re about what –

DARWALL:   The vaccination rates – the vaccination rates are pretty high and –


DARWALL:   — so hopefully –

CHAMBERS:   Especially in London.

DARWALL:   — and they did it age related.  That was the two good things they did was first of all, getting hold of vaccines.

CHAMBERS:   Oh, yeah.

DARWALL:   And secondly, being very, saying we’re going to vaccinate the most, we’re going to prioritize the most vulnerable, most elderly and do them first —

CHAMBERS:   Right.  Yeah, that’s what we did here, yeah.

DARWALL:   — and that’s very sensible.

CHAMBERS:   Can you believe – can you believe that this world created, what four vaccines that quick?  I mean I’m not actually that shocked, to be honest with you.  But, isn’t that amazing?  Moonshots?  They thought – they said it’s moonshot, right?  Isn’t that amazing?  And then to get it out to so many people so far.  Obviously, we got more to come but isn’t that – what do –

DARWALL:   It is amazing.

CHAMBERS:   Incredible.

DARWALL:   It is – it is amazing because when you look to how long it took previously for vaccines?  Well, when I – I thought we’d be in this – in COVID thing for indefinitely and the vaccines.  The vaccines happened much, much faster than I thought they would.

CHAMBERS:   Yeah.  I mean, of course they, you know – that’s just it.  Technocracy.  It goes back to it.  I think, you know, if we want to solve these – the problem – the (inaudible) problem of a gallon of oil or a barrel of oil being so energy rich, we probably can do it but the question is, is how much damage do we want to do to the economy?

DARWALL:   Yeah, I mean – I mean we know in a way for non-transportation stuff, we know there’s been nuclear for decades and decades.


DARWALL:   And that – so that does come – don’t want to sound like a nuclear guy but —

CHAMBERS:   Oh yeah.  I get it.

DARWALL:   — but and what’s interesting about nuclear is that for reasons I don’t really – I haven’t examined but is that each generation of nuclear has been more expensive than the previous one and the argument is this is to do with the way basically nuclear has been regulated, safety regulated out of existence.  

CHAMBERS:   Right.

DARWALL:   And the (inaudible).  But I can’t — I haven’t – I can’t say I’ve looked at that but what we do know is environmentalists the one thing they really hate is nuclear.


DARWALL:   A tiny proportion of them embrace it.

CHAMBERS:   Yeah.  Well, I mean, you know, it’s scary I guess, to a lot of people, right?  I mean I get it.  We have one not far from here.

DARWALL:   I’ll tell you.  People are – people are made to be scared about it.

CHAMBERS:   Oh no, I understand.  I get that.

DARWALL:   It’s not like it’s –

CHAMBERS:   The instances versus the benefit are very little.  Very, very small.  Yeah, I get it.  No, I understand.  I’m just saying to some people it’s very scary.  And it’s – listen, there’s no right answer.  That’s what the technocracy apparently is working through.  What is the right answer?  And, god we could go on forever.  I could just do this forever.  Hey, I know you’re busy.  Let’s do this again.  We certainly will.  On day when I come visit my daughter who’s maybe – who really wants to live in London, I expect you to take me to the Bull and where?  Last?

DARWALL:   Bull and Last on Highgate Road.

CHAMBERS:   All right.  We’re meeting up.  I’m going to record something else with you.  You’ll babble.  You’re talk smart stuff and we’ll move on with our lives.  It’s been lovely.  Thank you so much for your time, Rupert Darwall.  

DARWALL:   Great meeting you.

CHAMBERS:   We’ll talk soon.  All right. Have a good week.  Be safe.

DARWALL:   Yeah.  Bye bye.

Background Information:

Rupert Darwall – Full Bio
Rupert Darwall, a graduate of Cambridge University, is a strategy consultant and policy analyst researching such issues as energy and environmental policy and corporate governance. Darwall previously worked as an investment analyst and in corporate finance as well as serving as a special advisor to the UK’s Chancellor of Exchequer. The author of two books – Green Tyranny and The Age of Global Warming – and numerous think-tank reports, Darwall has also written for the Wall Street Journal, The Hill and Daily Telegraph among others.

Trevor Chambers – Full Bio
Trevor joined Olde Raleigh Financial Services in January of 2015 and his primary role is new business development and marketing.  Prior to joining the firm, Trevor spent 12 years working at his family’s restaurant, Raleigh’s Bella Monica Cucina & Vino. “Exceptional service, no matter the industry, is paramount and we attract clients who value and take comfort in being taken care of.”