Abandon All Hope: Dire Times for Europe

(Originally published in Spanish as “Abandonad toda esperanza” at The Oil Crash. Translated by Mark Burton, with David Costalago, Manuel Casal Lodeiro & Steven Johnson.)

In the last few weeks, there have been major changes in the world, especially in the wake of Donald Trump’s rise to the presidency of the United States of America (USA). Since his inauguration, Mr. Trump has been signing executive orders like mad, thus turning the US, and therefore the whole world, upside down.

The most shocking measures have been the massive sacking of workers in numerous federal agencies regardless of the importance of the task they were carrying out, the exit of the USA from organizations such as the World Health Organization (WHO) or international treaties such as the Paris Agreement on climate change, the sharp decline in USA international aid, and the imposition of tariffs on almost all of the nations with which the USA trades.

Among the many areas affected are all those related to the renewable transition. In particular, Mr. Trump has absolutely no faith in the ability of Industrial Renewable Electricity Systems (IRES) to maintain the competitiveness of the U.S. economy, and has instead decided to exploit and burn all extractable fossil fuels. At the same time, the decision to make a sharp reduction in personnel for NASA and NOAA guarantees a loss of the USA’s capacity not only to continue studying and trying to reduce the impact of Climate Change, but will even affect its ability to make short-term weather forecasts. There is a certain tendency to say that Mr. Trump is a madman or an extremist, and that he doesn’t understand what he is doing or even that everything he is doing will end up backfiring. On the contrary, I think Donald Trump understands well enough what he is doing and, worse, even if it is immoral, those actions have a logic that can provide him with a short term benefit (although in the long run it will condemn us all).

We have often talked in The Oil Crash about why the IRES model does not work, at least not on the scale intended. I don’t believe Donald Trump has done such a detailed analysis, but he surely knows —because it is very evident— that renewable energy production is not economically competitive, nor is it likely to become so, with respect to fossil fuels. But the members of the Trump administration are not a bunch of fools who are unaware of what the burning of fossil fuels means. For example, Elon Musk himself claimed in 2016 that “Climate Change is the biggest risk facing humanity in this century”. So, how can it be that Musk is now accepting that subsidies for the installation of new charging points will be cut, which is contrary to his company’s interests? The answer is simple: by now, they know there is no future in the IRES. The IRES is a failed bet on a technological revolution and the new USA government is turning the page on it. Musk himself is turning the page: he knows that Tesla will be a car company for the rich with a limited production run. Similarly they know that in the not too distant future, the majority of the population will not have a car of their own.

But that’s not to say that the USA government doesn’t realize that Climate Change is an existential risk. His bet, in the end, is very simple. The USA. has a considerable amount of resources in its own territory, and a population seriously threatened by poverty. Although the official statistics say that only 11% of the population lives below the poverty line, about 40% cannot meet an unforeseen expense. The big problem for a large part of the population with few or no qualifications is the displacement overseas of factories that has been taking place in the last few decades. Ergo, what is important is to reshore overseas production. To this end, the USA has embarked on a thinly disguised process of dismantling of the world trade system, imposing massive tariffs. In this way, it gets factories back into the USA and achieves a generalized impoverishment of the entire world (also in the USA itself at the beginning), which will result in an overall global decrease in CO₂ emissions. The USA will pollute more, but the rest of the countries will pollute less, and in the end this will compensate for the excesses of the Trump administration. Even the massive cuts in federal spending make perfect sense in this plan: after all, the USA energy strategy involves exploiting sources with a low Energy Return (EROI), and thus in the scenario depicted by the third of the questions I directed to Spanish politicians nearly a decade ago. Only by sacrificing parts of the welfare state can these sources be exploited, something that Argentina is experiencing intensively (which will be the subject of a future piece).

There are, of course, numerous objections, not just moral ones but also to technical aspects of this plan, and it is doubtful that it will work in the long term for the reasons that have been discussed throughout my blog —mostly, the increasing scarcity of resources and particularly of fossil fuels. But there is no denying that the plan has its logic, and it is even likely that in the short term it can bring about the results desired by its promoters. The message of “Make America Great Again” would thus become: “Since we are not going to be able to implement the IRES, at least we can prosper (for a time) whilst we plunge downwards into misery”.

It is the EU that has been badly placed in this new scenario. With no resources, an ageing population and rampant deindustrialisation, Europe is facing a new situation in which the American friend has told us to fend for ourselves and every man for himself (incidentally, if we want to defend Ukraine, we are told that we’ll have to do it alone). It seems that the USA is letting go of the burden that Europe has become. After all, it makes sense: Europe has no resources to contribute, and it does have a high level of consumption that is of no benefit to the USA. So for the USA, in a cynical way, the best thing to do is to let Europe get poorer.

Against this backdrop, and with the critical industrial situation of Germany (20% drop in industry between 2020 and 2024, after having already fallen 20% from the beginning of the century to 2020), the EU has only been able to react in desperation in an attempt to try to regain competitiveness. In January, it approved the so-called “Competitiveness Compass“, which theoretically keeps decarbonization at the centre of policies, but that at the same time wagers on “administrative simplification” to facilitate the development of economic competitiveness. Already after the German elections (with the fear of helping the far-right if the reversal on the renewable energy front was evident ahead of time), the new Omnibus regulation —with administrative simplification emphasised— leads to a reduction of environmental requirements and respect for human rights. Moratoria are also announced on the final banning of cars with internal combustion engines, while European companies continue to keep electric car production frozen and some, such as Stellantis (the conglomerate that includes Fiat, Chrysler, Peugeot, Citroën, and others), are betting on de-branding to survive.

Europe is out of step, it has been for a long time, but the world is not going to wait for the EU to re-evaluate its position in the world and decide on the new direction it will take. The large investment funds are accelerating their pull-out from green investment. Even Kanou Capital LLP, which a year ago was promoting 100% green investments, considers that the market is dead “for now”. These and other signs indicate that we are reaching the end of the first renewable bubble, that is, the end of the commitment to the industrial renewable energy system. As long as they exist, the Next Generation funds will continue to launch projects, and from time to time we will see rescue plans (for example, the 1,200 million euros announced by Spanish Prime Minister Pedro Sánchez for the increasingly beleagured green hydrogen), but there will be ever less breath wasted . There will certainly never be recognition that the IRES was a failure, but there will be less talk about it, making excuses from time to time to justify why it has not yet gained momentum, until, finally in 5 to 10 years it will be recognized for the first time that it was not feasible —not on the scale intended.

I don’t expect the (not so numerous but quite loud) champions of industrialism to ever recognize that they were wrong. No do I hope that those who defended and promoted from the highest levels the fallacy of the Green New Deal take responsibility for misspent public monies and, above all, for the opportunity cost of putting so much effort into such a misguided, destructive and colonizing, yet closed pathway. I know that for a while they will deny that this is happening, that the /Green New Deal /goes down the drain of history, that the renewable mega sites are not worth anything, that the IRES is dead, that there won’t be loads of electric cars nor a surfeit of green hydrogen. The more obvious the end of this bubble becomes, the more they will deny it. In their exasperation, I expect that more than ever they will point out to us those who warned of all the technical contradictions of these projects, and will accuse those of us who denounced its unfeasibility in terms of energy, economics and ecology. They will come to say, I am sure, that this is all our fault. Anything but accepting that in fact, they and they alone have been the cause of this failure. The shockwave will damage environmentalism for many years to come. Because, unfortunately, it is more than predictable that, in a Europe dominated by a populist discourse, advantage will be taken of the failure of these green (actually, productivist, industrialist) policies) to say that Climate Change and the rest of the environmental problems are false, and are the result of a conspiracy of camouflaged leftists. However, unfortunately, the environmental crisis is not only real, but is reaching a critical stage. Then will come the wailing and the gnashing of teeth. And it will also hit all those of us trying to raise awareness about environmental issues as we descend into a social hell. Bad times for the struggle against Climate Change, something that sincerely disheartens me, seeing the gravity of the current situation, seeing how we can descend to a literal hell because of the greed and ego of a few. “Abandon all hope, ye who enter here.”

In the meantime, the wheel of history continues to turn, oblivious to our petty disputes. The meeting between Trump and Putin to discuss the end of the war in Ukraine (without the participation of Ukraine, let alone the EU) has made it clear that we are entering a new phase in the decline of our civilization, that we are already in the first stages of the final game of the energy descent. While in Latin America and parts of Africa it is beginning to become apparent that there is a shortage of diesel (I hope to bring out soon the last edition of our series “El pico de diesel” on peak diesel) and blackouts multiply, the USA and Russia are dividing up their areas of influence in a world where there will be fewer resources and only a few players will have access to them.

Where does that leave Europe? In fact, in a state of exclusion that many other countries have been suffering for decades, but that smug Europe thinks it does not deserve. In the face of these challenges, the EU’s response is an absurd and self-destructive militarization, brandishing the phantom menace of a possible Russian invasion. But this is too large a subject, and therefore we will discuss it in another piece.