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energy transition
The Green Energy Revolution's Colonization of Africa
If capitalist interests continue to drive this crucial transition, which is all too likely, while global energy consumption isn’t scaled back radically, the amount of critical minerals needed to power the global future remains unfathomable.
Oct 12, 2024
Considered Angola’s crown jewel by many, Lobito is a colorful port city on the country’s scenic Atlantic coast where a nearly five-kilometer strip of land creates a natural harbor. Its white sand beaches, vibrant blue waters, and mild tropical climate have made Lobito a tourist destination in recent years. Yet under its shiny new facade is a history fraught with colonial violence and exploitation.
The Portuguese were the first Europeans to lay claim to Angola in the late sixteenth century. For nearly four centuries, they didn’t relent until a bloody, 27-year civil war with anticolonial guerillas (aided by the Cuban Revolutionary Armed Forces) and bolstered by a leftist coup in distant Lisbon, Portugal’s capital, overthrew that colonial regime in 1974.
Lobito’s port was the economic heart of Portugal’s reign in Angola, along with the meandering 1,866-kilometer Benguela Railway, which first became operational in the early 1900s. For much of the twentieth century, Lobito was the hub for exporting to Europe agricultural goods and metals mined in Africa’s Copperbelt. Today, the Copperbelt remains a resource-rich region encompassing much of the Democratic Republic of Congo and northern Zambia.
Perhaps it won’t shock you to learn that, half a century after Portugal’s colonial control of Angola ended, neocolonialism is now sinking its hooks into Lobito. Its port and the Benguela Railway, which travels along what’s known as the Lobito Corridor, have become a key nucleus of China’s and the Western world’s efforts to transition from fossil fuels to renewable energy sources in our hot new world. If capitalist interests continue to drive this crucial transition, which is all too likely, while global energy consumption isn’t scaled back radically, the amount of critical minerals needed to power the global future remains unfathomable. The World Economic Forum estimates that three billion tons of metals will be required. The International Energy Forum estimates that to meet the global goals of radically reducing carbon emissions, we’ll also need between 35 and 194 massive copper mines by 2050.
It should come as no surprise that most of the minerals from copper to cobalt needed for that transition’s machinery (including electric batteries, wind turbines, and solar panels) are located in Latin America and Africa. Worse yet, more than half (54%) of the critical minerals needed are on or near Indigenous lands, which means the most vulnerable populations in the world are at the most significant risk of being impacted in a deeply negative fashion by future mining and related operations.
Having lagged behind that country’s investments in Africa for years, the U.S. is now looking to make up ground.
When you want to understand what the future holds for a country in the “developing” world, as economists still like to call such regions, look no further than the International Monetary Fund (IMF). “With growing demand, proceeds from critical minerals are poised to rise significantly over the next two decades,” reports the IMF. “Global revenues from the extraction of just four key minerals — copper, nickel, cobalt, and lithium — are estimated to total $16 trillion over the next 25 years. Sub-Saharan Africa stands to reap over 10 percent of these accumulated revenues, which could correspond to an increase in the region’s GDP by 12 percent or more by 2050.”
Sub-Saharan Africa alone is believed to contain 30% of the world’s total critical mineral reserves. It’s estimated that the Congo is responsible for 70% of global cobalt output and approximately 50% of the globe’s reserves. In fact, the demand for cobalt, a key ingredient in most lithium-ion batteries, is rapidly increasing because of its use in everything from cell phones to electric vehicles. As for copper, Africa has two of the world’s top producers, with Zambia accounting for 70% of the continent’s output. “This transition,” adds the IMF, “if managed properly, has the potential to transform the region.” And, of course, it won’t be pretty.
While such critical minerals might be mined in rural areas of the Congo and Zambia, they must reach the international marketplace to become profitable, which makes Angola and the Lobito Corridor key to Africa’s booming mining industry.
In 2024, China committed $4.5 billion to African lithium mines alone and another $7 billion to investments in copper and cobalt mining infrastructure. In the Congo, for example, China controls 70% of the mining sector.
Having lagged behind that country’s investments in Africa for years, the U.S. is now looking to make up ground.
Zambia’s Copper Colonialism
In September 2023, on the sidelines of the G20 meeting in India, Secretary of State Antony Blinken quietly signed an agreement with Angola, Zambia, the Democratic Republic of Congo, and the European Union to launch the Lobito Corridor project. There wasn’t much fanfare or news coverage, but the United States had made a significant move. Almost 50 years after Portugal was forced out of Angola, the West was back, offering a $4 billion commitment and assessing the need to update the infrastructure first built by European colonizers. With a growing need for critical minerals, Western countries are now setting their sights on Africa and its green energy treasures.
“We meet at a historic moment,” President Joe Biden said as he welcomed Angolan President João Lourenço to Washington last year. Biden then called the Lobito project the “biggest U.S. rail investment in Africa ever” and affirmed the West’s interest in what the region might have to offer in the future. “America,” he added, “is all in on Africa… We’re all in with you and Angola.”
BothAfrica and the U.S., Biden was careful to imply, would reap the benefits of such a coalition. Of course, that’s precisely the kind of rhetoric we can expect when Western (or Chinese) interests are intent on acquiring the resources of the Global South. If this were about oil or coal, questions and concerns would undoubtedly be raised regarding America’s regional intentions. Yet, with the fight against climate change providing cover, few are considering the geopolitical ramifications of such a position — and even fewer acknowledging the impacts of massively increased mining on the continent.
In his book Cobalt Red, Siddharth Kara exposes the bloody conditions cobalt miners in the Congo endure, many of them children laboring against their will for days on end, with little sleep and under excruciatingly abusive conditions. The dreadful story is much the same in Zambia, where copper exports account for more than 70% of the country’s total export revenue. A devastating 126-page report by Human Rights Watch (HRW) from 2011 exposed the wretchedness inside Zambia’s Chinese-owned mines: 18-hour work days, unsafe working environments, rampant anti-union activities, and fatal workplace accidents. There is little reason to believe it’s much different in the more recent Western-owned operations.
“Friends tell you that there’s a danger as they’re coming out of shift,” a miner who was injured while working for a Chinese company told HRW. “You’ll be fired if you refuse, they threaten this all the time… The main accidents are from rock falls, but you also have electrical shocks, people hit by mining trucks underground, people falling from platforms that aren’t stable… In my accident, I was in a loading box. The mine captain… didn’t put a platform. So when we were working, a rock fell down and hit my arm. It broke to the extent that the bone was coming out of the arm.”
An explosion at one mine killed 51 workers in 2005 and things have only devolved since then. Ten workers died in 2018 at an illegal copper extraction site. In 2019, three mineworkers were burned to death in an underground shaft fire and a landslide at an open-pit copper mine in Zambia killed more than 30 miners in 2023. Despite such horrors, there’s a rush to extract ever more copper in Zambia. As of 2022, five gigantic open-pit copper mines were operating in the country, and eight more underground mines were in production, many of which are to be further expanded in the years ahead. With new U.S.-backed mines in the works, Washington believes the Lobito Corridor may prove to be the missing link needed to ensure Zambian copper will end up in green energy goods consumed in the West.
AI Mining for AI Energy
The office of KoBold Metals in quaint downtown Berkeley, California, is about as far away from Zambia’s dirty mines as you can get. Yet, at KoBold’s nondescript headquarters, which sits above a row of trendy bars and restaurants, a team of tech entrepreneurs diligently work to locate the next big mine operation in Zambia using proprietary Artificial Intelligence (AI). Backed by billionaires Bill Gates and Jeff Bezos, KoBold bills itself as a green Silicon Valley machine, committed to the world’s green energy transition (while turning a nice profit).
It is in KoBold’s interest, of course, to secure the energy deposits of the future because it will take an immense amount of energy to support their artificially intelligent world. A recent report by the International Energy Agency estimates that, in the near future, electricity usage by AI data centers will increase significantly. As of 2022, such data centers were already utilizing 460 terawatt hours (TWh) but are on pace to increase to 1,050 TWh by the middle of the decade. To put that in perspective, Europe’s total energy consumption in 2023 was around 2,700 TWh.
“Anyone who’s in the renewable space in the western world… is looking for copper and cobalt, which are fundamental to making electric vehicles,” Mfikeyi Makayi, chief executive of KoBold in Zambia, explained to the Financial Times in 2024. “That is going to come from this part of the world and the shortest route to take them out is Lobito.”
Makayi wasn’t beating around the bush. The critical minerals in KoBold mines won’t end up in the possession of Zambia or any other African country. They are bound for Western consumers alone. KoBold’s CEO Kurt House is also honest about his intentions: “I don’t need to be reminded again that I’m a capitalist,” he’s been known to quip.
In July 2024, House rang his company’s investors with great news: KoBold had just hit the jackpot in Zambia. Its novel AI tech had located the largest copper find in more than a decade. Once running, it could produce upwards of 300,000 tons of copper annually — or, in the language investors understand, the cash will soon flow. As of late summer 2024, one ton of copper on the international market cost more than $9,600. Of course, KoBold has gone all in, spending $2.3 billion to get the Zambian mine operable by 2030. Surely, KoBold’s investors were excited by the prospect, but not everyone was as thrilled as them.
“The value of copper that has left Zambia is in the hundreds of billions of dollars. Hold that figure in your mind, and then look around yourself in Zambia,” says Zambian economist Grieve Chelwa. “The link between resource and benefit is severed.”
Not only has Zambia relinquished the benefits of such mineral exploitation, but — consider it a guarantee — its people will be left to suffer the local mess that will result.
The Poisoned River
Konkola Copper Mines (KCM) is today the largest ore producer in Zambia, ripping out a combined two million tons of copper a year. It’s one of the nation’s largest employers, with a brutally long record of worker and environmental abuses. KCM runs Zambia’s largest open-pit mine, which stretches for seven miles. In 2019, the British-based Vedanta Resources acquired an 80% stake in KCM by covering $250 million of that company’s debt. Vedanta has deep pockets and is run by Indian billionaire Anil Agarwal, affectionately known in the mining world as “the Metal King.”
One thing should be taken for granted: You don’t become the Metal King without leaving entrails of toxic waste on your coattails. In India, Agarwal’s alumina mines have polluted the lands of the Indigenous Kondh tribes in Orissa Province. In Zambia, his copper mines have wrecked farmlands and waterways that once supplied fish and drinking water to thousands of villagers.
The Kafue River runs for more than 1,500 kilometers, making it Zambia’s longest river and now probably its most polluted as well. Going north to south, its waters flow through the Copperbelt, carrying with them cadmium, lead, and mercury from KCM’s mine. In 2019, thousands of Zambian villagers sued Vedanta, claiming its subsidiary KCM had poisoned the Kafue River and caused insurmountable damage to their lands.
The British Supreme Court then found Vedanta liable, and the company was forced to pay an undisclosed settlement, likely in the millions of dollars. Such a landmark victory for those Zambian villagers couldn’t have happened without the work of Chilekwa Mumba, who organized communities and convinced an international law firm to take up the case. Mumba grew up in the Chingola region of Zambia, where his father worked in the mines.
“[T]here was some environmental degradation going on as a result of the mining activities. As we found, there were times when the acid levels of water was so high,” explained Mumba, the 2023 African recipient of the prestigious Goldman Environmental Prize. “So there were very specific complaints about stomach issues from children. Children just really wander around the villages and if they are thirsty, they don’t think about what’s happening, they’ll just get a cup and take their drink of water from the river. That’s how they live. So they’ll usually get diseases. It’s hard to quantify, but clearly the impact was there.”
Sadly enough, though, despite that important legal victory, little has changed in Zambia, where environmental regulations remain weak and nearly impossible to enforce, which leaves mining companies like KCM to regulate themselves. A 2024 Zambian legislative bill seeks to create a regulatory body to oversee mining operations, but the industry has pushed back, making it unclear if it will ever be signed into law. Even if the law does pass, it may have little real-world impact on mining practices there.
The warming climate, at least to the billionaire mine owners and their Western accomplices, will remain an afterthought, as well as a justification to exploit more of Africa’s critical minerals. Consider it a new type of colonialism, this time with a green capitalist veneer. There are just too many AI programs to run, too many tech gadgets to manufacture, and too much money to be made.
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Can Democratic Societies Learn to Share the Burden of the Energy Transition?
If we can’t get to YIMBY and make fair decisions about near-term sacrifices, the end game is clear.
Oct 09, 2024
No one wants a nuclear reactor in their backyard. It’s an eyesore and a health hazard, not to mention the hit to your property values. And don’t forget the existential danger. One small miscalculation and boom, there goes the neighborhood!
In the 1970s, in the southwest corner of Germany, the tiny community of Wyhl was bracing for the construction of just such a nuclear reactor in its backyard. Something even worse loomed on the horizon: a vast industrial zone with new chemical plants and eight nuclear energy complexes that would transform the entire region around that town and stretch into nearby France and Switzerland. The governments of the three countries and the energy industry were all behind the project.
Even the residents of Wyhl seemed to agree. By a slim 55%, they supported a referendum to sell the land needed for the power plant. In the winter of 1975, bulldozers began to clear the site.
What sacrifices must be made to achieve the necessary transition away from fossil fuels and who will make those sacrifices?
Suddenly, something unexpected happened. Civic groups and environmentalists decided to make their stand in little Wyhl and managed to block the construction of that nuclear reactor. Then, as the organizing accelerated, the entire tri-country initiative unraveled.
It was a stunning success for a global antinuclear movement that was just then gaining strength. The next year, in the United States, the Clamshell Alliance launched a campaign to stop the construction of the proposed Seabrook nuclear power plant in New Hampshire, which they managed to delay for some time.
A few years later, critics of the antinuclear protests would dismiss such movements with the acronym NIMBY for Not In My Backyard. NIMBY movements would, however, ultimately target a range of dirty and dangerous projects from waste incinerators to uranium mines.
A NIMBY approach, in fact, is often the last option for communities facing the full force of powerful energy lobbies, the slingshot that little Davids deploy against a humongous Goliath.
That very same slingshot is now being used to try to stop an energy megaproject in eastern Washington state. A local civic group, Tri-City CARES, has squared off against a similar combination of government and industry to oppose a project they say will harm wildlife, adversely affect tourism, impinge on Native American cultural property, and put public safety at risk.
But that megaproject is not a nuclear power plant or a toxic waste dump. The Horse Heaven Hills project near Kennewick is, in fact, a future wind farm projected to power up to 300,000 homes and reduce the state’s dependency on both fossil fuels and nuclear energy.
Windmills: Aren’t they part of the solution, not part of the problem?
Critics of that Washington state project are, in fact, part of a larger movement whose criticism of “industrial wind energy development” suggests that they’re not just quixotically tilting at windmills but challenging unchecked corporate power. Left unsaid, however, is that the fossil fuel industry and conservative think tanks like the Manhattan Institute have been working overtime against wind and solar renewable energy projects, often plowing money into NIMBY-like front groups. (Donald Trump has, of course, sworn to scrap offshore wind projects should he become president again.)
It’s a reminder that the powerful, too, have found uses for NIMBYism. Rich neighborhoods have long mobilized against homeless shelters and low-income housing, just as rich countries have long outsourced their mineral needs and dirty manufacturing to poorer ones.
But even if you remove the right-wing funders and oil executives from the equation and assume the best of intentions on the part of organizations like Tri-City CARES—and there’s good reason to believe that the Washington activists genuinely care about hawks and Native American cultural property—the question remains: What sacrifices must be made to achieve the necessary transition away from fossil fuels and who will make those sacrifices?
Thanks to all the recent images of devastating typhoon and hurricane damage and record flooding, it’s obvious that much of the world’s infrastructure is not built to withstand the growing stresses of climate change. As if that’s not bad enough, it’s even clearer that political infrastructure the world over, in failing to face the issue of sacrifice, can’t effectively deal with the climate challenge either.
The Need for Sacrifice
The era of unrestrained growth is nearly at an end. In ever more parts of the world, it’s no longer possible to dig, discharge, and destroy without regard for the environment or community health. Climate change puts an exclamation point on this fact. The industrial era we’ve passed through in the last centuries has produced unprecedented wealth but has also generated enough carbon emissions to threaten the very future of humanity. To reach the goals of the 2016 Paris agreement on climate change and the many net-carbon zero pledges that countries have made, at a minimum humanity would have to forgo all new fossil-fuel projects.
Although the use of oil, natural gas, and coal has already produced a growing global disaster, those aren’t the only problems we face. The United Nations projects that, by 2060, the consumption of natural resources globally—including food, water, and minerals, those basics of human life— will rise 60% above 2020 levels. Even the World Economic Forum, that pillar of the capitalist global economic system, acknowledges that the planet can’t support such an insatiable demand and points out that rich countries, which consume six times more per capita than the rest of the world, will somehow have to tighten their belts.
In an era of unlimited growth, the political challenge was to determine how to divvy up the rewards of economic expansion. Today’s challenge, in a world where growth has run amok, is to determine how to evenly distribute the costs of sacrifice.
Alas, renewable energy doesn’t grow on trees. To capture the power of the sun, the wind, and the tides requires machinery and batteries that draw on a wide range of materials like lithium, copper, and rare earth elements. People in the Global South are already organizing against efforts to turn their communities into “ sacrifice zones” that produce such critical raw materials for an energy transition far away in the Global North. At the same time, communities across the United States and Europe are organizing against similar mines in their own backyards. Then there’s the question of where to put all those solar arrays and wind farms, which have been generating NIMBY responses in the United States from the coast of New England to the deserts of the Southwest.
These, then, are the three areas of sacrifice on Planet Earth in 2024: giving up the income generated by fossil-fuel projects, cutting back on the consumption of energy and other resources, and putting up with the negative consequences of both mining and renewable energy projects. Not everyone agrees that such sacrifices have to be made. Donald Trump and his allies have, of course, promised to “drill, baby, drill” from day one of a second term.
Sadly enough, almost everyone agrees that, if such sacrifices are indeed necessary, it should be someone else who makes them.
In an era of unlimited growth, the political challenge was to determine how to divvy up the rewards of economic expansion. Today’s challenge, in a world where growth has run amok, is to determine how to evenly distribute the costs of sacrifice.
Democracy and Sacrifice
Autocrats generally don’t lose sleep worrying about sacrifice. They’re willing to steamroll over protest as readily as they’d bulldoze the land for a new petrochemical plant. When China wanted to build a large new dam on the Yangtze River, it relocated the 1.5 million people in its path and flooded the area, submerging 13 cities, over 1,200 archaeological sites, and 30,000 hectares of farmland.
Democracies often functioned the same way before the NIMBY era. Of course, there’s always been an exception made for the wealthy: How many toxic waste dumps grace Beverly Hills? Or consider the career of urban planner Robert Moses, who rebuilt the roads and parks of New York City with only a few speedbumps along the way. He was finally stopped in his tracks in, of all places, that city’s Greenwich Village by architecture critic Jane Jacobs and her band of wealthy and middle-class protesters determined to block a Lower Manhattan Expressway. New York’s poorer outer-borough residents couldn’t similarly stop the Cross Bronx Expressway.
Whether it’s your unborn grandchildren or people living in the Amazon rainforest displaced by oil companies, the unsustainable prosperity of the wealthy depends on the sacrifices of (often distant) others.
Although a product of classical Greece, democracy has only truly flourished in the industrial era. Democratic politicians have regularly gained office by promising the fruits of economic expansion: infrastructure, jobs, social services, and tax cuts. If it’s not wartime, politicians might as well sign their political death warrants if they ask people to tighten their belts. Sure, President John F. Kennedy famously said, “Ask not what your country can do for you—ask what you can do for your country” and promoted the Peace Corps for idealistic young people. But he won office by making the same promises as other politicians and, as president, made famous the phrase “a rising tide lifts all boats,” an image of unrestrained growth that has become ominously prophetic in an era of elevated ocean levels and increased flooding.
In 1977, when President Jimmy Carter donned a sweater to give his famous “spirit of sacrifice” speech on the need to reduce energy consumption, he told the truth to the American people: “If we all cooperate and make modest sacrifices, if we learn to live thriftily and remember the importance of helping our neighbors, then we can find ways to adjust, and to make our society more efficient and our own lives more enjoyable and productive.”
Mocked for his earnestness and his sweater choice, Carter was, unsurprisingly, a one-term president.
Democracy, like capitalism, has remained remarkably focused on short-term gain, and politicians similarly remain prisoners of the election cycle. What’s the point of pushing policies that will yield results only 10 or 20 years in the future when those policymakers are unlikely to be in office any longer? Democratic politicians regularly push sacrifice off to the future in the same way that NIMBY-energized communities push sacrifice off to other places. Whether it’s your unborn grandchildren or people living in the Amazon rainforest displaced by oil companies, the unsustainable prosperity of the wealthy depends on the sacrifices of (often distant) others.
Sharing the Sacrifice
With its Green Deal, the European Union (E.U.) has embarked on an effort to outpace the United States and China in its transition away from fossil fuels. The challenge for the E.U. is to find sufficient amounts of critical raw materials for the Green Deal’s electric cars, solar panels, and wind turbines—especially lithium for the lithium-ion batteries that lie at the heart of the transformation.
To get that lithium, the E.U. is looking in some obvious places like the “lithium triangle” of Argentina, Bolivia, and Chile. But it doesn’t want to be completely dependent on outside suppliers, since there’s a lot of competition for that lithium.
Enter Serbia.
Rather than a sign that the political system can accommodate minority viewpoints, NIMBY movements demonstrate that the political system is broken.
The Jadar mine in western Serbia has one of the largest deposits of lithium in the world. For the E.U., it’s a no-brainer to push for the further development of a mine that could provide 58,000 tons of lithium carbonate annually and meet nearly all of Europe’s lithium needs. In August, the E.U. signed a “strategic partnership on sustainable raw materials, battery value chains, and electric vehicles” with Serbia, which is still in the process of joining the E.U. Exploiting the Jadar deposits is a no-brainer for the Serbian government as well. It means jobs, a significant boost to the country’s gross domestic product, and a way to advance its claim to E.U. membership.
Serbian environmentalists, however, don’t agree. They’ve mobilized tens of thousands of people to protest the plan to dig up the lithium and other minerals from Jadar. They do acknowledge the importance of those materials but think the E.U. should develop its own lithium resources and not pollute Serbia’s rivers with endless mine run-off.
Many countries face the same challenge as Serbia. Home to one of the largest nickel deposits in the world, Indonesia has tried to use the extraction and processing of that strategic mineral to break into the ranks of the globe’s most developed countries. The communities around the nickel mines are, however, anything but gung-ho about that plan. Even wealthy countries like Sweden and the United States, eager to reduce their mineral dependency on China, have faced community backlash over plans to expand their mining footprints.
Democracies are not well-suited to address the question of sacrifice, since those who shoulder the costs have few options to resist the many who want to enjoy the benefits. NIMBY movements are one of the few mechanisms by which the minority can resist such a tyranny of the majority.
But then, how to prevent that other kind of NIMBY that displaces sacrifice from the relatively rich to the relatively poor?
Getting to YIMBY
Wyhl’s successful campaign of “no” to nuclear power in the 1970s was only half the story. Equally important was the “yes” half.
Alongside their opposition to nuclear power, the German environmentalists in the southeast corner of the country lobbied for funding research on renewable energy. From such seed money grew the first large-scale solar and wind projects there. The rejection of nuclear power, which would eventually become a federal pledge in Germany to close down the nuclear industry, prepared the ground for that country’s clean-energy miracle.
That’s not all. German activists realized that the mainstream parties, laser-focused on economic growth, would just find another part of the country in which to build their megaprojects. Environmentalists understood that they needed a different kind of vehicle to support the country’s energy transformation. Thus was born Germany’s Green Party.
In this new spirit of sacrifice, we should be asking not what the planet can do for us but what we can do for the planet.
One key lesson from the Wyhl story is the power of participation. NIMBY movements, when they battle corporate power, weaponize powerlessness. Residents demand to be consulted. They want a place at the table to create their own energy solutions. Rather than a sign that the political system can accommodate minority viewpoints, NIMBY movements demonstrate that the political system is broken. It shouldn’t be a Darwinian struggle over who makes sacrifices for the good of the whole. Decisions should be made collectively in a deliberative process, ideally within a larger federal framework that requires all stakeholders to shoulder a portion of the burden.
As in the 1970s, the political parties of today seem remarkably incapable of charting a path away from unsustainable growth and the imposition of sacrifice on the unwilling. The Green Party in Germany transformed Wyhl’s anti-nuclear politics into NIABY—not in anyone’s backyard. At this critical juncture in the transition from fossil fuels, it’s necessary to move from discrete NIMBY protests against offshore drilling and natural gas pipelines to a NIABY approach to all oil, gas, and coal projects.
The parallel expansion of sustainable energy will require new political models for distributing the costs and benefits of the mining of critical raw materials and the siting of solar and wind projects. Here again, Germany provides inspiration. The country’s first town powered fully by renewable sources, Wolfhagen, assumed control over its electricity grid and created a citizen-run cooperative to make decisions about its energy future. When communities are involved in sharing the benefits (through lowered energy costs) as well as the costs (the placement of solar and wind projects), they are more likely to embrace “Yes In My Backyard” or YIMBY. When everyone is at the table making decisions, the slingshot of NIMBY gathers dust in the closet.
In this new spirit of sacrifice, we should be asking not what the planet can do for us but what we can do for the planet. The planet is telling us that sacrifice is necessary because there’s just not enough stuff (minerals, land, water) to go around. Autocrats can’t be trusted to make such decisions. Conventional politicians in democracies are trapped in the politics of growth and consumption. The wealthy, with a few exceptions, won’t voluntarily give up their privileges.
It falls to the rest of us to step in and make such decisions about sacrifice at a community level. Meanwhile, at the national and international level, new political parties that are radically democratic, embrace post-growth economics, and put the planet first will be indispensable for larger systemic change.
If we can’t get to YIMBY and make fair decisions about near-term sacrifices, the end game is clear. When the planet goes into a carbon-induced death spiral, we’ll all, rich and poor alike, be forced to make the ultimate sacrifice.
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By Dragging His Feet to Lower Interest Rates, Powell Hurt the Energy Transition
Rising interest rates were hampering efforts to decarbonize energy supplies and electrify transportation, housing, and other key sectors.
Sep 19, 2024
Federal Reserve Chair Jerome Powell on Wednesday announced that the Federal Open Market Committee is lowering the federal funds rate by 50 basis points, yielding an effective rate of 4.88%. Finally. The Fed should have provided interest rate relief months ago. While this overdue move is welcome, we must reiterate that Powell’s deferral of interest rate cuts has hurt the clean energy transition and inflicted other economic harms.
I wrote at length about this problem in January 2024:
It has become ever more apparent over time that rising interest rates are hampering efforts to decarbonize energy supplies and electrify transportation, housing, and other key sectors. High interest rates have had the dual effect of rolling back productive investment and lowering consumer demand, causing substantial drops in the stocks of major solar, wind, and other renewables-based companies; undermining the deployment of offshore wind projects; delaying the construction of electric vehicle (EV) factories; and slowing the installation of heat pumps.
In effect, Powell is exercising veto power over the Inflation Reduction Act and ruining “the economics of clean energy,” as David Dayen explained recently in The [American] Prospect. President Biden’s signature climate legislation contains hundreds of billions of dollars in subsidies for green industrialization, but repeated interest rate hikes have driven up financing costs enough to outweigh them. As Dayen noted, this is especially the case because the law’s reliance on tax credits requires upfront investment decisions.
Last month, Dominik Leusder explained why rate hikes have been particularly destructive for the green transition. Leusder drew attention to the capital-intensive nature of renewable power projects, which “tend to trade lower operating costs (the input into wind farms and solar plants is ‘free’) against higher (in relative terms) up-front costs.” As he noted:
By one estimate, 70% of the expenditure for an offshore wind farm derives from capital costs, compared to 20% with a gas turbine plant. This means that the vast majority of IRA-related projects require a lot of debt-financed spending up front. As the cost of the debt increases with higher interest rates, so does the levelized cost of energy (LCOE), a measure of the average cost of producing a unit of energy (kilowatt- or megawatt-hour) over the lifetime of the plant. And it does to a greater degree with renewables, the swift adoption of which is premised on them being cheap and profitable for investors.
As a result, a lot of the much-needed expansion in renewables capacity and storage—which is highly time-sensitive given the escalating effects of the climate crisis—is offset until borrowing costs adjust to the point where new projects become viable. What is more, while rates are high, the larger and better capitalized firms can gain a higher market share. Their deeper balance sheets also make it easier to accept higher borrowing costs now in the hope of refinancing these loans at lower rates later. The concentration of market power in the renewables sector would have all the usual implications for consumer welfare and innovation, the latter being seen as key to the energy transition.
His essay goes on to detail the devastating global impacts of the Fed’s monetary austerity, which hits developing countries especially hard, and is worth reading in full. At home, Powell’s maintenance of a higher-for-longer interest rate environment has also exacerbated the housing affordability crisis.
Ironically, raising the cost of borrowing did little to alleviate inflation (the stated reason for the rate hikes). This should come as no surprise. The cost-of-living crisis of 2021 to 2024 wasn’t the result of a wage-price spiral of the kind that neoliberal economists like Larry Summers and Jason Furman said can only be contained through demand destruction (i.e., engineering higher unemployment). Instead, as I wrote earlier this year:
[I]t was fueled by sellers’ inflation, or corporate profiteering, and exacerbated by the elimination of the pandemic-era welfare state. When the onset of Covid-19 and Russia’s invasion of Ukraine upended international supply chains—rendered fragile through decades of neoliberal globalization—corporations bolstered by preceding rounds of consolidation capitalized on both crises to justify price hikes that outpaced the increased costs of doing business. That safety-net measures enacted in the wake of the coronavirus crisis were allowed to expire only made the situation worse.
Given that the recent bout of inflation “is inseparable from preexisting patterns of market concentration, progressives have argued against job-threatening rate hikes… and for a more relevant mix of policies, including a windfall profits tax, stronger antitrust enforcement, and temporary price controls,” I pointed out. “Unlike the blunt instrument that Powell has been wielding ineffectively, those tailored solutions—the last two of which are within the Biden administration’s ambit—have the potential to dilute the power of price-gouging corporations without hurting workers.”
It’s noteworthy that during Powell’s August 2024 speech at the annual gathering of central bankers in Jackson Hole—where he signaled Wednesday’s pivot on monetary policy—the Fed chair excluded any mention of how the consolidation of corporate power contributed to rising prices in his explanation of the latest inflationary period.
This is significant because the Fed’s traditional inflation-fighting tool (i.e., raising interest rates to increase unemployment until demand and prices decrease) is ill-suited to confront our worsening polycrisis. It couldn’t effectively combat the supply shocks and corporate profiteering underlying the 2021-2024 cost-of-living crisis (disinflation occurred without mass joblessness despite Powell’s actions, not because of them). It also cannot solve cost-of-living struggles stemming from the fossil fuel-driven climate crisis.
The Roosevelt Institute’s Kristina Karlsson and Lauren Melodia showed in a 2022 paper that besides warming the planet, fossil fuel-based energy systems are inherently price volatile and a significant driver of inflation. The upshot is that shifting from coal, oil, and gas to renewables can permanently lessen inflationary pressures. Dovish monetary policy can help propel investment in wind, solar, and other green power sources.
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