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Renewables: Green gains crushed as banks weaken broad environmental progress.

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TLDR:

  • Climate groups are protesting traditional banks to end fossil fuel funding, but central bankers are largely avoiding calls for change.
  • The renewable sector is currently impaired by high central bank rates and a long-term environmental crisis accelerated by currency devaluation.
  • The renewable sector lags behind as the value of assets diminishes due to high discount rates.
  • Rising interest rates are creating financial challenges and impacting the viability of renewable projects.
  • Central banks print money, which leads to currency devaluation and increased consumption and emissions.

Despite protests by climate groups calling for an end to fossil fuel funding, central bankers have largely avoided calls for change. This is despite the fact that the renewable sector is currently impaired by high central bank rates and a major long-term environmental crisis accelerated by currency devaluation. While central bankers have added climate change to their mandates, it seems they have largely escaped scrutiny from environmentalists due to their public stance on the issue. However, these policies deserve a climate lens due to the fact that all incentives in society, including those driving emissions, can be traced back to the currency.

The renewable sector has been negatively impacted by the fast rate hike cycle initiated by many central banks. High discount rates have diminished the value of renewable assets, while oil and gas assets, especially shale wells, are less impacted by discounting due to their quick returns. Additionally, high interest rates have created challenges for the renewable industry, as prolonged evaluation periods have emerged as deadly to the financial viability of projects. Consequently, renewable projects have been called off by companies such as Vattenfall AB and EDF Renewables.

Central banks also contribute to the environmental crisis through currency devaluation, which drives consumption and emissions. The inflationary nature of central bank policies encourages immediate consumption over delayed consumption, leading to higher emissions and energy consumption. Furthermore, inflation increases input costs and competition for renewable energy. As central banks continue to print money, more direct air capture will likely be needed to compensate for missed emissions targets.

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