The New Eggs. A Few Thoughts on Sustainability

Bloomberg could very well prove right in saying that “electricity is the new eggs”. If so, that’s going to be a problem for politicians. People don’t like inflation and they don’t need an excuse to blame the government for it while, in this case, taking away tax credits that incentivize new electricity generation means the Trump administration (and the Senators & Reps that voted for it) are directly to blame while the OBBB is already pretty unpopular with Republican voters (let alone Democrats) as Doug Lewin points out.

With the OBBB set to unwind much of the IRA, the pace of renewables deployment will be slower but progress is inevitable given the nature of technology and learning curves. A reminder from Hugh Whelan of the excellent work by Richard Famer and colleagues with the thrust of the argument in this video (from the 45 min mark): the pace of cost reduction of renewables have consistently been underestimated by major economic modelers (like the IEA) while his team’s quantitatively-driven approach “hit the nail on the head”.

While we’re talking about flaws in IEA modeling, this time it’s ‘peak oil’ and Chris Wright who in an interview with Breitbart earlier this week called the IEA’s outlook for a peak in oil demand later this decade as "nonsensical". The IEA have had to push back their peak oil forecast repeatedly but China provides some hope they’ll be less wrong and, eventually, right.

How the next financial crisis starts. The FT argues that climate-driven weather events push up property insurance costs, property values fall, that can tip homeowners into negative equity leading them to walk away, banks then are left to deal with impaired assets and potentially insolvency. If that feels a bit of a stretch to you, it is on Jerome Powell’s mind as earlier this week he told the Senate Banking Committee that “if you fast-forward ten or fifteen years there are going to be regions of the country where you can’t get a mortgage.”Property taxes and insurance now make up about a third of the average single family homeowner’s monthly payment and, under the radar, they’re also rising sharply (frequently climate-driven as municipalities struggle with the climate adaptation needs of weather events).

Still, there’s no sign in public equity markets or wealth trends to indicate any of this is a problem with some interesting insights from the UBS Global Wealth Report 2025. A high and rising level of inequality rarely augurs well for social cohesion and American youth already has a lot to deal with on that front from student debt to rising death rates for young males.

‘Better than coal’ isn’t exactly a high bar but International Energy Agency analysis has found that overall LNG "results in about 25% fewer emissions than coal across energy use cases… (with) More than 99% of the LNG consumed in 2024 had fewer life-cycle emissions than coal."

A renewable mandate Republicans can get behind… “The EPA’s latest biofuel rule and the Senate’s proposed tax bill mark a sharp turn toward homegrown fuels — giving corn ethanol and domestic biodiesel a boost while shucking imported alternative.”

The political realities of the farm lobby mean this is something we all just have to live but when you’ve already got almost 40% of the US corn harvest going into ethanol we’re facing land as a binding constraint on multiple fronts including the footprint of renewables, the reforestation demands to counteract GHG emissions, andclimate-driven headwinds to crop yields.

Anyway, the only thing that’s really clear is that you need to take your wins wherever you find them. As an example: How Trump Can Quietly Cut Global Livestock Emissions By Selling American Beef.

I expect you’re all sick of ‘How about this heat?’ commentary but it’s still striking that the US saw heat records broken in over 280 locations this week. That was driven by a heat dome. We understand why they happen but are they actually happening more frequently? Yes. You can find the paper here and a good explainer here with the figure below illustrating.

Hurricane Erick didn’t get a lot of attention but it was one of the fastest-intensifying storms on record. There’s a lot of noise around where the IPCC stands on hurricanes, which is where Andrew Dressler is helpful.

Hurricanse have an under-appreciated impact on communities. Take a look at how Panama City changed following Hurricane Michael (with echoes of Paradise, CA) in this piece from the WSJ. Another example of ‘resilience gentrification’.

Full comments below. The picture above: First images from world’s largest digital camera

Enjoy your Sunday.

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With the OBBB set to unwind much of the IRA, it’s worth remembering that, although the pace of renewables deployment will be slower without it, progress is inevitable given the nature of technology and learning curves. A reminder from Hugh Whelan of the excellent work by Richard Famer and colleagues in the catchily-titled Empirically grounded technology forecasts and the energy transitionwith the thrust of the argument in this video (from the 45 min mark): the pace of cost reduction of renewables have consistently been underestimated by major economic modelers (like the IEA) while his team’s quantitatively-driven approach “hit the nail on the head”. As a result, their forecast of “that by 2050 solar energy will be about 3$ per megawatt hour, more than a factor of 10 cheaper than it is now, making energy cheaper by far than it's ever been in the past” will maintain momentum. If you’ve not got the time, here’s my summary of that 2022 paper from Farmer’s team… In inflation-adjusted terms, fossil fuels are essentially ““running-to-stand-still” as production prices have remained roughly constant for more than a century. In contrast, for several decades the costs of solar photovoltaics (PV), wind, and batteries have dropped (roughly) exponentially at a rate near 10% per year. The cost of solar PV has decreased by more than three orders of magnitude since its first commercial use in 1958.” Solar, Wind, Batteries & Electrolyzers are all clearly on a learning curve. Yes, you actually need to get the deployment rates up to deliver that cost effect and that faces political, social & financing hurdles. However, it’s clear that models like those used by the IPCC, IEA, and others have consistently underestimated the pace of cost declines and repeatedly set floors that were quickly broken through. As an example, the study looked at 2,905 projections of the annual rate at which solar PV system investment costs would fall between 2010 and 2020 – the mean was a 2.6% pa cost reduction, every forecast was for less than a 6% reduction … yet over that period, solar PV costs fell by 15% pa. Embracing their stochastic version of Wright’s law, you can get that miracle: “compared to continuing with a fossil fuel-based system, a rapid green energy transition is likely to result in trillions of net savings. Hence, even without accounting for climate damages or climate policy co-benefits, transitioning to a net-zero energy system by 2050 is likely to be economically beneficial.” If that feels a little too good to be true, then you’re in good company: take Dieter Helm at Oxford who calls describes that in the “The Miracle Solution … the difficulties are going to be overcome not by threats and bribes, but by the underlying costs of decarbonizing… For if all this were true, if it was all economic, there would be no need for an international agreement, or protocol, or even a treaty.” (Net Zero, 2020). However, the back-testing works, the long term trends are clear, and the disconnect with existing iterative cost models that run over long time frames is neatly captured: “deployment in one period is used to project costs in the next, and vice versa. By iterating between costs and deployment in this way, small errors can quickly get amplified, leading to scenarios that are inconsistent with empirically observed trends.” I’ve extracted some charts & highlights below but recommend taking the time to read the full paper.

While we’re talking about flaws in IEA modeling, this time it’s ‘peak oil’ and Chris Wright who in an interview with Breitbart earlier this week called the IEA’s outlook for a peak in oil demand later this decade as "nonsensical" and that the US’ own EIA had become “political” and is now in dialog with the IEA to address the concern. The criticism would likely carry a bit more weight if it wasn’t couched in terms of ‘economic denialism’ –IEA modeling is not a mandate and ‘peak oil’ doesn’t mean ‘no oil’ – but the Republicans who have previously knocked the IEA for repeatedly getting the call on peak oil wrong have a point. IEA will likely be wrong again but China provides some hope they’ll be less wrong and, eventually, right. At the very least, we’re going to find out pretty soon. The IEA is now calling for a peak in China demand in 2027 which is 2 years earlier than previously and that is in alignment with what China’s own Sinopec has forecast. China matters here as their contribution to oil demand growth can’t be understated - China has been half of global demand growth over the past 30 years – and their progress on a broader renewables roll out that has result in emissions reduction despite strong recent economic growth shows that economic development can be coupled with less fossil fuel consumption: recall the analysis from Carbon Brief which showed that “for the first time on record, China’s CO2 emissions have fallen as a result of clean energy expansion rather than weak growth in electricity demand”.

How the next financial crisis starts. This recent comment from Pilita Clark, in the FT has grabbed some attention. If you’re not a subscriber then Bill McKibben has an extract but the core of it is that climate-driven weather events continue to push up property insurance costs, property values fall, that can tip homeowners into negative equity leading them to walk away, banks then are left to deal with impaired assets and potentially insolvency. Sounds a lot like the GFC but is both better and worse: better in that it unfolds over decades rather than months, worse in that the problem is physical rather than financial and can’t be repaired via cutting interest rates, recapitalizing banks, nd restructuring loans.

If that feels a bit of a stretch to you, it is on Jerome Powell’s mind as earlier this week he told the Senate Banking Committee that “if you fast-forward ten or fifteen years there are going to be regions of the country where you can’t get a mortgage.” With insurance rates being the trigger here, it’s worth revisiting this recent piece. Insurance isn’t the foundation of capitalism – that’s instead concepts of private property, free markets, and profit-seeking – but it certainly enabled dramatically better risk management and capital accumulation which ultimately drove stronger economic growth and underpins the significant leverage within modern financial systems. As a result, a path towards 3C is more than a little troubling. Climate, Risk, Insurance: The Future of Capitalism. “This applies not only to housing, but to infrastructure, transportation, agriculture, and industry. The economic value of entire regions—coastal, arid, wildfire-prone—will begin to vanish from financial ledgers. Markets will reprice, rapidly and brutally. This is what a climate-driven market failure looks like… If insurance is no longer available, other financial services become unavailable too. A house that cannot be insured cannot be mortgaged. No bank will issue loans for uninsurable property. Credit markets freeze. This is a climate-induced credit crunch… Once we reach 3°C of warming, the situation locks in. Atmospheric energy at this level will persist for 100+ years due to carbon cycle inertia and the absence of scalable industrial carbon removal technologies.”

For those skeptical of this cascading argument, we are arguably already beyond the point where the first domino is tipping with home insurance arguably already at the leve where they can meaningfully impact property prices at a national level in the United States: insurance costs are now at c20% of total mortgage costs across the US. When we’re talking about the single biggest store of wealth for the average American (and one that’s gone up almost 60% in real terms over the past two decades) this is everyone’s problem. Rising costs mean that people will pay less (i.e. house prices decline) or move or both. Property Prices in Peril: First Street.

However, it’s not just insurance costs but property taxes. Yes, insurance costs are rising at 3x the rate of Principal, Interest, and Taxes for the average American homeowner but property taxes are also rising sharply (frequently climate-driven as municipalities struggle with the climate adaptation needs of weather events) and, taken together, property taxes and insurance now make up about a third of the average single family homeowner’s monthly payment.

Still, there’s no sign in public equity markets or wealth trends to indicate any of this is a problem with some interesting insights from the UBS Global Wealth Report 2025. I view capitalism the same way that Winston Churchill viewed democracy - It has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time. - but a high and rising level of inequality rarely augurs well for social cohesion and American youth already has a lot to deal with on that front from student debt to rising death rates for young males. Only in mainland China and Turkey was there a bigger gap between average wealth growth and median growth i.e. strong overall growth but unequally divided… (interestingly), “The United States and mainland China are jointly home to over half of the personal wealth in our sample of markets. A combination of high wealth per adult and a large population makes the US stand out by holding almost 35% of the entire wealth measured in USD. Mainland China, thanks to its large population, holds almost 20% of personal wealth. The other 54 entries in our sample share the remaining 46%.” Still, it’s the US that’s got the biggest decline in the Gini coefficient since 2000 (along with Finland). Even if they come in at #7 of highest income inequality, only Sweden is worse amongst developed countries and, with a population 33x larger the US has a significantly broader problem. UBS try to soften the blow with “The rise of the EMILLI, the Everyday MILLIonaire” – “this heterogeneous group is united by a single factor – each of its members owns assets of one to five million US dollars. EMILLIs are multiplying, fast. The number of EMILLIs in the world has more than quadrupled since 2000 to around 52 million” – but those Gini coefficients remain.

I have leaned towards defending US LNG exports as, although the DOE’s LNG export report argued that greater exports means higher domestic gas prices (and likely also higher price volatility), the security benefits for (historic?) European allies and the ability to mitigate the upstream leakage problems (I don’t disagree with Howarth, I just felt that better controls of upstream methane emissions – most of which have negative abatement costs - could make it ‘less bad’) meant that LNG exports were still ‘better than coal’ so I can live with it for now. It seems that, at a global level, the same International Energy Agency analysis has reached the same conclusion. There's lots of variation, but overall LNG "results in about 25% fewer emissions than coal across energy use cases… (with) More than 99% of the LNG consumed in 2024 had fewer life-cycle emissions than coal."

A renewable mandate Republicans can get behind… “The EPA’s latest biofuel rule and the Senate’s proposed tax bill mark a sharp turn toward homegrown fuels — giving corn ethanol and domestic biodiesel a boost while shucking imported alternative.”

The political realities of the farm lobby mean this is something we all just have to live – and certainly prior Federal administrations of both persuasions have leaned into it – but when you’ve already got almost 40% of the US corn harvest going into ethanol it does serve to highlight that we’re well beyond the point at which this can be justified on any environmental basis.

However, what it does serve to highlight is the widespread belief – at least amongst the general public – that there is plenty of land. There is not and there’s a lot of ways to explore that.

It could be the footprint of renewables... Recall Princeton's landmark net zero study which noted that “Direct land use for wind-turbine pads in net-zero scenarios is small, but the (visual) footprint of wind farms is significant. In 2050, total wind farm visual footprint (at its) smallest … (is) the equivalent of the combined land areas of Illinois and Indiana… (at its largest it is) the equivalent of Arkansas, Iowa, Kansas, Missouri, Nebraska, and Oklahoma combined… Land use for solar farms in 2050 is much smaller than the visual footprint of wind farms, but directly impacted lands are greater, ranging from the equivalent of the area of Connecticut to that of Virginia.”

… or it could be the footprint of forests needed to GHG emissions… I appreciate that there’s a lot of assumptions that go into this analysis limiting its usefulness but it illustrates the point very well: the need to offset existing & future GHG emissions are another call on land in terms of reforestation. In this exercise, all of North America and a chunk of South America just to offset existing emissions and then all of Europe and most of Africa to include future emissions (based on existing reserves of the top 200 fossil fuel companies). Carbon offsetting of fossil fuel emissions through afforestation is limited by financial viability and spatial requirements. Naef et al. 2025

… or it could be climate-driven headwinds to crop yields. An interesting paper which summarizes as“for every 1°C of temperature rise, global food production capacity falls by 120 calories per day per person. "If the climate warms by 3 degrees, that's basically like everyone on the planet giving up breakfast"”. What was most interesting for me was that, although most regions see headwinds, the “global impacts are dominated by losses to modern-day breadbaskets with favourable climates and limited present adaptation”. Just glancing at the figure below which shows projected 2100 changes in crop yield resulting from climate change, the hit to maize across the US mid-west or wheat in eastern Australia and across Ukraine, indicate there is significant disruption to global agriculture ahead. Impacts of climate change on global agriculture accounting for adaptation. Hultgren et al. 2025

Anyway, the only thing that’s really clear is that you need to take your wins wherever you find them. As an example: How Trump Can Quietly Cut Global Livestock Emissions By Selling American Beef. Turns out that US beef is relatively low on GHG emissions as the use of feed lots – for all their other drawbacks – help cattle mature more quickly leaving them less time for generating methane. “Global agricultural trade is often seen as a net negative for the climate. The localist impulse supposes that food grown closer to where it is consumed is fundamentally better for the environment. But, this logic assumes two things: first, that food grown everywhere has the same impact; and second, that transportation represents a larger share of the overall climate impact of food than the production system. Both of these assumptions are false.”

I expect you’re all sick of ‘How about this heat?’ commentary but it’s still striking that the US saw heat records broken in over 280 locations this week. We know why heat domes happen… The Artic is warming much faster than the rest of the northern hemisphere, that’s weakening the jet stream and “its pathway can wobble, much like a spinning top losing momentum, and pockets of cold Siberian air can then break out and scramble weather patterns in unpredictable and radical ways”.

… but are they actually happening more frequently? Yes. You can find the paper here and a good explainer here with the figure below illustrating.

The news cycle is spinning especially fast at present and so interest in Hurricane Erick – ‘just’ a Cat 3 when it made landfall and it didn’t hit the US either – understandably faded quickly. However, it still managed to go from a tropical storm to a Cat 4 (its peak) in 24 hours which makes it one of the fastest-intensifying storms on record. Also, the fact that it happened in June – early in the season before water temperatures have really had a chance to ramp – is notable too. “Even more impressive, Erick is the first storm in either the Eastern Pacific or Atlantic known to have made landfall as a major hurricane (Cat 3 or stronger) prior to the summer solstice. The only other major landfall on record during the first half of any year is Cat 3 Audrey, which struck Louisiana in catastrophic fashion on June 27, 1957. The reliable database extends back to 1971 for the Eastern Pacific and 1851 for the Atlantic.”

As soon as you mentioned a hurricane, the immediate push back is usually along the lines of ‘the IPCC hasn’t said that climate change is making hurricanes worse’. That doesn’t make a lot of intuitive sense – the physics is pretty clear that more heat means more energy which should mean more energetic storms – so breaking that down is Andrew Dressler. Sea level rise should make hurricanes more destructive, the IPCC does already state (with high confidence) that it is making them ‘rainier’, it is very likely they will get rainier as temperatures rise, the IPCC already said that it “is likely that the global proportion of Category 3–5 tropical cyclone instances … have increased globally over the past 40 years” and now we’re just waiting to see if that’s driven by natural variability or climate change. However, as Dressler notes, “when we look to the future, the uncertainty disappears. Climate models consistently show that, as the planet continues to warm, we'll see a higher fraction of Category 4 and 5 hurricanes: “the proportion of Category 4–5 TCs will very likely increase globally with warming.””

Hurricanes are awful for long-term health impacts… Recall the recent paper in Nature found a dramatic increase in state-level all-cause excess mortality following hurricanes making landfall in the US that continued for 15 years following the event.

… but it turns out that wildfires can be just as bad in terms of smoke inhalation. Most the Northern US states and all of California have experienced wildfire-driven smoke concerns but I expect the long-term health impacts are significantly under-appreciated. This report in The Atlantic runs through a bunch of different studies but the most interesting one for me was where “the researchers followed up with residents for two years after the fires, checking on their lung function. To their surprise, the worst effects didn’t show up immediately, despite the heavy dose of smoke. Instead, people’s lung function seemed to deteriorate later. Right after the fires, about 10 percent of the cohort had lung function that fell below the lower limit of normal. By the one-year mark, about 46 percent did. At the two-year mark, most of those people still had abnormally poor lung function.”

Your Electric Bill Is Rising Faster Than Inflation. Why? I don’t think anyone should be that surprised that it’s natural gas. In many markets, it’s the marginal fuel and so price increases in natural gas flow through to electricity. Regardless of the driver, the price is heading higher with the EIA expect prices 4% this summer and it has already been sharply outpacing not only the CPI but also the other major retail energy prices (gasoline, residential nat gas, heating oil) so Bloomberg could very well prove right in saying that “electricity is the new eggs”. If so, that’s going to be a problem for politicians. People don’t like inflation and they don’t need an excuse to blame the government for it while, in this case, taking away tax credits that incentivize new electricity generation means the Trump administration (and the Senators & Reps that voted for it) are directly to blame while the OBBB is already pretty unpopular with Republican voters (let alone Democrats) as Doug Lewin points out. It’s hard to see how some version of the OBBB doesn’t pass - ‘less bad’ is our only hope on the renewables side – but this is not going to play well for Republicans at the mid-terms.

We are at risk of focusing a bit too much on renewables in terms of what’s commercially relevant. If you’re trying to make money, the biggest markets aren’t in solar or wind but EVs and heat pumps … and those markets are going to get much bigger both in absolute and relative. Some great perspective from Kingsmill Bond at Ember. “End-use energy services such as transport and heating are sectors where households and businesses already spend trillions of dollars each year. These are large, high-value, generally high-margin markets. Unlike bulk energy supply, which is capital-intensive and commoditized, demand-side technologies sell directly to consumers and command stronger pricing power… This difference is already evident in market size: the combined dollar value of the electric vehicle and heat pump markets is now three times larger than that of wind turbines and solar panels. This is despite the fact that wind and solar already account for over 90% of new global power capacity additions, while electric vehicle and heat pump sales still make up less than a quarter of total car and heating system sales—currently around 20% and 12%, respectively. The gap is set to widen. The IEA projects that by 2035, these end-use markets will outpace supply markets by a factor of eight.”

The other thing that hurricanes damage is a sense of community. Take a look at how Panama City changed following Hurricane Michael (with echoes of Paradise, CA) in this piece from the WSJ. FEMA’s ‘50% rule’ will force many to elevate badly damaged homes above the ‘100-year-flood’ level if they choose to rebuild. However, given the cost to rebuild and the frequent absence of insurance (1-in-5 Florida homes is uninsured) many will be forced to sell. What follows is ‘resilience gentrification’ which has been seen from Brooklyn to Barbuda (and I’d argue my own town of Rowayton in the wake of Sandy in 2012). In the US, the most common response to rebuilding post disasters is ‘structural mitigation’ – building back greener or more sustainably which fundamentally “raises the cost of coastal redevelopment, giving capital greater access and control over development decisions. These changes make coastal areas more expensive and more exclusive.”Also, the only people without insurance who can really afford to rebuild after a disaster are the relatively rich.