Sadly few people nowadays find themselves reminded of Canadian music icon Stompin’ Tom Connors. But being right in tune with cultural trends a half-century old or more, we were reminded of his 1973 song “The Consumer” warning against supposed bargains where we “Save a lot of money spending money we don’t got” when the green energy transition came calling. Specifically, Bloomberg Green just rationalized that “The venture capital model honed and perfected in Silicon Valley is proving a bad fit for the clean tech industry, and investors should instead accept that they’ll need to commit much bigger sums of money for longer periods of time.” Right. The financial system that floated duds like Apple and Microsoft is just too dumb to see the golden possibility of green hydrogen so we have to give them hundreds of trillions of money we don’t got in order somewhere down the line to save a fortune and the planet. Which surely amounts to an admission that all the chatter about it being inevitable, profitable and a no-brainer was just carney-pitchman hokum.

In a suit, mind you. The story is about a banker who explains, or at least says, that this way we can bet the house on we know not what:

“‘In traditional VC, the model is to make 100 bets, 90 of which will completely fail, and of the 10 remaining maybe a couple will have real exponential growth,’ JPMorgan Chase & Co.’s Rama Variankaval said in an interview. However, ‘the amount of capital you’d need to replicate that in climate is enormous, so you might need to accept a revised model where you are picking fewer, more concentrated bets.’”

And not minding if all of them fail. Well, they call him a banker and we suppose he is one. But dude, if we could walk that way we wouldn’t have to work for a living. The whole problem in investing, and the reason for backing a bunch of ventures, is that we don’t know which “concentrated” bets are the good ones. If we did, we’d just invest in them. Our portfolio would contain only hot stocks with double-digit returns every year not mutual funds that fluctuate, and we’d be driving a brand-new car and sipping champagne from a gold-plated flute or something.

The story adds that:

“The warning from Variankaval, whose role as global head of corporate advisory includes running JPMorgan’s Center for Carbon Transition, has serious implications for the trajectory of climate change.”

For our money that kind of job title has serious implications for the state of modern finance. But speaking of gold-plated, what sums are involved? Unfortunately one with fourteen zeroes, which we don’t got:

“More than $200 trillion needs to be invested in the transition to net zero over the next three decades to avoid catastrophic temperature rises, BloombergNEF estimates. Spending last year, meanwhile, was just over $2 trillion.”

Holy platinum, Batman! The entire U.S. economy is just around 30 trillion bucks, so they want to spend that much seven times over in the next 30 years. Egad. And for what?

Ah, see, “to avoid catastrophic temperature rises”. And who among us wouldn’t just sign anything with that in the prospectus?

Well, us. Not least because (a) we’re told we’ve already been living with catastrophic temperature rises but somehow failed to notice, (b) we’re also told we will face catastrophically catastrophic ones by 2050 if we don’t act well before that date and (c) as we have previously pointed out the same models that tell us there’s a crisis also say the action being proposed won’t do anything to stop it.

There is some precision in the next bit of the argument:

“Most of the money – both public and private – flowing into the low-carbon transition is going toward electrified transport, renewable energy and power grids, BNEF’s analysis shows. Those are capital-intensive sectors that require committed capital. That’s in contrast to the ‘asset-light businesses’ to which venture capital is best suited, Variankaval said.”

We could raise issues with “flowing” or indeed “the low-carbon transition”, since if the former were real and so were the latter, it would be suitable for the traditional investment model where you put money you do have into things that, sufficiently often, actually prosper so you end up with more money.

In which case we wouldn’t need this absurdly astronomical sum for a bunch of assets unsuitable for traditional investments due to their dubious profitability. Instead, as the piece admits:

“Clean tech was particularly vulnerable to the rapid surge in interest rates that started in early 2022, with much of the capital-intensive green sector brought to its knees in the period that followed. Over the past three years, the S&P Global Clean Energy Transition Index has lost almost 40% of its value, compared with a gain of more than 40% in the S&P 500 Index.”

Which also reminds us of a Dilbert cartoon from the days of the “dot-com bubble” where someone questions a Dogbert venture that seems unlikely to prosper and he replies “Profits are for losers, neener neener.”

Here we want to credit Heatmap for profiling a venture capitalist of the sort Variankaval seems to be trying to bypass. In a piece headlined “The Climate Tech Investor Who Won’t Touch DAC”, they start:

“Technology to suck carbon dioxide out of the air – a.k.a. direct air capture – has always had boosters who say it’s necessary to reach net zero, and detractors who view it as an expensive fig leaf for the fossil fuel industry. But when the typical venture capitalist looks at the tech, all they see is dollar signs. Because while the carbon removal market is still in its early stages, if you look decades down the line, a technology that can permanently remove residual emissions in a highly measurable fashion has got to be worth a whole lot, right? Right? Not so, says Tom Chi, founder of At One Ventures and co-founder of Google’s technological ‘moonshot factory,’ X. Bucking the dominant attitude, he’s long vowed to stay away from DAC altogether.”

What’s more, author Katie Brigham explains why, in direct, vivid and physics-based language:

“‘If you’re trying to collect carbon dioxide in the air, it’s like trying to suck all the carbon dioxide through a tiny soda straw,’ Chi told me. Given that the concentration of CO2 in the atmosphere sits at about 0.04%, ‘2,499 molecules out of 2,500 are not the one you’re trying to get,’ Chi said. ‘These are deep, physical disadvantages to the approach.’”

The article goes on to say that despite this fairly obvious problem:

“investors are generally comfortable taking on risk across a host of different technologies and industries on the premise that at least a few of their portfolio companies will hit it big…. Most prominent climate tech venture capital firms – including Lowercarbon Capital, Breakthrough Energy Ventures, Prelude Ventures, and Khosla Ventures – have at least one DAC company in their portfolios.”

Right. Because you never know, and if someone breaks through here, it will pay off big time. If. But it’s that dang old-tyme venture-capital thing where you accept that 90% plus of your portfolio will fail, with the other 10% covering those costs as well as their own and buying you a yacht.

Mr. Banker Person has other ideas. And he shows exceptional skill at sales jargon, including this classic gooblahoy:

“‘The problem is investors are very segmented,’ Variankaval said. ‘Different investor groups have different risk-reward preferences, and for the most part a lot of the transition theme falls in the gap between various pockets of capital,’ in what’s known as ‘the missing middle.’”

Or in plain language the missing return on investment. Because it comes down to this is a plan very likely to fail extremely expensively, and in the best-case scenario it works extremely expensively, so it’s a bargain except for not being one even if you’re absurdly optimistic.

Which Bloomberg Green seems to be, and as an infuriating result sees the problem and takes it for a solution. Thus another item says “The Green Transition Needs More Workers”. Great. All those shiny clean green fulfilling low-stress jobs we were promised would like ripe figs drop directly into our laps.

Or not, because the piece, after rubbishing Donald Trump’s press secretary for saying Harvard churns out too many “LGBTQ graduate majors” and too few tradespeople, essentially goes on to say as if it were a plus that this “green transition” is incredibly resource-intensive, including when it comes to labour. Which is the opposite of actual efficiency. So we’ll also save a bunch of money hiring people we don’t got.