At what point does a new technology cause an existing industry to start losing significant value?

Writing in The New York Review of Books, Bill McKibben reviews two recent papers on climate change. The first is by Kingsmill Bond, a UK financial analyst. It is titled: “2020 Vision: Why You Should See the Fossil Fuel Peak Coming.

The central question Bond asks in his paper is this: “At what point does a new technology cause an existing industry to start losing significant value?”

McKibben says that “this may turn out to be the most important economic and political question of the first half of this century, and the answer might tell us much about our chances of getting through the climate crisis without completely destroying the planet. Based on earlier technological transitions—horses to cars, sails to steam, land lines to cell phones—it seems possible that the fossil fuel industry may begin to weaken much sooner than you’d think.”

He goes on to say: “Major technological transitions often take a while. . . . But the economic effect of those transitions can happen much earlier . . . as soon as it becomes clear to investors that a new technology is accounting for all the growth in a particular sector.”

As I consider the implications of this paper, I see the possibility that investors will be alert to all of this, and will bail out very quickly once the precipitous downward slope of the graph is definitive: they will cut their losses and run. This, along with other climate-related indicators will undermine the confidence of the super-wealthy, prompting them to protect their wealth in ways that create a destructive feedback-loop leading to unprecedented economic disruption and societal collapse. Read more . . .

REPORT: A New World: The Geopolitics of the Energy Transformation

A 94 page report by the International Renewable Energy Agency (January 2019)

Excerpts from the IRENA report:

“This ongoing transition to renewables is not just a shift from one set of fuels to another. It involves a much deeper transformation of the world’s energy systems that will have major social, economic and political implications which go well beyond the energy sector.

The global energy transformation will have a particularly pronounced impact on geopolitics. It is one of the undercurrents of change that will help to redraw the geopolitical map of the 21st century. The new geopolitical reality that is taking shape will be fundamentally different from the conventional map of energy geopolitics that has been dominant for more than one hundred years.

The majority of countries can hope to increase their energy independence significantly, and fewer economies will be at risk from vulnerable energy supply lines and volatile prices. Some countries that are heavily dependent on exports of oil, gas or coal will need to adapt to avoid serious economic consequences. Many developing economies will have the possibility to leapfrog fossil fuelbased systems and centralized grids. Renewables will also be a powerful vehicle of democratization because they make it possible to decentralize the energy supply, empowering citizens, local communities, and cities.

“Global power structures and arrangements will change in many ways and the dynamics of relationships within states will also be transformed. Power will become more decentralized and diffused. The influence of some states, such as China, will grow because they have invested heavily in renewable technologies and built up their capacity to take advantage of the opportunities they create.

“By contrast, states that rely heavily on fossil fuel exports and do not adapt to the energy transition will face risks and lose influence.

The supply of energy will no longer be the domain of a small number of states, since the majority of countries will have the potential to achieve energy independence, enhancing their development and security as a result.

“The transition will generate considerable benefits and opportunities. It will strengthen the energy security and energy independence of most countries; promote prosperity and job creation; improve food and water security; and enhance sustainability and equity. Some states will be able to leapfrog technologies based on fossil fuels. The number of energy-related conflicts is likely to fall.

“Countries must prepare for the changes ahead and develop strategies to enhance the prospects of a smooth transition. At the same time, the energy transformation will generate new challenges. Fossil fuel-exporting countries may face instability if they do not reinvent themselves for a new energy age; a rapid shift away from fossil fuels could create a financial shock with significant consequences for the global economy; workers and communities who depend on fossil fuels may be hit adversely; and risks may emerge with regard to cybersecurity and new dependencies on certain minerals.

2020 Vision: why you should see the fossil fuel peak coming

The peak in fossil fuel demand will have a dramatic impact on financial markets in the 2020s. This is one of the major reasons we will see a societal collapse in the 2020s. The transition to renewable energy sources is a minefield of risks, dislocations, and oscillations for investors and nation states.

The global energy system is transitioning from a system mainly based on fossil fuels to one mainly based on renewable energy sources. The shift will involve near-term peaking of fossil fuel demand, an S curve of renewable growth, and the endgame for fossil fuel demand.


The amounts at risk are colossal –
Investors face three types of risk from the energy transition – systemic, country, and stock specific. The systemic risk to investors comes from the fact that the fossil fuel sector has $25 trillion of fixed assets which is increasingly vulnerable to stranding as the energy transition progresses.

Kingsmill Bond

Read full report HERE. View video interview below.

Kingsmill has worked as a sell-side City equity analyst and strategist for over 20 years, including for Deutsche Bank, Troika Dialog and Citibank in London, Hong Kong and Moscow. He has written strategy on emerging markets and global themes, including the wider significance of the shale revolution. He worked for many years in Russia, which is the world’s largest exporter of fossil fuels, and deeply impacted by the transition.
Kingsmill has an MA in History from Cambridge University, trained as an accountant (CIMA), and is a Chartered Financial Analyst (CFA).