This is a problem to be assigned to a group to resolve and report back. As part of your first assignment, you already read Goldman Sachs’ report entitled Carbonomics: The Future of Energy in the Age of Climate Change (Goldman Sachs Equity Research 12/11/19, as redacted). Note that this is a presentation about both current and future economic and technological developments in the fossil fuel and renewable energy sectors taking into account climate change in charting decarbonization. But Goldman’s competitors also produce similar research, such as the J.P. Morgan report “Eye on the Market: 2021 Annual Energy Paper” (JP Morgan Asset and Wealth Management, 2021). (The old joke is that if you are going to predict the future, better you should do so often to bracket all the potential results, so do not expect all projections into the future to reach the same results.) Are both reports of the same mind concerning potential decarbonization, its pace and the necessary technology to accomplish it?
On the whole, JP Morgan seems not quite as optimistic as Goldman. Why is that, and is the difference about pace of change, lack of technology, different regulatory approaches, or what? What is the relative wisdom of simply regulating by articulating future emissions targets, when the technology to achieve such targets does not exist yet (normally referred to as “technology forcing,” on the theory that if you give the private sector the proper incentives, they will find a solution, like forward-looking CAFÉ fleet-level miles-per-gallon standards)? What are the other choices, and is this better understood as a regulatory or a legal challenge, or simply restructuring the economy? Having said that, someone like the general counsel of an energy or automotive company will have to deal with the regulatory concepts all the time, and the entire automotive industry is investing billions of dollars in EVs, including battery technology and the like, see Bullard, “Automakers are Investing in EVs like They Mean It: Sales Targets are Good. So is R & D. But Capital Expenditure is the Real Commitment.” (Bloomberg.com, 08/05/21); Denning, “Biden’s Electrical Vehicle Target is All About the Drive: Can he really electrify the car market? It doesn’t matter.” Bloomberg.com, 08/05/21; Smith, “ America Squandered Decades Living for the Moment.” Bloomberg.com, 08/05/21). How can you deal legally in the regulatory sphere with something that does not exist yet, but everyone seems to think will be coming down the pike? What kind of (legal) allowances need you make for regulatory uncertainties and future developments? In a nutshell, what happens if you do something like finance electricity generating facilities including a variety of undertakings over time, then the regulatory framework simply shifts (think introduction of a real carbon tax)? How to address that kind of legal and regulatory risk? How many different kinds of legal and regulatory risks are buried here? What exactly does managing legal risk mean here longer term, looking at climate change, and for that matter biodiversity?
Copyright 2020–21 © David Linnan.