1. Introduction
We have a new paper published in the Journal of Applied Corporate Finance, entitled
A Critique of the Apocalyptic Climate Narrative The paper reflects the JACF’s ongoing interest in publishing articles that analyze important Environmental, Social, and Governance (ESG) issues in ways that are useful for investors, money managers, and corporate directors, as well as for economists and legal scholars who study corporate governance.
The official link for the publication at Wiley . The paper can be downloaded from SSRN . Please use SSRN to download, as is it easier to navigate and so that we can keep track of the download numbers.
The back story on this paper is that Harry DeAngelo sent me a draft manuscript for comments. I was intrigued by writing a paper on this topic for the corporate/investor audience, and the collaboration was born.
Some excerpts from the paper are provided below:
Summary
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The apocalyptic climate narrative is a seriously misleading propaganda tool and a socially destructive guide for public policy. The narrative radically overstates the risks to humanity of continued global warming, which are manageable, not existential. It prescribes large-scale near-term suppression of fossil-fuel use, while failing to recognize the huge costs that such suppression would inflict on humans because fossil fuels are currently irreplaceable inputs for producing food (via ammonia-based fertilizer), steel, cement, and plastics.
The paper details the flaws in the apocalyptic climate narrative, including why the threat from human- caused climate change is not dire and why urgent suppression of fossil-fuel use would be unwise. We argue that sensible public policies would focus instead on developing a diversified portfolio of energy sources to support greater resilience and flexibility to respond to whatever weather and climate extremes that might occur. We identify nine principles for sensible U.S. public policies toward energy and discuss implications of the flaws in the narrative for investors and their agents.
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The first three sections provide introductory material that readers of Climate Etc. should be very familiar with. Here is the outline of sections 2 and 3:
2. Is global warming dangerous?
- Warming over the past 120 years
- Prospective warming over the 21st century
- Tipping points and surprises
3. Fossil fuel suppression: shooting ourselves in the foot
- Failure of net zero policies
- Geopolitical concerns about fossil fuel suppression
- Moral concerns about fossil fuel suppression
- Other economic, technological, and social impediments to fossil fuel suppression
- Bad energy choices
- Ever-growing demand for energy
Section 4 addresses rational energy policy for the 21st century, with the full text of this section excerpted here:
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4. Rational energy policy for the 21st century
We offer nine principles for operationalizing this approach to U.S. energy policies, with #3, #5, and #6 specifying actions we should take and the remainder highlighting what we should not do.
- We should not inflict costs on U.S. citizens – reduced overall economic prosperity, constrained individual choice, and diminished national security – by adopting public policies intended to mitigate global warming that will not detectably affect Earth’s temperature in the short or long
- We should not eliminate fossil fuels before we have technologically viable and cost-effective replacements for the critical inputs they provide in the production of food, steel, cement, plastics, and electricity.
- We should use “carrots” to foster investment in innovation in energy, materials science, and agricultural science, as well as in the ability of humans to adapt to a changing climate.
- We should not use “sticks” to punish consumption that generates greenhouse gasses (e.g., banning gas stoves, jet travel, internal combustion engines, and non-vegan food), while having no material effect on temperatures now or in the long run.
- We should cultivate clean energy (to reduce air pollution) and energy independence (for national defense and economic security reasons) with a diversified set of reliable energy sources to hedge the risks of adverse “unknown unknowns” in the evolution of our political, economic, and physical
- We should put major emphasis on the resuscitation (and refined development) of nuclear power, which is at least as safe as solar and wind and far safer than coal and oil (based on comparisons of death rates due to both accidents and air pollution per unit of electricity generated).
- We should not focus narrowly on solar panels, wind turbines, and biofuels. Solar and wind are problematic because of their (i) unreliability and consequent need for a stand-by power system, (ii) low energy density and consequent massive land requirements to deliver energy at scale, and (iii) negative externalities (e.g., from rare-earth mining to produce batteries to address the unreliability problem). Biofuel emissions are at least as bad as gasoline, while biofuel production uses massive amounts of cropland and played a significant role in three major food crises in the last 20 years.
- We should not engage in backdoor regulation of fossil-fuel use by the Federal Reserve (through bank oversight) and the SEC (through ESG empowerment) that will warp the allocation of investment capital.
- We should not use our power to impose credit policies toward developing countries (e.g., by the World Bank) that discourage fossil-fuel-based projects and thereby make it more difficult for world’s poorest people to elevate themselves out of poverty.
The three proactive principles (#3, #5, and #6) reflect the physical reality that human flourishing depends critically on the abundant availability of energy and on the currently irreplaceable role that fossil fuels play in the production of food, steel, cement and plastics. Deterrent principle #7, which cautions against a narrow focus on solar, wind, and biofuels, reflects the strong technological limits of these technologies.
The remaining deterrent principles (#1, #2, #4, #8, and #9) reflect the fact that it makes no sense to mandate or constrain choices that will cause humanity to bear costs when those choices will have no detectable effect on global warming in the short- or long-run. These costs have a direct component: Avoidable waste from outlays on unpromising technologies and on consumption goods that simply sound good from a carbon emissions perspective. They also have an opportunity cost component in terms of diverting resources from worthwhile causes, including investments to foster greater resilience to weather and climate extremes as well as to help wide swaths of humanity to elevate themselves out of poverty.
Implications for investors and their agents
The flaws in the apocalyptic climate narrative have three important implications for the risk-management decisions of private investors and for the corporate directors and money managers who work on their behalf.
- The actual risks of fossil-fuel-generated climate change are not nearly as great as portrayed in the drumbeat of worried discussions of global warming in public discourse that the apocalyptic climate narrative has fostered.
- Those who nonetheless want to do something to help mitigate global warming should realize that the long-run consequences for the planet of the ESG pursuit of a reduced corporate carbon footprint will do little, if anything, to change the climate over the course of the 21st
- The apocalyptic climate narrative is itself an element of investment. The narrative has gained such powerful traction – especially in the U.S. and other wealthy countries – that it is significantly affecting the allocation of real resources and the stock-market values of companies.
The latter traction creates upside investment potential and downside risk. The upside, of course, is the potential for profits by responding to the demand for green investments. The downside risk is the possibility that many people will eventually come to realize that the importance of suppressing fossil-fuel use has been blown far out of proportion in public discourse.
From a capital markets perspective, the current green-investment situation accordingly has elements of a stock-price bubble that is supported by a false narrative. One can expect that bubble to sustain or grow provided that many people continue to buy into the premise of an urgent need to transition away from fossil fuels and as governments add more subsidies to renewable-energy projects.
The danger is that the bubble will pop or dissolve as it becomes increasingly clear that the Apocalyptic climate narrative is an extremely effective form of environmentalist propaganda that markedly overstates the risks to humanity of continued global warming.
One might be tempted to take investment positions that effectively “short the bubble” and wait for the gains to come rolling in when the bubble pops or dissolves. The problem with such strategies is that substantial valuation errors in the capital market can take a long time to correct. Consequently, arbitrageurs who have finite capital to invest and who make strong bets against the bubble can be wiped out financially before the asset-pricing errors are corrected.
The upshot is that there is no clear path to a “free lunch” of abnormal investment performance from shorting green investments. The reason is that one simply cannot be sure about whether or when the world will come to broad recognition of the flaws in the narrative.
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Full text is also excerpted for the final section:
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5. Bottom line: Sensible alternatives to net-zero policies
The apocalyptic climate narrative is a seriously flawed guide for public policy because it (1) radically overstates the risks to humanity of continued global warming, which are manageable, not existential and
(2) prescribes large-scale near-term suppression of fossil-fuel use, while failing to recognize the huge costs that such suppression would inflict on humans because fossil fuels are currently irreplaceable inputs for producing food (via ammonia-based fertilizer), steel, cement, and plastics.
The answers to four key questions provide a compact foundation for a far more sensible template for public policies toward global warming and the use of fossil fuels.
What would happen if the U.S. enforced a net-zero emissions policy? In 2100, according to climate- model projections. Earth’s average temperature would be lower (than it otherwise would be) by less than 0.2°C, which would be undetectable statistically given normal temperature variation. U.S. consumption and production of goods created with steel, cement, and plastics, and of food grown with ammonia-based fertilizer would immediately plummet because of the essential role fossil fuels play in their creation. A sharp decline in the quality of life would surely ensue.
Is it worth it? Is an undetectable reduction in the warming trend worth a huge sacrifice in the quality of life caused by an urgent move to net-zero? According to the apocalyptic climate narrative, the answer is yes because humanity (ostensibly) faces an existential threat from global warming. However, there is no credible evidence of an existential threat from global warming. Nor, indeed, is there evidence of warming- related costs that cannot be addressed by humanity’s resilience and ability to adapt to extreme climates.
Is an aggressive move to net-zero emissions politically feasible? Public policies that enforce an urgent move to net-zero would be especially hard to sell to the U.S. electorate once voters see the costs they would bear. The resistance would almost surely grow stronger as more voters come to realize that, regardless of their personal quality-of-life sacrifices, global warming is predicted to continue because China, India, Russia, Iran, and many other countries have strong incentives to continue to use fossil fuels.
What then should the U.S. do about global warming? We should encourage investment in efforts to find and improve alternatives to fossil fuels and in adaptation to a changing climate. We should not suppress fossil-fuel use because that would impose serious costs while generating no detectable benefits. Such suppression would put the net-zero cart before the horse, which is finding viable alternatives to fossil fuels in the myriad ways they enable humans to live far longer and much higher quality lives than our ancestors did even as recently as 100 years ago.
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LINK TO THE FULL ARTICLE:
A Critique of the Apocalyptic Climate Narrative
Journal of Applied Corporate Finance, 5 May 2025
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ABOUT THE AUTHORS
Judith Curry is President and co-founder of Climate Forecast Applications Network (CFAN). Following an influential career in academic research and administration, Curry founded CFAN to support the management of weather and climate risk. She is Professor Emerita at the Georgia Institute of Technology, where she served as Professor and Chair of the School of Earth and Atmospheric Sciences for 13 years. Curry is a Fellow of the American Meteorological Society, the American Association for the Advancement of Science, and the American Geophysical Union. She is frequently called upon to give Congressional testimony and serve as an expert witness on matters related to weather and climate. Curry received a Ph.D. in Geophysical Sciences from the University of Chicago. Climate Etc. provides a forum for climate researchers, academics and technical experts from other fields, citizen scientists, and the interested public to engage in a discussion on topics related to climate science and the science-policy interface.
Harry Charles De Angelo is Professor Emeritus of Finance and Business Economics & Kenneth King Stonier Chair in Business Administration, School of Business, Marshall University. He specializes in corporate finance, with a focus on payout policy, capital structure, and corporate governance. His work has been published in the Journal of Financial Economics, Journal of Finance, and American Economic Review, and he received the Jensen Prize for best corporate finance paper in the Journal of Financial Economics in 2004 and 2011. He served as Associate Editor for the Journal of Financial Economics and Journal of Finance, and as an American Finance Association director. Professor DeAngelo received a Golden Apple Award in 1999, and Business Week named him one of Marshall's two most popular teachers in 2000.
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