A Short ESG Guide: Economic Problems
- Media Manager
- Dec 29, 2023
- 2 min read
Activist Post
Written By: Paul Mueller
Published: December 29th, 2023
The Environmental, Social, and Governance movement has wrapped itself in the garb of justice. It is just as much a moral crusade as it is an economic, social, or political one, with the unfortunate effect that those who criticize ESG can easily be sidelined and dismissed as reactionary, selfish, or worse. Be that as it may, I would be remiss not to raise a host of problems that arise from the pursuit of ESG goals.
Costs and (Un)Feasibility of Carbon Offsets
The environmental component clearly has the biggest economic implications. When it comes to “net zero” pledges and the use of renewable energy, pursuing ESG creates massive costs for society and ultimately has limited feasibility, even if it were to be embraced by everyone. Let’s consider the cost of carbon offsets first.
Many companies, from Microsoft to Nestle to Hess, plan to achieve their net-zero goals in part by purchasing carbon offsets. No single carbon offset method dominates the scene. Heirloom Carbon sequesters carbon from limestone, and then uses the limestone to pull carbon out of the air. Other companies bury biodegradable materials that would release greenhouse gas emissions while decomposing. And of course, you still have the old-fashioned method of planting trees or preserving forests.
But these activities are costly. Hundreds of millions of dollars that belong to shareholders are being diverted to the carbon-offset market. Research, labor, and other resources that could be used to produce goods and services people want are being used to dig holes and fill them up, or to prop up relatively untested technology. And to what end? For these carbon sequestration activities to really impact global CO2 emissions, their scale would have to be far greater — hundreds of billions of dollars annually. Rerouting that kind of capital on an annual basis has immense opportunity costs. Furthermore, there are growing concerns about widespread fraud in carbon-offset markets.
