Friday Haymaker
An Inconvenient Reevaluation
An Inconvenient Reevaluation
"To prepare adequately for the challenge of global warming, we must acknowledge both the good and the bad that it will bring. If our starting point is to prove that Armageddon is on its way, we will not consider all of the evidence, and will not identify the smartest policy choices." -Bjorn Lomborg
Back in July, the U.S. Department of Energy quietly dropped a report titled “A Critical Review of Impacts of Greenhouse Gas Emissions on the U.S. Climate.” It was put together by five scientists recruited by Secretary Chris Wright: John Christy, Judith Curry, Roy Spencer, Steven E. Koonin, and Ross McKitrick. Every member of this cohort had a track record of raising sharp questions about mainstream climate modeling. What makes this report unusual is not just the names involved, but its layered implications of their findings, which challenge some dearly held climate assumptions. Specifically, that the speed of warming, frequency of extreme weather, and linearity of sea‑level rise, may in fact be overstated. It argues that U.S. climate policy has had only limited measurable impact on global indicators, that mitigation efforts may carry unintended economic consequences, and that the datasets driving urgency are more open to interpretation than often acknowledged.
For Haymaker readers who remember past exchanges, where Dr. Koonin debated more dire views and was judged by many to have made the more persuasive case, this new report feels like a bit of a sequel. It stakes out some ground in the middle by acknowledging that climate change is real and the danger is not fictional. But some of the alarm may rest on models that push worst‑case assumptions forward as if they were defaults, and perhaps too much capital has been allocated under that framing.
One of the report’s more sobering reminders concerns the scale of U.S. impact on global climate metrics. Even a complete elimination of domestic carbon emissions, an unrealistic outcome under virtually any policy, would result in a projected temperature reduction of less than 0.2°C by century’s end. That figure, long cited by Koonin and others, carries renewed weight in today’s context, where hundreds of billions of dollars in energy transition investment rest on the assumption of transformative impact.
Against this backdrop, the report invites a broader reevaluation, not of climate science per se, but of the way we interpret and put it to use.
For instance, Representative Concentration Pathway (RCP) 8.5 is a greenhouse gas emissions scenario developed for climate modeling and policy analysis. The use of high-end emissions scenarios, such as RCP 8.5, as default baselines rather than stress tests, is a practice that gained momentum in the early 2000s and has since shaped not only public discourse, but binding international agreements. These scenarios helped form the rationale behind the 2015 Paris Accords and provided intellectual cover for sweeping provisions in the Inflation Reduction Act. They continue to underpin emerging disclosure mandates from agencies like the SEC, even as legal challenges question their validity.
The report does not dismiss the goals of de-carbonization, but it raises important questions about how those goals are pursued, and at what cost. Its timing is notable, as the macro environment has shifted and the cost of capital has returned. Subsidy-heavy energy bets — once justified by both policy and interest-rate tailwinds — are now being reevaluated. Wind and solar developers have recently started pulling back and ESG fund flows have begun to reverse. We’ve seen a softening in green bond issuance, and raw material prices tied to the EV supply chain have fallen sharply from recent highs.
Meanwhile, more traditional forms of energy have seen a resurgence, with oil and gas majors producing steady returns, often choosing to return capital rather than expand capacity. Nuclear energy, once politically sidelined (rather irrationally, in Team Haymaker’s opinion), is regaining attention across a growing number of countries. And natural gas continues to function as a geopolitical backstop, particularly in regions where energy security has become a primary concern.
All of this suggests a more nuanced reality than the one that's been lopsidedly advanced over the last couple of decades. It’s quite clear that the transition is not being reversed, but its velocity and direction may no longer be taken for granted. The report suggests that we may have reached an inflection point of sorts, not necessarily in emissions or temperatures, but in narrative. And if the market’s allocation of capital has been tethered too closely to one dominant storyline, then even a modest shift in the consensus could carry some pretty meaningful consequences.
The overarching message here is not one of cynicism, but of recalibration. Investors and policymakers may need to reconsider whether the frameworks that they’ve relied on still make sense as guides going forward. The energy transition may be undergoing a quiet transformation away from inevitability, and toward something more conditional, and possibly, more grounded.
Additional commentary:
One of the authors of the report discussed above is Dr. Steven E. Koonin who has been previously highlighted in this newsletter and its predecessor version. Some Haymaker readers may recall a “debate” included in these pages several years ago that contrasted the climate outlook of Dr. Koonin and an individual with a much bleaker view of the threats from global warming. At the time, we asked for a vote from readers regarding who most impressed them in that opinion exchange. Perhaps due to the composition of the Haymaker reader base, Dr. Koonin handily won.
This newsletter has favorably referred to his book, Unsettled. If you haven’t read it, we’d suggest you do so, particularly if you are at all intrigued by the bombed-out traditional energy sector. As we have indicated recently, the entire energy sector now makes up a mere 3% of the S&P’s total valuation. That’s about one-third of what Nvidia alone represents.
Accordingly, it remains the view of this newsletter that traditional energy producers are grossly undervalued. A likely catalyst to a valuation renaissance is the accelerating surge in U.S. electricity consumption due to the frenetic build-out of AI data centers. As the talented Stephanie Pomboy said recently: “If you love AI, you’ve got to love energy!”. And even though Team Haymaker worries the AI narrative is morphing into a mania, we have no doubt that there will be a plethora of new data centers coming online over the next five years. In our opinion, at this point, after stocks like Nvidia have more than quadrupled, it may be preferable to skew your AI investments toward gas, not chips!
David “The Haymaker” Hay
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terrific piece. thank you.