The Non-Environmental Case for Climate Focus

Why the cost of energy and the price of risk keep moving—no matter what Washington says

I’m writing this from Europe. Over the past week I have been traveling for meetings in Paris, where I met with a range of cultural foundations, and I’m now in Vienna for a board meeting for our Austria-based software company that is focused on decarbonizing real assets across the EU.

In the days since the Munich Security Conference (February 13–15, 2026)—where climate and the environment occupied a surprisingly small share of the overall security agenda—Senator Sheldon Whitehouse offered a framing that is worth taking seriously precisely because it is not sentimental. (Security Conference) His contention, echoed in his remarks around Munich, is that arguing the moral imperative can be politically sterilized by culture-war framing, while markets are already pricing the reality into balance sheets. In his words and emphasis, the most persuasive and least deniable place to look is the financial system’s own behavior—especially energy costs and insurance markets.

Impala Ventures has had a mission to bring more disruptive, market-embraced CleanTECH to the world. But the last fourteen months have given us pause, as U.S. federal posture has visibly shifted away from the language and architecture of global decarbonization—most concretely in the formal withdrawal from the Paris Agreement taking effect on January 27, 2026. (Reuters)

We believe strongly in the science behind global warming, the need to decarbonize, and the impact on my daughter’s generation and her children’s children. But this paper leans into Whitehouse’s pragmatic lens: whatever one believes about climate rhetoric, the pricing signals in energy and insurance are behaving as if climate risk is real, sustained, and compounding. Markets do not care whether something is “woke.” Markets care whether it is expensive, volatile, and increasingly unhedgeable.

Two indicators tell the story more clearly than any political speech: the cost curve of electricity and the insurance industry’s pricing of risk.

The Cost of Energy and the Direction of Industrial Advantage

The most consequential energy question for policymakers is not what consumers paid last month, although this has continued to rise in the US and Europe; it is what it costs to build the next unit of reliable electricity supply—and how volatile that cost will be over the life of the asset. That marginal supply decision sets the long-run cost base of the economy. It influences where factories, data centers, and new housing are built, which regions attract investment, and whether electrification becomes a deflationary force or a political liability.

Within the mainstream of energy finance, the most common yardstick for comparing new generation options is levelized cost—imperfect, but useful because it translates capital and operating costs into a per-kWh equivalent for new-build decisions. Lazard’s Levelized Cost of Energy+ (June 2025)—one of the most widely cited annual benchmarks used across utilities, investors, and regulators—shows unsubsidized utility-scale solar and onshore wind in ranges that are generally competitive with, and often below, many conventional new-build alternatives (depending on assumptions, fuel prices, and financing.

The point is not that renewables are “always” cheapest everywhere, or that system constraints do not matter. The point is that the global electricity system has crossed a threshold: renewables are no longer a boutique option justified mainly by values. In many markets they are the rational marginal choice, especially once you incorporate the economic value of fuel-free generation. Fuel-free electricity reduces exposure to commodity shocks, improves long-term price stability, and lowers the macroeconomic risk that energy becomes a recurring inflation driver.

The second and equally important shift is that the reliability argument is evolving because storage economics are moving quickly. The historic critique of wind and solar has been intermittency; that critique is incomplete without asking what it costs to firm and balance the system. The International Energy Agency has highlighted how quickly battery costs and competitive dynamics have shifted. In a February 2026 commentary on battery markets, the IEA noted that average battery prices declined in 2025 and that battery energy storage system prices fell sharply, with average global BESS prices in 2025 dropping to about one-third of 2020 levels. (IEA)

As storage and flexibility costs decline, the “renewables aren’t reliable” debate loses force. The constraint increasingly becomes infrastructure and execution—interconnection queues, transmission buildout, siting and permitting, and market design that properly values flexibility and reliability. That is not a technological dead-end; it is a deployment and governance problem. And it is exactly where policy posture matters.

This is the non-environmental conclusion: if the cheapest marginal kilowatt-hour is increasingly renewable (with declining firming costs), then reflexively slowing clean generation because it has become culturally coded is not an ideological victory. It is a decision to raise the long-run unit cost of the American economy—and to make that cost more volatile than it needs to be.

The Pricing of Risk and the Insurance Market Signal

If energy is the input-cost story, insurance is the risk-cost story—and insurance is where climate stops being abstract.

Insurers and reinsurers are not in the business of ideology. They are in the business of solvency math. When they raise premiums, increase deductibles, tighten underwriting, or retreat from geographies, it is because their models and loss experience suggest the probability distribution has worsened. For policymakers, this matters because insurance is not a luxury add-on; it is a gatekeeper to housing, lending, construction, and business continuity.

Reinsurers sit at the apex of this system, and their research is among the clearest windows into what the risk market believes. Swiss Re’s sigma research reported that global insured losses from natural catastrophes reached USD 137 billion in 2024 and stated that, if the recent trend holds, insured losses would approach USD 145 billion in 2025, consistent with a multi-year upward real-growth trend. (Swiss Re) These are not niche sources; they are among the most recognized, conservative institutions in the global risk-transfer system. The OECD, summarizing global insurance market conditions, also references the same order of magnitude of insured natural catastrophe losses for 2024, underscoring how central catastrophe experience has become to non-life insurance dynamics. (OECD)

The mechanics of premium escalation are straightforward. Rising catastrophe loss experience increases the cost and restrictiveness of reinsurance. Primary insurers pass those costs through in the form of higher premiums, higher deductibles, narrower coverage, and non-renewals. In high-risk zones the problem is not only price; it is availability. When availability shrinks, the economic consequences propagate quickly.

That propagation is the part many policymakers underappreciate. Insurance is often a prerequisite for a mortgage. When insurance becomes unaffordable or unobtainable, lending tightens or fails altogether. Liquidity falls. Property values can soften. Local tax bases weaken. Municipal finance is strained precisely when infrastructure investment for resilience becomes more urgent. And as private capacity retreats, risk does not disappear; it migrates onto the public balance sheet through disaster appropriations and last-resort insurance mechanisms. This is why Whitehouse’s Munich emphasis on the insurance channel is so potent: the insurance market is not debating the reality of risk. It is repricing it.

For Impala Ventures, this repricing is not an academic topic. We saw direct impact on two different real estate-related assets we sponsored: one in the urban core of San Diego and another at our Julian family farm, a multi building sustainable project we rebuilt in the Laguna Mountains in Southern California. In the fall of 2024, our fire insurance on the Julian property increased by roughly 7x—the canary in the coal mine perhaps. There was no change in how we used the land, the scale of the built structures and no practical mitigation step that meaningfully changed the underwriting outcome—but for one—increasing danger from California wild fires, brought on by severe climate change. The significant risk, shifted since 2018 as the market’s perception of wildfire risk and the cost of carrying that risk collided. That single renewal cycle forced the same decision that more households and businesses are facing in exposed regions: accept dramatically higher costs for worse terms, or exit. We sold the property because the trajectory was clear and because it was moving toward effective uninsurability.

This is the non-moral, market-based policy relevance. When insurance reprices climate-linked hazards, it does more than raise premiums. It changes behavior. It changes what gets financed, what gets built, where families can live, and which real assets remain bankable.

America’s Clean-Tech Advantage and the Risk of Exporting It

For roughly two decades the United States has benefited from a distinctive innovation engine in energy: world-class research universities, national labs, catalytic federal R&D, and deep venture and project finance. This ecosystem produced not just science, but commercialization pathways—the hard part of translating prototypes into scale.

ARPA-E is a useful proxy for this advantage. In its FY2022 annual reporting, ARPA-E documented innovation outputs including thousands of peer-reviewed articles and hundreds of issued patents generated by projects it supported. (arpa-e.energy.gov) Whatever one’s political stance, those are the measurable outputs of an innovation infrastructure that is difficult to rebuild once it erodes.

The threat now is less about whether the U.S. can still invent. It can. The threat is whether the U.S. will still be the best place to scale. Commercialization capital is sensitive to policy volatility. When federal posture signals hostility toward net-zero planning frameworks used by much of the global energy system, it reads as increased uncertainty about markets, incentives, and the durability of the transition pathway.

Recent reporting captures the tone shift. Reuters reported that U.S. Energy Secretary Chris Wright pressured the International Energy Agency to abandon its net-zero focus, including threatening U.S. withdrawal from the IEA if it did not change course. (Reuters) The Financial Times likewise described the IEA ministerial meeting as fracturing along U.S.–Europe lines, with no unified communiqué and a more contentious posture around climate goals. (Financial Times) These developments sit alongside the already realized step of leaving the Paris Agreement as of January 27, 2026. (Reuters)

Policy volatility does not merely slow domestic deployment. It risks shifting the center of gravity of innovation to places that offer clearer long-term demand signals and more consistent industrial policy. The consequence is not philosophical. It is strategic: the U.S. may continue to do early R&D while ceding manufacturing scale, supply chain depth, and platform leadership to others.

China’s Scaling Strategy and the Economics of “Why They’re Doing It”

China’s accelerating leadership in scaling solar, batteries, storage, and EV supply chains is often discussed in moral terms—either as climate virtue or climate hypocrisy. The more accurate interpretation is economic and industrial policy.

The IEA has been explicit about China’s cost competitiveness and dominance in core clean-tech manufacturing. In its work on solar PV supply chains, the IEA states that China is the most cost-competitive location to manufacture across the solar PV supply chain and notes that costs in China are materially lower than in the United States. (IEA) In battery markets, the IEA has emphasized that China produces over three-quarters of batteries sold globally and that battery prices in China fell rapidly in 2024, highlighting both scale and cost-curve capture. (IEA)

This is not primarily a moral project. It is an industrial strategy built around learning curves, export competitiveness, energy security, and long-run macro stability. China is acting as if the financial and risk signals are durable because they are. Cheap, fuel-free electricity strengthens industrial competitiveness and reduces commodity exposure. Scale manufacturing captures cost declines and locks in strategic leverage. And resilience planning reduces the economic volatility that shows up in insurance markets, fiscal exposure, and supply chain disruption.

If the U.S. chooses to treat clean energy and decarbonization as cultural combat rather than economic strategy, the predictable outcome is that the upside migrates. Innovation and scale will flow to where the long-term unit economics are most bankable, and where capital can underwrite projects without fearing whiplash.

The Narrative Must Change—the Outcome Will Not

The moral argument for decarbonization remains strong, and for many it is the core reason to act. But in the current U.S. political context, it is the market argument that is hardest to dismiss. The cost of energy is signaling that new-build electricity is increasingly renewable and increasingly firmable as storage costs decline.

The price of risk is signaling that catastrophe exposure is rising, and insurers are transmitting that reality through higher premiums, tighter terms, and, in some places, retreat. (Swiss Re)

This is the essential non-environmental claim: climate change is already being priced into two of the most foundational cost structures of the real economy—electricity and insurance. That pricing is not rhetorical; it is contractual. It appears in underwriting, premiums, capital markets, and long-lived infrastructure decisions.

If the United States continues to pull away from decarbonization commitments and antagonize the frameworks used by global energy planners, it will not “win” a culture war. It risks losing a competitiveness race—exporting the upside of clean-tech innovation and industrial scale while still absorbing the downside of higher insurance costs, higher fiscal exposure, and higher long-run energy volatility. (Reuters)

The question, then, is not whether policymakers agree on a moral imperative. The more durable question is whether they are willing to respond to the pricing signals markets are already sending.