One of the great investment themes this decade is the green transition. It will involve incredible amounts of spending, government subsidies and (hopefully) progress.
Ministers met in Sapporo, Japan and agreed to speed up renewable energy development and move toward a quicker phase-out of fossil fuels and plastics.
Some had pushed for a 2030 phase out of coal but that didn’t appear in the communique, nor did hopes for less natural gas usage. That’s not a big surprise given the energy crisis in Europe and practical considerations butting up against aspirations.
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“In the midst of an unprecedented energy crisis, it’s important to come up with measures to tackle climate change and promote energy security at the same time,” Japanese industry minister Yasutoshi Nishimura told a news conference.
One concrete push was towards more offshore wind, including a pledge for 150 gigawatts of capacity by 2030.
I’m curious about the economics of offshore wind because last month, NextEra energy saidoffshore wind is a bad bet. They’re the largest producer of renewable power and have extensive experience in offshore wind.
The communique also set a target to install 1 terawatt of solar.
On the fossil fuel side, they agreed to “the phase-out of unabated fossil fuels” by 2050 at the latest.
None of the targets are binding but they highlight the direction that governments are going, including subsidies.
One of the best investment opportunities will be to front-run critical materials spending and the looming supply gap. While G7 nations are pushing for a faster transition, global regulatory structures around opening new mines are long and onerous. There are few places in the world where it’s possible to build a greenfield copper mine in less than 7 years, with many taking double that.
The communique touched on that, stressing the vital importance of strengthening critical minerals and materials supply. The US has already put in place subsidies for new mines.
This is one of the more-compelling charts in the global investment landscape right now, given the time lags.
Note the oversupply though for this year and next.
Copper prices have remained resilient this year despite worries about a recession but there are short-term signs of weakening as the premium in China’s refined market falls to CNY$90/lb, versus a peak of $260/t a month ago, according to CIBC.
copper prices
For further reading on what’s next for copper, see this breakdown from S&P Global from the March 21 FT Commodities Global Summit.
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