The transition to cleaner energy is under way. But it’s going to take several decades. In the meantime we need traditional sources of energy. Shouting at oil doesn’t change that. You could even call it, as the UK pensions minister did this week, “reverse greenwashing” — something that might make you look good but that does nothing to fix the real problem.
Value stocks are beating growth stocks by the widest margin in two decades, the latest sign that investors expect the next year to bring a powerful economic rebound.
The next bull market isn’t in Tech.
Customers in Western Europe registered roughly 98,000 Teslas in 2020, down about 11% from 2019, while overall registrations of all-electric vehicles more than doubled, according to Schmidt Automotive Research. Tesla’s share of the market fell to around 13% in 2020 from roughly 31% a year earlier.
Around the world, governments and automakers are focused on selling newer, cleaner electric vehicles as a key solution to climate change. Yet it could take years, if not decades, before the technology has a drastic effect on greenhouse gas emissions.
One reason for that? It will take a long time for all the existing gasoline-powered vehicles on the road to reach the end of their life spans.
In our view, today’s electric vehicle industry is a classic example of the big market delusion. The EV phenomenon will not change the fact that the auto industry will remain highly competitive and capital intensive, and not every company can be a winner. Further, it remains unclear how simply switching the means of auto propulsion will make the entire light EV market more profitable, an assumption the market is now currently making. We suspect that as EV competition heats up, many companies will fail, as was the case in previous industry booms—whether autos, airlines, or technology—and with time the total value of the industry will recede to more reasonable levels.
Hedge fund manager Pierre Andurand has emerged as one of the early winners from the big commodity market rebound, drumming up returns of almost 15 per cent since the start of the year thanks to bets on rising oil and European carbon prices.
But there is another, simpler reason for Big Oil’s support: it is good business. The board members and executives have a fiduciary duty to their shareholders. In the long run—say, years down the line—carbon pricing may not help them, and it’s possible that carbon pricing would not result in decreased regulation. However, Big Oil has realized that the market today wants to see good immediate financials and pro-environment policies. To help their own stock prices in the immediate future, Big Oil knows that the best move is to support policies like carbon pricing. Investors seem to want environmentalist oil companies, especially if they are profitable too.
There are people who have been conditioned by cryptocurrencies to believe that just the fact that it can be owned makes it valuable. People just 100% believe that this thing has value, but in fact it doesn’t because there’s no way to get value out of it except for selling it to another investor.
The move dramatically raises the value of carbon, which had fallen to as little as $1 under President Trump. The figure used by Biden mirrors estimates from the Obama-era, when it was $50 a ton. And it stands to go higher in January after the administration completes a comprehensive overhaul of carbon’s value.