April 2021 Newsletter

Global Warming Rush and Capital Spending

The world is in a rush to reduce global warming. Billions are being spent on a solution. So, follow the money. A financial bonanza awaits those companies with innovative solutions. As well-regarded carbon emissions expert, Bill Gates, admits the world’s democratic industrial nations need to engage capitalistic economies to motivate consumers to move toward zero-carbon-emissions products and services. Gates says that while it’s the job of government to assess pending disasters, it’s the public’s consumption patterns driven by supply and demand that will solve the problem.  

Some 197 nations of the world, representing the Paris Climate Agreement, want to reduce carbon emissions attributed to human behavior from some 24 billion tons per year to zero by the year 2050. According to the U.S. Geological Survey, the world’s volcanoes, both on land and undersea, generate about 200 billion tons of carbon dioxide annually. Nevertheless, to account for all carbon emissions caused by humans: 27% come from electricity production, 7% from automobiles, 16% from overall transportation, 19% from agriculture, 7% from heating and air conditioning and 24% from manufacturing, steel and cement.  

While the United States represents only 15% of worldwide carbon emissions, this represents an opportunity for U.S. businesses to patent and sell their green innovations to the remainder of nations representing 85% of the problem.    

Moreover, global warming experts estimate that the world will witness the addition of some 2.5 trillion square feet of office space by 2060. If correct, that is the equivalent of building another New York City every year for the next forty years. This staggering number has already encouraged innovators to think of new ways to reduce the carbon-emissions footprint this activity by injecting carbon emissions into cement.

The race is on to innovate in every industry group on the planet. These are huge opportunities that will create international winners and losers for decades to come.

The last thing the Europeans want to do is play catch-up to the U.S. and China in green technology. Both already have produces global leaders in social media and digital technology. Last month, Christine Lagarde, President of the European Central Bank, reported that global warming is costing European Union (EU) members 200 billion dollars annually. She reported that one of the central elements of her stimulus plan, to be launched later this year, is to focus spending on solutions to mitigate global warming.

As part of the EU Green Deal, the European Commission has published its Renovation Wave strategy which establishes areas of spending, inclusive of legislative proposals, and funding mechanisms. to improve the energy performance of the EU’s building stock. The Europeans see an opportunity to reduce the carbon-emission footprint of buildings throughout the European Union. Some of the following key statistics highlight why renovating buildings is such a significant focus in the EU’s plan to reduce carbon emissions.

Overall, buildings are responsible for approximately40% of the EU’s total energy consumption, and 36% of its greenhouse-gas emissions (including indirect emissions from upstream power generation). Almost 75% of the EU’s building stock was built prior to 1970 when energy performance requirements started coming into effect and thus are considered energy inefficient, according to current building standards (e.g., which rely upon fossil fuels for heating and cooling and use old technologies and wasteful appliances). Meanwhile, 85-95% of the EU’s buildings that exist today are expected to still be standing in 2050.

Currently, only about 10-12% of the EU existing building stock (based on floor area) has undergone some level of energy renovation. However, the weighted annual energy renovation rate is just 1%. This is because medium and deep renovations that reduce energy consumption in two categories, buildings with energy consumption reduced by approximately 30-60% and those greater than 60% account for only 1.1% and 0.2% of building stock respectively. So the EU sees the need and the benefit since by 2030 an additional 160,000 green jobs could be created in the EU construction industry through this effort.

And that’s just a start.

What about the United States? President Biden’s plan, which is former President Trump’s plan plus added spending for green initiatives and benefits for blue states, is a final negotiation away from the specifics. Word is, the process of negotiating a completed plan will take until August of this year. Thereafter, the pressure of the mid-term elections will be upon us.  

Initial reports indicate that a 2.2 trillion-dollar spending plan will be put forward to put people back to work through the building out of a national 5G infrastructure,  a national water retention network, a national energy transmission plan, support for civil engineering,  a national electric vehicle charging station network, tiered tax credits for carbon emissions reduction, electric vehicles, and energy-efficient housing products, homeowner subsidies for renewable energy solutions, research and development support for biofuels, nuclear subsidies, batteries and improved storage devices, foundries for extreme ultraviolet lithography, 5-nanometer chips, autonomous-vehicle chips, smaller transistors, energy-efficient lighting, lithium and rare-earth metals, support for cybersecurity, education, safety enhancements for dams and bridges, canal linings, new technologies in steel and cement and financial backing for military applications and data center roll outs.  

Funding for all is expected to come from higher corporate tax rates and higher personal income tax rates.  

Investors should be aware that there are risks inherent in all investments such as fluctuations in investment principal.  Past performance is not a guarantee of future results.  Asset allocation cannot assure a profit nor protect against loss.  Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed.  Views expressed in this newsletter may not reflect the views of Bolton Global Capital or Bolton Global Asset Management.  The information provided is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.  VW1/VWA0259


Sources: Credit Suisse Research, Gurufocus.com, SeekingAlpha.com