The Dirty Secrets of Green Energy

In 1988, climate change entered public debate, transforming perspectives on our environmental responsibilities. The consequences of climate change - such as global warming, ice caps melting, rising sea levels, and ozone layer depletion - were recognized as undeniable realities. In response, numerous policies were enacted across various states and nations to mitigate carbon emissions. Initiatives were launched to establish new waste standards and enforce stringent emission standards for vehicles.

Recently, several countries, like the United States and Britain, have mandated the transition to electric cars by 2030, reflecting a commitment to eco-friendly practices. This transition is paramount for sustaining healthy living conditions on Earth. The shift towards Green Energy has spurred innovative investments like the ESG movement discussed in our post last week. However, the hidden costs associated with Green Energy transitions remain underexamined.

Consider electric cars. They differ from traditional cars primarily due to their reliance on batteries instead of gasoline. These batteries use rare earth metals like cobalt and lithium, predominantly sourced from countries like China and Africa, known for lax environmental regulations and humanitarian violations regarding mining practices. Another distinct feature is the extensive use of copper, a crucial component for electrification, making electric cars house up to five times more copper than traditional ones. The environmentally detrimental mining practices for copper extraction, coupled with the existing supply being unable to meet the burgeoning demand, raise significant concerns.

Another pivotal issue revolves around how electricity is generated to power electric cars. In America, the primary electricity sources are fossil fuels, natural gas, and coal. Countries like China and India, with less stringent environmental norms, are witnessing soaring demands for coal, the most polluting energy source.

Interestingly, industries labeled as "dying," such as oil, coal, and copper, have outshined most ESG funds since 2020. For instance, Peabody Energy (BTU), a coal producer, has seen over a 900% increase, while Freeport McMoran (FCX), a copper producer, experienced a surge of over 550%. ESG S&P funds have returned around 36% in the same timeframe. Many experts predict this could be the onset of a commodity supercycle lasting the next eight years.

At Arbitrage, we delve beyond surface-level analyses. Our investment approach is meticulous, considering all influencing factors and disregarding fleeting market commentaries, such as those from Jim Cramer on CNBC. We rely on a first-principles approach, substantiated by statistics and probabilities, to formulate our investment thesis.

For more high-alpha investment ideas and trading strategies, visit arbitragetrade.com. This information is for educational purposes only and should not be construed as investment advice.