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Global Initiatives Driving the Energy Transition

October 11, 2021

Watch Time 6:37 MIN

Veronica Zhang, Deputy Portfolio Manager of VanEck's Environmental Sustainability Fund, discusses recent global policy changes around sustainability efforts, the outlook for long-term progress, and opportunities beyond renewables.

Jenna Dagenhart: Policy has come to align more with long-term sustainability objectives. Joining us now with more is Veronica Zhang, Deputy Portfolio Manager for the Environmental Sustainability Fund at VanEck. Veronica, could you walk us through some of these recent policy changes here in the U.S. as well as globally?

Veronica Zhang: Hi, thank you, Jenna. Yes, it's a pleasure to be here today, and there's a lot of exciting stuff to talk about. When it comes to policy at a high level, we pay special attention to what comes out of the U.S., the EU, and China, as these three countries contribute to half of global greenhouse gas emissions. And even just within the past few months, you've seen the Biden administration talk about funding for solar and EV, as well as initiatives to build out the infrastructure for electrification. Currently, the target is to have solar provide 45% of the U.S.'s electricity by 2050 and for zero EV vehicles to comprise 50% of the new car sales by 2030. But if we're really going to reach our targets and net zero targets by 2050, these are not so much lofty agenda items as they are just the bare minimum, as electricity demand is expected to increase as much as 50% in that same timeframe.

Veronica Zhang: Just a corollary, in China right now, one in five cars sold are electric. While here, if you look at California, which is by far the leader among all the states, they're clocking in only 1 in 10. So, we think the legislation is a positive, but when you step back, we still have a long way to go. So, in the U.S., that's sort of what's going on in a nutshell.

Veronica Zhang: In the EU, the Commission recently rolled out the “Fit for 55” legislation, which basically touches on all areas of policy and practice towards the EU's climate goals, including more renewable energy adoption, more applications for emissions trading, a faster rollout of EVs, and an alignment of tax policies with the EU Green Deal.

Veronica Zhang: And then there's China, which officially rolled out - after over a decade of planning - its national carbon emissions trading scheme, which, when it's fully implemented, is expected to be the world's largest carbon trading market. So, that all happened in the past quarter.

Jenna Dagenhart: Yeah, and a long way to go as you said. And while some of these policies are more focused on the long-term, we are seeing some near-term pressures such as supply shortages and cost inflation. Could some of these near-term challenges hinder long-term progress?

Veronica Zhang: Yeah, as the saying goes, “progress is rarely a straight line.” To answer the last part of your question directly, no, this will absolutely not hinder long-term progress. If anything, this global energy crunch we're currently experiencing layered on top of rising costs of everything is pushing industries and politicians to, hopefully, work together and figure out a way to transition from fossil fuels gracefully without crippling the consumer. We have, over the past year, experienced significant global growth, while at the same time, the power that keeps the factories on and our houses warm is seeing a reduction in supply. Because for years now, we've been moving slowly away from conventional fossil fuels and replacing them with solar, wind, and hydro, which are all good things.

Veronica Zhang: The problem is that renewables are intermittent power sources. They only work when the sun is shining, and the wind is blowing. And if production falls below the statistical model and demand is tight, you're going to have spiking power prices, which is what's going on right at this moment. So, there is an elegant solution to all this, which we've been investing at the Fund for about half a decade, and that's battery storage. It definitely needs to happen faster, but that's sort of a low hanging fruit for solving the issue around intermittent energy sources, and hopefully preventing a kind of two steps forward, one step back in our progress around energy transition.

Jenna Dagenhart: Finally, what about opportunities beyond renewables, for when the sun is not shining, and the wind is not blowing?

Veronica Zhang: So, as I just said, the answer to harnessing renewables is storage and that's all great, but that also has greater implications, such as investing in the electric grid. Our grid is 40 years old. The transmission infrastructure is incapable of supporting the way our communities are being built today. Right now, we expect two-way energy flows and virtual power plants because of all the renewables that we've brought online. The grid would cost $5 trillion to replace, and we're obviously not going to do that. But even a small percentage of that number is still pretty significant and the minimum requirement for a thoughtful revamp of energy transmission. So, that's one area of opportunity we're looking at on a global level.

Veronica Zhang: I touched on the inflation aspect earlier. Just to give some context, there's five times more metals used in EVs than conventional cars. You've got graphite, nickel, cobalt, lithium, much more copper, and we're finding unique angles to play on the commodity producers within green metals.

Veronica Zhang: Last but not least, and this is a huge, huge focus on our Fund in the near future, agriculture or agtech, which goes well beyond your alternative protein and position planting, but now includes vertical farming, irrigation, seed genetics, ingredients, and flavors. I mean, 50% of land used in the world goes towards farming currently and 70% of fresh water. Those are already insane numbers, yet we have to feed a growing population and we're literally running out of resources. So, there is so much under the ag-umbrella, which by the way, is also a quarter of global greenhouse gas emissions. So, we're expecting to see a lot of innovation come from that space towards decarbonization in the near future.

Jenna Dagenhart: Well Veronica, thanks very much for joining us.

Veronica Zhang: Thank you, Jenna.

Jenna Dagenhart: And thank you for watching. Once again, that was Veronica Zhang, Deputy Portfolio Manager for the Environmental Sustainability Fund at VanEck. To receive regular updates from VanEck's experts, please visit I'm Jenna Dagenhart with Asset TV.


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