Global energy-related carbon dioxide emissions jumped 6% to record highs last year, confirming there’s still much work to be done in developing and embracing renewable energy and clean technologies.
As ominous as it is, that carbon data point also underscores the long-term viability of exchange traded funds, such as the SPDR Kensho Clean Power ETF (CNRG). A variety of factors highlight long-term potential with renewable energy funds like CNRG.
“The recovery of energy demand in 2021 was compounded by adverse weather and energy market conditions – notably the spikes in natural gas prices – which led to more coal being burned despite renewable power generation registering its largest ever growth,” says the International Energy Agency (IEA).
CNRG, which debuted in October 2018, has one of the deeper benches among renewable energy ETFs, confirming the fund’s validity as a longer-ranging idea to capitalize on global decarbonization and clean technology expansion efforts. Other data points confirm that the runway for renewable growth and fossil fuels reduction is long.
“Coal accounted for over 40% of the overall growth in global CO2 emissions in 2021, reaching an all-time high of 15.3 billion tonnes. CO2 emissions from natural gas rebounded well above their 2019 levels to 7.5 billion tonnes,” adds IEA. “At 10.7 billion tonnes, CO2 emissions from oil remained significantly below pre-pandemic levels because of the limited recovery in global transport activity in 2021, mainly in the aviation sector.”
CNRG’s depth is a vital part of its underlying investment thesis because expanding renewables and reducing the world’s carbon footprint will require contributions from multiple sources. To that end, CNRG features exposure to industries ranging from sleepy electric utilities to semiconductors to automobile manufacturers and many more.
Adding to the allure of the long-term CNRG thesis is that some of the world’s largest economies have much work to do regarding carbon reduction. While the U.S. and Western Europe, among others, are leaders in this fight, developing economies such as China and India have a lot of ground to make up.
“With rapid GDP growth and additional electrification of energy services, electricity demand in China grew by 10% in 2021, faster than economic growth at 8.4%. This increase in demand of almost 700 TWh was the largest ever experienced in China,” concludes IEA. “With demand growth outstripping the increase in supply from low emissions sources, coal was used to meet more than half of the rise in electricity demand.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.