1 00:00:00,520 --> 00:00:02,719 Speaker 1: This is tomern Ands Reese and you're listening to Switched 2 00:00:02,759 --> 00:00:04,960 Speaker 1: on the podcast brought to you by Bloomberg and EF. 3 00:00:05,320 --> 00:00:08,680 Speaker 1: The energy transition is now more complex than ever. Geopolitics, 4 00:00:08,760 --> 00:00:12,440 Speaker 1: trade tensions, and rapid technological change are reshaping markets, creating 5 00:00:12,480 --> 00:00:16,880 Speaker 1: new risks but also new opportunities across clean power, electric vehicles, 6 00:00:16,880 --> 00:00:20,320 Speaker 1: and data centers. Demand is rising quickly, even as supply 7 00:00:20,400 --> 00:00:23,759 Speaker 1: chains titan and policy becomes more fragmented. At the same time, 8 00:00:23,880 --> 00:00:26,800 Speaker 1: falling costs, new business models, and shifting trade flows are 9 00:00:26,800 --> 00:00:29,800 Speaker 1: opening the door to wider adoption and investment. So how 10 00:00:29,800 --> 00:00:31,280 Speaker 1: do we make sense of this new phase of the 11 00:00:31,360 --> 00:00:35,320 Speaker 1: energy transition and where might opportunities be found? Today's episode 12 00:00:35,360 --> 00:00:37,920 Speaker 1: is a little different. At this year's Davos, the only 13 00:00:38,000 --> 00:00:40,760 Speaker 1: F CEO, John Moore, presented a briefing note titled the 14 00:00:40,920 --> 00:00:45,440 Speaker 1: Energy Transition, Finding opportunity and Complexity. In this episode, BNF's 15 00:00:45,479 --> 00:00:48,280 Speaker 1: head of Strategy, kobab Bavner Greek reads that note in 16 00:00:48,440 --> 00:00:51,880 Speaker 1: full and a final message before we begin. Earlier this month, 17 00:00:51,960 --> 00:00:54,160 Speaker 1: John Moore announced that he will retire in April after 18 00:00:54,200 --> 00:00:58,080 Speaker 1: eighteen years with the organization, including twelve as CEO. Bloomberg 19 00:00:58,120 --> 00:01:00,640 Speaker 1: has appointed Albert Chung as a new CEO of Bloomberg 20 00:01:00,680 --> 00:01:02,680 Speaker 1: and EF. We wish John all the very best for 21 00:01:02,720 --> 00:01:06,120 Speaker 1: his retirement. BNF clients can find further transition research by 22 00:01:06,160 --> 00:01:08,800 Speaker 1: heading to BNIF, go on the Bloomberg terminal, or BNIF 23 00:01:08,880 --> 00:01:10,920 Speaker 1: dot com. If you'd like to learn more about how 24 00:01:10,959 --> 00:01:14,680 Speaker 1: BNF approaches strategy research on the energy transition, including developments 25 00:01:14,720 --> 00:01:17,560 Speaker 1: and commodity markets, trends across different sectors, and the cross 26 00:01:17,600 --> 00:01:20,520 Speaker 1: cutting technology shaping the future, you can find more information 27 00:01:20,560 --> 00:01:22,760 Speaker 1: on BNF dot com and if you'd like to speak 28 00:01:22,760 --> 00:01:25,040 Speaker 1: with a member of our sales team about becoming a client, 29 00:01:25,160 --> 00:01:28,360 Speaker 1: email US at Sales BNF at Bloomberg dot net. But 30 00:01:28,480 --> 00:01:30,280 Speaker 1: for now, let's take a look at the opportunities in 31 00:01:30,319 --> 00:01:34,960 Speaker 1: our current era of complexity. 32 00:01:43,800 --> 00:01:49,400 Speaker 2: The energy transition. Finding Opportunity in Complexity a BNF briefing 33 00:01:49,480 --> 00:01:53,680 Speaker 2: note for the World Economic Forum Annual Meeting twenty twenty six. 34 00:01:55,160 --> 00:01:58,800 Speaker 2: The last year has been one of extraordinary complexity, marked 35 00:01:58,800 --> 00:02:03,920 Speaker 2: by huge geopolitical shifts, continued armed conflict, and imminent technological 36 00:02:03,960 --> 00:02:08,720 Speaker 2: disruption from artificial intelligence. The energy transition is central too, 37 00:02:09,080 --> 00:02:13,720 Speaker 2: and deeply impacted by each of these stories. Tariffs and 38 00:02:13,840 --> 00:02:17,960 Speaker 2: other protectionist measures are disrupting trade flows and driving up 39 00:02:18,000 --> 00:02:22,440 Speaker 2: price tags for low carbon technologies, Yet falling manufacturing costs 40 00:02:22,480 --> 00:02:25,960 Speaker 2: have made renewables the cheapest choice for new build electricity 41 00:02:26,200 --> 00:02:29,880 Speaker 2: in much of the world. Data centers and electric vehicles 42 00:02:29,880 --> 00:02:33,920 Speaker 2: are sparking a boom in electricity demand, snarling gridqueues and 43 00:02:34,000 --> 00:02:37,040 Speaker 2: straining supply, yet this could prove to be a boon 44 00:02:37,240 --> 00:02:41,080 Speaker 2: for clean power of all types, power purchase agreements, and 45 00:02:41,360 --> 00:02:46,200 Speaker 2: even carbon capture and storage. Several metals that are critical 46 00:02:46,360 --> 00:02:50,440 Speaker 2: to energy transition technologies are entering a supply crunch, yet 47 00:02:50,480 --> 00:02:54,520 Speaker 2: new sources of supply and an increasingly robust battery recycling 48 00:02:54,560 --> 00:02:59,160 Speaker 2: industry are helping balance the market. Some sectors, such as 49 00:02:59,200 --> 00:03:04,000 Speaker 2: aviation heavy industry, remains stubbornly difficult to decarbonize, yet a 50 00:03:04,040 --> 00:03:08,120 Speaker 2: growing appetite for green products in selected sectors is helping 51 00:03:08,240 --> 00:03:12,640 Speaker 2: nascent technologies get off the ground. Finally, extreme weather events 52 00:03:12,720 --> 00:03:15,639 Speaker 2: caused more than one trillion dollars of damages each year 53 00:03:15,680 --> 00:03:19,040 Speaker 2: between twenty twenty and twenty twenty four, Yet this ongoing 54 00:03:19,080 --> 00:03:22,720 Speaker 2: threat is also paving the way for climate adaptation activities 55 00:03:22,800 --> 00:03:26,399 Speaker 2: and investment around the globe. Embedded in each of these 56 00:03:26,400 --> 00:03:30,560 Speaker 2: complex stories are significant business opportunities, some of which are 57 00:03:30,560 --> 00:03:38,240 Speaker 2: summarized in this white paper. Tariffs, exports and onshoring. Tariffs 58 00:03:38,240 --> 00:03:41,400 Speaker 2: and trade volatility were one of the marquee stories of 59 00:03:41,480 --> 00:03:46,200 Speaker 2: twenty twenty five. Yet, while protectionist measures make headlines inexpensive, 60 00:03:46,240 --> 00:03:50,160 Speaker 2: clean tech exports, especially from China, now helping the energy 61 00:03:50,200 --> 00:03:54,360 Speaker 2: transition expand around the globe. This influx of cheap, low 62 00:03:54,400 --> 00:03:58,280 Speaker 2: carbon technologies is allowing a wider array of companies to 63 00:03:58,320 --> 00:04:01,560 Speaker 2: get into the clean tech game and bring these technologies 64 00:04:01,600 --> 00:04:06,320 Speaker 2: to new shores. US President Donald Trump's second administration has 65 00:04:06,360 --> 00:04:10,600 Speaker 2: brought a marked volatility to this. International trade duties have 66 00:04:10,680 --> 00:04:15,360 Speaker 2: been raised, reversed, or abandoned with little warning, forcing renewable 67 00:04:15,480 --> 00:04:18,880 Speaker 2: energy developers to reroot supply chains, and putting a dent 68 00:04:19,200 --> 00:04:23,240 Speaker 2: in plans to grow US manufacturing. In more general terms, though, 69 00:04:23,480 --> 00:04:27,640 Speaker 2: while the US nacts barriers, China is expanding exports and 70 00:04:27,720 --> 00:04:32,320 Speaker 2: manufacturing investments like never before. Facing low margins at home, 71 00:04:32,560 --> 00:04:37,240 Speaker 2: Chinese clean tech manufacturers are eager to expand their footprint abroad. 72 00:04:37,800 --> 00:04:42,640 Speaker 2: Lower income countries are particularly enthusiastic in courting Chinese investment. 73 00:04:43,279 --> 00:04:46,520 Speaker 2: The share of Chinese clean tech exports to low to 74 00:04:46,760 --> 00:04:50,280 Speaker 2: upper middle income countries rose by an average of twenty 75 00:04:50,360 --> 00:04:53,720 Speaker 2: seven percentage points from twenty twenty two to twenty twenty four, 76 00:04:54,160 --> 00:04:58,760 Speaker 2: contributing to a boom in renewable energy deployment, energy storage projects, 77 00:04:59,120 --> 00:05:03,920 Speaker 2: and electrified transport in emerging markets. Emerging markets FA sub 78 00:05:04,000 --> 00:05:07,839 Speaker 2: balancing act. Low cost imports are allowing these countries to 79 00:05:07,920 --> 00:05:11,640 Speaker 2: shore up their energy supplies and decarbonize much faster than 80 00:05:11,680 --> 00:05:16,200 Speaker 2: once anticipated. Yet they could also undercut attempts to grow 81 00:05:16,279 --> 00:05:21,560 Speaker 2: local manufacturing capacity. Public funding allocated to ensuring supply chains 82 00:05:21,680 --> 00:05:25,919 Speaker 2: is in short supply. Historically low prices the product of 83 00:05:26,040 --> 00:05:30,920 Speaker 2: overcapacity across several sectors, do not help. Some governments are 84 00:05:30,920 --> 00:05:34,800 Speaker 2: thus putting up tariffs and employing strategies to court manufacturing 85 00:05:34,800 --> 00:05:38,839 Speaker 2: investment from China rather than simply importing finished goods, and 86 00:05:39,000 --> 00:05:43,000 Speaker 2: some regions are making serious headway. India, for instance, is 87 00:05:43,080 --> 00:05:47,599 Speaker 2: expanding its local supply chains at pace. The country's photovoltaic 88 00:05:47,680 --> 00:05:51,719 Speaker 2: solder production is moving upstream, with sixty nine gigawatts per 89 00:05:51,839 --> 00:05:55,720 Speaker 2: year of solar cell capacity commissioned or announced since the 90 00:05:55,760 --> 00:05:59,279 Speaker 2: government declared a ban on imported cells from June twenty 91 00:05:59,320 --> 00:06:03,520 Speaker 2: twenty six and planned gigafactories will serve the country's growing 92 00:06:03,600 --> 00:06:10,440 Speaker 2: battery demand. AI data centers. Data centers are nothing if 93 00:06:10,480 --> 00:06:14,400 Speaker 2: not hungry for electricity. BENF expects a fourfold jump in 94 00:06:14,480 --> 00:06:18,880 Speaker 2: power demand from these facilities come twenty thirty five, squeezing 95 00:06:18,920 --> 00:06:23,400 Speaker 2: the world's electrical infrastructure, but also presenting a massive opportunity 96 00:06:23,440 --> 00:06:26,640 Speaker 2: for companies that can help meet this surging demand. To 97 00:06:26,720 --> 00:06:30,520 Speaker 2: put the AI power crunch into perspective, consider how data 98 00:06:30,640 --> 00:06:34,960 Speaker 2: centers are encroaching on global energy supplies. In twenty twenty four, 99 00:06:35,320 --> 00:06:38,200 Speaker 2: these facilities accounted for one point four percent of the 100 00:06:38,240 --> 00:06:42,279 Speaker 2: world's final energy demand. By twenty thirty five, they account 101 00:06:42,320 --> 00:06:46,279 Speaker 2: for four point five percent. Under benf's base case energy 102 00:06:46,320 --> 00:06:50,960 Speaker 2: transition scenario. Such a massive increase casts a long shadow 103 00:06:51,080 --> 00:06:54,200 Speaker 2: over the power system as a whole. In Texas, a 104 00:06:54,320 --> 00:06:57,920 Speaker 2: data center hub, some two hundred gigawatts of demand has 105 00:06:57,960 --> 00:07:00,760 Speaker 2: applied to connect to the power grid, more than double 106 00:07:00,760 --> 00:07:04,440 Speaker 2: peak demand and up from thirty five gigabots in twenty 107 00:07:04,480 --> 00:07:08,400 Speaker 2: twenty two. Of this, one hundred and forty four gigawots 108 00:07:08,680 --> 00:07:11,720 Speaker 2: is from data centers alone, a two hundred and fifty 109 00:07:11,720 --> 00:07:15,560 Speaker 2: percent jump in just two years. While it's unlikely that 110 00:07:15,600 --> 00:07:18,560 Speaker 2: all this demand will ultimately come online. The rate of 111 00:07:18,640 --> 00:07:22,880 Speaker 2: growth illustrates just how quickly the sector is expanding. Getting 112 00:07:22,960 --> 00:07:26,320 Speaker 2: all this supply and demand onto the grid requires not 113 00:07:26,360 --> 00:07:30,720 Speaker 2: only building out hard infrastructure, but also identifying new ways 114 00:07:30,720 --> 00:07:35,400 Speaker 2: of producing and distributing energy. Data centers are pushing developers 115 00:07:35,440 --> 00:07:38,720 Speaker 2: to enter the power market in new ways, locking down 116 00:07:38,760 --> 00:07:44,040 Speaker 2: clean electricity supply through power purchase agreements, restarting old nuclear plants, 117 00:07:44,080 --> 00:07:47,520 Speaker 2: and even getting into the power trading game. The data 118 00:07:47,520 --> 00:07:50,600 Speaker 2: center boom could also prove to be a boon for 119 00:07:50,680 --> 00:07:55,040 Speaker 2: Phase two clean tech technologies like carbon capture and storage. 120 00:07:55,440 --> 00:07:58,600 Speaker 2: Developers are also turning to carbon capture equipped to gas 121 00:07:58,640 --> 00:08:03,080 Speaker 2: plants to power their fee facilities while maintaining their green credentials. 122 00:08:03,520 --> 00:08:07,320 Speaker 2: Two major power purchase agreements from Google and Meta will 123 00:08:07,320 --> 00:08:11,440 Speaker 2: supply facilities with gas fired equipped ccs and could add 124 00:08:11,520 --> 00:08:15,360 Speaker 2: three million metric tons of annual capture capacity to BNF's 125 00:08:15,360 --> 00:08:22,360 Speaker 2: base case scenario by twenty thirty five. Electric vehicles one billion. 126 00:08:22,800 --> 00:08:25,520 Speaker 2: That's how many electric cars could be driving on the 127 00:08:25,560 --> 00:08:29,040 Speaker 2: world roads by twenty fifty, when the electric vehicle fleet 128 00:08:29,360 --> 00:08:32,880 Speaker 2: is expected to outnumber the world's gas cars two to one. 129 00:08:33,120 --> 00:08:37,160 Speaker 2: In BNF's base case scenario. Yet the rise of evs 130 00:08:37,440 --> 00:08:40,800 Speaker 2: is not simply a story of electric drive trains replacing 131 00:08:40,800 --> 00:08:46,880 Speaker 2: their internal combustion counterparts. Instead, fierce competition, especially in China, 132 00:08:46,960 --> 00:08:51,080 Speaker 2: is sparking innovation as automakers reimagine. 133 00:08:50,360 --> 00:08:51,840 Speaker 1: What the passenger car can be. 134 00:08:52,520 --> 00:08:55,400 Speaker 2: More than twenty one million new electric cars were expected 135 00:08:55,440 --> 00:08:58,480 Speaker 2: to drive off dealership lots in twenty twenty five, up 136 00:08:58,520 --> 00:09:01,719 Speaker 2: from seventeen point six million in the year before. By 137 00:09:01,760 --> 00:09:06,240 Speaker 2: twenty thirty, forty percent of newcast sales worldwide could come 138 00:09:06,320 --> 00:09:09,600 Speaker 2: with a plug. That's causing a huge shift away from 139 00:09:09,640 --> 00:09:14,640 Speaker 2: gasoline and diesel and toward electricity. BNF estimates that sales 140 00:09:14,640 --> 00:09:18,520 Speaker 2: of internal combustion engines have been declining since twenty seventeen. 141 00:09:19,040 --> 00:09:22,480 Speaker 2: Data centers may be getting the headlines, but evs are 142 00:09:22,520 --> 00:09:26,760 Speaker 2: set to drive more power demand growth over the next decade. 143 00:09:26,880 --> 00:09:30,520 Speaker 2: As EV's pull demand away from fossil fuels, they are 144 00:09:30,559 --> 00:09:34,920 Speaker 2: contributing to the same electricity supply crunch and opportunities as 145 00:09:35,040 --> 00:09:39,760 Speaker 2: data centers. BNF estimates EV charging will require nine hundred 146 00:09:39,760 --> 00:09:43,800 Speaker 2: and fifty billion dollars of investment over the next fifteen years, 147 00:09:44,080 --> 00:09:47,280 Speaker 2: and utilities are rolling out special tariffs to enable and 148 00:09:47,480 --> 00:09:52,160 Speaker 2: encourage new charging practices. In some ways, evs illustrate the 149 00:09:52,280 --> 00:09:55,240 Speaker 2: challenge of transitioning from a niche product to the mass 150 00:09:55,280 --> 00:09:59,000 Speaker 2: market as year on year growth rates slow. They've also 151 00:09:59,080 --> 00:10:02,480 Speaker 2: faced speed bump in twenty twenty five with a rollback 152 00:10:02,520 --> 00:10:05,960 Speaker 2: of supportive policy in the US and a proposal in 153 00:10:06,000 --> 00:10:10,480 Speaker 2: the EU to water down the block's tailpipe emissions targets. Yet, 154 00:10:10,480 --> 00:10:13,720 Speaker 2: the very fact that evs must now appeal to a 155 00:10:13,760 --> 00:10:17,880 Speaker 2: mass market means that affordability and innovation are the name 156 00:10:17,920 --> 00:10:21,120 Speaker 2: of the game. A relatively new drive train that can 157 00:10:21,160 --> 00:10:25,559 Speaker 2: help a lay range anxiety e revs or range extended 158 00:10:25,679 --> 00:10:29,720 Speaker 2: electric vehicles is on the rise. Car makers are also 159 00:10:29,760 --> 00:10:34,359 Speaker 2: appealing to customers with automated driving and other intelligent features, 160 00:10:34,559 --> 00:10:37,800 Speaker 2: and while robotaxis are a small part of the auto market, 161 00:10:38,080 --> 00:10:40,360 Speaker 2: being IF expects the number of vehicles on the road 162 00:10:40,679 --> 00:10:46,440 Speaker 2: to more than double this year. Renewables around the world, 163 00:10:46,679 --> 00:10:51,119 Speaker 2: a remarkable shift towards clean sources of electricity is underway. 164 00:10:51,520 --> 00:10:56,360 Speaker 2: The evolution isn't about climate goals, however, it's about economics. 165 00:10:57,040 --> 00:11:00,360 Speaker 2: Renewables are now the obvious opportunity when it comes to 166 00:11:00,400 --> 00:11:04,560 Speaker 2: supplying the world's energy needs. In countries accounting for two 167 00:11:04,640 --> 00:11:07,680 Speaker 2: thirds of the world's power supply. Wind or solar is 168 00:11:07,720 --> 00:11:11,160 Speaker 2: the cheaper source of new bulk electricity generation. On a 169 00:11:11,200 --> 00:11:15,520 Speaker 2: per kilobot hour basis, a new solar project is cheaper 170 00:11:15,880 --> 00:11:19,559 Speaker 2: than continuing to run coal or gas in Europe, India 171 00:11:19,600 --> 00:11:24,000 Speaker 2: and Brazil, and wind is cheaper in China. That influx 172 00:11:24,040 --> 00:11:27,480 Speaker 2: of clean power is fundamentally changing the world's energy mix. 173 00:11:28,000 --> 00:11:31,600 Speaker 2: Every year since twenty ten has posted a record for 174 00:11:31,640 --> 00:11:36,480 Speaker 2: renewables additions. Installed solar capacity has surpassed that of coal, 175 00:11:36,800 --> 00:11:40,199 Speaker 2: and while coal still produces more energy each year than solar, 176 00:11:40,520 --> 00:11:44,480 Speaker 2: that could soon change. Output from renewables is expected to 177 00:11:44,520 --> 00:11:48,520 Speaker 2: nearly quadruple by twenty fifty. That's compared with twenty five 178 00:11:48,559 --> 00:11:51,880 Speaker 2: percent growth between twenty twenty four and twenty fifty for 179 00:11:52,040 --> 00:11:56,200 Speaker 2: natural gas and a long term decline for coal and oil. 180 00:11:57,000 --> 00:12:01,040 Speaker 2: Simply flooding the grid with renewables isn't a bible strategy. 181 00:12:01,520 --> 00:12:04,880 Speaker 2: Regions with excellent wind and solar resources may not be 182 00:12:04,920 --> 00:12:09,080 Speaker 2: located near high population demand centers. Solar and wind generate 183 00:12:09,160 --> 00:12:11,600 Speaker 2: only when the sun shines, are the wind blows, and 184 00:12:11,760 --> 00:12:16,079 Speaker 2: excess output from renewables can overwhelm the grid. Forcing utilities 185 00:12:16,080 --> 00:12:19,880 Speaker 2: to curtail output, Yet that is creating an opening for 186 00:12:19,960 --> 00:12:24,400 Speaker 2: storage solutions. Batteries and energy storage are getting cheaper with 187 00:12:24,520 --> 00:12:28,520 Speaker 2: each passing year. Lithium ine battery prices have fallen to 188 00:12:28,600 --> 00:12:30,760 Speaker 2: one hundred and eight dollars per kilo what hour in 189 00:12:30,800 --> 00:12:34,520 Speaker 2: twenty twenty five, down eight percent year on year, and 190 00:12:34,640 --> 00:12:37,880 Speaker 2: down from nearly one thousand, five hundred dollars per kilo 191 00:12:37,920 --> 00:12:41,400 Speaker 2: what hour in the year twenty ten. That in turn 192 00:12:41,760 --> 00:12:47,400 Speaker 2: is decreasing the cost of colocating storage solutions with renewable output. Today, 193 00:12:47,600 --> 00:12:51,360 Speaker 2: building a colocated project is around twenty two percent less 194 00:12:51,360 --> 00:12:56,200 Speaker 2: expensive than building separate solar and storage arrays, suggesting that 195 00:12:56,280 --> 00:12:59,640 Speaker 2: the next phase of opportunity may lie in how renewable 196 00:12:59,640 --> 00:13:06,840 Speaker 2: technologies work together. Metals, the energy transition is a trillion 197 00:13:06,880 --> 00:13:11,000 Speaker 2: dollar opportunity for the metals industry. Around six trillion dollars 198 00:13:11,000 --> 00:13:14,480 Speaker 2: of metals will be needed between now and twenty fifty 199 00:13:14,720 --> 00:13:18,720 Speaker 2: to meet demand in benef's economic transition scenario. In a 200 00:13:18,760 --> 00:13:22,320 Speaker 2: scenario that achieves net zero, that figure jumps to ten 201 00:13:22,400 --> 00:13:26,080 Speaker 2: trillion dollars, from the steel and aluminium in wind and 202 00:13:26,120 --> 00:13:30,880 Speaker 2: solar farms to the graphite and lithium powering electric vehicle batteries. 203 00:13:31,160 --> 00:13:36,160 Speaker 2: Metals are everywhere in the technologies, enabling a low carbon future. 204 00:13:36,679 --> 00:13:40,920 Speaker 2: The resulting shifts in market balance illustrate not only where 205 00:13:40,960 --> 00:13:46,240 Speaker 2: opportunities exist, but also how producers and refiners are already 206 00:13:46,320 --> 00:13:51,040 Speaker 2: stepping in to meet growing demand. Consider lithium, a critical 207 00:13:51,080 --> 00:13:55,680 Speaker 2: component of both electric vehicle batteries and energy storage solutions. 208 00:13:56,400 --> 00:14:00,120 Speaker 2: Lithium demand triples by twenty thirty five in benf it's 209 00:14:00,200 --> 00:14:04,560 Speaker 2: most recent Transition Metals outlook. Yet there is no supply 210 00:14:04,640 --> 00:14:08,120 Speaker 2: crunch on the horizon, as new sources in South America 211 00:14:08,160 --> 00:14:12,400 Speaker 2: and Africa and a growing battery recycling market are helping 212 00:14:12,559 --> 00:14:17,199 Speaker 2: keep the market stocked. Copper, by contrast, represents an opportunity 213 00:14:17,600 --> 00:14:21,880 Speaker 2: still waiting to be seized. Declining all grades at existing 214 00:14:21,960 --> 00:14:25,480 Speaker 2: minds and limited investment into new deposits have put a 215 00:14:25,560 --> 00:14:30,240 Speaker 2: lid on expected supply. A massive deficit amounting to some 216 00:14:30,400 --> 00:14:35,000 Speaker 2: nineteen million metric tons by twenty fifty looms if new 217 00:14:35,120 --> 00:14:39,720 Speaker 2: mines and recycling facilities are not built over the next decade. 218 00:14:39,760 --> 00:14:44,120 Speaker 2: The data center boom is further exacerbating this tight copper market. 219 00:14:44,600 --> 00:14:48,240 Speaker 2: New facilities are denser and more energy intensive, and thus 220 00:14:48,320 --> 00:14:53,040 Speaker 2: require more copper than traditional facilities. While demand from data 221 00:14:53,080 --> 00:14:56,680 Speaker 2: centers is only a small sliver of overall supply, it 222 00:14:56,760 --> 00:14:59,960 Speaker 2: suggests that big tech could face stiff competition for FI 223 00:15:00,080 --> 00:15:06,560 Speaker 2: this key metal hard to abate sectors. Some sectors, including 224 00:15:06,640 --> 00:15:11,440 Speaker 2: shipping and aviation, heavy industry, and baseload clean power, have 225 00:15:11,600 --> 00:15:18,360 Speaker 2: proven to be particularly complex to decarbonize. Hydrogen, carbon capture, biofuels, 226 00:15:18,640 --> 00:15:22,320 Speaker 2: nuclear and heat pumps sit at the heart of efforts 227 00:15:22,360 --> 00:15:26,320 Speaker 2: to decarbonize these stubborn sectors, but none of them are 228 00:15:26,400 --> 00:15:30,400 Speaker 2: economic on their own. The scaling opportunity will lie in 229 00:15:30,520 --> 00:15:35,160 Speaker 2: finding innovative business models and formulas to de risk project 230 00:15:35,200 --> 00:15:39,600 Speaker 2: financing and to support this. Both robust policy and a 231 00:15:39,680 --> 00:15:43,960 Speaker 2: market that can support green premium prices are required. While 232 00:15:44,040 --> 00:15:47,120 Speaker 2: this may sound complex to achieve, there are some early 233 00:15:47,200 --> 00:15:51,200 Speaker 2: success stories. Take green steel as an example. Over the 234 00:15:51,240 --> 00:15:54,560 Speaker 2: past three years, one hundred and ninety one off takes 235 00:15:54,600 --> 00:15:58,720 Speaker 2: have been signed for clean steel globally. Automakers and auto 236 00:15:58,720 --> 00:16:02,080 Speaker 2: suppliers have account for more than a quarter of green 237 00:16:02,160 --> 00:16:07,000 Speaker 2: steel offtake agreements tracked by BNF. Two elements are key 238 00:16:07,400 --> 00:16:10,400 Speaker 2: to the dominance of the auto sector in clean steel 239 00:16:10,440 --> 00:16:14,520 Speaker 2: off takes. First, the steel value chain for autos is 240 00:16:14,760 --> 00:16:19,520 Speaker 2: very short, unlike other manufacturing value chains. This means green 241 00:16:19,600 --> 00:16:23,520 Speaker 2: demand signals from consumers are not watered down through a 242 00:16:23,600 --> 00:16:28,640 Speaker 2: long chain of intermediaries, unlike in other sectors. Costly clean 243 00:16:28,720 --> 00:16:32,560 Speaker 2: steel plants are thus more bankable, as these customers are 244 00:16:32,600 --> 00:16:36,120 Speaker 2: more willing to sign a binding price premium off take, 245 00:16:36,520 --> 00:16:40,200 Speaker 2: and second, the car companies signing these off takes tend 246 00:16:40,240 --> 00:16:43,760 Speaker 2: to make higher value cars, for which the price premium 247 00:16:43,760 --> 00:16:47,080 Speaker 2: of clean steel in the car is a minor inconvenience 248 00:16:47,120 --> 00:16:50,640 Speaker 2: to the buyer. An emerging business model that could help 249 00:16:50,720 --> 00:16:55,440 Speaker 2: kickstart small volumes of green materials is book and claim, 250 00:16:55,680 --> 00:16:59,840 Speaker 2: which decouples climate benefits from the physical delivery of a product. 251 00:17:00,400 --> 00:17:05,440 Speaker 2: Companies such as Microsoft have been buying environmental attribute certificates 252 00:17:05,720 --> 00:17:09,840 Speaker 2: or EACs from buy fuels, clean steel, and clean cement 253 00:17:09,920 --> 00:17:13,280 Speaker 2: companies as a way of funding the green premium required 254 00:17:13,320 --> 00:17:17,800 Speaker 2: to finance these projects, but then buying nearby gray fuels 255 00:17:17,920 --> 00:17:22,600 Speaker 2: or materials to serve its immediate needs. If widely accepted, 256 00:17:22,920 --> 00:17:26,000 Speaker 2: this book and claim model could ease the path for 257 00:17:26,160 --> 00:17:30,679 Speaker 2: end customers to slash emissions from materials use, simplify supply 258 00:17:30,760 --> 00:17:37,800 Speaker 2: chain management, and help finance green material production, climate adaptation activities, 259 00:17:39,160 --> 00:17:42,960 Speaker 2: climate related damages cost the global economy one point four 260 00:17:43,200 --> 00:17:47,200 Speaker 2: trillion dollars in twenty twenty four, according to data from 261 00:17:47,200 --> 00:17:51,600 Speaker 2: Bloomberg Intelligence. That represents a tenfold jump from the year 262 00:17:51,600 --> 00:17:55,879 Speaker 2: two thousand and with virtually every year breaking a temperature record, 263 00:17:56,359 --> 00:18:00,600 Speaker 2: these financial impacts are only going to get worse. Adaptation 264 00:18:00,720 --> 00:18:04,840 Speaker 2: to climate change is thus no longer optional. Instead, it's 265 00:18:04,880 --> 00:18:09,840 Speaker 2: an imperative, and viewed correctly, it's also a trillion dollar opportunity. 266 00:18:10,480 --> 00:18:15,320 Speaker 2: Climate adaptation is a particularly complex challenge. In many areas 267 00:18:15,320 --> 00:18:18,439 Speaker 2: of the energy transition, a single broad solution can be 268 00:18:18,480 --> 00:18:22,919 Speaker 2: deployed to address an array of challenges renewables for clean power, 269 00:18:23,160 --> 00:18:27,280 Speaker 2: electric vehicles for clean transport, and the like. By contrast, 270 00:18:27,600 --> 00:18:32,320 Speaker 2: adaptation lends itself to no single solution. Each locality faces 271 00:18:32,400 --> 00:18:36,440 Speaker 2: its own combination of extreme weather events and potential solutions. 272 00:18:37,119 --> 00:18:41,040 Speaker 2: That said, global markets are beginning to respond to these challenges. 273 00:18:41,640 --> 00:18:44,760 Speaker 2: In the short term, companies are leaning on insurance to 274 00:18:44,920 --> 00:18:48,880 Speaker 2: ameliorate the worst damages. In the longer term, a new 275 00:18:49,000 --> 00:18:54,000 Speaker 2: market for adaptation solutions will almost surely arise, and revenue 276 00:18:54,040 --> 00:18:57,840 Speaker 2: opportunity could find its way to beneficiaries as diverse as 277 00:18:57,880 --> 00:19:02,240 Speaker 2: contractors that build adaptation in front structure, or startups developing 278 00:19:02,280 --> 00:19:08,360 Speaker 2: forecasting software, or commodity suppliers developing resistant materials. The hopeful 279 00:19:08,440 --> 00:19:11,360 Speaker 2: part of this story is that we're already spending more 280 00:19:11,400 --> 00:19:15,600 Speaker 2: than one trillion dollars a year reacting to damage. By 281 00:19:15,640 --> 00:19:19,679 Speaker 2: guiding finances towards resilience, money that would otherwise have been 282 00:19:19,720 --> 00:19:23,720 Speaker 2: spent on recovery can be guided toward further adaptation efforts, 283 00:19:24,119 --> 00:19:28,480 Speaker 2: sparking a positive feedback loop and supporting a nascent industry. 284 00:19:37,440 --> 00:19:40,560 Speaker 2: Today's episode of Switched On was produced by Cam Gray 285 00:19:40,760 --> 00:19:43,159 Speaker 2: with production assistance from Kamala Shelling. 286 00:19:43,320 --> 00:19:46,520 Speaker 1: Bloomberg NEF is a service provided by Bloomberg Finance LP 287 00:19:46,680 --> 00:19:49,680 Speaker 1: and its affiliates. This recording does not constitute, nor should 288 00:19:49,680 --> 00:19:53,000 Speaker 1: it be construed as investment invise, investment recommendations, or a 289 00:19:53,080 --> 00:19:55,760 Speaker 1: recommendation as to an investment or other strategy. 290 00:19:55,760 --> 00:19:59,160 Speaker 2: Bloomberg ANNIAF should not be considered as information sufficient upon 291 00:19:59,240 --> 00:20:02,360 Speaker 2: which to base an investment decision. Neither Bloomberg Finance LP 292 00:20:02,640 --> 00:20:05,800 Speaker 2: nor any of its affiliates makes any representation or warranty 293 00:20:05,920 --> 00:20:08,959 Speaker 2: as to the accuracy or completeness of the information contained 294 00:20:09,000 --> 00:20:11,520 Speaker 2: in this recording, and any liability as a result of 295 00:20:11,560 --> 00:20:13,520 Speaker 2: this recording is expressly disclaimed.