COP26 – A Secular Trend - Alpha Edge Investing

COP26 – Conference of Parties with 26 nations participating, including the US and China to combat global climate change.
China: The country is making significant investments in green technology, and it aims to peak its carbon dioxide (CO2) emissions by 2030 and achieve carbon neutrality by 2060.
U.S.: President Joe Biden will enhance the country’s green efforts, with important implications for the renewable energy industry and the full ecosystem around it (fiscal policies)

COP26 – Investment Implications

growth in renewable energy may be driven by falling costs.
solar power continues to take over from coal as the cheapest source of electricity in more and more regions.
wind and solar are now the cheapest new sources of power in countries that represent around 75% of global GDP.

Penetration in Europe and the US could increase significantly, given increased affordability, efficiency, climate awareness, subsidies, and more charging stations.
EV penetration may increase to more than 50% over the next five to 10 years, according to Bloomberg.
The Chinese State Council approved a plan for EV transition that could see penetration rise to an estimated 20% by 2025 and 50% by 2035.
The UK joined Ireland and the Netherlands in signaling a ban on sales of new petrol and diesel cars by 2030, while France and Spain, like California, are targeting 2035.

Increased EV production: EV cars use three times more semiconductors than combustion engine cars. Also, driverless cars (a possible trend over the super-secular horizon) use even more microprocessors.
5G: Devices designed for 5G communications tend to have two or three times as many semiconductors as similar 4G devices.
Robotization and the “internet of things” (IoT): The automation of many tasks via digital networks involves more semiconductor use.
Power efficiency: Cleaner manufacturing processes require cleaner tools, which need more and better chips to regulate voltage and save power.