Zeus: A contrarian outlook for climate investors in 2025
Welcome to Callaway Climate Insights. This is our last newsletter of the year. Please have a safe and festive holiday season and we'll see you in January.
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(David Callaway is founder and Editor-in-Chief of Callaway Climate Insights. He is the former president of the World Editors Forum, Editor-in-Chief of USA Today and MarketWatch, and CEO of TheStreet Inc. His climate columns have appeared in USA Today, The Independent, and New Thinking magazine).
SAN FRANCISCO — Even in a year of extraordinary and unprecedented news events, December has stood out.
The rapid collapse of the Syrian regime of Bashar al-Assad, the fall of governments in both France and Germany, the brief declaration of martial law in South Korea, and the dramatic scaling of Russian missile attacks on Ukraine are enough to shake even the most hardened political critic.
And President-elect Donald Trump hasn’t even taken the oath of office yet.
Against such a backdrop, and with stock prices closing out the year at or near record highs, it would be tempting for most climate investors to cash out and just hide under a rock for a few months. Except the rock might wash away in the December floods or get scalded in the rare winter wildfires of California as 2025 approaches.
Still, there is plenty for renewable energy investors and advocates to get excited about as we enter a new era. Close to home for us, both Lake Mead and Lake Shasta, California’s two largest reservoirs, have reported that after years of drying out in drought, they are filling back up; a crucial development for the water-starved Western states and their important agricultural industries.
Other reasons for optimism can also be found amid the foreboding headlines.
David Callaway explains why this column is called Zeus in The coming battle with the climate gods: How mortal innovators and investors will save the planet.
We expect that among the carnage of Republican attacks on ESG and President Joe Biden’s climate initiatives next year, we’ll start to see some areas of the renewable movement not only survive but begin to thrive under different strategies.
The most obvious one will be improvements to our national and local electric grids as tech companies race to build new data centers for AI research, demanding more and more electricity. While gas is proving an early winner in some of these projects, basically because it is readily available, some of the tech companies such as Microsoft MSFT 0.00%↑ and Amazon AMZN 0.00%↑ are planning to use nuclear energy.
That should lead to more investment in nuclear, including so-called small modular reactors, as well as the holy grail of nuclear research, fusion. Should we get a significant breakthrough in fusion research from the more than 50 funded projects out there trying to crack the technology, it could change the power landscape.
Likewise, solar power is likely to benefit from the rush to build data centers, as well as the electric grid updates, which will potentially remove or reduce massive backlogs in adding new sources of electricity such as cable, and in some cases wind and battery.
Solar stocks have collapsed in the past few years under a combination of higher interest rates and supply chain issues, even as the Biden team has promoted renewable projects. While Trump is no fan, any massive energy push is likely to benefit solar, which is why we see it as a bit of a contrarian play going forward.
Carbon storage and removal is another obvious favorite for growth in the next two years as oil and gas companies produce more fossil fuels. The technology, in various phases of scaling at more than 300 startups as well as the big players, is the preferred strategy of the fossil fuel industry to clean up emissions while continuing to drill.
Electric vehicle and battery power companies may seem unlikely beneficiaries of a Trump administration hell bent on reversing Biden’s EV subsidies, but we expect Elon Musk to finesse this one with the boss. Yes, likely in favor of Tesla TSLA 0.00%↑but also in favor of building out much needed charging capability and power wall products that ultimately will help EVs, even if they are built in the name of increased power capacity. And yes, we expect Rivian RIVN 0.00%↑ will survive the onslaught.
Finally, the outlook for global agreement on mitigating climate change and helping poorer countries survive global warming is so depressed after the latest United Nations summit, COP29, that expectations for COP30 next November in Belem, Brazil, are so low they can only go up.
Latin America economies are slowing, as our colleague Michael Molinski wrote this week, leaving the region in difficult straits in terms of investing in a renewable energy transition. But progress has been made on slowing damages to the Amazon Basin and we expect some sort of global deal tied to preserving the Amazon that also benefits South American countries.
And that deal will cap an unlikely 2025 that just might see more from the climate investing and finance world than anyone has a right to speculate on now. But hey, it’s the holidays. Have a safe and festive season!
Read more Zeus columns from David Callaway:
Zeus: 5 things climate investors should watch for in Trump's second term
Zeus: Clean energy growth will change our electric systems forever
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