Blue Is The New Green
The OECD predicts that the $1.5 trillion blue economy will expand to $3 trillion by 2030. Additionally, there are currently over 30 million people employed directly in the ocean economy, a number that expands by 100 million if artisanal fisheries around the globe are included.
+The Ocean Economy in 2030 - OECD
It is generally agreed that the ocean economy consists of the following core industries - Seafood, Energy, Ports, Maritime Transportation, and Coastal and Marine Tourism.
While offshore oil and gas is a dominant segment of the blue economy at this time, Emerging Oceans is much more interested in the transition away from fossil fuels and where offshore renewable energy will contribute to this trend (at this time mostly through the offshore wind industry).
Here are some of this weeks stories in these core blue economy sectors.
Marine Coastal Tourism
You aren’t going to find much sympathy for the cruise industry or those who choose to see the world that way in this newsletter. That being said, it is a bafflingly large industry and vitally important economically to the ports they ruin visit, around the world.
Cruise lines are having a rough time getting back in action, mainly because they are disgusting petri dishes and floating environmental disasters.
+Avoid cruise travel forever, says US CDC (ok, that’s not exactly what they said) - Reuters
+Norwegian Cruise Line cancels sailing as Omicron cases surge - GCaptain
Seafood
Aquaculture, already the fastest growing segment in food, is an important part of meeting global food demand.
However, aquaculture is not without its faults and is going to have to step up its game. Source and composition of feed is part of the issue (ie, grinding up little ocean fish to feed big ocean fish often has net negative protein production) as are land use challenges (destroying mangroves to make room for shrimp farms).
Developments in the feed itself and the technology to deploy it more efficiently will be big targets of investment in the coming decade.
+Will future aquafeeds turn to insects of single-cell proteins? - The Fish Site
+Global Fish Production - Our World In Data
Offshore Wind
While blue economy pundits often talk about offshore renewable energy in general, what they are really talking about in the near term is offshore wind. While companies are out there doing interesting research into tidal and wave energy, no other form of offshore renewable is close to being ready for roll-out, especially at scale.
“New York Governor Kathy Hochul has announced a “nation-leading”...investment in offshore wind”, which is not difficult considering the US is embarrassingly behind other countries.
+New York state announces $500 million investment in offshore wind - GCaptain
Additionally, companies in this industry have not fared well in the equity markets over the last year. At what point is there a compelling value play?
Shipping
If there is one historically dirty industry that seems united in its call for carbon pricing, it is shipping. While politicians are playing for soundbites and the next term’s elections, shipping industry execs are trying to make 20-30 year investment decisions about their assets.
Unlike other global industries, the International Maritime Organization (IMO) is a strong UN organized governing body for the shipping industry, giving it a uniquely respected place to set binding global rules.
Major larger shipping companies are already upgrading fleets to alternative fuels. LNG is the dominant available choice, but is viewed as a transition fuel.
Everything is on the table, including sails and kites that can reduce emissions on certain routes by 90%. (On a personal note, I hope I get to witness this some day. I mean, how cool!).
+Giant kites to drag cargo ships in bid to cut down carbon - The Independent
23 lenders to the global shipping industry have disclosed emissions from their shop loan portfolios.
+Poseidon Principles Annual Disclosure Report 2021
Finance
Follow the money. Despite what the naysayers and prognosticators say about ESG, when a company like AXA begins to price climate into its models things will change.
“Sustainable Development Goal 14 Life Below Water is the least financed of the UN Goals, receiving just 1% of total climate finance.”
+Build Back Bluer - Global Banking and Finance
+Cost of neutralising carbon emissions soars as demand escalates - FT
+Seven Capital Markets Trends to Watch in 2022 - Planet Tracker
Energy Transition
Despite the dirty nature of mining, the electrification of everything is going to require metals and minerals. Latin America is positioned to benefit from this boom and will be a specific region of focus for me going forward.
“The ‘Lithium Triangle’ - Argentina, Bolivia and Chile - controls 58% of the world’s 78 million metric tons of lithium reserves. The International Energy Agency predicts that if the world successfully moves to net-zero emissions by 2050, the demand for lithium will balloon 42 times by 2040 (from about 200,000 to 8.4 million metric tons).”
Let’s not forget that Chile and Peru, with Mexico in a distant third, already control 40% of copper reserves.
+Jack M. Mintz: Latin America: mining’s new Middle East - Financial Post
Keep an Eye on the Elections
“Because Chile bashes out nearly 30% of global copper supply and 20% of lithium, consumers will already need ‘another Chile’s worth’ of copper once EV manufacturing hits its stride around 2030.”
+A leftist firebrand is taking power in Chile. It’s a red flag for the EV revolution - Barron’s
(On the Latam note, It’s worth keeping in mind that Brazil will slip into campaign mode with its presidential election happening in October. More on this important election to come.)
Final Note: A Lesson In Supply Chain Resiliency
+Latin Americas drug gangs have had a good pandemic - Economist