As many of you will know, I have been preparing a second edition of my book, Commodities: 50 Things You Really Need To Know. The original book, published in 2015 was an introduction for many investors unfamiliar with commodity markets. The second edition builds on that work, and goes into greater depth on lots of different issues – everything from the commodity capital cycle and previous energy transitions, to the difference between thermal and met coal, the dry bulk and tanker markets and onto less well known commodities such as hydrogen and palm oil.
One particular chapter was almost three times longer than any other chapter. And I still felt that I’d barely scratched the surface of what I had (needed) to say on the subject.
The title of that chapter was simply, ‘Carbon markets’.
It suddenly hit me that the price of carbon also underpinned everything I had discussed throughout the rest of the book. It affects everything from the pressure to divest from fossil fuel assets and its impact on the investment cycle to decarbonising the power grid and confusion over the role of met coal. It affects the speed at which commodities are transported around the globe and the investment plans of the ship owners, and it also affects the economics of hydrogen and the environmental trade-offs from palm oil plantations.
It’s still very early in the development of these markets. There are opportunities for investors who understand commodities (the role of scarcity), and currencies (the role of trust). The carbon price is the currency of decarbonisation.
As they evolve they will increasingly influence the rest of our lives and certainly impact commodity markets. The idea that the state, even via market mechanisms will have an increasing role is sure to be anathema to many of my readers, whatever your views on climate change.
But I seek to play the game that I see in front of me, rather than the one I wish it to be.
With that in mind, at the start of November I decided to experiment launching a separate newsletter called Carbon Risk. The idea being that I take subscribers along on my journey in carbon markets, and hopefully benefitting all of us.
All of the words from that chapter of the book came pouring out, and more, much more. While I could have soldiered on and completed the book for my ideas to see the light of day, I felt that that would just take too long.
The experiment has been much more successful than I’d ever imagined.
I will continue to publish on Materials Risk, but probably only on a monthly basis, delving into some of the larger macro and commodity related trends that I’m focused on plus the lessons I’ve learned from the best books about markets and investing.
Thank you to all the subscribers that have continued to support me over the years.
Until next time you are all very welcome to join me over at Carbon Risk. It’s got all the ingredients of an eventful journey.
Oh, and I will get round to finishing the book…sometime, very soon.
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