Are electric vehicles (“EVs”) really that good for the environment?
It’s a question we get a lot from readers.
And in today’s mailbag, our tech expert, Jeff Brown, lifts the lid on a dirty secret EV makers don’t want us to know about.
You’ll also hear from former Wall Street insider Nomi Prins. She looks at whether bitcoin is as big an energy problem as its critics claim.
Finally, we’ll turn to the crypto market… and a 13,943% gain Teeka Tiwari notched in the model portfolio at our Palm Beach Confidential advisory.
So, let’s jump in with that question about EVs’ green credentials…
Reader question: With the push to eliminate fossil fuels in vehicles by 2050, it’s my understanding the world does not even come close to mining the quantity of metals needed – lithium, copper, aluminum, nickel, etc. If this is correct, isn’t the outcome significantly higher prices for these EV metals?
Maybe the one industry more reviled than oil and gas is mining, but doesn’t the world need huge expansion of mines and mining capacity and without this the world has no chance to come close to eliminating fossil fuels for vehicles?
– James D.
Jeff’s response: Hi, James. You’re right. But many in the EV industry have been oblivious to, or have ignored, this inconvenient truth.
Take lithium. It’s a critical input into electric vehicle (“EV”) batteries. And as you can see, demand is overtaking supply.
What you’re looking at is lithium demand (red bars) compared with supply (blue bars). You’ll notice that demand began to outpace supply in 2020. And analysts forecast a widening gap through 2030. That’s a major problem for the industry.
It’s not a surprise. 2020 was the first year EV adoption took off with about 3 million EV sales worldwide. By 2021, there were more than double that with about 6.6 million.
If the world has any hope of hitting the aggressive EV adoption goals you referenced, we need more supply of battery metals such as lithium. And we need them quickly.
The answer seems obvious: Mine more lithium. The problem is a new lithium mining project can take 5 to 10 years to come online. And that’s if everything goes well. It then takes another six months for EV battery makers to approve the lithium quality… and another two years to ramp up production capacity.
The result is clear: EVs are getting costlier to build.
The cost to make an EV battery – measured in price per kilowatt hour – fell from 2013 to 2021. But something surprising happened in 2022 (red bar on the chart). The costs went up. And it has everything to do with commodity constraints.
There are also lots of environmental issues related to mining battery metals.
One, it’s energy intensive. Mining and excavation equipment don’t run on solar panels. They run on fossil fuels.
There are also serious concerns about the kind of labor used in mining.
More than two-thirds of the world’s cobalt is mined in the Democratic Republic of Congo in central Africa, where child labor is rife. Kids mine cobalt there under dangerous conditions.
Tesla is shifting to cobalt-free batteries. And the company sources the cobalt it still requires from non-conflict areas that don’t use child labor.
The rest of the industry doesn’t seem to care much. Nor do the folks who use their EVs to virtue signal their green credentials. But much of the power that charges the batteries in their cars comes comes from burning fossil fuels.
My hope is that industry executives and politicians have more honest discussions about producing EVs – including batteries and the metals required to make them.
Better still, we need to get serious about developing technology that can provide abundant clean energy. In particular, nuclear fusion. Our aim should be to fuel our EVs from a 100% clean energy source. Otherwise, what’s the point?
Now, let’s tackle a common complaint about the world’s largest cryptocurrency, bitcoin (BTC).
Figures from Columbia University show that bitcoin uses about 150 terawatt-hours of electricity a year.
This emits 65 megatons of carbon dioxide. That’s comparable to the annual emissions of Greece – a country of more than 10 million people.
But one Nomi reader wonders whether the traditional financial system is an even worse environmental offender…
Reader comment: I find it nearly impossible to accept the claim that Bitcoin mining uses more electricity than the entire legacy financial system. There must be millions of computers and large computer systems running to keep track of all the money that flows all over the Earth!
– Thomas R.
Nomi’s response: Thanks, Thomas. It’s a sharp observation.
It’s true. Bitcoin uses a lot of energy. That’s because the folks that verify bitcoin transactions – knowns as “miners” – must solve complex math puzzles first. And this requires a lot of computing processing power.
But I mentioned in a recent dispatch of my Inside Wall Street e-letter, bitcoin miners are energy buyers of last resort. In other words, a guaranteed buyer of cheap energy that nobody else wants to buy.
If there is a stranded or inaccessible source of cheap energy that can’t be economically transported – say an isolated source of hydroelectric power – bitcoin miners will be there to provide a bid.
The legacy financial system doesn’t enjoy this advantage. It needs electric grids located close enough to residential or industrial areas to keep track of all the electronic fiat money deposits in the world.
And you’re right… All this money moving takes millions of computers and extensive computer systems running on massive amounts of energy.
A research paper published in June by Michel Khazzaka, an IT engineer, cryptographer, and consultant, calculates that bitcoin uses at least 28 times less energy than the fiat payment system does globally.
So, you’re right: The legacy financial system is probably much more wasteful than bitcoin. It’s just not something the bitcoin naysayers are willing to admit.
Finally, a note on 13,943% gain for longtime Teeka readers who acted on his recommendation to buy Binance Coin (BNB).
It’s the coin cryptocurrency exchange Binance issues.
Teeka recommended it at Palm Beach Confidential as a picks-and-shovels play on the growth of the crypto market in November 2017.
And last month, he recommended it again because he believed it would benefit from the collapse of FTX, one of its largest rivals.
It’s an oversimplification. But you can think of BNB as “stock” in Binance. It increases in value as the exchange grows.
But in the light of the collapse of rival exchange FTX… and other bankruptcies that have rocked the crypto market… at least one Teeka reader started to get anxious about this holding.
As this email that Teeka received on Monday shows…
Over the past few weeks, I’ve watched on the sidelines as the FTX and now BlockFi [the popular crypto lender that went belly-up last month] debacle has crushed the crypto industry.
I’m anxiously waiting to see if Binance is next, as this coin represents a decent portion of my crypto portfolio.
I’m concerned this exchange will be next to pause their withdrawals. I have no crypto on Binance. But I’m concerned this could cause the Binance Coin to price to go down substantially.
Maybe now is a good time to take profits?
– Dallas A.
And Teeka has similar concerns…
Yesterday, he recommended Dallas and his other subscribers sell 70% of their stake in BNB and lock in a 13,943% gain.
That’s enough to turn every $1,000 stake into $140,430.
As Teeka wrote in his sell alert…
As an exchange, Binance has stood the test of time. And it said it’s committed to transparency – something lacking on other centralized exchanges like FTX.
But since then, regulators have increased their scrutiny of the crypto space in general… and Binance in particular. It’s possible they could push Binance out of major markets like the U.S.
And while Binance has improved transparency of its assets, it’s failed to do so with its liabilities.
Failing to disclose liabilities was a major problem with FTX. And as the largest exchange in crypto, we’d like to see Binance provide more transparency about its balance sheet.
But Teeka is still recommending his readers hang on to the remaining 30% of their stake in BNB. As he wrote in his alert…
Binance is still one of the best crypto exchanges on the market. If it survives this Crypto Winter and passes regulatory scrutiny, we expect it to rally to new highs. But given current uncertainty in the space, we don’t want to risk too much on that outcome.
Remember, if you own crypto and are still holding your cryptocurrency on Binance or any other centralized exchange, it’s best to move your holdings to a wallet so you can self-custody them instead.
As FTX customers found out the hard way, if an exchange gets into trouble, you could lose any coins you’ve stored with it.
So, check our free one-page guide on how to do that here.
That’s all for this week.
The Legacy Research offices will be closed until after the holidays. So you won’t be getting your usual mailbag edition of The Daily Cut next Friday or the Friday after.
But I have a something special lined up for you instead.
We know it’s been a tough year…
So next week, I’ll be sharing with you an “old-money” secret that can help you build wealth not just for a lifetime… but for generations.
And the Friday after, I’ll share with you an insight from Andrew Packer.
He’s the chief analyst over at our Palm Beach Letter advisory. And he’s an expert at forcing income out of the stock market… no matter the market conditions.
Andrew will detail a strategy you can use to create your own dividend on stocks that don’t pay them.
As always, you can write us your questions, concerns, and comments at [email protected]. We look forward to hearing from you in the new year.
Editor, The Daily Cut