Many countries have pledged to reduce emissions and become carbon neutral by mid-century. Yet, when having to decide between energy security and climate goals, they often choose the former. This suggests that fossil fuels might persist longer than anticipated, potentially offering a compelling opportunity for those interested in contrarian investments.
Energy Security is National Security
The Department of Homeland Defense defines national security as, “the security and defense of a nation state, including its citizens, economy, and institutions.” It then includes “energy security” as one element of national security.[1]
There have been several recent examples of nations prioritizing energy security over climate goals.
The U.S. Blinks
Despite its commitment and progress in reducing carbon emissions, in the fall of 2021, when faced with tightening energy markets and price increases, President Biden authorized the release of oil from the U.S. Strategic Petroleum Reserve and called on oil companies to increase production.[2]
Russia’s Invasion of Ukraine – A Wake-Up Call
In February 2022, Russia’s invasion of Ukraine ignited a global energy crisis and unleashed widespread chaos in the global supply chain. In a bold move to fracture the European Union's solidarity with Ukraine, Russia severed the majority of its natural gas supplies to Europe, aiming to create turmoil and weaken the coalition.
Europe compensated by turning to Liquified Natural Gas (LNG). Political leaders in Europe looked to secure alternative oil and gas supplies and called for more production. In February 2024, Germany approved plans to finance up to 20 new natural gas-fired electric generating plants.[2]
The chairman of Japan’s Institute of Energy Economics noted that the crisis was a reminder for the world to look not only through the lens of climate but seriously look at the importance of energy security and the stability of energy markets. He noted that discouraging investment in oil and gas was inconsistent with the need to reduce dependence on Russian energy.[2]
China and India – The Energy Elephants
Both China and India are increasing coal-fired energy production despite climate pledges.
In Q3:23, China permitted more coal plants than in all of 2021. This recent surge comes amid crippling power shortages the country experienced in 2021.[3]
China’s climate envoy noted that energy security concerns meant phasing out fossil fuels remains “unrealistic.”[3]
India is also significantly increasing coal-fired power plants. In 2024, they are expected to increase coal capacity by the highest amounts in six years.[4]
The Indian government cited energy security and low per-capita emissions to defend the country’s high dependence on coal.[4]
How May Investors Gain Exposure to Fossil Fuels?
Range ETFs aim to capitalize on the enduring importance of nuclear and fossil fuels in the energy sector. These ETFs look to offer investors an opportunity to navigate the evolving energy landscape.
Explore our Range ETFs today as you consider your position in the energy sector.
- Range Global Coal Index ETF (COAL): seeks to provide exposure to companies involved in the metallurgical and thermal coal industry
- Range Global LNG Ecosystem Index ETF (LNGZ): seeks to provide investors with exposure to companies involved in the Liquified Natural Gas (“LNG”) ecosystem
- Range Global Offshore Oil Services Index ETF (OFOS): looks to provide exposure to companies in the offshore oil services ecosystem
- Range Nuclear Renaissance Index ETF (NUKZ) looks to provide exposure to companies in the nuclear energy sector including utilities, construction, services, fuel, and advanced reactors
[1] Homeland Security Defined, United States Environmental Protection Agency website, Retrieved 12/1/23
[2] Yergin, Daniel, The Return of Energy Security, S&P Global, 2/29/24
[3] Howe, Colleen & Cao, Ella, In China’s Coal Country, Full Steam Ahead With New Power Plants Despite Climate Pledges, Reuters, 11/30/23
[4] Varadhan, Sudarshan, India To Increase Coal-Fired Capacity in 2024 By The Most In At Least Six Year, Reuters, 2/1/24
Risk Disclosures:
Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's full or summary prospectus, which may be obtained by visiting www.rangeetfs.com/investor-materials. Read it carefully before investing or sending money.
Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives.
Investments in the energy industry are subject to significant volatility due to changes in commodity prices. Additional risks include changes in exchange rates, government regulation, world events, economic and political conditions in the countries where energy companies are located or do business, and risks for environmental damage claims.
The Funds are non-diversified. Their concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.
International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investments in smaller companies typically exhibit higher volatility.
The Funds may invest in securities denominated in foreign currencies. Because the Funds' NAV is determined in U.S. dollars, the Funds' NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.
Because the Funds are new, investors in the Funds bear the risk that the Fund may not be successful in implementing their investment strategy, may not employ a successful investment strategy, or may fail to attract sufficient assets under management to realize economies of scale, any of which could result in the Funds being liquidated at any time without shareholder approval and at a time that may not be favorable for all shareholders. Such liquidation could have negative tax consequences for shareholders and will cause shareholders to incur expenses of liquidation.
The Funds are a recently organized investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. Moreover, investors will not be able to evaluate the Funds against one or more comparable funds on the basis of relative performance until the Funds has established a track record
Exchange Traded Concepts, LLC serves as the investment advisor of the funds. NUKZ, LNGZ, COAL, and OFOS ETFs are distributed by SEI Investments Distribution Co. (SIDCO, 1 Freedom Valley Drive, Oaks, PA 19456), which is not affiliated with Exchange Traded Concepts, LLC, or any of its affiliates.
