In late January, General Motors made a dramatic announcement: By 2035 – a mere 15 years from now – it will have entirely phased out all its gas- and diesel-powered cars and trucks, moving to an all-electric lineup.

Great news, right? Understandably, it was hailed by anyone concerned about climate change as a major step towards transitioning to a world of clean, green energy. EVs have long been seen as critical to this transition. A world populated by EVs in place of gas-powered vehicles would make a huge dent in carbon emissions. (Of course, even after carmakers stop producing gas-powered vehicles, it will take time for all the older vehicles to be retired and off the roads.)

Also applauded was the announcement by the Biden administration setting a goal of charging stations throughout the U.S., an essential step towards making widespread EV ownership feasible.

But there’s a big catch that has been widely overlooked.

It has to do with copper – the world’s most widely used industrial metal. Copper is getting scarcer and more expensive. And EVs require a whole lot of copper. 

Copper is used in the wiring of all cars. But EVs use far more of it than gas-powered vehicles do. According to the International Copper Association, while conventional cars use between 18 and 49 pounds of copper each, battery EVs need 183 pounds. The charging stations also require a lot of copper.

Beyond EVs, copper is essential in renewable energies in general, including in the infrastructure needed to convert solar and wind energy into electricity.

In other words, as we ramp up renewable energies, including by producing millions more EVs, demand for copper will rise sharply. This will come on top of accelerating demand from other sources, including the huge amounts of infrastructure China is helping create in developing nations as part of its Belt and Road Initiative. Will it be possible to obtain all the copper that’s needed? It’s not something to take for granted. But one thing you can be sure of: copper prices are going to rise sharply.

One problem is that copper grades – the richness of veins of ore – have been declining, and that decline will accelerate. That means it is taking ever more energy to obtain the same amount of metal. This adds to production costs, which will rise further as energy itself grows more expensive in part because of rising demand from copper producers themselves – a vicious circle.

Grades likely will fall to where the energy needed to mine copper will start growing exponentially. Nor is technology likely to rescue us. In a 2020 peer-reviewed paper, two German scientists showed that as copper grades declined between 1930 and 1970, technology reduced energy demand enough so that production costs declined. But in the following 40 years, as grades dropped below 1%, technological gains were not enough to compensate, and real production costs rose back up to 1930 levels. In other words, geological scarcity overwhelmed gains in technology.

Over the past 20 years, annual growth in copper demand increased by about 60%, resulting in a fourfold rise in copper prices. Current trends suggest the world will need around 1 billion tons of copper over the next 20 years. That means yearly growth in copper demand will more than double. And this will be in the context of copper (as measured by the ratio of demand to reserves) 20% scarcer than in 2000. 

My latest book, China’s Rise and the New Age of Gold, explores the multiple investment implications from worsening copper scarcities and other trends related to commodities and to China’s overall activities. But here I want to point to two specific investment conclusions. 

One, not surprisingly, is that investors should have a stake in the best-situated copper producers. These include a favorite that recommended in my investment publication The Complete Investor. (For more information, visit my website at www.stephenleeb.com.)

  The second conclusion is that in coming years, to really break our fossil fuel dependency, we will need to ramp up nuclear energy, something else investors should have a stake in. Nuclear energy has been out of favor in recent years, but if you think that solar and wind make it less relevant, you couldn’t be more wrong. More details in a coming blog.