One of the measures that are contemplated through the climate change law is the prohibition of the sale of diesel, gasoline and hybrid cars in 2040. This government proposal is included in a working draft of this regulation to improve the environment. environment and with which it is planned reduce CO20 emissions by 2% by 2030 and that at least 70% of electricity is renewable. One of the consequences in its application will consist of the empowerment of the electric car to the detriment of the more traditional energies.
"As of the year 2040, the registration and sale of passenger cars and light commercial vehicles with direct carbon dioxide emissions will not be allowed in Spain," according to the information issued by the Ministry of Ecological Transition. To the point that one of the most ambitious plans by the executive lies in progressively promoting the installation of a minimum of 3.000 MW of power per year between 2020 and 2030. In what is considered a power plan healthy for the long term.
In any case, a program of these characteristics involves a series of very direct effects on equity markets. Where without a doubt there are some beneficiaries and some losers of such measures and that you can take advantage of when taking positions in the financial markets. However, you will not notice its effects in the short term at least in all its intensity. The sectors related to energy, electricity and especially oil will be the most affected by the aforementioned measures.
Climate change law
Of course, this is not good news for companies linked to the powerful sector of the oil. Not surprisingly, consumers will have less dependence on this financial asset to take their car since what this law tries to achieve is to encourage the use of the electric car over other more particular considerations. In fact, one of the most relevant news that the new year that we have just started holds is that the car manufacturer Volvo has announced that from 2019 it will only sell electric cars. This is an abrupt change in its line of business, with wide repercussions in the financial markets.
On the other hand, it cannot be forgotten that another of the greats in the sector, such as Toyota, has announced a few months ago that it will stop sell diesel vehicles in Europe. This factor will lead to an increase in the commercialization of electric cars from now on. Although it remains to be resolved under what intensity it will be carried out in the coming months or even years. In this sense, the various electricity companies are facilitating the work by creating different recharging points for this class of vehicles that do not pollute the environment.
It will affect the price of oil companies
A first consequence of the application of the ley of climate change is that the profit in the oil companies is less than until now. This will carry over to a greater or lesser extent as the valuation of their prices is corrected based on the cuts experienced by this important financial asset. In the national financial markets of variable income, the great victim of this recent measure will be the oil company Repsol that will be able to reduce the level of its prices in the short and medium term. When at this time its price is located in a very wide range that moves between 13 and 16 euros per share. But when their consumption decreases, their benefits would logically decrease substantially, even to be at levels well below those marked at the moment.
More complex is the situation with respect to international markets where the presence of large oil multinationals is very active. But they can accuse this hard blow to the sector with an adjustment in their prices. From this general scenario, the most prudent measure for small and medium investors will consist of not taking positions in this sector. There are others with better growth prospects and despite the fact that the price of crude oil is at one of the highest levels in recent years. Where the price of a barrel is very close to 80 dollars a barrel.
Electricity business will increase
On the contrary, one of the great beneficiaries of this measure are the companies in the electricity sector that will see their production increase from now on. Especially in terms aimed at the medium and long term and which should be reflected in the price quote. This is at least in theory since this factor depends on other variants that are highly relevant to its conformation. In this sense, it cannot be forgotten that the installation of a minimum of 3.000 megawatts (MW) of power per year in electricity production facilities will be promoted.
In Spain, companies that best fit this measure on the protection of the environment are Endesa, Iberdrola and the former Gas Natural. At the moment, and despite the good moment that equities are going through, they are not importing this variation in their business models. Although all of them are in the high zone of their prices and some such as Red Eléctrica Española have even placed themselves in the free rise figure in recent weeks. One of the advantages for small and medium investors since the buying trend is imposing itself with a special clarity on paper and sales.
In the medium and long term
In any case, these government measures should channel a buying trend within a few years. With what the investment in the electrical companies can be very profitable to these terms of permanence. On the other hand, it cannot be forgotten that they distribute a dividend among its shareholders very generous. With a fixed and guaranteed profitability that ranges between 5% and 7%, depending on the listed company. To form a fixed income within the variable, regardless of what happens in the equity markets. Something that is very beneficial in times of great weakness in the equity financial markets.
In this way, one of the alternatives to make the savings profitable from now on is represented by the electricity companies, which also have a business model that has always been very stable. To the point of being considered as shelter value at times of greatest instability and volatility in the stock markets. You can build your next investment portfolio with some of these stocks in order to obtain a return, but not in the short term. With less risk in the exposures developed from the new measures by the government of the nation.
Strategies to carry out
As a consequence of this scenario that entails the implementation of the ley of climate change is the ban on the sale of diesel, gasoline and hybrid cars in 2040, there will be no choice but to vary investment strategies. Replacing companies linked to crude oil by electricity companies and beyond other technical considerations and even from a fundamental point of view. With the goal that in a few years you can increase capital that you have invested in the stock market from now on. Not surprisingly, this should be your main objective from these very moments.
Another goal in your investments should be directed to the elimination of any kind of risks in your stock market operations and in this sense nothing better than to get away from the oil companies. Especially in movements that are developed for the longest terms. They can be replaced by the electricity sector that can benefit from this new environment in the environment. On the other hand, it should also be taken into account that the current government intends to modify, on an exceptional basis, specific aspects of the planning of the electricity transmission network. This will be a new incentive for the interests of the electric companies.
Financial instruments
While, on the other hand, a good part of the electricity companies have not taken up this conjunctural situation, it does not mean that they will not do so in the coming years. Although the great doubt lies in when it will be done to be positioned and collect the price increase of actions. For its part, the General State Administration points out that "it will not make new investments in shares or financial instruments whose activity includes the exploitation, extraction, refining or processing of fossil fuels."
Not in vain, what a large part of investors expect is that these measures help them to channel their investments in an efficient way and in accordance with their interests. Which is at the end of the day what it is about this time to improve their positions in equities within a reasonable period of time.