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On June 11, the prior Tory Government of the United Kingdom established a goal of net-zero carbon emissions by 2050. Further, the UK Department for Business recently published the impressive fact that in 2018, “Total UK greenhouse gas emissions were 43.5% lower than in 1990.” But when you add back the UK’s consumption emissions, such as steel imports from China and a doubling of coal supplied by Russia, the actual carbon reduction is 3.4% since 1997. It is not clear how the UK can get to net-zero carbon emissions without severely impairing the British economy, which, come to think of it, may be accomplished sooner by a hard Brexit or a Labour government.

In the US, environmental purity has resulted in generous wind and solar subsidies, and opposition to all pipelines. We have benefited as shareholders of Terraform Power, a solar and wind Yieldco, especially in New York State. The New York environmental community opposes pipelines, which Governor Cuomo has obliged by vetoing new pipeline capacity. Despite sitting next to the Saudi Arabia of natural gas in Pennsylvania, this ban has resulted in a moratorium of new natural gas hookups in Brooklyn, Queens, Long Island and Westchester and likely higher heating prices this winter. In general, building new interstate oil or gas pipeline has become near impossible throughout many parts of the US.

Recently, for accounts where MLPs are permissible, we started adding USD Partners, a crude-by-rail (“CBR”) MLP that yields 12.3%. We owned USDP briefly in the past because we thought CBR was a viable shipping option for Western Canadian oil sands producers. We sold it after we and the market determined that Keystone Pipeline, a much cheaper and safer alternative to CBR, would be built. We were wrong. In 2019, Canadian oil sands companies have been ramping up crude-by-rail movements as a result. The National Energy Board reported this week that exports on railway cars rose 43.4% year-over-year to more than 285K bbl/day in May. The pro-energy Alberta government continues to ease oil output curtailments, adding to volume. As even a moderate Democrat such as Joe Biden wants to ban all fracking, we would expect the prospects for CBR to accelerate if the Democrats were to retake the White House. Supplies from Western Canada would only become more valuable.

It is also worth noting that we have completely exited our coal exposure. It was a profitable, multiyear series of trades. While we could deal with the threats of boycotts of coal companies, we couldn’t handicap when the overabundance of natural gas, which is pressuring coal prices, will come to an end.