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ESG & Climate Services

 

This weekly report covers all aspects of the major changes facing industry, from climate change initiatives through ESG investing, and includes regular work on recycling, renewables, energy transition and hydrogen, and carbon capture and use.  It is included as part of our comprehensive research/consulting subscription, but can also be purchased separately.

 

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Private Investment Will Make Or Break The Inflation Act

Many are hailing the spending side of the Inflation Reduction Act as a catalyst for real change in climate-related investment and even see positives for fossil fuels.
The funding in the bill is spread widely and targets communities and projects – attracting third-party capital will be critical to achieving many goals.
CCS is straightforward: the increase in 45Q should get private investment going – other aspects of transition carry risks that may be too high for some investors.
We look at the importance of stimulating investment in materials – not just energy and note that we have already seen some prices bounce – like copper.
Otherwise, we look at why R-PET prices are collapsing, what LyondellBasell might do with its refinery, CCS in Europe, and Bloom Energy 2Q22 results.

A US Climate Policy – Can It Be True? Can It Last?

The Inflation Reduction Act – the reworded and watered-down climate policy for the US – stands a chance of passing. We think it could drive some real action.
We suspect there will be much more debate about the tax aspects of the bill than the climate piece, and much of the climate piece could drive real investment.
We like the changes to 45Q as we think the incentive is now more equitable and does not penalize the smaller emitters: the higher value will drive investment.
We look at why some of the proposed materials investments matter – yet more shortfalls in renewable power installation – good for coal, but tighter natural gas.
Otherwise, it’s reporting season, and we see many presentations displaying how well companies think they are doing on the ESG front – we are seeing a lot of fluff.

Renewable Power: Time For The Nuclear Option

Embracing nuclear power as a core pathway to decarbonization, where able, will free up other renewable resources and ease many energy transition challenges.
Wind and solar are currently preferred pathways but are capacity constrained and have capacity factors that are very challenging for the grid and industry.
Water-based power looks cheap, but opportunities are more limited – nuclear technology is well understood, but there would be issues with feedstock sources.
We again discuss why we believe climate change must be taken seriously. It’s not about whether the science is right, it’s about the severity of the consequences.
Otherwise, we look at recycling diversity, lots of action on the carbon capture front, Air Products hydrogen empire, and critical metals availability (again).

ESG Investing Stinks! We need something different to drive change

We argue ESG investing is doing very little to support environmental initiatives, penalizing energy companies with transition plans rather than helping them.
ESG and green money is unavailable for most projects that do not exhibit “safe” returns – in the current setting, almost everything does not fit this requirement.
Public companies with well-articulated transitions strategies are hamstrung by public valuations, limiting degrees of freedom, and take private options look good.
Start-ups are equally hampered by shrinking risk appetite on both inflation and higher borrowing costs – we want energy transition but won’t pay for it.
Otherwise, we look at metals’ prices, the cost of chemical recycling, methane emissions, renewable natural gas, and renewable power costs.

The Fuel Ethanol Market Could Self Destruct – Good For SAF/Gevo

While lower LCFS prices suggest increased availability of renewable fuels in California, most of what is under development is yet to hit the market.
A further collapse in credit values because of oversupply, would impact ethanol economics, viability of the mid-west CCS projects, and more ethanol investment.
While developers are holding out hope that LCFS or something like it will extend to other states – we are in an environmental no-mans-land in the US right now.
We expect SAF to come to the rescue eventually, competing with renewable diesel and potentially using significant ethanol volumes – Gevo/Axens process.
Otherwise, we look at recycling and the need for all options, decarbonizing LNG, hydrogen networks, and what goes in them, and European ESG fund changes.

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