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Sustainability, 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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Accounting Carbon: Maybe More Work for Banks and Lawyers than Developers

1st Topic of the Week: A carbon capture conference in Houston next week appears to have more bankers and lawyers attending than developers. This is partly the conference focus, but it also shows the interest in carbon accounting and trading, with the value of tax credits and other credits critical to project success. 2nd Topic of the Week: We have to talk about US politics, as it is becoming central to almost all client discussions around business planning, not just for the next few months but also for the longer term. Otherwise: We look at the lower cost of solar panels but the higher costs of power and question stock values.

Data Center and Other AI Related Power Demand Poses Challenges for Industry

1st Topic of the Week: Our expectations around renewable power availability for industry is getting more challenging as power demand expectations rise and the purchasing power of the data centers looks much higher than industry. Industry cannot find many customers willing to pay for green/clean and cheap power is needed.

2nd Topic of the Week: We use a lithium example to discuss the risk of “peak” investing – building something that only makes sense with high prices. The investment process in the US and Europe is slow enough to last through some pricing peaks and avoid mistakes – China moves much faster and can build based on a peak market view.

Otherwise: We look at some recycling price opportunities in food packaging, highlight another reason why we believe carbon credit values will rise steeply, note some of the battery initiatives are stalling – bad for lithium demand, good for EV makers, and we take a quick first look at the new BP net-zero global model.

Transition Solution Shortfalls – Either Very Good or Very Bad for Those Progressing

1st Topic of the Week: Those pushing ahead with risky transition investments – fuels, hydrogen, ammonia, direct air capture, will do well if the shortfalls we expect materialize as mandates bite – the risk is that the impact of the consequential rise in prices and consumer costs will cause governments to rethink mandates.

2nd Topic of the Week: VW – saving Rivian? Only if VW can drive focus and production efficiencies, as EVs’ pricing environment looks poor. How long can VW and Amazon afford to prevent Rivian from failing, and will the turnaround happen in that time frame?

Otherwise: We look at recycling consolidation, the CI opportunity with ExxonMobil’s DAC ambition, why nuclear power is a “must have”, and green steel.

There Can Be Only One (or Two) – Not Every Car Can Be a Highlander

Topic of the Week: High-dollar consumer durables like autos are profitable only when they achieve economies of scale, and the new entrants in the EV space are competing with companies that have developed economies of scale over decades, except for Tesla and BYD, who had first mover advantage. We expect other new EV entrants to fail – maybe all of them!

Making matters more challenging, Chinese deflation around auto and battery components makes it easier for automakers to overcome tariff increases. The lower cost of the entire supply chain in China will be challenging for the West to keep pace with.

Otherwise: We question again how a low carbon price will impact European progress, we discuss further economic roadblocks for renewable fuels, bankruptcy, and margin declines, and we look at the increasing politicized rhetoric around current ESG investing, an investment process which in our view contributes nothing to sustainability goals.

Optimizing The Value in Waste Plastic – Is It to Make More Plastic?

1st Topic of the Week: The drive for plastics recycling is too prescriptive and will likely drive too much expense for products that may also not have the best carbon footprints. Recycle mandates, especially in Europe, could drive severe spikes in pricing when supply runs short, which seems likely given limited incentives to invest today.   

2nd Topic of the Week: Mandates run the second risk that they can be repealed if the political will to enforce them is not there, and the recent results in Europe suggest eventual change – perhaps not from sustainability goals but from the ideology that is driving costs higher than they need to be    

Otherwise: We look at why offshore wind may be good for consumers but not industry, and we compare very different sustainability messages from OMV and Westlake this week.

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