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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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Decarbonizing Is Becoming A Thing – Thankfully

Air Products announced a US blue hydrogen/ammonia investment last week, the first firm pledge to very large-scale carbon capture & sequestration in the US.
Whether Air Products is the first to inject CO2 in the US Gulf is secondary to its confirmation of the value of CCS. Also, beyond economics, investors approved it.
Large-scale CCS is needed if green energy shortfalls predicted by the EIA and IEA are correct – CCS is the insurance against underinvestment in clean fuels.
COP26 could surprise us on the upside, but only because expectations are spectacularly low – including expectations around how to travel through Glasgow!
Otherwise, we push back on the Biden pension plan – ESG is not ready yet – and we discuss carbon use, carbon pricing, and misinformation.

EIA View Suggests Natural Gas & CCS Critical To Net-Zero Goals

EIA estimates of energy needs and sources through 2050 poison net-zero targets – increased natural gas supply and rapid CCS growth are the antidote.
The EIA projection of required fossil fuels volume suggests COP26 should focus on channeling fossil fuel along paths that broadly decarbonize fuel.
Fossil fuel companies, like Chevron, talk about decarbonizing, but the industry will need broad support to pivot towards (clean) natural gas. Broad support for natural gas now may prevent further long-term harmful energy inflation.
Investors and consumers want low carbon polymers AND less waste. We find corporates, such as Dow, working on both issues and the participant list growing.
Canada – the county with the highest carbon tax has recently seen a significant number of new-facility investments – go figure!

China: A Challenge With 2060 Goal But Also A Possible Edge

The IEA study on China’s 2060 net-zero goals concludes that the pathway is theoretically possible but it will require sizable investment and new technologies.
The delay to 2026 means that not much happens before 2040 as the country continues to grow its economy. The West will be spending billions over that period.
China stands to gain from the learning curve pains in the West and could end up spending less per ton of carbon abated as a consequence – tariffs may be needed to protect other countries from even cheaper (relative) Chinese goods.
COP26 rhetoric is rising – we see progress on the acceptability of (clean) natural gas as a longer-term fuel as the most positive move that could be made.
Otherwise, we look at battery vs hydrogen storage, making a case for hydrogen.

COP26: Science/Economics Or Emotion Driven – Major Problems Ahead If It Is The Latter

Corporate ESG agendas appear focused more on appeasing the immediate pressure from stakeholders rather than practical and viable goals.
COP26 could worsen the outlook by embracing some of the more aggressive targets not based on science/economics or help by accepting imperfections.
We would like to see broad support for clean natural gas (accompanied by carbon capture) to allow needed industries to grow while minimizing inflation.
Separately, we provide more evidence that clean energy cannot come quickly enough and reliably enough to satisfy current ambitions in the West, and the quest we are on will potentially give competitive leverage to those less driven.
We expand further on alternative polymers and their rate of penetration.

Runways to Brick Walls: ESG Fund Flows Pave Paths To Problems

ESG funds may be approaching a proverbial brick wall, as further fund inflows could collide with much tighter regulations around definitions.
This development could send the more obvious ESG darlings higher but lay waste to the “almost” stocks within ESG funds largely for “padding”.
We hope that the fallout creates “emerging” ESG funds – looking for companies that could meaningfully change – this would help with a broader climate agenda.
Separately, we look at the disconnect between the bio-diesel ambitions of many refiners and the gaping opportunity in adjacent sustainable aviation fuel.
Otherwise, we look at the Houston and other potential carbon capture hubs, inflation in renewable energy, and unintended consequences of the Shell litigation.