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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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Sustainable Fuels – Fields of (Achievable) Dreams

Renewable fuels have a very bright future in our view, but the focus will likely move away from capturing high credits like LCFS towards aviation fuel globally.
Despite forays into electric and hydrogen power for aircraft, sustainable, low carbon jet fuel will likely dominate decarbonization efforts for many decades.
Electricity and fuel cells will eat into gasoline and diesel demand quickly (next 10-15 years), but renewable (ground) transport fuel demand will still rise.       
Carbohydrate and waste-based fuels will be necessary; the current scale is small, and the investments needed are huge; newer/lower-cost technologies will emerge.
Otherwise, we look at Eastman’s plans in France, more on renewable fuels, further ESG investing challenges, and ExxonMobil’s net-zero ambitions.

Hydrogen – Hype, Hope, and Headlines

We introduce our hydrogen stock index and make a constructive investment case for equipment makers, which comprise most of the index today.  
Green hydrogen producers with strong balance sheets will likely make it through, but many start-ups will get squeezed by high costs and competition.
Monolith has an interesting offering, and DOE backing should get a first world-scale unit built – a greater problem for producers of carbon-black than hydrogen.    
We look at what we expect to be an onslaught of bullish headlines to start the year, with new technologies and new participants looking for backing & support.
Otherwise, we discuss natural gas, carbon values, and recycled polymers  (again), plus some thoughts on Origin Materials and our new ESG stock indices.

The Evolution Of the Plastic Industry Could Stall in 2022

Lower polymer prices in 2022 could reduce the incentive to recycle, especially in the US, with the direction of polymer prices likely to impact recycling investments.
Lower polymer prices may hurt “New” material producers, but construction inflation for new capacity and rising feedstock costs will be more problematic.
Material/energy price inflation continues, and new capacity plans for renewable are fast enough to inflate inputs but too slow to solve energy shortages.  
The natural tension between what is desired by activists and what is practical is rising. We highlight examples in energy, waste, carbon, and other areas.
Otherwise, we look more closely at European energy shortages and why some suggested natural gas compromises may not be enough.

2022 – Policy Key, But Inflation Will Distract – Maybe Beneficially

Our ESG and climate coverage in 2021 was generally balanced but trended more toward policy in 2H21, partly due to holes left by COP26 and also due to inflation.
Rethinking energy transition policy in the light of energy shortages and higher prices will be critical in 2022 – failure will drive underinvestment & higher prices.
Coal or heavy hydrocarbons to hydrogen with CCS looks like a win all around as it could create unsubsidized hydrogen minimizing natural gas or renewable power.
It will be interesting to see how polymer companies rate their challenges in 2022 – will plastic waste be more or less of a stakeholder issue than carbon footprints.
Otherwise, we look at the rise in “intent” for CCS but the lack of investment, wind and solar installation rates, ESG definitions (again), and energy M&A.

Coal – The Cheapest Blue Hydrogen: Heresy Or Common-Sense?

As the “Build Back Better” plan looks less likely in the US we would expect compromises that provide greater opportunities for “clean” US fossil fuel.
While the need for more LNG is glaringly apparent, we provide a compelling case for using abundant, low-cost US coal to produce cheap blue hydrogen.
Hydrogen is likely to be supply-constrained, and clean blue hydrogen from coal is possible relatively quickly and does not rely on unproven new technology.
The investor and litigation backlash from throwing support towards coal would likely be significant, and any lifeline would need stringent emission regulation.
Otherwise, we look at the aggressive chemical recycling push, carbon pricing, possible renewable power inflation in 2022, and the benefits of being nimble.