One of the subjects that we will cover at length in the ESG and Climate report tomorrow (to be found here) is the significant need for CCS globally, but especially in the US, as we see more balanced forecasts of energy supply emerging which show more use of fossil fuels for longer – especially, but not limited to natural gas. These forecasts recognize the current energy momentum as well as some of the more practical realities around the rate of construction of renewable capacity relative to energy demand growth. The CCS plans that are appearing all over the place are nothing more than plans right now and if the EPA permit activity is a true barometer – not much has moved beyond planning. This needs to change and we likely need both an increase in CCS incentives – which could take many forms – as well as some streamlining around the permitting process. Simply waiting and hoping for a renewable miracle is not going to work – nor is some sort of CCS cost breakthrough.
Source: Rystad Energy, Natgas Intel, March 2022
The IEA “let's all hold hands and save the world together” plan, as outlined below, is an interesting case study, but not much more as history has taught us that voluntary consumption cuts are generally not enough to impact any market. The IEA guidelines likely need to be converted in regulation to get anything to change. For example, the steep increase in bicycle use in London, only came after congestion taxes on vehicles were increased significantly and energy cuts in the 70s required government action to make a difference. The IEA lays out some interesting options, but the ideas will need to become laws to get real compliance and therefore a real impact. The other option is to let prices rise enough to drive real economic decisions to avoid energy use.
Source: IEA, March 2022
