Whether it is carbon capture, hydrogen investments (blue versus green or just in general), plastics waste, or any other aspect of the drive to greater sustainability and net-zero emissions, everyone is looking for a “playbook”; a set of rules that allow for more effective and less risky decision making. The headline linked that talks about the chemical industry needing governments to take more action is another such example. Companies facing increasing shareholder pressure to make change are not only looking for government guidance and possible incentives but they are also not wanting to second guess what any regulatory move might be. No one wants to make a significant capital decision if there is a risk that a government policy shift will make it the wrong move. The European carbon credit price – shown below is at least a framework that many European companies can use to value possible decisions – even if some European companies and countries are moving at different paces than others in terms of emission and hydrogen mandates. The price is tangible and its mechanism for calculation should also allow companies to forecast how it might change. Europe is also working on a plastic waste tax – this would give a stronger economic framework to push improved recycling.
Source: Bloomberg, C-MACC Analysis, June 2021
In the US, the shareholder pressure is mounting and we see a war of press releases from companies that talk about intent, but do not go much further. The Dow announcement linked is an exception – Dow needed the capacity and will likely have included an assumption around carbon costs in its analysis. Otherwise, in the US we continue to dance around the topics, encouraging companies to make small but highly publicized moves that suggest a desire to do the right thing but an unwillingness to commit significant capital in case the rules are changed.
