ExxonMobil is seriously upping its lower-carbon game with the CCS announcements over the last few weeks and the release this week that states the company will spend $15 billion over the next 6 years on lower carbon initiatives. In this linked headline ExxonMobil states that it will meet its 2025 emission goals this year – we are assuming that this must be correct as the company would not want to risk the accusation of greenwashing. Either way, the critics will weigh in, either claiming “greenwashing” or suggesting that the targets were not high enough, to begin with. The ExxonMobil focus is very much on CCS, which makes sense for an oil and gas-centric company whose only real play right now is to lower the carbon footprint of its fuel portfolio. In the release linked above, ExxonMobil also talks about biofuel and hydrogen initiatives, but again calls for supportive policies from governments and we suspect that the underlying push here is towards the US government. ExxonMobil and others have indicated that $100 per ton is the right incentive to drive CCS and other carbon abatement strategies and we would agree with this estimate as it backs up much of the work that we have done over the last year. See - Carbon: Trading, Offsets, and CCS as a Service – It’s All Coming! and - Carbon Games – Appetite, But Not Enough Hunger Yet. The other reason why ExxonMobil and others would like to see the US act is because other jurisdictions in which they operate will likely take a lead from the US.
The decarbonization of the airline industry remains a hot topic. The energy density issue shown in the exhibit below is a correct assessment of why commercial aviation faces a challenge to transition to electric power. Not only is the energy density too low - which restricts weight/range - but electric power can only turn things, and propellor-based flying has speed limitations relative to jets. The announcements from the airlines to date on electric power have focused on low capacity short-haul opportunities. With this in mind and as noted in the article headlining of the exhibit below, electric power is not the only decarbonizing option for airlines. Hydrogen is the very long-term future - Airbus is saying not before 2050, but in the meantime, the push should be for low carbon or carbon-neutral biofuels. These are essentially plug-in fuels that are identical to current aviation fuel but made either from waste oils or from carbohydrates. Many of the oil majors are working on waste oil or vegetable oil-based processes, especially in California where the LCFS credit helps pay for the conversion, and companies like Gevo and Aemetis are working on carbohydrate-based routes through fermentation. If the carbohydrate, corn in the case of Gevo, is sourced from sustainable agriculture the carbon values of the fuel can be very low and potentially zero or negative through the life cycle. The airlines are going to have to pay up for the low carbon fuel if they want to bid the fuel away from the high credit markets like California diesel and gasoline, but this route could decarbonize the airlines significantly and relatively quickly with the right pricing structure and enough capital.