Sustainability, Clean Energy, Recycling & ESG

The headlines in today's daily report are interesting as they discuss a large number of different initiatives in recycling, carbon use, and capture, routes to hydrogen, etc. Each initiative is small, but the collective news is encouraging as it suggests that the mood might be changing from one which focuses on only a handful of tools to meet emission goals – which in turn are already helping to driven materials inflation - to a much broader approach that recognizes, or at least beings to recognize, that we need to try everything. We need to experiment with new approaches to recycling; we need more use for CO2 than simply pushing it all underground (but we must still push a lot underground), and we need to try multiple routes to hydrogen, not just those that need to consume vast amounts of renewable power. We need more partnerships – several listed this week - and we need government support where it can be most effective. The headlines today are far more heterogeneous, which is a good sign. One company's view of the solution is show in the chart below.

The exhibit below shows in stark terms what would be required. The column on the left is 50% of the sector emissions from 2005 according to the EPA, and this what we need to get to by 2030 to meet the pledge. It is only the Power Generation sector that has seen meaningful reductions since 2005 and consequently a 50% target from 2019 is the average needed from the other segments. We discuss the challenges (which are significant) and some possible solutions in today's ESG & Climate Report

The chart in the Exhibit below can have multiple interpretations, but one is a far greater risk to the US economy and US geopolitical influence than others. The fossil fuel supporters in the US will point to the 15% and say that the US is not the problem and China and India (which is growing rapidly) have more to do. The FT article linked, would cause you to look at the chart differently. The article talks about China using aggressive climate change action to gain favor with the rest of the world and increase its influence on the global economic debate and economic progress. This could come at the expense of a disorganized US, which ultimately risks becoming the laggard in climate change and lose influence as a consequence. China has a bigger carbon footprint, but this may play to the country’s advantage if central decisions drive investment quickly and push carbon progress faster than others. This could help China’s global leadership ambitions, especially if they help other countries lower their carbon footprints either through direct investment or through the supply of “low carbon” materials.

The methanol lobby/advocates are trying to find their place in the world of clean energy and clean chemicals and there was an interesting conference earlier today in which the case was made for methanol in a climate-friendly World. While clean methanol would have plenty of applications in lowering the carbon footprint of many chemicals, as it is a building block from which many products can be derived, the presentation focused on methanol as a fuel cell alternative to hydrogen. As the  exhibit below shows, clean methanol would start with green hydrogen as a feedstock and so by definition would be more expensive to produce than green hydrogen. This would be offset by the greater density in methanol versus hydrogen, but more important by the much lower cost of infrastructure that would be needed to make methanol available – it is a liquid and could use existing infrastructure – such as fueling stations. It all still needs renewable power that we do not yet have to spare.

We note the Air Liquide announcements of its ESG objectives this week. Industrial gas companies have some of the greatest challenges and some of the greatest opportunities when it comes to clean energy and emission. As the largest producers of hydrogen (from natural gas) they have very large carbon footprints and these are made worse by the power consumption required to run their many air separation units to make oxygen and nitrogen. At the same time, they are the most logical producers of blue hydrogen – using CCS, but most of their existing hydrogen capacity is tied up under long-term contracts with refineries and chemical producers. Making blue hydrogen through capturing the CO2 would only make sense where the primary customer wanted it, or where there was enough slack in the system to free up blue hydrogen to make blue ammonia or to use directly for power generation or transport. Like Linde and Air Products, Air Liquide operates hydrogen grids where there are several consumers in relative proximity – these would seem the most logical places to find meaningful blue hydrogen opportunities and the US Gulf is a more obvious location.