The Dow, LyondellBasell, Nova, Closed Loop Partners announcement yesterday is worth some thoughts. Closed Loop Partners is a PE company focused on funding recycling opportunities, but by its nature, it is relatively risk-averse as it has return goals to meet for its investors – to date its investments have been low-hanging fruit and niche in nature, but steps in the right direction nonetheless. The investment from the majors perhaps gives Closed Loop some wiggle room to look at projects that are less of a sure thing and maybe require a leap of faith on untested technologies or at least technologies untested at scale – primarily in sorting and identifying polymers and cleaning. We would still expect each project to be small, simply because access to the clean and easily sorted polyethylene and polypropylene in the US is limited by very poor standards of recycling and the vast proportion of unrecyclable polymer that ends up in a waste stream. If the group can find locations with significant supply, it might be wise to build pyrolysis at the same site to deal with everything that cannot be recycled. Our hope for this investment is that it is not simply an ESG PR opportunity for the polymer producers and that it does the following:
There is a broad technology theme to the articles that we have chosen today, which is in keeping with one of the core conclusions of the IEA report earlier this week. The IEA is estimating that roughly half of the path to net-zero will require technologies still in the test phase, or in some cases still conceptual. The Dow headline around ethane dehydrogenation and electric furnaces is a good example. Both technologies could lower the carbon footprint of making ethylene, but the dehydrogenation route will require some catalyst or other breakthrough as current propane dehydrogenation technologies require a lot of heat. The electric furnace idea is complex and would require extremely high levels of power, all of which would have to be renewable for the carbon footprint to fall – this type of technology is likely implied in the BASF announcement today. The IEA talked about some of the transition moves required to allow the technology advances time to become either commercial or cost effective, or both. Carbon capture features meaningfully in the IEA plans, but the study has carbon capture volume rising through 2050, which we find odd. The idea of carbon capture is to act as a bridge between where we are today and where we could be once new technology is developed – therefore, while companies like Dow should be aiming for technologies that lower the carbon production of its processes, carbon capture should be an almost immediate bridge to lower emissions while both the technology is developed, and its costs are reduced. Carbon capture needs should then decline. View today's Daily Report for more.