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.
We doubt that President Biden’s moratorium on new drilling will result in an outright ban. As we discuss in the ESG report today, the lack of unity on the idea of a carbon tax in the US means that the administration has to approach climate change issues in a more piecemeal fashion and one of the easiest triggers to pull, is to limit any new investment that adds to emissions. Our guess is that we will see an EPA-led agenda shortly that will only allow new US energy (and probably industrial) investments that come with a carbon-neutral plan. Drilling will likely be allowed to continue as long as the new wells have zero emissions or have offsets to counter any new emissions. It is unlikely that this will be restricted to oil and gas, and CP Chemical with their 1-Hexene project announced above may be in for a surprise when they apply for a permit.
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 focus for today and tomorrow in this section as well as the focus of next week’s ESG and climate piece will be the environmental summit that is being held today and tomorrow and the possible ramifications of pledges that will inevitably come from it. We must start with President Biden’s emissions pledge: “This is the decisive decade,” Biden said at the summit on Thursday morning. “This is the decade that we must make decisions to avoid the worst consequences of the climate crisis.” The administration put forward a goal of reducing US emissions by 50% by 2030. “This is a moral imperative. An economic imperative. A moment of peril, but also a moment of extraordinary possibilities,” the president said.