The linked Canada headline supports one of the themes that we have been highlighting for a while, which is that certainty around carbon pricing is likely to drive investment rather than discourage it. Canada, and specifically Alberta, has seen several new investments announced over the last few months because manufacturers can now add some certainty around carbon values to other advantages offered by the province, including cheap natural gas and what appears to be low-cost CCS opportunities. We are also seeing investments shape up in Europe – also to produce low carbon materials and fuels – and this is also driven by greater certainty around carbon value. The lack of a carbon price in the US is becoming a competitive disadvantage for the country and those opposing it in government are, in our view, very misguided. If China can develop a credible and broad carbon pricing mechanism, it will also likely gain investment dollars, possibly at the expense of the US. Not having a sound climate change and carbon value framework in the US is a major threat to many of the reshoring initiatives that US retailers and manufacturers would like to see.
A couple of things worth highlighting in today's daily report – the first being Chevron’s move to join the net-zero club – focusing all eyes now on ExxonMobil in particular but also the rest of the US E&P crowd. Chevron will have some major challenges getting to net-zero and will likely face much of the same skepticism that bp, Shell, and TotalEnergies attracted in Europe initially and still face today. The Europeans have placed a lot of their bets on moving into renewable power – for the moment, Chevron is focused on moving to net zero in its own operations, which we read as biofuels and a lot of CCS. Given the acute shortage of international natural gas, it would make the most sense for the independent natural gas E&P companies and the LNG sellers to jump on the same boat. By promising low carbon natural gas and LNG, the industry is much more likely to gain support for the expansion that the world needs to counter some of the EIA assumptions around coal and petroleum product use from 2030 to 2050. Of course, it would be a whole lot easier for the US industry to do this if they had a value on carbon to work with! The chart below looks at one of the core clean-up issues, which is methane leakage. This is a subject we cover extensively in our ESG and Climate service linked here.