Monthly Archives: May 2019

Carbon Capture – but with a difference

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    Occidental Petroleum (Houston USA) has released plans disclosing the company’s intention to construct the world’s largest direct air capture facility in Texas oil.  What makes this investment stand out to Leading Green is the fact that it will be in partnership with Carbon Engineering, a Canadian company backed by Bill Gates.

    Unlike other forms of carbon capture technology for carbon storage which I have worked on in the UK, this claims to extract CO2 directly from the environment.  The technology claims to capture CO2 from atmospheric air, converting it into a purified form for use or storage.  It achieves this within a closed loop system, adding only water and energy, with the output taking the form of a concentrated stream of compressed CO₂ gas.  This captured CO₂ offers a range of potential environmental & chemical opportunities from industrial CO2 use, urea yield boosting, beverage carbonation and food processing, the production of low-carbon liquid fuel, carbon storage with or without enhanced oil or gas recovery.

    In this case Occidental Petroleum would use the captured carbon to help pump hard-to-reach oil out of one of Texas’ shale oil field.   I am usually cautious when the words ‘shale gas’ and ‘carbon storage’ are concerned, but in the move towards climate change adaptation there has to be transition points along the graph between high carbon use – low carbon use and zero-carbon technologies.  Industrial & societal transition to a low carbon economy cannot be achieved overnight.   

    In this case Occidental Petroleum & Carbon Engineering claim that the plant once on stream will remove over 500,000 tons of carbon from the atmosphere every year – this it is claimed will offset the drilling and eventual burning of the shale oil that will be extracted — potentially bringing the overall operation towards a zero carbon balance in emissions.

    What is often ignored in climate adaptation strategies is the requirement not only to significantly cut emissions across various high CO2 sectors, but also to move towards zero/low carbon emissions where it is achievable in partnership with significant carbon capture to remove the CO2 that has (and will be still be) entering the atmosphere.  Increased atmospheric carbon capture through natural or industrial chemical routes will be key to dropping, and dare I say, managing future global temperature rises.

    So I wish this project well, as it takes us into new territory and a new way of thinking both about new energy technology but what needs to be achieved where industry and societies seek to continue to exploit fossil fuels and live within carbon-controlled economies.  However, the goal across all components of human life must be negative carbon release. 

    The facility is due to be completed in 2023, and I hope that Occidental Petroleum, under its CSR or ESC policies places the environmental impact assessment statement on line for the global climate change community to examine (we expect a very comprehensive and waffle free section on climate change!).  In truth, this technology is still in its early stages.

    Here at Leading Green we hope it is a success and that it is commercially viable in meeting its zero carbon claims, but it does raise some interesting regulatory & land-use planning questions if the technology proves successful:

    • The willingness of civil councils to actively promote within land planning, zoning and other social regulatory policies the ‘political’ presumption in favour to develop carbon neutral technologies.
    • The technological ability and capacity of environmental regulators, environmental health officers and environmental consultancies to undertake and verify the mass balance carbon calculations that will form the beneficial claims of these plants.
    • The regulatory control to ensure net-zero or net positive C-capture within these plants’ over thier commercial life; and
    • Clarity on other carbon-demanding elements within the technology & plant, its components and feedstocks that back up the claims of carbon neutrality within such a plant’s mass balance if the technology achieves global expansion. 

    Climate Change Transition – can you see the changes yet?

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    Climate Change transition can be hard to identify within the operational investment plans within some oil & gas giants.

    At the IAIA 2019 conference in Brisbane last week, several authors delivered papers on current & future oil + gas investment projects and programmes that would be rolled out over the next decade.  The local press was also reporting on new coal investment plans for Queensland, and within a 2-day Leadership in EIA training programme I led with Claire Gronow of Bristol University in Brisbane, several of the course’s experienced EIA participants were employees or IFC/Government officials with oversight of new fossil fuel projects coming through the investment chain. 

    Yes, they were all dealing diligently with any environmental & social risks arising on site, but it was hard to define any clear signs of climate change transition or adaptation within the corporate business strategies of their parent companies, or any corporate shift away from fossil fuel exploitation.

    This concern has been backed up by analysis from Global Witness in April that identified close to $5 trillion of planned investment in exploration and extraction from new oil & gas fields.  This the authors concluded is incompatible with reaching the world’s climate goals.  The report also concluded that despite rhetoric to the contrary, the oil and gas sector’s future investment plans remain drastically incompatible with limiting climate change.

    From recent experience, I concur with these unfortunate conclusions.  If politicians and businesses are increasingly tempted to use the word ‘emergency’ in respect of climate change, there is an obligation on them to demonstrate thier own response and strategic action they are taking to address the ‘emergency’.   As sustainability and IA professionals we are working hard to mitigate the unintended consequences of Man’s exploitation of cheap carbon-based energy and advocating for greater sustainability within business practices. Future climate change transition now requires more than advocacy, it demands action and a strategic shift in the mindset of Governments and Boardroom leaders.  The solutions and advice are out there to be called upon, but action is an individual responsibility.

    Your Business Approach to Climate Change may soon affect your Credit Score

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    My company Leading Green is based on my strong belief that Business leaders and organisations that integrate sustainability into their business thinking and leadership culture will benefit in the long-term through a better strategic mindset for future growth, higher investor interest, capital investment delivery and ultimately a lower corporate risk profile that delivers long term financial value with innovation and market branding. 

    It was therefore of interest to read in a recent edition of GreenBuzz that Moody’s, one of the world’s leading credit rating agencies had proposed a scoring framework for assessing carbon transition risk.  This will be of interest in evaluating the transition towards a low carbon future of some of the more energy intensive or dependent sectors, and especially those past investments are at risk of being stranded as the implications of climate change extend into the most world’s most obstinate boardrooms.  

    Impact Assessment (IA) professionals have for many years grappled with the problem of how one multi-$billion or $million investment will impact on a region’s or society’s air quality or climate change footprint, looking at proposed investments in terms of their solo contributions, and struggling to truly evaluate their cumulative impacts.  Tools such as Technology Impact Assessment allow us to evaluate with greater visibility and transparency the global benefits or negatives of technology as we shift towards a lower carbon economy.

    The move by Moody’s is of interest to IA and ESG professionals in that it could herald the start of an investment trend that better identifies credit risk, business strategies and capital investment opportunities with an ESG’s financial value assessment.  Many ESG and IA assessment approaches & models are at risk of focusing too much on the identification of social & ethical values rather than a more comprehensive evaluation of an investors or multi$ project proponent’s understanding of how environmental and social factors impact on the core financial objectives of the project.  If you want a case in point look at the global investments for large hydro-power schemes and how far apart the early assessments of project costs are from their final ‘constructed’ costs (often by factors of $billions) and how often their project timescales were delayed (>years).  A reflection of the investor and lender’s reluctance to assess environmental and social risks earlier in the investment cycle and to clarify the upstream linkage between social and environmental parameters and financial risk.

    Carbon transition within investment portfolios, organisations and within technology/marketplace sectors must become, and is increasingly likely to become, a core parameter within the global society’s climate change adaptation and how the continuing flows of investment capital will impact on future growth and carbon release.  If organisations and government are slow to react to risk and carbon transition, then perhaps a more risk adverse appetite amongst financial lenders and investors will prevent much of the downstream arguments between society and business that prevent capital projects and asset investments gaining the one thing that they all require – consent to build the proposed asset. 

    It was of interest to read in the article that Moody’s defines carbon transition risk as the implications of the policy, legal, technology and market changes that are likely to affect a company in its transition to a lower-carbon economy.  These are the often the intangible vales that lie outside traditional boardroom thinking and rarely make it into formal financial risk analysis, credit ratings or creditworthiness.  Moody’s propose a 10-point scale across four key components that seeks to identify an organisations credit risk and transition towards carbon transition.  The will help reflect 4 key parameters:

    • its current business profile (survivability in the current marketplace);
    • its technology, market and policy exposure (risk of stranded assets, exposure to disruptive technology and societal megatrends);
    • its medium-term response activities (is its boardroom awake to the risks!); and
    • its longer-term resilience (potential for value and growth).

    This is a move to be welcomed as the development of comprehensive ESG models is still in its infancy, as is the marketplace’s understanding of them and their ability to drive better financial decision making.  In addition, it starts to position IA and ESG as ‘active’ tools that enhance decision-making rather than their often perceived ‘negative’ image as blockages to investment fluidity and choice.  It also starts to open to the marketplace the maturity of some boardrooms towards social, environmental and carbon/climate risks and how they are perceived.  Many ESG reports often contain performance data on ESG issues that masks any real cultural or leadership change towards sustainability in business and environmental risk management.  If you want evidence on this, just look at how many organisations there are out there who have held environmental certification under ISO14001 for many years, but who are now struggling to re-certify to the new standard that requires auditable proof of linkage within their organisations between the executive leadership groups and their organisation’s environmental risk performance.

    So, the takeaway message is what is the long-term strategic value for organisational leaders in better aligning sustainability, environmental risk or carbon adaptation/transition strategies within their core corporate and investment planning strategies.  It is becoming increasing clear to sustainability advisers, chief financial officers, some CEOs and their Boards that in the future organisations with higher ESG ratings and a strategic mindset to sustainability in business are likely to experience lower exposure to disruptive market risks, protect asset investments or at least minimise stranded asset investments within portfolios avoiding large drawdowns, and lower risk within their sector or marketplace. 

    If Moody’s initiative is a success it will also reinforce these benefits through lower cost of capital and higher investor interest, in particular the type of investor who is likely to take a longer, rather than a shorter, term interest in your organisation’s financial health and growth.