Decarbonisation Technology – August 2021

Financing Just as science and engineering know-how provide options for reducing GHG emissions, new sources of financing, such as private equity, are equally important. Novel financial strategies create value by driving transformation more efficiently across geographies and industry sectors. Money is flowing into ESG funds, with climate impact metrics (for example, global carbon pricing by 2030) as a high priority. Companies demonstrating stewardship on a range of ‘Paris-compliant’ strategies will have clearer access to financing. For example, achieving 100% net-zero emissions by 2050 may not seem achievable to many without access to a deep pool of capital needed for decarbonisation. Much of the technology needed to achieve 2030 emissions targets is already integrated into industry processes at varying degrees (see Table 1 ). To name just a few, decarbonisation technologies include carbon capture and storage (CCS) for enhanced oil recovery (i.e., CO 2 injection), hydrogen (H 2 ) generation from methane and third-generation biofuels. The real challenge is acquiring financing for these nascent technologies. United Nations data collected between 2013-2019 show that companies with consistently high ESG performance enjoyed 4.7 times higher operating margins and lower volatility than low ESG performers over the same period. Commitments Based on 2050 net-zero emissions targets, the need for carbon mitigation may be much more complex than estimated, often involving technology yet to be commercialised. In the

spirit of cooperation, members of the Oil and Gas Climate Initiative (OGCI) are involved in the development of low-carbon solutions. Often these companies build $30 to $50 per tonne of carbon into the cost of new projects. Global oil and gas companies like Repsol, Total, BP and Shell are part of OGCI and committed to sustainable ‘net-zero’ operations by 2050. This commitment requires exponential growth in environmental innovation. They could benefit from the input of innovators from other ESG-driven industries towards the elimination of emission sources (such as flaring) and selling hydrogen at scale by 2030. In the transition from a fossil fuel-based market to renewables, innovative technology suppliers are dually serving the ‘integration’ of the fossil fuel and renewable energy industry. For many operators and the markets they compete in, fossil fuels’ high energy-to-volume ratio cannot be overlooked, especially as much of the world struggles to find ways to recover from an unprecedented pandemic. The cost of renewable fuels and energy (such as wind and solar-PV) is becoming competitive with fossil fuels. However, end-users prefer energy sources that are continuous, not intermittent. Significant capital investment is going into electric vehicles, green hydrogen (currently just 0.1% of global H 2 production), and so on, but markets favour fossil fuels in the near term. When will this balance shift towards renewables? The rate at which renewables will replace fossil fuels to achieve decarbonisation goals varies among regions. For example, the goal in some

countries like Saudi Arabia is not to replace fossil fuels, but to create a balanced approach that will reduce the amount of oil burned domestically, safeguarding this important resource for generations to come. Safeguarding important resources requires increased complexity, such as investing in the ability to recover hydrogen from refinery fuel gas. In other cases, complexity can be avoided. For example, the World Economic Forum noted

Figure 1 Bringing extraordinary capabilities and people together on the road to decarbonisation Photo courtesy of Refining Community