Following market consultation and feedback, Platts has begun publishing new daily Carbon Credit price assessments which reflect Nature-Based Carbon Credit Projects and Household Device Carbon…
Jun 14, 2021
Following market consultation and feedback, Platts has begun publishing new daily Carbon Credit price assessments which reflect Nature-Based Carbon Credit Projects and Household Device Carbon Credit Projects, effective June 14, 2021.
Liquidity in the associated carbon credit markets has continued to grow, and these new assessments will add further transparency in market pricing and trading activity. Platts launched the CEC assessment, which reflects CORSIA-eligible carbon credits, on January 4 in a note available here: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/121620-platts-to-publish-voluntary-carbon-credit-price-assessments-jan-4.
Platts CNC reflects the most competitive nature-based carbon credits that either avoid or remove GHG emissions. The CNC is measured in $/mtCO2e and represents five lots of 1,000 CO2e units each and reflects value at 16:30 London time. Platts also publishes a Eur/mtC02e conversion assessment for 16:30 London time.
Platts defines nature-based carbon credit projects as projects that involve Forestry & Land Use including, but not limited to projects that avoid deforestation (including REDD/REDD+), afforestation, reforestation, no-till farming projects, soil sequestration (including biochar), wetland management and/or restoration, and reduced methane from livestock.
Platts CNC reflects the spot market bids, offers and trades for maturations or vintages of each of the last five years for delivery in the current year. Platts does not publish separate values for different vintages of the CNC assessment, but reflects indications in which a buyer agrees to take any suitable vintages for current year delivery.
The Platts Household Devices Carbon Credit assessment reflects the most competitive household device carbon credits, timestamped to 16:30 London time. It reflects 20 lots of 1,000 CO2e units each, and those credits from Household Device projects that carry standard Sustainable Development Goal co-benefits (ie Good Health & Well-being). Platts also publishes a Eur/mtCO2e conversion assessment for 16:30 London time.
Platts defines Household Devices projects as projects that lead to improved Energy Efficiency and Water Access including, but not limited to Clean Cookstoves projects, improved building energy efficiency, and clean water access.
Both the Platts CNC and Platts Household Devices Carbon Credit assessments reflect projects certified by the following groups: The Gold Standard, Climate Action Reserve (CAR), Verified Carbon Standard (VCS), Architecture for REDD+ Transactions, and American Carbon Registry (ACR). Platts reflects all of the nature-based and household device methodologies issued by the above standards.
Platts Carbon Credit Assessments reflect standard SDG co-benefits within each project type (ie Platts CNC reflects credits from projects that have the Climate Action SDG). However, Platts does not reflect additional non-standard SDGs. While credits from projects that contain non-standard SDG benefits may be included within the Platts Market on Close assessment process, they may be normalized back to a standard SDG basis for the purposes of assessment.
These new assessments are available on the Platts Platform, Platts Live and in the Platts Pricing Database under the below codes:
Price Assessment Daily Code MAvg Code
PlattsCNC $/mtCO2e CNCAD00 CNCAD03
Platts CNC Eur/mtCO2e CNCAE00 CNCAE03
Household Devices $/mtCO2e CNHDD00 CNHDD03
Household Devices Eur/mtCO2e CNHDE00 CNHDE03
Please send all feedback, comments and questions to Platts_Carbon@spglobal.com and email@example.com.
For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.
Jun 08, 2021
Jun 10, 2021
2021 will probably be remembered as the year when carbon finance emerged as a talking point among a wide range of industries.
In a market note released at the start of May, the most liquid carbon credits exchange currently, the New York-based Xpansiv CBL, shared a figure that made that clear: on May 7, CBL’s year-to-date carbon volume of more than 30 million tons of CO2 traded emissions was already approaching 2020’s full-year record of 31 million tons.
Among the 2021 new entrants in voluntary carbon markets, oil and gas majors, hedge funds and banks were heard as the most active players, resolutely taking positions in the market.
Many political entities like the EU, the UK or the state of California already have mandatory carbon markets covering specific industry sectors and gases. These form an important part of the effort to meet the Paris Agreement target of limiting global heating to 2 degrees Celsius above preindustrial levels, with a more ambitious ideal of remaining within a 1.5 C increase, although it should be noted that some of these markets predate the Paris commitments.
But other sectors have taken a cue from compliance schemes and pledged to offset their greenhouse gas emissions (GHG) by participating in carbon markets voluntarily.
Voluntary carbon markets allow carbon emitters to offset their unavoidable emissions by purchasing carbon credits emitted by projects targeted at removing or reducing GHG from the atmosphere.
Companies can participate in the voluntary carbon market either individually or as part of an industry-wide scheme.
While compliance markets are currently limited to carbon credits from a specific region, voluntary carbon credits are significantly more fluid, unrestrained by boundaries set by nation-states or political unions. They also have the potential to be accessed by every sector of the economy instead of a limited number of industries.
The Taskforce on Scaling Voluntary Carbon Markets, sponsored by the Institute of International Finance with support from McKinsey, estimates that the market for carbon credits could be worth upward of $50 billion as soon as 2030.
Five main players make up the engine of carbon markets.
Project developers represent the upstream part of the market, and produce carbon credits. Projects can range from large-scale, industrial style projects like a high-volume hydro plant, to smaller community-based ones like clean cookstoves.
Community-based projects are usually very localized and typically designed and managed by local groups or NGOs. They tend to produce smaller volumes of carbon credits and it is often more expensive to certify them. However, they often generate more additional co-benefits and meet the UN’s Sustainable Development Goals (SDGs), contributing, for example, to improved welfare for the local population, better water quality, or the reduction of economic inequality.
When a carbon credit project also helps to meet some of the SDGs, the value of a credit from that project to potential buyers may be higher, and the credit can trade at a premium to other types of projects.
Industrial projects are typically larger-scale projects that can often produce large volumes of credits with more easily verified GHG offset potential. But this kind of project may not generate strong co-benefits and may not meet additional SDG objectives. For this reason, credits emitted by industrial projects may trade at a discount to projects that do carry SDGs.
The large-scale nature of some types of projects can also raise questions about whether they are truly “additional”, meaning that they would be able to operate without the additional revenue generated from the sale of carbon credits.
This is a particularly salient question in the development of renewable energy projects, given that renewable energy is often cheaper in some regions than the development of new, conventional fossil fuel plants.
The downstream market is made of end buyers: companies—or even individual consumers—that have committed to offset part or all of their GHG emissions. Among the early buyers of carbon credits were tech companies such as Apple and Google, airplane operators, and oil and gas majors, but more industry sectors are joining the market as they set their own net-zero targets.
To link supply and demand, there are brokers and retail traders, just as in other commodity markets. Retail traders purchase large amounts of credits directly from the supplier, bundle those credits in portfolios, ranging from hundreds to hundreds or thousands of mtCO2e, and sell those bundles to the end buyers, typically with some commission.
Brokers buy carbon credits from a retailer trader and market them to an end-buyer, usually with some commission.
There is a fifth player unique to carbon markets. Standards are organizations, usually NGOs, which certify that a particular project meets its stated objectives and its stated volume of emissions.
Standards have a series of methodologies, or requirements, for each type of carbon project. For example, a reforestation project will follow specific rules when calculating the level of CO2 absorption of the planned forest and therefore the number of carbon credits it produces over time.
A renewable energy project will have a different set of specific rules to follow when calculating the benefit in terms of avoided CO2 emissions and carbon credits generated over time.
As of January 2021, the number of carbon credits issued by the largest Standards (UN Clean Development Mechanism, Verra, the American Carbon Registry, Climate Action Reserve and Gold Standard), totaled 3,110 million mt of CO2. Of these, 810 million mt were still available in January, while 2,300 million mt had already been offset and therefore retired, meaning that those credits had been used by buyers to offset their emissions.
There is an overlapping of roles that is specific to carbon markets.
Many brokers act as traders, and many financiers have both brokering arms and project development arms. All these groups may ultimately market credits to a buyer, or a developer may arrange to sell them direct. All these juxtapositions can have an impact on price, and ultimately affect market transparency.
While most of the transactions are currently happening in private conversations and over-the-counter deals, some exchanges are also emerging. Often, the exchanges are used to settle large bilateral deals that have been negotiated offscreen.
In a market note released May 7, Xsignals, a data company owned by CBL exchange operator Xpansiv, said that ever larger numbers of bilateral deals negotiated offscreen are being brought by traders on the CBL platform to be settled. These deals make up a significant portion of recent volume transacted on CBL.
When a company turns to voluntary carbon markets as a potential way to compensate for its carbon emissions, one of the key pieces of information it looks for is the price of carbon credits. With this information, a company can decide how ambitious it can be when setting its emission reduction target and whether voluntary markets can really help in reaching it.
At the same time, a clear price signal for carbon allows players already involved in the market to make sure that they are trading their credit at a price that reflects the real market value.
But putting a price on carbon credits is far from a straightforward operation, mostly because of the wide variety of credits in the market.
Projects emitting carbon credits can be of many different types and sub-types. The nature of the underlying project is one of the main factors affecting the price of the credit. As mentioned above, for example, community-based projects can be priced at premiums to industrial projects.
Carbon credits can be grouped into three large categories or baskets: avoidance projects (they avoid emitting GHGs completely), reduction (they reduce the volume of GHGs emitted into the atmosphere) and removal (they remove GHG directly from the atmosphere).
The avoidance basket includes renewable energy projects—wind and solar power, hydroelectric power, and biofuel development including biogas—but also forestry and farming emissions avoidance projects. The latter, which are also known as REDD+, prevent deforestation or wetland destruction, or use soil management practices in farming that limit GHG emissions—such as projects aiming to avoid emissions from dairy cows and beef cattle through different diets.
The reduction category includes projects that reduce demand for energy (energy efficiency) including for example cookstove projects, fuel efficiency or the development of energy-efficient buildings. Plans to capture and destroy industrial pollutants are also part of this group (destruction of industrial pollutants). Another example is the methane collection and combustion group of projects, which involve the combustion or containment of methane generated through farming, landfills and heavy industry.
In the removal category there are reforestation projects, afforestation projects and wetland management (forestry and farming). Plans to remove the existing carbon in the atmosphere, including direct air capture, and neutralize it with permanent underground storage, fall into this basket (carbon capture).
Other factors impacting price are the volume of CO2 emissions traded (the higher the volume the lower the price, usually), the geography of the project, its vintage –the year when the credit was “produced” (typically, the older the vintage the cheaper the price); and the delivery time.
In current carbon markets, the price of one carbon credit can vary from a few cents per metric ton of CO2 emissions to $15/mtCO2e or even $20/mtCO2e. S&P Global Platts assesses the price of carbon credits traded within the CORSIA voluntary market (Platts CEC), which is one of the few commoditized parts of a market that otherwise defies commoditization.
The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is one of the most clearly defined industry-wide voluntary schemes. Airline operators taking part in CORSIA have pledged to offset all the CO2 emissions they will produce above a baseline 2019 level.
Airlines intend to do this—at least in part—by purchasing carbon credits emitted by projects certified by international agencies and recognized as CORSIA-eligible. The first part of the scheme from 2021 to 2026 is voluntary. From 2027, CORSIA will become mandatory for almost all international routes. While CORSIA credits are one of the ways through which the aviation industry plans to achieve its ambitious climate goals, it is not the only way. The aviation industry has also committed to technology, operations and infrastructure advancement as well as focus on fuel efficiency.
Platts collects bid, offers and trades for carbon credits that are considered eligible for the CORSIA market and that have been certified by the following standards: The Gold Standard, Climate Action Reserve (CAR), Verified Carbon Standard (VCS), Architecture for REDD+ Transactions, and American Carbon Registry.
Price indications are collected directly from market participants during every trading day.
The CEC reflects the spot market for specific vintages and for delivery in the current year (spot prices). It does not reflect price differences caused by project co-benefits or location.
These credits are measured in $/mtCO2e, and each one is made of a minimum of 5 lots of 1,000 CO2e units.
The CEC price represents the most competitive way at which end-buyers can fulfill their CORSIA offsetting goals on a given day and therefore it usually reflects some of the most competitively priced credits being traded in the market, be it from a wind power plant or from a reforestation project.
Given the wide array of credits, Platts also reports price indications for each category of projects as they are traded in the broader voluntary market and not just as part of the CORSIA scheme, in an effort to increase transparency.
Putting a price on each of these baskets will help increase visibility in the still-blurry world of carbon finance.
Although the rise of voluntary carbon markets dates back to the early 2000s, following the ratification of the Kyoto protocol, growth was stunted by the 2008 global economic crisis. The new wave of public and private commitments to curb carbon emissions over recent years is now triggering a resurgence of interest in voluntary carbon credits as one way to manage carbon footprints.
While there are no barriers to entry, the lack of transparency in transactions and insufficient understanding of how carbon finance works have kept many potentially interested players at bay.
However, the growing interest in understanding voluntary carbon markets, as well as the efforts of several players to scale and standardize operations, suggest that carbon finance will soon be able to attract new entrants and increase in size.
Jun 08, 2021
Navigating a pathway to a low-carbon global economy requires a new plan. The S&P Global Platts Atlas of Energy Transition, produced in collaboration with S&P…
Feb 22, 2021
Feb 01, 2021
Uncertainty around the outcome of the 26th annual United Nations Climate Change Conference of the Parties has been holding back the launch of new carbon…
Jun 14, 2021
Uncertainty around the outcome of the 26th annual United Nations Climate Change Conference of the Parties has been holding back the launch of new carbon projects, with a potentially harmful impact on the development of voluntary carbon markets, several stakeholders told S&P Global Platts.
Concerns are emerging around the implementation of Article 6 of the Paris Agreement on climate change in particular, which will be one of the key points on the agenda for the conference in Glasgow, due to take place in November.
Article 6 will determine whether countries can use voluntary carbon markets to reach their net-zero emissions goals. It will also allow participating countries to set additional goals such as mitigating climate change and promoting sustainable development.
“The uncertainty around the Article 6 of the Paris Agreement is responsible for the current slowdown in supply,” a European carbon trader said. “We would have more projects implemented if there wasn’t a lack of clarity and understanding of what Article 6 will mean for countries and players.”
“The lack of internationally agreed rules as a basis increases the risk to investment in carbon markets generally,” said Hugh Salway, Head of Environmental Markets at The Gold Standard Foundation, in an emailed statement. “It prolongs uncertainty about the future of the Clean Development Mechanism and its projects.”
There are three main unresolved issues that the Parties will be discussing at the 26th annual Conference of Parties.
The first is the future of the United Nations Clean Development Mechanism (CDM) and its projects, mentioned by Salway. The Parties will have to decide whether to allow carbon credits issued under the CDM as part of the Kyoto Protocol to be recognized also by the Paris Agreement.
Credits issued under the CDM are known as Certified Emission Reduction (CER) credits and currently represent some of the most competitive credits available on the market. Their competitive price is due to the old vintages held by these credits and the low-quality reputation deriving from this. The CDM scheme is the first scheme of its kind and CERs were issued as far back as 2006.
For some, the continuity of previous mechanism should be guaranteed to create a stable and inviting regulatory environment. According to others, many of the projects issuing CERs no longer comply with one of the core principles of voluntary markets, which is additionality, and should therefore be excluded from the current carbon finance space. Under the principle of additionality, to be eligible for credits issuance, a carbon project needs to prove that it would not be able to operate without the additional revenue generated from the sale of carbon credits.
A second unresolved issue is represented by the Share of Proceeds (SOP). Article 6 is expected to rule whether a portion of the proceeds coming from the trade of voluntary carbon credits should be destined to developing countries to help their mitigation and adaptation efforts. This portion of proceeds, which some opponents call tax, would go into a separate fund that will be used by developing countries to finance their mitigation efforts. Negotiations are underway to decide not only if a SOP should be set, but how large the percentage should be and how it will be managed.
The third and last issue is about deciding whether a percentage of carbon credits should be canceled any time a bundle of credits is purchased.
In other words, when a buyer purchases a bundle of carbon credits, a set percentage of those credits, for example 20%, is immediately canceled and no longer available to the buyer for its offsetting needs. This share of canceled credits could either be treated as a “climate bonus” to help reach even higher climate targets or, according to others, should be offered to host countries as a way to meet their mitigation obligation under the Paris Agreement.
According to Jeff Holmstead, a partner at the Bracewell legal firm and head of Bracewell’s Environmental Strategies Group, the second and third issues stem from the same question: “Should carbon credits be used simply to reach emission reduction targets at the lowest cost, or should it be used for other purposes — such as redistributing wealth across countries or attempting to go beyond the actual targets?”
“If we allow developing countries to benefit from a share of the proceeds coming from trading activities, or to keep some of the emission reduction credits purchased by buyers, we would help developing countries to reduce the cost of their mitigation efforts,” Holmstead said in an emailed statement. “But this would have an impact on voluntary carbon markets and on the environment because carbon finance will become less efficient and more expensive.”
While carbon markets are on the edge of their seat and are keen to get more clarity on the topic at hand, the general sentiment in the industry is that carbon credits will still play an important role on the journey to net-zero. The question just remains of what capacity.
“Regardless of the outcome of COP26, voluntary carbon markets will continue to grow,” said Robin Rix, Chief Policy and Markets Officer at Verra, in an emailed statement. “The world is witnessing an inexorable trend toward net-zero by 2050, and voluntary carbon markets are leading the way.”
Even if governments are not able to reach an agreement in Glasgow this November, negotiations will continue, according to Salway.
“Bilateral trading arrangements between a select number of countries will also likely move forward, shown by the agreements Switzerland has already struck with Peru, Ghana and Thailand,” Salway said.
The transition to a low-carbon energy future raises tough questions for the US upstream natural gas industry over its environmental impacts and what measures should…
Jun 14, 2021
The transition to a low-carbon energy future raises tough questions for the US upstream natural gas industry over its environmental impacts and what measures should be taken to mitigate them. It also threatens to end nearly 20 years of growth in gas production.
In earnings calls, investor presentations and at conferences, the low-carbon narrative has become a recurring theme among upstream companies and their investors as the energy transition grows in prominence. In the 2020s and beyond, that narrative promises to dramatically alter the shale gas producer business model.
Throughout the early 2000s, the stunning success of shale drilling was determined largely by institutional investors and politicians directing capital and tax incentives to the upstream sector. Those investments allowed US producers to nearly triple domestic output since the early 2000s to more than 90 Bcf/d currently.
As boardrooms and legislatures scrutinize the carbon costs of drilling, their mandate for the 2020s is one of discipline and stewardship. First and foremost, low-cost, maintenance-level production will remain critical to the survival of individual producers. Beyond that, though, intensive carbon-tracking and emissions reductions will also become vital in the years ahead.
Over the past decade, the price of benchmark Henry Hub gas has averaged just $3.01/MMBtu, according to S&P Global Platts data. Consistently low prices have long been the hallmark of shale drilling and will remain a major selling point for gas as a residential-commercial and industrial fuel.
Through 2030, the real, inflation-adjusted, price of benchmark Henry Hub gas will average just $2.85/MMBtu, according to a forecast from S&P Global Platts Analytics. Through the decade that follows, prices will likely rise by less than 45 cents.
In the US, low prices – and the high cost to overhaul or repurpose midstream and downstream infrastructure – will make gas a fierce competitor to alternative fuels, even in a low-carbon world. While the push toward renewable power will erode market share for gas in the generation sector, the fuel is forecast to remain critical to both the residential-commercial and industrial markets over the next 30 years.
For the upstream industry, low prices will require further improvements in efficiency and cost-control.
Over the past 10 years, low gas prices have rendered obsolete some of the most prolific early-era shale basins, such as the Fayetteville in Arkansas and the Barnett in Texas. In the decades to come, that trend will only accelerate as producers focus on a narrowing pool of profitable resources in a handful of plays. These are likely to include the Delaware and Midland sub-basins of the Permian in Texas and New Mexico; the Bakken, largely in North Dakota; the Marcellus in Appalachia; and the Haynesville in Texas and Louisiana.
As of first-quarter 2021, an average shale producer in the Delaware Basin – currently the most profitable in North America – sees an internal rate of return close to 34%, based on a half-cycle, post-tax analysis. Across Appalachia, the average producer sees closer to 14% to 19% – just enough to remain profitable.
In recent years, average IRRs in even the most prolific basins have at times dipped lower – into the single digits, sometime for months. Generally, producers require a return of at least 10% to achieve breakeven, making margins below that level unsustainable longer term, according to Platts Analytics.
Over the next decade, thin margins and a growing focus of investors on profitability will likely narrow the field by way of bankruptcies, mergers and acquisitions, leaving only the most efficient standing.
In Q1 2021, bankruptcies among US exploration and production companies totaled eight, according to recent data published by Haynes and Boone. It was the most for any first-quarter period since 2016, but still down from peak levels in Q2 2020 when 18 E&Ps filed, and Q3 when 17 bankruptcies were filed. Even for producers that have weathered the recent storms, consolidation pressures in the 2020s are only likely to grow. During a recent earnings call, EQT President and CEO Toby Rice told analysts that scale will become increasingly critical to producers’ survival in a low-price commodity environment.
“In Appalachia, we’ve got 30 teams running around 30 rigs; you may have very efficient companies, but when you look at that, it could be more efficient than that,” he said. “You’ve got a lot of service providers that are running at, call it 50% utilization. And you’ve got multiple gathering infrastructures.”
Cost, efficiency and consolidation pressures are just half of the equation for E&Ps, though. In the 2020s and beyond, discerning investors and tighter regulations will demand environmental stewardship, too.
For natural gas producers, emissions detection, tracking and certification at the wellhead and on gathering lines will become an indispensable, routine component of environmental stewardship. Beyond that, investors will look to E&Ps for leadership in the adoption of low- or zero-carbon business models and emissions-cutting technologies.
This spring, the US’ largest gas producer, EQT, already took its first step in that direction, saying its Marcellus output would undergo an independent assessment of its environmental impact. Its certification will include quantified assessments for methane detection and intensity, along with an overall score based on other factors, including the company’s record on corporate governance, ethics, social impacts, human rights, community engagement, biodiversity and climate change.
The push for greater environmental stewardship comes, not just from investors but from end-user customers, too. Earlier this year, Pavilion Energy signed a six-year LNG sales and purchase agreement with Chevron for the supply of some 500,000 mt/year of LNG to Singapore starting in 2023. Under the agreement, cargoes delivered will be accompanied by a statement of GHG emissions measured from the wellhead to the discharge port. At a recent climate summit, Chevron’s general manager of ESG and Sustainability said he anticipates many future commercial deals will include such agreements.
For some companies, the push to meet environmental goals will be met early on by aggressive emissions cuts. Last year, BP, for instance, announced an ambitious goal to achieve carbon neutrality across its global operation by mid-century.
For other E&Ps, the pressure has intensified just in recent weeks. At ExxonMobil – which has announced its own plan to reduce GHG emissions some 30% by 2025, with reductions coming in part from carbon capture and sequestration technology – an activist hedge fund managed to get three nominees on to the ExxonMobil board. The same day, Chevron investors voted for stringent targets to cut emissions from the company’s products, and Royal Dutch Shell was handed a court decision in the Netherlands ordering the company to accelerate emissions reductions and cut its carbon footprint 45% globally by 2030.
Environmental initiatives are already becoming business-critical for E&Ps as they look to attract both investor dollars and end-user customers. The sector can expect more of the same into the mid-2020s and beyond.
Evolving choices around EV battery composition have altered price dynamics in the lithium market, with the two main forms, hydroxide and carbonate, now moving independently to each…
Jun 02, 2021
Evolving choices around EV battery composition have altered price dynamics in the lithium market, with the two main forms, hydroxide and carbonate, now moving independently to each other, reflecting different use cases and trading patterns. LFP was considered by many industry participants to be a lower priority in the upcoming EV boom. This started to change with the gradual removal of Chinese EV subsidies, which lowered the incentives for local automakers to target only long-range EVs and increased the pressure to reduce costs. Moreover, improvements on the pack design, through the cell-to-pack approach, allowed a bigger portion of the battery pack to be filled with cells which significantly increased energy density.
In the latest of S&P Global Platts Future Energy Podcast, Platts Pricing Director of Metals Scott Yarham speaks to Tianqi Lithium‘s Sales Director Ron Mitchell and Platts Pricing Specialist Henrique Ribeiro to unpack these new trading patterns and what is emerging in the market.
Investors are proving they have climate change and the energy transition on the their minds. Last week, activist investors got at least two seats on…
Jun 01, 2021
Investors are proving they have climate change and the energy transition on the their minds.
Last week, activist investors got at least two seats on the ExxonMobil board of directors, and Chevron’s shareholders approved Scope 3 emission targets, both which could lead to lower oil and gas production ahead.
The popularity of ESG (environmental, social and governance) investments is soaring. But what does it even mean for a company to adopt that label, and how do we weigh one ESG pledge against another?
Jonathan Chanis, managing member of New Tide Asset Management, believes ESG priorities are here to stay. He thinks regulators have a role to play to make sure these ESG labels mean something but he sees potential risks from regulators getting these reforms wrong.
India’s road to recovery from the pandemic’s deadly second wave may help fast track oil majors’ ambitions to expand their portfolio in Asia’s fastest-growing energy…
Jun 08, 2021
India’s road to recovery from the pandemic’s deadly second wave may help fast track oil majors’ ambitions to expand their portfolio in Asia’s fastest-growing energy market while at the same time reducing their carbon footprint.
With plentiful funds expected to support an economic recovery from the COVID-19 crisis, CEOs of leading global companies are hopeful a large part of that relief will flow into the energy sector, creating opportunities in both fossil fuels and in clean energy.
“Perhaps a post-pandemic economic recovery anchored around sustainability and climate action could well be the prudent way,” Nitin Prasad, chairman of Shell Companies in India, said in an exclusive interview with S&P Global Platts. “We also believe that there are opportunities to accelerate our activities to help the country recover cleaner and faster, which we are actively encouraging the government to consider.”
The pandemic has neither altered the country’s long-term robust energy fundamentals nor Shell’s commitment to grow its business, Prasad said, and he believes that with every crisis comes an opportunity.
“My vision for India is one with a clear focus on decarbonization and climate action, but in a fair and equitable way,” Prasad said.
The pandemic has encouraged Shell to shift the role of its fuel stations, converting them into safe havens by ensuring proper sanitization, social distancing and contactless transactions.
A study Shell jointly conducted with The Energy and Resources Institute highlighted how the country will need to evolve as energy demand in India is set to almost double by 2050.
In order to transition into a net-zero future, the share of the country’s electricity in its energy mix needs to grow to more than 50% of energy use, with rapid electrification of energy services primarily from renewables.
Fuels as molecules—such as crude oil, natural gas, coal, hydrogen, biofuels and biomass—will meet the remaining energy consumption basket. In addition, liquid biofuels need to surpass petroleum products by 2040 in fueling industry and transport, including hard-to-abate sectors like aviation.
“We believe that hydrogen will play a key role in the net-zero emissions journey of India’s energy system,” Prasad said.
Bill Davis, CEO and lead country manager for ExxonMobil South Asia, said in India’s road to recovery and move towards energy security there be higher demand for lower emissions and affordable energy, and finding hydrocarbon resources domestically will be crucial.
“There is no denying the need to simultaneously pursue further emission reduction efforts and technologies to support the transition to a lower carbon future,” Davis told Platts. “It’s really a question of doing it in a smart way.
ExxonMobil is developing technologies to make refining less energy-intensive and is researching breakthroughs to make future solutions like carbon capture more affordable for a wide range of applications.
The transportation sector, being a key component of India’s transition to a gas-based economy, is another areas of focus for ExxonMobil. As India prepares the adoption of LNG as a vehicular fuel, ExxonMobil is working with GAIL to build opportunities that add impetus to that vision.
ExxonMobil expects natural gas to do a part of the heavy lifting to support economic growth following the pandemic. The company is working with leading Indian energy companies to accelerate gas access for industries, transportation and other applications.
“As India transitions to lower-carbon sources, it has concrete emission reduction plans consistent with making energy access more equitable and affordable,” Davis said.
ExxonMobil is one of the world’s largest producers of hydrogen, and as its potential for use in the transition to a lower-carbon future develops in India, Davis believes the company is well positioned to apply its experience, scale and technology to contribute.
“Hydrogen can be useful in hard-to-decarbonize sectors, such as fuel for heavy-duty trucks, and to produce high-temperature industrial heat for steel, refining and chemical industries,” Davis said. “Low-carbon hydrogen from natural gas with carbon capture and storage, or CCS, has cost and scale advantages in the near and medium term.”
Outside the global majors, leading Indian oil companies are also stepping up efforts to ensure they are not left behind in the race.
Shrikant Madhav Vaidya, chairman of Indian Oil Corp., said while IOC’s strategic growth path will focus on its core refining and fuel marketing businesses with a bigger petrochemicals presence, hydrogen and electric mobility will figure prominently in its portfolio over the in the next 10 years.
IOC is pushing ahead with research on carbon capture, utilization and storage technologies, a space where it is seeking global collaboration to meet its Paris climate goals.
“We are at an advanced stage of embracing such technologies for energy transition,” Vaidya said.