Carrots, Sticks, Chickens and Eggs – Instruments, Incentives, Supply and Demand?

The current regulatory landscape for “going green” can be complex to understand, with different local/national/global incentives and stated policy goals.? How do we manage that when looking at where and how to invest to ensure that the right projects are being implemented??

And while investment support is important, there is no shortage of project ideas or project potential to decarbonize, certainty, demand, and intelligence on customers' willingness to pay a premium for low-carbon products are all make or break in determining how aggressively we can move forward. How do we evaluate demand and pricing for these products compared to their conventional counterparts??

Discussing the regulatory environment, investment economics, customer interest and more, Austin Lin , Principal Analyst, Wood Mackenzie sat down with Billy Bardin, Global Climate Transition Director, 陶氏化学 , Christopher Cain , Senior Vice President, Net Zero Transition Strategy, LyondellBasell , Alex Coles, P. Eng, MBA , Vice President & General Manager, Burnaby Refinery, Parkland Corporation , Sarah Forbes , Deputy Director, Carbon Management Technologies, U.S. Department of Energy (DOE) , and Mike Wright , Executive Vice President & Chief Operating Officer, CVR Energy, Inc. for this year’s ESF North America keynote panel. ?

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Key takeaways from the discussion include:

• It all starts with energy efficiency - energy efficiency is the most financially beneficial way to make CO2 emission reductions. The more energy efficient we can become, the more process efficient we become, and the more success we will have.??

• Hydrogen fuel switching – switching from fossil fuels to hydrogen for heat production offers significant environmental benefits thanks to hydrogen's clean-burning properties, but the shift to hydrogen doesn't come without its challenges as well as a substantial financial investment.?

• Only an interim solution – While CCS can help reduce emissions in the short term, storing it alone has a finite life. The long-term goal should be to develop technologies that not only capture CO2 but also utilize it effectively to make other valuable products and create economic opportunities.??

• A significant step forward - To date the IRA has been a great start in addressing climate change and promoting sustainable energy practices. Globally other regions are responding, looking for ways to implement and accelerate programs that better compete. While the IRA represents a significant step forward, to reach its full potential, and ensure the regulations are enabling rather than restrictive to support an energy transition that is sustainable, reliable, and affordable, improvements are needed especially to encourage technology advancements and facilitate the commercialization of projects, permitting being a prime example.??

• Policy and funding envy - Canada home to Dow’s PATH2ZERO project,?the world’s first net-zero ethylene and derivatives complex is an excellent example of where all the critical elements required have come together to foster significant investment. The site in Fort Saskatchewan, Alberta offers a supportive regulatory and incentive environment, facilitative governments, and carbon capture infrastructure.?

• Navigating an evolving market landscape - we are witnessing a broad portfolio of market opportunities and a growing demand for lower-carbon or decarbonized products however limited supply means market discontinuities which for some presents opportunities to monetize and take advantage of. As we advance, the market for low-carbon products will be distinct from the traditional commodity market, at least for a while until it reaches a critical inflection point. To navigate this evolving landscape, we need to adopt new marketing strategies and engage with various market segments.?

• Market mentality - A full understanding of the carbon footprint of our products must consider the broader effects on brand owners and consumers downstream. Taking a holistic view of the carbon footprint, we can better position our products in the market and meet the growing demand for sustainable solutions.?

• Creating inherent value - Government subsidies and incentives are not a permanent solution to make low-carbon technologies and projects profitable. The focus should be on solutions that create inherent value by understanding and anticipating consumer demand and brand owner requirements regardless of the presence of subsidies, incentives, or targets. Regulations should set goals, not define solutions – the industry is better equipped to give feasible optimal solutions??

• Failure to prepare is preparing to fail - We must navigate the lifespan uncertainties of government incentives and credits, and the unpredictability of future market conditions. Capitalizing on opportunities, building on successes, and exiting markets when necessary to maintain profitability and growth, requires continuous reassessing of assumptions, stress testing of strategies, monitoring of market signals, and a preparedness to adapt and pivot.??

• It’s not just sustainability for sustainability's sake – it's about value creation - Whether an investment in energy efficiency, a conventional or new low-carbon technology, applying the same hurdle rate to all investments ensures a consistent and rigorous evaluation process, based on competitiveness and a need to be value accretive. While some investments may not be as financially attractive as other options, they may add value and align with a broader portfolio and objectives. We must make this energy transition in a smart and financially responsible way that shareholders can support.?

• No one-size-fits-all - A global footprint of assets requires a balanced portfolio of solutions and sources supporting a strategy that does not dive into one area specifically too heavily. Our industry's need for resilient and robust power and heat supply makes nuclear, with its ability to provide clean, on-demand, and reliable power source and steam a great match to help decarbonize and lower the carbon footprint of some of our industry’s facilities.??

• Circular solutions are low-carbon solutions - The plastics industry must collaborate to address the opportunities presented by plastic waste. Partnerships are essential to the success of recycling initiatives and collaborations in the post-consumer recycling (PCR) space are critical for advancing goals. There is a growing market demand for products with recyclable, renewable, and circular content. Customers are increasingly calling for these types of products, presenting a significant market opportunity for our industry. Each advancement in circular recycling offers new opportunities to improve efficiency and reduce environmental impact.?

• We cannot address decarbonizing without talking about steam generation – decarbonization does not always mean carbon capture and storage, or direct air capture. We must focus on actionable steps that we can take today while preparing for the next decade to achieve net zero by 2050. For refiners, steam and process heat generation significantly contribute to our emissions footprint so we must find ways to achieve lower carbon footprints and higher efficiency in heat transfer processes.?

?? Would you like to hear more?

?? Learn more about the event: europetro.com/esfnorthamerica