Happy New Year! I hope that 2019 is off to a great start for you, your family, and those around you.
Chances are you have many hopes, plans, and aspirations for 2019. Doubtless, you'd like some things to be different than they were in 2018 and before.
For many of us, a different narrative on "climate change" would be wonderful news. Unless you've decided to swear off media, you likely feel bombarded with stories about impending environmental doom due to climate change. Lots of scary scenarios are on the horizon. While there is hope that environmental disaster can be avoided later in the 21st century, there is a great deal of fear that not enough is being done now to avoid future calamity.
Which brings me back to the need for a "change of narrative". In my mind, too much of the debate is focused on one of three topics: 1) international climate forums such as the recent talks in Poland; 2) impending climate catastrophe projections; or 3) climate change denial. It's rare to find a story that doesn't somehow fit in one of those three "buckets".
So here's a story about climate that doesn't fit any of the three conventional "climate change storylines". Instead, it focuses on some of the practical, behind the scenes things being done to deal with the problem. For me, a great "change of narrative" for 2019 would be to stop talking about the three "buckets" above and re-focus onto practical solutions.
My "practical" story is definitely about climate change (because it's real), but it isn't the usual narrative about what governments are doing. In fact, some of the protagonists in this story are the last you'd ever think of in the climate change debate: Big Oil companies.
Please understand, this is not an apologetic about Big Oil, and it isn't about environmental "green washing". Instead, I want to talk about some practical strategies being used to try to deal with the problem of greenhouse gas removal. It fits into what you might call the "angel/venture capital investing" model. It isn't a panacea, but it could provide a useful, if slightly unexpected, model of the "practical" variety.
The common denominator is technology. If you look back in history, there have been various predictions of environmental catastrophe, beginning with Thomas Malthus. Malthus predicted that the Earth would be destroyed by overpopulation. It never happened, and the reason it didn't was because technology changed.
The best chance we have of avoiding an environmental catastrophe due to greenhouse gas-induced climate change is new technology. The good news is that a whole bunch of new technology has already emerged:
- Better solar panels
- Better wind turbines
- Better battery storage.
These three technologies have made all electric vehicles, as well as solar and wind power, highly cost competitive, in a way hardly dreamed possible just 10 to 15 years ago.
However, we're going to need even more technology, and we'll need it pretty quickly, especially in heavy industry, particularly to deal with greenhouse gas associated with things like cement and steel production.
One approach is to encourage university research, then get that research spun out into start up businesses. This is a well known strategy employed by angel investors. Exhibit A for this approach is a company C-Capture Technology. The Chemistry Department at the University of Leeds in the United Kingdom sought to find a way to improve carbon capture technology. The technology most recently available is very energy intensive, and it reduces the economic efficiency of any plant that adopts it.
The chemistry researchers at Leeds have developed a new technology they believe will significantly improve the process. The technology has been spun out into C-Capture Technology. C-Capture will try to commercialize technology. If the company is successful, it will likely mean both a much better commercial method to capture carbon in an industrial plant, but it will also provide a large financial reward to the university, to be reinvested in the school.
Lots of technology companies spin out of university-based research. The challenge, then, is to commercialize that technology and create viable businesses. It's one thing to build a company based upon software, but a very different thing to try to build a business that requires lots of assets. Unfortunately, many technologies associated with greenhouse gas reduction require huge asset investments. From where will that capital come?
A four year old project called the Oil and Gas Climate Initiative provides an interesting approach. The OGCI is a joint undertaking of a number of international oil and gas companies. Members include ExxonMobil, Chevron, Occidental Petroleum, BP, Shell, and Total. The companies have joined together to make investments in a variety of "green" technologies.
This particular initiative is interesting for several reasons. The first is that it points to the idea that major oil and gas companies are being pushed by their shareholders, as well as governments and other entities, to do something about greenhouse gas emissions. Some think the companies are only doing this because they're being forced by public opinion.
I don't think so. Instead, they're doing it because they perceive that greenhouse gas reduction is not just politically popular, it's a good business investment. In my mind, these companies are making investments because they perceive a potentially huge payout.
The OGCI companies have already invested in seven companies that have developed "green" technologies. Here's a quick rundown of the companies in which they've invested:
Achates has developed high fuel efficiency piston engines. The most obvious application is in aviation.
Clarke has developed the world's first new valve in more than 50 years. It's valves can be used in a broad range of industrial applications. They're considerably more efficient than traditional designs. (Full disclosure: I am an investor in this company)
Econic has developed catalysts that permit the incorporation of CO2 as a raw material in various plastics. The idea is to take CO2 emissions and turn them into plastic, a fantastic recycling strategy if it can be commercialized!
GHGSat is developing a set of greenhouse gas monitoring devices and data services. The need for such monitoring is quite evident, as the first step to reducing greenhouse gases is to identify where they're present, as well as their source.
WhiIe various organizations are trying to develop carbon capture technology, Inventys says it is trying to do it on the "gigatonne scale".
Kairos is adapting aerospace technology to improve detection of methane gas, one of the most potent greenhouse gases.
Solidia is developing improved technology for making cement. Many if not most people don't realize that cement-making is a potent source of greenhouse gases. The world would be hard pressed to do without cement, so developing better processes â€" especially ones that reduce greenhouse gases â€" is really important.
These are OGCI's initial investments. The experience of angel and venture capital investors suggests that OGCI will need to create a portfolio of at least 20, and preferable 30 or more, investments. Most likely, for every 10 investments that OGCI makes, half will fail and another three will provide only a fairly small return. The goal, however, is for one or two of every ten investments to be very successful. If that happens, the investors will likely realize excellent returns.
In this case, however, there should be an additional benefit: the successful companies will be successful because they've developed and commercialized an important technology that will help reduce greenhouse gases. In that case, everyone will win!
OGCI has made one other investment. It is in an initiative to build the first natural gas plant that uses carbon capture and underground storage (CCUS) technology. The plant is in Teeside in the United Kingdom. If this investment is a success, the technology could be used to capture carbon in plants around the world.
Policymakers around the world should be encouraging similar types of investment in new technology to reduce or eliminate carbon. The examples above provide a useful template:
#1: Fund basic and applied research in universities to develop carbon capture or other carbon reduction/elimination technologies;
#2: Encourage universities to spin out promising technologies;
#3: Encourage angel and venture capital investors to focus attention on these new technologies;
#4: Encourage other industries to model what the OGCI has done.
Much, if not most, attention has been focused on government-led initiatives to reduce carbon emissions. The entire Paris Climate Treaty strategy is built upon this. Unfortunately, governments are poorly equipped to carry out the four steps listed above. The only way that government can be helpful is with #1 and, to some extent, #4. Governments could, and should, invest more funds in research, especially through major research universities.
The other place government might have a positive influence is through the promotion of OGCI-style initiative in other industries. Consider the example of cement-making cited earlier. Greenhouse gas is a significant problem. Governments might encourage companies in cement-making to establish pools of capital to invest in new technology. Why not create a portfolio of companies developing new technology to improve the process? On one level, this could be financially remunerative to the investor-owners. More importantly, it could help build new technology that could benefit an entire industry, much less the planet as a whole.
Please understand, none of this is a panacea. None of the companies cited above are likely to create a "magic bullet" that will solve the carbon emissions problem. But encouraging the development of new technology is likely the very best way we'll avoid the climate disaster that appears in the offing.
Had technology not improved, Thomas Malthus probably would have been proved right, with disastrous consequences for the entire planet. The same is likely true for us today, so we'd best do what we can to encourage the improvement of technology. Doubtless, technology will get better in 2019. We just need to find ways to channel that technology to create better solutions to things such as greenhouse gas emissions. Governments, especially national ones, tend to be pretty ineffective in doing this, but there are ways to get the job done. The examples I've cited above could provide a useful, practical model.
May 2019 be the best year ever for you, your family, and those who surround you, and may you be showered with blessings. May the "narratives" you hear be different â€" and better â€" than anything you thought possible.
