Welcome to the Green Investor, powered by Investopedia. I'm Caleb Silver, the Editor-in-Chief of Investopedia, and your guide and fellow traveler on our journey into what it means to be a green investor today, and where this investing theme is headed in the future. On the show this week, an energy crisis is gripping Europe and California, and price shocks are on the way. And carbon capture was touted as a key solution to reducing global warming, and tens of billions of dollars has been spent and promised to carbon capture technologies by the largest countries and companies in the world. But critics argue that not only is it less effective than promised, it might not even be necessary. Carroll Muffett of the Center for International Environmental Law is one of them, and he joins the show to make the case.
California is baking and ISO, its grid operator, has issued an emergency call for consumers and businesses to conserve energy for the seventh consecutive day to avoid blackouts amid soaring temperatures. The state has even urged residents to cut back on charging their electric vehicles due to energy shortages. If demand for power exhausts the grid's electric reserves, the ISO said it would instruct utilities to start imposing rotating outages throughout the state. It would be the first time the state has taken such a measure since a brutal heat wave in August of 2020, with the move likely to force power cuts over two days to around 800,000 homes and businesses. U.S. power prices in California and other Western states soared to their highest levels since 2020 this week. As of earlier this week, solar power was supplying about a fifth of California's power demand.
Meanwhile, in Europe, gas prices have been surging for several days after Russia halted gas flows to the continent via its Nord Stream 1 pipeline, in response to sanctions and accusations that European countries are aiding Ukraine's armed forces. That Nord Stream 1 pipeline runs under the Baltic Sea to Germany and has historically supplied about a third of the gas Russia exported to Europe, although lately it's been running at about 20% of capacity due to maintenance outages. Many European power distributors have already collapsed and some major power generators could be at risk, hit by caps that limit the prices they can pass on to consumers. With gas prices now 400% higher than a year ago, countries including Finland, Sweden and Germany are already preparing aid packages to backstop their biggest utilities to keep them from collapsing. Keep in mind that all European countries are already dealing with rampant inflation, just as the European Central Bank (ECB) is raising interest rates.
Here is Goldman Sachs' forecast on where prices are headed from a note out earlier this week: at current forward prices, they estimate energy bills will peak early next year at €500 per month for a typical European family. That implies a 200% increase versus 2021. This also implies a $2 trillion surge in energy bills, or 15% of Europe's gross domestic product (GDP). Protests are already flaring up around Europe as consumers rail against high food and energy prices.
Meet Carroll Muffett
Carroll Muffett is President and CEO of the Center for International Environmental Law (CIEL), a nonprofit organization that uses the power of law to protect the environment, promote human rights and ensure a just and sustainable society.
Prior to joining CIEL, Carroll served as Executive Director of the Climate Law & Policy Project and Deputy Campaigns Director at Greenpeace USA, where he was instrumental in the organization’s campaigns on global warming, forests and other issues. From 2000 to 2006, Carroll served as the international counsel and Senior Director for International Conservation at Defenders of Wildlife, helping to win and defend international protections for high-value timber species including mahogany. Before joining Defenders, Carroll was an attorney with Covington & Burling, and served as a legal fellow at CIEL.
Carroll is also a member of IUCN’s Commission on Environmental Law, and serves on the Board of Advisors at the Climate Accountability Institute and the Board of Editors for the Journal of International Wildlife Law and Policy.
What's in this Episode?
Carbon capture technology has been proselytized as one of the great hopes for reducing global greenhouse emissions, and everyone, from the largest industrial superpowers on the planet to the biggest multinational corporations have ambitious plans for using it in their net zero strategies and pledges. As a reminder, carbon capture, utilization, and storage, often referred to as CCUS–one of those great acronyms in green investing–refers to a suite of technologies designed to capture carbon dioxide from high-emitting activities, such as power plants or industrial facilities, that either use fossil fuels or biomass for fuel. The captured carbon dioxide, which can also be captured directly from the atmosphere, is then compressed and transported via pipeline, ship, rail, or truck to be used in a range of applications, or permanently stored underground.
The topic and the technology are also a source of great debate in the energy and global warming conversations–as you might imagine–and critics of it–and there are many–argue about whether it's even effective, or even necessary. One of the most vocal critics of CCUS is Carroll Muffett. He's the president and CEO of the Center for International Environmental Law, which is a nonprofit organization that uses the power of law to protect the environment, promote human rights, and ensure a just and sustainable society. And he is our guest this week on the Green Investor. Thanks so much for being here.
Carroll: "Thanks for having me."
Caleb: "Tell us briefly what the Center for International Environmental Law does. I just gave the broad strokes, but who are your backers and what are your key initiatives?"
Carroll: "CIEL has been around for 35 years. We are a nonprofit legal organization that works to protect the environment, promote human rights, and ensure a just and sustainable society. We work with communities around the world who have been affected by large infrastructure projects and extractive projects to work on climate change, toxics, and an array of issues."
Caleb "Great, so let's talk about carbon capture technology. Your center put out a report last year, basically stating that not only is it not effective at reducing or slowing climate change, it may not even be necessary. Let's break that down a little bit. Let's talk about the efficacy of it. Why might it not be as effective as it's touted to be?"
Carroll: "Well, I think if you look at the history of carbon capture and storage, what you find is a cure in search of a disease. When I first began researching and working on CCS in the early 2000s, CCS was going to save the American coal industry. CCS was designed to allow us to continue burning coal indefinitely. And yet the problems that plagued CCS, with respect to coal, plague CCS and fossil fuel-burning power plants to this day. And that is, CCS takes a technology that is just increasingly uncompetitive and not economic, and it makes it even more expensive. And so that's the first and fundamental problem with CCS, in that there's no place for it when it comes to the phasing-out of fossil energy. And in fact, the proponents of CCS focus less and less on deploying CCS with respect to existing fossil energy plants, because it's just going to make them even more costly."
"If you look at the analysis from Bloomberg New Energy Finance, among others, what you find is that new-build, renewable energy is now the cheapest source of new electricity for more than two-thirds of the U.S. population, and more than two-thirds of the global population. And therefore, the clear solution in most cases, where there is an energy shortfall, is new-build renewable energy. CCS can't compete with that–and indeed–increasingly coal and even natural gas plants are struggling to compete with renewable energy. When you add CCS on top of that, it makes them more costly, it makes them less efficient, and the economic case for doing that is really slender. This is one of the reasons why we see proponents of CCS increasingly talking not about using CCS on natural gas plants or on coal plants, which needs to be phased out entirely, but instead used for hard-to-reach industrial emissions. And most of the analysis, most of the proponents of CCS now, are very focused on these hard-to-reach industrial emissions. And the problem that they face is that analysis, even from CCS proponents, reveals that CCS can make only a very modest, and still very costly and risky contribution, to those hard-to-reach industrial emissions."
"One of the key sources that we looked at was a comprehensive analysis of more than 1,500 industrial facilities in the United States, that was undertaken by six researchers, including a researcher from Chevron Corporation, which is a major CCS proponent. That analysis of more than 1,500 facilities found only 123 for which CCS was economically viable, even with full deployment of enhanced oil recovery, which means you take the captured carbon just to produce more oil, and with full deployment of federal subsidies. So even fully subsidized–what the researchers found was that CCS could contribute to only about 56 million tonnes of CO2 emission reductions, which is a fraction of a fraction of U.S. reductions. Only 8% of all industrial facilities they assessed were even viable for CO2, for carbon capture. I think that's a pretty low number given the cost of these facilities and the enormous risks that they pose."
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Caleb: "So, Carol, why do the big oil companies–let's just pick on them for a second–why do they embrace it? Is it a get-out-of-jail-free card to produce as much carbon dioxide as they want in their operations, as long as they're promising to grab carbon on the other side through carbon capture? Why are they so into it, because we know there's a lot of money put behind this, and a lot more money potentially coming through the Inflation Reduction Act of 2022."
Carroll: "Well, actually, I think it's really important to look at those two things separately. There are a lot of claims by industry, and yes, there is a lot of federal money being committed to these projects. But the actual amount of company money that is being invested in these projects is comparatively small, compared to their wider infrastructure investments. And that brings me back to the question of what is the value of CCS, particularly for the major oil and gas producers? And there, I think the answer is really simple. CCS creates the idea that we can go on burning oil and gas indefinitely and somehow make the carbon disappear. And that narrative is enough to slow action, and we saw that in the Inflation Reduction Act, we saw in the bipartisan infrastructure bill that was adopted earlier in the year. So what we are seeing is this narrative–that CCS is going to make emissions disappear–has been very effective in allowing major fossil fuel producers to argue that their business models will somehow be sustainable over a long time horizon."
Caleb: "Right. You say in your report that CCS perpetuates fossil fuel systems and impacts. It allows them just to keep operating as usual. We know these big oil companies have promises of transitioning to cleaner energy in the future, but we're in the middle of a commodity super cycle, if you hadn't noticed. China is going to be using more oil and coal. India is going to be using more oil and coal. The U.S. has reduced that, but basically we're in a heavy usage period right now, and prices are sky high. And then the thing that you care most about at your center is this posing risk to communities, especially poorer communities, and the environment that this proposes. How is this myth being propagated? It's actually doing more damage than any potential good."
Carroll: "And I think this is why the CCS myth and so pervasive for so long, is that there were very few projects being built in any meaningful way, and now we see the acceleration of CCS projects. It's worth noting that CCS pilot projects have by-and-large failed or underdelivered for decades. Now we see the expansion and acceleration of projects, and those projects are overwhelmingly targeting communities that have been surrounded by fossil fuel infrastructure for decades. When you look at the maps of the proposed CCS buildout, what you see is that proponents of CCS are arguing for between 25,000 and 60,000 thousand miles of new CCS pipelines. Once that carbon is captured, it has to be stored, and it can be stored in one of two ways. The vast majority of captured carbon has been used simply to produce more oil. Eighty percent of captured carbon to date, and most projects in the pipeline, were about producing more oil through enhanced oil recovery, which just releases that carbon back to the atmosphere.
"If you are going to move the carbon to some place where you can store it, then the number of places where viable storage exists and is economic are relatively limited. And so, what you see is this focus on the places where you have the shortest distance between heavy concentrations of emissions and places where carbon might be injected. And those places are overwhelmingly places like Cancer Alley in Louisiana and Houston's Petrochemical Corridor, to name a few–places that have lived with fossil fuel infrastructure for decades. And this is important because, for those communities, what CCS will mean is increased emissions from facilities that apply the CCS technology, because you have to burn more fuel to get the same amount of energy, when you're using CCS, and it means new or repurposed pipelines."
"And there is this assumption–this longstanding assumption–that carbon dioxide is benign. Everyone thinks, well, CO2 is what you use to make your fizzy water fizzy, so it must be harmless. But when you compress CO2 to the densities required to ship it through pipelines, it becomes a fundamentally different and a fundamentally more dangerous substance. CO2 is highly corrosive when it's compressed, which means that it can cause failures in the pipelines that it's being shipped through. It's shipped at higher pressures than natural gas. And so, arguments that we can use existing natural gas pipelines and repurpose them for CCS are fundamentally dangerous. And then there's the question of what happens if there is a leak, because CO2 is an asphyxiant and an intoxicant. And that means that at low concentrations of CO2, you can render people inebriated, intoxicated, unable to make their decisions. At slightly higher concentrations, you can knock them out, render them unconscious, and at slightly higher concentrations above that–it's fatal."
"We've seen the consequences of CO2 exposure many times over the years. But the most recent evidence of this is a pipeline, a CO2 pipeline, that burst in Mississippi in early 2020. And what happened when that pipeline burst was that dozens of people were sent to the hospital, and more than 300 people had to evacuate. First responders, when they got to the scene, described people wandering around like zombies and frothing at the mouth. And more significantly, because CO2 is more dense than air, unlike natural gas, which in the case of a release will disperse, CO2 sinks to the ground and hugs the ground and moves into low places, which increases the period during which it can cause significant exposures. So for all of these reasons, the buildout of CCS poses really significant risks that aren't being fairly evaluated, and those risks are falling disproportionately on communities of color who have faced precisely this sort of systemic racism and environmental injustice for many decades."
Caleb: "Well, we will link to the report in the show notes. But as you know, Carol, there are more than 20 large-scale CCS commercial projects in operation around the world. There's plans for over 40-or-so new facilities that are coming on in the next year or two, or in the next several years, and there's a lot of money flowing into the venture capital area of climate tech. For these purposes, though, are these billions of dollars chasing after a myth of what might be a potentially useful technology, but actually isn't, according to your standards?"
Carroll: "It is absolutely chasing after a myth. I think if you look–if you look seriously at CCS, if you look at the use cases, if you look at the energy demands that it poses and the economic context in which it's being deployed, it's clear that CCS faces the same problem that it's always faced, which was a problem of fundamental economics. This is why you see that no matter how many subsidy dollars are being deployed into CCS, there's always a demand for still-higher subsidies. We saw that with the 45Q federal subsidy for CCS being increased, and then it increased yet again in the latest round. I think this speaks to the fundamental economic failure of this technology, and that economic failure is really coupled with its failure from a climate perspective. It is much more effective, from a climate perspective, to deploy renewable energies that are going to avoid emissions in the first place, than to try to catch emissions at the end of a smokestack."
Caleb: "Right. So you say in the report, again, a 1.5 degrees Celsius pathway–this is the limiting of temperature rising to 1.5 Celsius over the next several years. It's possible without CCS, but that is really through a transition to renewable sources, whether that's through transportation, whether that's through energy production, enhancing natural carbon sequestration. So is the answer renewables? What solutions actually work? What solutions actually work for industry, and what solutions actually work in terms of protecting those most vulnerable?"
Carroll: "Yeah, absolutely. And I think here, what we've seen is a dramatic acceleration in the deployment of renewable energy, coupled with a dramatic reduction in its cost. And this is why renewable energy is now not only out-competing new-build coal and gas plants, but increasing outcompeting existing coal plants. So absolutely, renewable energy from an economic perspective is the more viable approach and the technology that we know works right now. CCS pilot projects have a decades-long history of over-promising and under-delivering. So I think when you look at what is actually going to deliver results from the climate perspective, it really is the coupling of renewable energy deployments with, you know, increased electrification, which we also see accelerating."
"In the industrial sector, I want to go back to that analysis that I referred to. One of the really striking things about that analysis of industrial sector emissions was that the authors of that research report, looking at those 1,500 facilities, immediately eliminated from their analysis the grid energy that was actually the primary source of industrial emissions for the whole U.S. sector. And the reason was, they concluded that, well, this energy is coming in from the grid, and so, electrifying that part of the grid is as viable a solution as anything else, so we're not going to look at that. So they were looking only at process emissions from industrial facilities. This is really important. It means that massive amounts of industrial facility emissions can actually be addressed by electrifying the grid. And then, yes, you do get facilities that have more difficult emission profiles."
Caleb: "What you're urging is this transition to renewable energy. We know it's happening, slowly but surely, across a bunch of different sectors, but it's going to cost a lot of money. Would it make more sense–and I think I'm hearing you say this–for these companies and countries to devote these tens, or hundreds of billions of dollars, towards renewables and just forget about carbon capture technology and sequestration, because it's just not going to work as effectively as putting that money towards a massive transition, but that could still take years."
Carroll: "Yeah, and I think this is actually key. The transition will take years. But if you look at the proposals for carbon capture and storage, many of those took years, if not decades before they began delivering results as well. And so if we've got the technology that we know is working, we know is scalable, we know is shovel-ready in countries around the world, and that technology also happens to be cheaper than not only CCS, but even increasingly cheaper than the fossil fuels themselves, why would we not be using that technology and investing there, instead of investing billions of dollars in a technology that has really limited use cases?"
Caleb: "Which country–briefly here before we close–is doing it right, or which countries are doing it right, where the U.S. and other developed nations can take their hints from?"
Carroll: "Yeah, I think that is something that really remains to be seen. I think one of the things that we've seen is that this promise of CCS has been touted for so long, that it's really received little critical attention, truly critical attention, until the last couple of years. And what we're seeing now is as these proposals start to look real, as they move out of academic texts and out of policy papers and into people's communities, people are starting to take a hard look at them. And that's where the economics of these projects are going to meet reality in a very hard way. And so if you're investing in this myth because you've been told that it's going to be cheaper and easier than other forms of transition, I think that's where you're going to face a very rude awakening when these projects make the communities that don't want to see them."
Caleb: "Great point, and we will link to your report and to your center. Carol Muffett, the president and CEO of the Center for International Environmental Law. Thanks so much for joining the Green Investor."
Carroll: "Thanks very much for having me."