WEBVTT - Things to Watch: Industrial Decarbonization

0:00:00.320 --> 0:00:03.320
<v Speaker 1>This is Dana Perkins and you're listening to Switched on

0:00:03.600 --> 0:00:07.400
<v Speaker 1>the bn EF podcast. Today we have another bonus episode

0:00:07.480 --> 0:00:10.479
<v Speaker 1>focused on the twenty twenty four Things to Watch series

0:00:10.480 --> 0:00:14.319
<v Speaker 1>from BNF. Today's topic is materials, and we draw upon

0:00:14.400 --> 0:00:18.520
<v Speaker 1>research that's found in the note Industrial Decarbonization Things to

0:00:18.600 --> 0:00:21.240
<v Speaker 1>Watch in twenty twenty four. I'm joined on the show

0:00:21.280 --> 0:00:25.840
<v Speaker 1>by Julia Atwood, an industrial decarbonization specialist here at BNF.

0:00:26.079 --> 0:00:29.720
<v Speaker 1>She shares the potential bottlenecks for carbon capture in storage

0:00:29.720 --> 0:00:32.720
<v Speaker 1>and direct air capture, along with what the future holds

0:00:32.760 --> 0:00:36.360
<v Speaker 1>for CO two storage and why twenty twenty four might

0:00:36.479 --> 0:00:39.360
<v Speaker 1>be the year that we see real progress in capacity

0:00:39.479 --> 0:00:42.920
<v Speaker 1>editions and announcements. We also discuss chemical recycling and the

0:00:42.920 --> 0:00:47.400
<v Speaker 1>potential impact editions of recently commissioned large scale plants could

0:00:47.440 --> 0:00:50.680
<v Speaker 1>have on the sector, and finally we get into one

0:00:50.680 --> 0:00:54.120
<v Speaker 1>of the hardest to abate sectors, cement. With more government

0:00:54.160 --> 0:00:57.960
<v Speaker 1>subsidies and assistants available, will twenty twenty four finally be

0:00:58.040 --> 0:01:01.880
<v Speaker 1>the year that green cement becomes an economically viable alternative.

0:01:02.160 --> 0:01:05.119
<v Speaker 1>To access this research note, subscribers can find it at

0:01:05.120 --> 0:01:07.880
<v Speaker 1>BNF dot com and at BEENF, go on the Bloomberg Terminal.

0:01:08.040 --> 0:01:10.560
<v Speaker 1>If you like this podcast, make sure to subscribe to

0:01:10.600 --> 0:01:14.440
<v Speaker 1>receive updates when future episodes are published, including bonus episodes

0:01:14.480 --> 0:01:16.399
<v Speaker 1>like this one, and if you give us a review

0:01:16.440 --> 0:01:19.280
<v Speaker 1>on Apple Podcasts or Spotify, other people will be able

0:01:19.319 --> 0:01:22.120
<v Speaker 1>to find us more easily. But right now, let's speak

0:01:22.160 --> 0:01:25.240
<v Speaker 1>with Julia about what lies ahead for materials in twenty

0:01:25.280 --> 0:01:38.440
<v Speaker 1>twenty four. Julia, thank you for coming back to switched

0:01:38.480 --> 0:01:39.000
<v Speaker 1>On today.

0:01:39.200 --> 0:01:40.840
<v Speaker 2>Thanks for having me Dana here.

0:01:40.880 --> 0:01:43.640
<v Speaker 1>We are to talk about things to watch in the

0:01:43.680 --> 0:01:46.720
<v Speaker 1>material space, But let's start off with the definition. How

0:01:46.840 --> 0:01:50.000
<v Speaker 1>would we or how would you and your team define materials?

0:01:50.440 --> 0:01:54.559
<v Speaker 2>You know, we often explain it as industrial decarbonization because

0:01:54.560 --> 0:01:57.840
<v Speaker 2>if you're looking at the emissions from industry, so the

0:01:57.880 --> 0:02:01.160
<v Speaker 2>emissions involved in making material, you're really looking at the

0:02:01.200 --> 0:02:05.760
<v Speaker 2>way you make steel, aluminum, padcams, or petrochemicals and cement,

0:02:06.000 --> 0:02:08.480
<v Speaker 2>and that's basically what we focus on. Now. We also

0:02:08.520 --> 0:02:13.320
<v Speaker 2>talk about circular economy and CCS or carbon capture and storage,

0:02:13.400 --> 0:02:17.560
<v Speaker 2>because those are two really important technologies to decarbonizing industry.

0:02:17.720 --> 0:02:19.200
<v Speaker 2>And of course we get a lot of help from

0:02:19.200 --> 0:02:21.280
<v Speaker 2>our friends over on the Hydrogen team, and.

0:02:21.280 --> 0:02:24.040
<v Speaker 1>We have a separate things to watch, note and things

0:02:24.040 --> 0:02:27.680
<v Speaker 1>to watch, podcasts on switched on about the industrial material.

0:02:27.760 --> 0:02:29.640
<v Speaker 1>So today we're going to focus on that kind of

0:02:29.800 --> 0:02:32.560
<v Speaker 1>ladder half that you listed off. But before we talk

0:02:32.639 --> 0:02:36.080
<v Speaker 1>about twenty twenty four and what's in store, let's have

0:02:36.200 --> 0:02:39.720
<v Speaker 1>that retrospective look back on twenty twenty three. So this

0:02:39.840 --> 0:02:42.600
<v Speaker 1>time last year you also put out of things to watch,

0:02:42.639 --> 0:02:46.400
<v Speaker 1>Note and will you help us better understand what scorecard

0:02:46.400 --> 0:02:49.520
<v Speaker 1>you're giving yourself and actually, even broadly, would you consider

0:02:49.560 --> 0:02:51.480
<v Speaker 1>yourself to be an optimist?

0:02:53.639 --> 0:02:58.680
<v Speaker 2>I definitely consider myself an optimist, especially about people and

0:02:58.840 --> 0:03:02.160
<v Speaker 2>especially about the weather, often to my detriment. So we

0:03:02.160 --> 0:03:05.680
<v Speaker 2>were pretty optimistic about twenty twenty three and it turned

0:03:05.720 --> 0:03:07.880
<v Speaker 2>out to be kind of a disappointing year for us.

0:03:08.080 --> 0:03:11.240
<v Speaker 2>So being b enough, we put together a scoring system

0:03:11.360 --> 0:03:14.000
<v Speaker 2>and we gave ourselves sixty five percent on what we

0:03:14.040 --> 0:03:17.280
<v Speaker 2>said last year, so not great. I think the way

0:03:17.320 --> 0:03:20.360
<v Speaker 2>we approached it was we thought that twenty twenty three

0:03:20.600 --> 0:03:24.720
<v Speaker 2>would finally be a year of normalcy again. After COVID.

0:03:24.800 --> 0:03:27.760
<v Speaker 2>We figured supply chains are starting to sort themselves out.

0:03:28.040 --> 0:03:30.800
<v Speaker 2>You have the Inflation Reduction Act or the IRA in

0:03:30.840 --> 0:03:33.880
<v Speaker 2>the US in full force. We felt that everything was

0:03:33.919 --> 0:03:37.360
<v Speaker 2>starting to come together for industrial decarbonization, and what we

0:03:37.560 --> 0:03:41.560
<v Speaker 2>found was that either too much regulation or the lack

0:03:41.600 --> 0:03:45.040
<v Speaker 2>of it was really holding everything up. So we're still

0:03:45.080 --> 0:03:49.800
<v Speaker 2>waiting on guidance, the really important information, all the nitty

0:03:49.800 --> 0:03:52.760
<v Speaker 2>gritty staff on the IRA that's holding up a bunch

0:03:52.760 --> 0:03:56.520
<v Speaker 2>of projects. In the US. Permitting is incredibly difficult right

0:03:56.560 --> 0:04:00.960
<v Speaker 2>now for carving, capture and storage sites. That's using some problems.

0:04:01.160 --> 0:04:03.960
<v Speaker 2>There's no consensus on green steel. We have a bit

0:04:04.000 --> 0:04:07.800
<v Speaker 2>more clarity on the Carbon Border Adjustment Mechanism or SEABAM

0:04:07.840 --> 0:04:10.400
<v Speaker 2>in Europe, but there's still a lot to figure out,

0:04:10.600 --> 0:04:14.160
<v Speaker 2>and the supporting infrastructure justicen't there. So all of that

0:04:14.360 --> 0:04:17.799
<v Speaker 2>meant that anything we were hoping would happen that required

0:04:17.839 --> 0:04:22.400
<v Speaker 2>any kind of consensus, like steel standards, like Canada countering

0:04:22.520 --> 0:04:27.400
<v Speaker 2>the IRA with new credits for ccs, didn't really happen. However,

0:04:27.600 --> 0:04:29.800
<v Speaker 2>there was a brighter side. The things that we did

0:04:29.800 --> 0:04:32.640
<v Speaker 2>well on were the things that were outside a lot

0:04:32.680 --> 0:04:36.840
<v Speaker 2>of policy and regulation, So announcements we did pretty well on.

0:04:37.160 --> 0:04:41.320
<v Speaker 2>Today there is eleven point two million tons of direct

0:04:41.360 --> 0:04:45.000
<v Speaker 2>air capture capacity that's been announced. That's much higher than

0:04:45.040 --> 0:04:47.560
<v Speaker 2>what we saw a couple of years ago. Double seventy

0:04:47.600 --> 0:04:50.400
<v Speaker 2>eight percent of that is in the US, as we expected,

0:04:50.480 --> 0:04:53.440
<v Speaker 2>so the US is really the hub for director capture

0:04:53.640 --> 0:04:57.880
<v Speaker 2>DAK right now. We also saw the first commercial green

0:04:58.320 --> 0:05:02.360
<v Speaker 2>steel making facility come online and that was from HBIS,

0:05:02.400 --> 0:05:05.600
<v Speaker 2>which is a Chinese steelmaker. So they brought on zero

0:05:05.640 --> 0:05:09.279
<v Speaker 2>point six million tons of capacity that uses fifty five

0:05:09.320 --> 0:05:12.680
<v Speaker 2>percent hydrogen, it is fuel. And then trade, our predictions

0:05:12.680 --> 0:05:14.720
<v Speaker 2>on trade went pretty well. So a lot of EU

0:05:14.800 --> 0:05:18.760
<v Speaker 2>countries are now net importers of plastic waste because they

0:05:18.839 --> 0:05:21.880
<v Speaker 2>need that in order to make the recycled plastic packaging

0:05:22.160 --> 0:05:23.440
<v Speaker 2>that they have some policy on.

0:05:23.880 --> 0:05:26.320
<v Speaker 1>So a lot of the work that your team is

0:05:26.360 --> 0:05:29.600
<v Speaker 1>looking at are regarding some of these really hard to

0:05:29.640 --> 0:05:33.480
<v Speaker 1>transform industries and you know, the hard to abate space.

0:05:33.960 --> 0:05:36.560
<v Speaker 1>One of the bottlenecks that has presented itself is an

0:05:36.600 --> 0:05:40.520
<v Speaker 1>issue both for direct air capture technology, so that removing

0:05:40.560 --> 0:05:44.000
<v Speaker 1>of carbon from the air and carbon capture and storage technology,

0:05:44.040 --> 0:05:47.400
<v Speaker 1>which is this capturing of carbon and technology that actually

0:05:47.520 --> 0:05:50.360
<v Speaker 1>has been around for some time but is improving and

0:05:50.360 --> 0:05:53.800
<v Speaker 1>making strides. Is once we capture everything, where are we

0:05:53.880 --> 0:05:56.880
<v Speaker 1>going to store it? That has been a point of

0:05:56.920 --> 0:06:00.320
<v Speaker 1>friction is twenty twenty four. Is there an optimistic view

0:06:00.360 --> 0:06:02.880
<v Speaker 1>on this and are there developments that we should be

0:06:02.960 --> 0:06:04.880
<v Speaker 1>keeping an eye on in the year head when it

0:06:04.920 --> 0:06:07.960
<v Speaker 1>comes to storage, both for direct air capture and CCS.

0:06:08.279 --> 0:06:11.599
<v Speaker 2>Definitely, one of the things that we're expecting to see

0:06:11.720 --> 0:06:14.680
<v Speaker 2>in twenty twenty four is a little bit of relief

0:06:14.839 --> 0:06:17.960
<v Speaker 2>for developers on those permitting issues. So in a lot

0:06:18.000 --> 0:06:22.039
<v Speaker 2>of cases, you start out by saying, Okay, I need

0:06:22.080 --> 0:06:25.680
<v Speaker 2>to capture CO two from this highly emitting source and

0:06:25.760 --> 0:06:27.680
<v Speaker 2>I want to store it somewhere, but there is a

0:06:27.839 --> 0:06:31.680
<v Speaker 2>massive supply chain there that all has to come together,

0:06:32.000 --> 0:06:34.400
<v Speaker 2>and a lot of the problems, as you've rightly pointed out,

0:06:34.400 --> 0:06:37.400
<v Speaker 2>are coming from the storage side, either technically getting the

0:06:37.440 --> 0:06:40.200
<v Speaker 2>CO two in there has been difficult, or as we've

0:06:40.240 --> 0:06:43.520
<v Speaker 2>seen in the US recently, the pipeline to get the

0:06:43.560 --> 0:06:46.839
<v Speaker 2>CO two there has been denied permits, or the CO

0:06:47.080 --> 0:06:51.120
<v Speaker 2>two storage site itself has been waiting often for years

0:06:51.279 --> 0:06:54.159
<v Speaker 2>to actually get permission to put CO two there. So

0:06:54.279 --> 0:06:56.960
<v Speaker 2>the anecdote that we've heard right now is oh, it's

0:06:57.000 --> 0:07:00.960
<v Speaker 2>taking six years for the US to permitid any kind

0:07:01.200 --> 0:07:04.120
<v Speaker 2>of CO two storage site. What we've seen this year

0:07:04.400 --> 0:07:07.640
<v Speaker 2>is some movement of the federal government to actually allow

0:07:07.680 --> 0:07:11.440
<v Speaker 2>the states to do that permitting process. So North Dakota

0:07:11.520 --> 0:07:15.160
<v Speaker 2>and Wyoming already have that power. Louisiana was just given it,

0:07:15.280 --> 0:07:17.280
<v Speaker 2>and so we think that's going to help speed up

0:07:17.280 --> 0:07:19.840
<v Speaker 2>some of these applications because you just have more people,

0:07:20.080 --> 0:07:23.200
<v Speaker 2>more engineers and geologists looking at them and figuring out

0:07:23.240 --> 0:07:28.080
<v Speaker 2>whether they're safe. So we think that about five of

0:07:28.160 --> 0:07:30.440
<v Speaker 2>the storage sites in the US that are waiting for

0:07:30.520 --> 0:07:33.920
<v Speaker 2>permitting could be granted this year, and for context, in

0:07:34.000 --> 0:07:38.000
<v Speaker 2>Louisiana alone, there's twenty two sites waiting for a permit,

0:07:38.400 --> 0:07:41.680
<v Speaker 2>so that's on the storage side. The pipelines we still

0:07:41.800 --> 0:07:44.040
<v Speaker 2>expect to be a bit of an issue because there's

0:07:44.080 --> 0:07:47.760
<v Speaker 2>been so much community pushback. Everyone is very wary of

0:07:47.800 --> 0:07:51.040
<v Speaker 2>pipelines because they've seen the oil and gas industry use them.

0:07:51.080 --> 0:07:53.360
<v Speaker 2>They don't want them on their land, and they're often

0:07:53.440 --> 0:07:57.240
<v Speaker 2>crossing pretty large swathes of land, so it's been tough

0:07:57.280 --> 0:07:59.280
<v Speaker 2>for those to get permits, and we think that's going

0:07:59.320 --> 0:08:02.160
<v Speaker 2>to persist. But if you can find a storage site

0:08:02.200 --> 0:08:05.080
<v Speaker 2>closer to where you're emitting the CO two, as you

0:08:05.200 --> 0:08:08.080
<v Speaker 2>can with direct air capture, you may have an easier

0:08:08.120 --> 0:08:09.600
<v Speaker 2>time of it. In twenty twenty four.

0:08:10.160 --> 0:08:13.360
<v Speaker 1>Is this largely something that's being moved forward in twenty

0:08:13.400 --> 0:08:15.840
<v Speaker 1>twenty four in the US, or is there CO two

0:08:15.920 --> 0:08:18.520
<v Speaker 1>storage that's coming online in Asia as well?

0:08:18.880 --> 0:08:22.440
<v Speaker 2>In Asia and actually in Europe, we're seeing more and

0:08:22.480 --> 0:08:25.680
<v Speaker 2>more announcements there. The reason why we're not as concerned

0:08:25.960 --> 0:08:28.920
<v Speaker 2>about Europe is that there are a lot of countries

0:08:29.000 --> 0:08:32.120
<v Speaker 2>and companies involved in a single site in the North

0:08:32.160 --> 0:08:36.240
<v Speaker 2>Sea called lang Skip. The EU has committed to an

0:08:36.280 --> 0:08:40.800
<v Speaker 2>eighteen month permitting cycle. In the US, the EPA says

0:08:40.880 --> 0:08:43.520
<v Speaker 2>that that's probably going to be more like twenty four months,

0:08:43.720 --> 0:08:47.440
<v Speaker 2>so there are at least some guidelines on this, but

0:08:47.520 --> 0:08:50.400
<v Speaker 2>we think permitting is going to be the most difficult

0:08:50.440 --> 0:08:53.880
<v Speaker 2>in the US because of the number of government bodies involved.

0:08:54.040 --> 0:08:57.600
<v Speaker 1>So when we're not thinking about storing the CO two,

0:08:57.880 --> 0:09:01.880
<v Speaker 1>we're thinking about this other term CCUS, and with the

0:09:02.000 --> 0:09:06.840
<v Speaker 1>U part, utilization of the waste byproduct that we actually

0:09:06.840 --> 0:09:09.360
<v Speaker 1>discussed in one of our previous shows can make its

0:09:09.400 --> 0:09:12.560
<v Speaker 1>way into our soda. I want to know what's in

0:09:12.600 --> 0:09:16.400
<v Speaker 1>the year head for this utilization part of CCUS and

0:09:16.480 --> 0:09:17.760
<v Speaker 1>what should we be keeping an eye on.

0:09:18.320 --> 0:09:21.600
<v Speaker 2>We think there's going to be a renaissance in CCS

0:09:21.600 --> 0:09:25.320
<v Speaker 2>and CO two utilization, so ignoring the S part of

0:09:25.360 --> 0:09:27.720
<v Speaker 2>CCS and just going with the U. And we think

0:09:27.720 --> 0:09:30.360
<v Speaker 2>that people are going to see how difficult the permitting is,

0:09:30.559 --> 0:09:32.600
<v Speaker 2>throw out their hands and be like, I'm not going

0:09:32.679 --> 0:09:34.960
<v Speaker 2>to deal with this anymore. I'm going to find a

0:09:35.000 --> 0:09:37.400
<v Speaker 2>buyer for my CO two and they're going to use it.

0:09:37.679 --> 0:09:41.080
<v Speaker 2>The places that we think will be the best to

0:09:41.160 --> 0:09:45.080
<v Speaker 2>put that CO two is either a synthetic fuel, so

0:09:45.200 --> 0:09:48.199
<v Speaker 2>a fuel that's made from captured CO two and hydrogen,

0:09:48.360 --> 0:09:51.000
<v Speaker 2>because there's a big market for that. In terms of

0:09:51.120 --> 0:09:54.600
<v Speaker 2>sustainable aviation fuel, the aviation industry doesn't have a lot

0:09:54.600 --> 0:09:58.959
<v Speaker 2>of decarbonization options, so it's really looking at fuels. We've

0:09:59.000 --> 0:10:01.760
<v Speaker 2>already seen a few say that they're going to take

0:10:01.840 --> 0:10:06.240
<v Speaker 2>CO two, either from director capture or from ethanol plants

0:10:06.280 --> 0:10:08.840
<v Speaker 2>and turn it into fuel. The tricky thing here is

0:10:08.840 --> 0:10:11.080
<v Speaker 2>that you have to be really careful where you're getting

0:10:11.080 --> 0:10:13.200
<v Speaker 2>your CO two from if you're going to turn it

0:10:13.240 --> 0:10:15.640
<v Speaker 2>into a fuel, because that fuel is eventually going to

0:10:15.640 --> 0:10:18.160
<v Speaker 2>get burned, so you want to make sure that your

0:10:18.200 --> 0:10:20.560
<v Speaker 2>CO two was either coming out of the atmosphere in

0:10:20.600 --> 0:10:23.439
<v Speaker 2>the first place, so that's dak or it was coming

0:10:23.480 --> 0:10:26.960
<v Speaker 2>from a biogenic source, so that's ethanol. If you're just

0:10:27.000 --> 0:10:29.760
<v Speaker 2>a regular old cement plant or steel plant and you

0:10:29.800 --> 0:10:32.480
<v Speaker 2>want to use your CO two, in order to be

0:10:32.840 --> 0:10:35.800
<v Speaker 2>really clear with your carbon accounting, you have to make

0:10:35.800 --> 0:10:38.160
<v Speaker 2>sure that that CO two is going somewhere where it

0:10:38.200 --> 0:10:40.680
<v Speaker 2>can't escape as it would when you burn a fuel.

0:10:40.800 --> 0:10:45.120
<v Speaker 2>So the options there are really using it for enhanced weathering,

0:10:45.320 --> 0:10:49.280
<v Speaker 2>so you're creating aggregates with carbonates in them from that

0:10:49.400 --> 0:10:52.560
<v Speaker 2>CO two, or you're putting it back into cement. So

0:10:52.600 --> 0:10:55.160
<v Speaker 2>it's going to be tough for the industrial users to

0:10:55.280 --> 0:10:57.680
<v Speaker 2>find someone to buy their CO two and store it

0:10:57.720 --> 0:11:01.240
<v Speaker 2>in a different way. But dak ethanol, they can turn

0:11:01.320 --> 0:11:04.800
<v Speaker 2>to fuels and there's already demand and a supply chain there.

0:11:05.480 --> 0:11:08.080
<v Speaker 1>Now let's turn to chemical recycling, and if I'm not mistaken,

0:11:08.120 --> 0:11:10.120
<v Speaker 1>this might be the very first show that you and

0:11:10.160 --> 0:11:12.720
<v Speaker 1>I did with each other, Julia a few years ago.

0:11:13.120 --> 0:11:15.520
<v Speaker 1>One of the issues that we discussed at the time

0:11:15.720 --> 0:11:18.800
<v Speaker 1>was that there is a limiting factor here, So it's

0:11:18.920 --> 0:11:22.680
<v Speaker 1>the scale and the ability to actually tackle the problem

0:11:22.679 --> 0:11:26.400
<v Speaker 1>with chemical recycling. Is this going to continue in twenty

0:11:26.440 --> 0:11:28.800
<v Speaker 1>twenty four or are we going to see a breakthrough.

0:11:29.000 --> 0:11:31.240
<v Speaker 2>So this was actually one of the phases where we

0:11:31.240 --> 0:11:34.000
<v Speaker 2>were a bit too optimistic. Last year, we thought that

0:11:34.200 --> 0:11:38.480
<v Speaker 2>about a million tons of chemical recycling capacity was going

0:11:38.520 --> 0:11:40.599
<v Speaker 2>to come online. When we tallied it up at the

0:11:40.679 --> 0:11:43.000
<v Speaker 2>end of the year, we got to just under seven

0:11:43.080 --> 0:11:46.520
<v Speaker 2>hundred and fifty thousand. So we still think that chemical

0:11:46.559 --> 0:11:49.959
<v Speaker 2>recycling has a really big place in the circular economy

0:11:50.120 --> 0:11:54.960
<v Speaker 2>and in decarbonizing petcems or petrochemicals, but we're being a

0:11:54.960 --> 0:11:57.959
<v Speaker 2>little bit more measured with our predictions this year, so

0:11:58.080 --> 0:12:02.360
<v Speaker 2>we're expecting to see two large scale chemical recycling plants

0:12:02.400 --> 0:12:06.360
<v Speaker 2>come online, and we would define large scale as more

0:12:06.440 --> 0:12:11.120
<v Speaker 2>than fifty thousand tons of capacity. Chemical recycling has really

0:12:11.120 --> 0:12:14.920
<v Speaker 2>been hit pretty hard by the huge increase in construction

0:12:15.040 --> 0:12:17.520
<v Speaker 2>costs that we saw this year and all of the

0:12:17.520 --> 0:12:20.559
<v Speaker 2>supply chain issues. If you can't get the pumps and

0:12:20.600 --> 0:12:24.240
<v Speaker 2>the pipes and the bars that you need to build

0:12:24.320 --> 0:12:27.040
<v Speaker 2>your plant, it's pretty tough to commission on time.

0:12:27.600 --> 0:12:32.040
<v Speaker 1>Okay, now let's turn to green steel and the decarbonization

0:12:32.280 --> 0:12:36.439
<v Speaker 1>of steel manufacturing. Steel is incredibly important for so much

0:12:36.520 --> 0:12:40.560
<v Speaker 1>of the infrastructure across the world, and hydrogen has increasingly

0:12:40.600 --> 0:12:43.560
<v Speaker 1>been used to be a part of the solution for

0:12:43.640 --> 0:12:47.760
<v Speaker 1>decarbonizing well steel and actually other hard to abate spaces,

0:12:47.880 --> 0:12:51.120
<v Speaker 1>but invariably hydrogen is still expensive and is really quite

0:12:51.320 --> 0:12:54.600
<v Speaker 1>limited in its application up until this date. Do you

0:12:54.720 --> 0:12:58.280
<v Speaker 1>see green steel and then as a second part of that,

0:12:58.400 --> 0:13:01.000
<v Speaker 1>hydrogen use really taking off in the airhead.

0:13:01.480 --> 0:13:05.200
<v Speaker 2>Green steel is the success case that everyone loves to

0:13:05.240 --> 0:13:09.440
<v Speaker 2>turn to and they look at industrial decarbonization because we've

0:13:09.480 --> 0:13:13.280
<v Speaker 2>seen plants be announced, we've seen the customers be really

0:13:13.360 --> 0:13:16.960
<v Speaker 2>enthusiastic about signing up for off take agreements, and we're

0:13:17.000 --> 0:13:19.960
<v Speaker 2>starting to see the early stages of all of the

0:13:20.000 --> 0:13:23.280
<v Speaker 2>technical issues being worked out. So there are three places

0:13:23.360 --> 0:13:27.199
<v Speaker 2>that we're watching for green steel and especially hydrogen made

0:13:27.240 --> 0:13:30.720
<v Speaker 2>green steel this year, and they are Canada, Brazil, and

0:13:30.760 --> 0:13:33.800
<v Speaker 2>the Middle East. Most of the green steel that we've

0:13:33.800 --> 0:13:36.320
<v Speaker 2>seen so far has been made in Europe, but we

0:13:36.440 --> 0:13:39.480
<v Speaker 2>think that now is the time for those announcements to

0:13:39.480 --> 0:13:41.880
<v Speaker 2>start to diversify. And there are a few things that

0:13:41.920 --> 0:13:44.440
<v Speaker 2>we look for when we are choosing these regions that

0:13:44.440 --> 0:13:47.320
<v Speaker 2>we're going to be watching. One is you want to

0:13:47.360 --> 0:13:50.160
<v Speaker 2>have a steel maker in the region who knows what

0:13:50.200 --> 0:13:53.640
<v Speaker 2>they're doing, because these are not small technical changes. You

0:13:53.760 --> 0:13:56.760
<v Speaker 2>really need to have people there with the technical expertise

0:13:56.840 --> 0:13:59.200
<v Speaker 2>to build the plants and then run them. We think

0:13:59.240 --> 0:14:01.920
<v Speaker 2>all of those regions that I just listed have that.

0:14:02.400 --> 0:14:05.440
<v Speaker 2>You also want access to really high quality iron ore.

0:14:05.800 --> 0:14:09.520
<v Speaker 2>The process that you use hydrogen in isn't as effective

0:14:09.760 --> 0:14:13.400
<v Speaker 2>as the typical cold based process at removing impurities from

0:14:13.400 --> 0:14:15.880
<v Speaker 2>iron ore, So you need the really good stuff and

0:14:15.920 --> 0:14:18.080
<v Speaker 2>you can get that in Brazil and the Middle East

0:14:18.080 --> 0:14:21.000
<v Speaker 2>in particular, and Canada has some access to it as well.

0:14:21.280 --> 0:14:23.200
<v Speaker 2>And then the third thing that we're really looking for

0:14:23.560 --> 0:14:26.440
<v Speaker 2>is cheap hydrogen. Brazil is due to have some of

0:14:26.480 --> 0:14:30.800
<v Speaker 2>the lowest cost hydrogen in the world according to our calculations,

0:14:30.960 --> 0:14:33.880
<v Speaker 2>and so that makes it a really interesting place for

0:14:34.000 --> 0:14:36.600
<v Speaker 2>us to be watching. So green steel isn't just going

0:14:36.680 --> 0:14:39.200
<v Speaker 2>to be for the Europeans anymore. We're going to see

0:14:39.240 --> 0:14:40.520
<v Speaker 2>a lot more diversification.

0:14:41.240 --> 0:14:43.680
<v Speaker 1>So let's keep building something on the show today. And

0:14:43.840 --> 0:14:47.720
<v Speaker 1>let's turn next to cement. Costs for green cement have

0:14:48.080 --> 0:14:52.320
<v Speaker 1>been far exceeding traditional cement making it and not particularly

0:14:52.400 --> 0:14:55.560
<v Speaker 1>competitive up until this point. So from a cost standpoint,

0:14:55.800 --> 0:14:58.400
<v Speaker 1>what's in store for us in the cement space?

0:14:58.800 --> 0:15:01.880
<v Speaker 2>You know, I've been really surprised by the cement industry.

0:15:02.040 --> 0:15:05.560
<v Speaker 2>Those companies are moving much faster than I expected. Back

0:15:05.600 --> 0:15:08.360
<v Speaker 2>in twenty twenty one, when we looked at how much

0:15:08.440 --> 0:15:12.080
<v Speaker 2>material capacity is covered by a net zero target, cement

0:15:12.160 --> 0:15:14.680
<v Speaker 2>was at seven percent. By the start of twenty twenty three,

0:15:14.680 --> 0:15:17.720
<v Speaker 2>it was at forty seven percent. Now, the cost of

0:15:17.760 --> 0:15:20.840
<v Speaker 2>making green cement is still pretty high. You can see

0:15:20.840 --> 0:15:24.120
<v Speaker 2>premiums of more than one hundred percent, so double the

0:15:24.200 --> 0:15:27.640
<v Speaker 2>cost right now, but those should fall. There's still a

0:15:27.680 --> 0:15:31.640
<v Speaker 2>lot of new equipment that needs to be designed and tested,

0:15:31.880 --> 0:15:35.360
<v Speaker 2>like electric kilns, But by twenty fifty we could see

0:15:35.400 --> 0:15:39.080
<v Speaker 2>premiums that are much more reasonable, so much like thirty

0:15:39.080 --> 0:15:42.360
<v Speaker 2>five to forty percent. This is really the year that

0:15:42.720 --> 0:15:45.560
<v Speaker 2>the demand side needs to help out all of those

0:15:45.560 --> 0:15:48.880
<v Speaker 2>cement makers with their net zero targets, though, because they'd

0:15:48.960 --> 0:15:52.120
<v Speaker 2>won't have the confidence to build a green plant until

0:15:52.120 --> 0:15:54.240
<v Speaker 2>they're sure that somebody's going to buy what they're making

0:15:54.240 --> 0:15:56.080
<v Speaker 2>at the end of it. So what I'll be watching

0:15:56.120 --> 0:15:58.680
<v Speaker 2>for is whether you see some really big off take

0:15:58.720 --> 0:16:03.760
<v Speaker 2>agreements from the major cement producers who have announced green projects.

0:16:04.240 --> 0:16:07.240
<v Speaker 1>Now you took a closer look at the just transition

0:16:07.480 --> 0:16:10.360
<v Speaker 1>and the overlap with materials so can you talk a

0:16:10.400 --> 0:16:15.280
<v Speaker 1>little bit about how this interplays with steel and cement

0:16:15.520 --> 0:16:16.880
<v Speaker 1>in the material space.

0:16:17.600 --> 0:16:21.680
<v Speaker 2>Steel and cement are really the bedrock of any industrialized society,

0:16:22.000 --> 0:16:25.600
<v Speaker 2>So whenever we start to see GDP rising in a country,

0:16:25.680 --> 0:16:27.800
<v Speaker 2>we figure they're going to have a lot more demand

0:16:28.040 --> 0:16:31.720
<v Speaker 2>for steel and cement. Most countries think of those materials

0:16:31.760 --> 0:16:35.400
<v Speaker 2>as strategic, so they not only want to be able

0:16:35.440 --> 0:16:38.480
<v Speaker 2>to produce them in the country, but they also want

0:16:38.520 --> 0:16:42.000
<v Speaker 2>to benefit have their people benefit from all of the

0:16:42.080 --> 0:16:44.920
<v Speaker 2>jobs that they create as well. So we're expecting to

0:16:45.000 --> 0:16:49.280
<v Speaker 2>see countries really working hard to try and save their

0:16:49.400 --> 0:16:53.400
<v Speaker 2>domestic cement and steel industries. In developed countries and in

0:16:53.440 --> 0:16:56.800
<v Speaker 2>developing countries, we're expecting to see a lot more capacity

0:16:56.880 --> 0:17:00.240
<v Speaker 2>being built. Now, the question is whether that new capacity

0:17:00.400 --> 0:17:03.840
<v Speaker 2>is green and whether developed countries decide to save their

0:17:03.880 --> 0:17:06.600
<v Speaker 2>capacity by making it green. So we think this will

0:17:06.640 --> 0:17:09.720
<v Speaker 2>be a huge question. It's about not leaving anyone behind

0:17:09.840 --> 0:17:14.560
<v Speaker 2>and ensuring that the jobs in those industries become green jobs.

0:17:14.680 --> 0:17:16.040
<v Speaker 2>In the next few years.

0:17:16.240 --> 0:17:20.320
<v Speaker 1>Let's finally come to financing the transition. We're moving from

0:17:20.520 --> 0:17:24.199
<v Speaker 1>a high carbon to a low carbon future. For what

0:17:24.280 --> 0:17:26.639
<v Speaker 1>are some of the most difficult to green parts of

0:17:26.680 --> 0:17:31.359
<v Speaker 1>the economy, and transition finance can sometimes be controversial, with

0:17:31.560 --> 0:17:34.720
<v Speaker 1>fears over green washing really coming to the front, but

0:17:35.000 --> 0:17:38.639
<v Speaker 1>also incredibly important for a lot of the different areas

0:17:38.640 --> 0:17:41.320
<v Speaker 1>that you cover as they are, like I said, moving

0:17:41.440 --> 0:17:46.600
<v Speaker 1>from high carbon to lower carbon means of manufacturing their products.

0:17:46.680 --> 0:17:47.320
<v Speaker 2>So is there.

0:17:47.160 --> 0:17:49.439
<v Speaker 1>Anything we should be keeping an eye on in the

0:17:49.480 --> 0:17:52.200
<v Speaker 1>year ahead when it comes to the role of transition

0:17:52.320 --> 0:17:55.720
<v Speaker 1>finance and how transition finance might be perceived by the

0:17:55.760 --> 0:17:56.480
<v Speaker 1>outside world.

0:17:56.840 --> 0:17:59.520
<v Speaker 2>Transition finance is going to be a really important tool

0:17:59.680 --> 0:18:04.399
<v Speaker 2>for industrial decarbonization, and that really stems from the fact

0:18:04.520 --> 0:18:08.000
<v Speaker 2>that transition finance sits in this middle ground. It's not

0:18:08.160 --> 0:18:12.159
<v Speaker 2>green finance, but you're probably not using it for the

0:18:12.240 --> 0:18:16.679
<v Speaker 2>highest emitting project. The thing about industrial decarbonization is that

0:18:16.760 --> 0:18:20.399
<v Speaker 2>it often happens piecemeal. So there are very few projects

0:18:20.480 --> 0:18:22.720
<v Speaker 2>that we see that are going to be one hundred

0:18:22.800 --> 0:18:26.920
<v Speaker 2>percent green, zero carbon from the start. Most people want

0:18:26.960 --> 0:18:29.600
<v Speaker 2>to make investments in order to get to their thirty

0:18:29.640 --> 0:18:32.320
<v Speaker 2>percent reduction target, or they want to take an old

0:18:32.359 --> 0:18:34.920
<v Speaker 2>plant and make it a lot more efficient. Now, those

0:18:35.119 --> 0:18:39.240
<v Speaker 2>definitely provide emissions reductions, but not enough to qualify for

0:18:39.359 --> 0:18:42.000
<v Speaker 2>green finance. So you have all these projects that are

0:18:42.040 --> 0:18:45.000
<v Speaker 2>stuck because they're an extra cost. They may be a

0:18:45.040 --> 0:18:47.879
<v Speaker 2>new technology and they're finding it hard to get the

0:18:47.920 --> 0:18:51.399
<v Speaker 2>financing for that because of the technology risk or the

0:18:51.400 --> 0:18:55.280
<v Speaker 2>emissions risk. So that's really where transition finance can step

0:18:55.320 --> 0:18:58.200
<v Speaker 2>in and fill the gap. And we're expecting the countries

0:18:58.280 --> 0:19:02.480
<v Speaker 2>with outsized industrial and like Japan and China to be

0:19:02.560 --> 0:19:04.560
<v Speaker 2>the places where you see a lot of growth. So

0:19:04.680 --> 0:19:09.040
<v Speaker 2>Japan is expecting eleven billion in transition finance, and China

0:19:09.080 --> 0:19:11.880
<v Speaker 2>things that it's going to grow faster than green finance,

0:19:12.040 --> 0:19:14.520
<v Speaker 2>which given its industrial base and all of the work

0:19:14.520 --> 0:19:17.720
<v Speaker 2>that it has to do to decarbonize, probably isn't a surprise.

0:19:18.200 --> 0:19:20.840
<v Speaker 1>Well, Julia, thank you for taking me through the things

0:19:20.880 --> 0:19:23.640
<v Speaker 1>to watch in twenty twenty four for materials.

0:19:23.440 --> 0:19:31.840
<v Speaker 2>Thanks Dana.

0:19:32.880 --> 0:19:36.000
<v Speaker 1>Switched On is produced by Cam Gray with production assistance

0:19:36.080 --> 0:19:39.760
<v Speaker 1>from Kamala Shelling and Lushi Karunarete. Bloomberg NIF is a

0:19:39.800 --> 0:19:42.960
<v Speaker 1>service provided by Bloomberg Finance LP and its affiliates. This

0:19:43.040 --> 0:19:45.719
<v Speaker 1>recording does not constitute, nor should it be construed, as

0:19:45.760 --> 0:19:49.679
<v Speaker 1>investment advice, investment recommendations, or a recommendation as to an

0:19:49.720 --> 0:19:52.920
<v Speaker 1>investment or other strategy. Bloomberg enif should not be considered

0:19:52.920 --> 0:19:56.240
<v Speaker 1>as information sufficient upon which to base an investment decision.

0:19:56.359 --> 0:19:59.320
<v Speaker 1>Neither Bloomberg Finance LP nor any of its affiliates makes

0:19:59.320 --> 0:20:03.080
<v Speaker 1>any representation or warranty as to the accuracy or completeness

0:20:03.080 --> 0:20:06.080
<v Speaker 1>of the information contained in this recording, and any liability

0:20:06.119 --> 0:20:08.800
<v Speaker 1>as a result of this recording is expressly disclaimed