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Can Exxon become the next big lithium producer?
104 Plays1 year ago
This week, just Anthony and Mike are taking on the news: Lux's forum in Amsterdam, Exxon's move into lithium production, New York's lawsuit against PepsiCo, and the problem with sustainable technologies that just don't work.
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Transcript
Introduction and Co-host's Absence
00:00:07
Speaker
Welcome to Innovation Matters. It's the podcast about sustainable innovation. I just started us off with the ballpark drop that's built into Zencaster, which will not be appearing in this episode's audio file. But you're just going to have to imagine that.
00:00:26
Speaker
And you're also going to have to imagine the presence of one of my co-hosts, Karthik Zabramian. He is on vacation. We will insert, you know, minute-long pauses in the audio for you to sort of just visualize, meditate on what he could have said. But for this episode, it's just going to be myself and my colleague, Mike. Mike, how are you? Doing well.
Sci-Fi and Technology Predictions
00:00:50
Speaker
I was thinking about innovation. I was reading
00:00:55
Speaker
the Hitchhiker's Guide to the Galaxy with my son on the subway in the mornings. And it's always funny reading these old sci-fi things. They could imagine all of these crazy tractor beams and forms of interstellar travel, but could not imagine a portable electronic device with a screen larger than three inches on it. Just the spec given for the guide.
00:01:24
Speaker
That's just a lot of, I just feel like that's good enough. You know what I mean? It's less about- You gotta have room for the keyboard, you know, of course. You gotta have room for the keyboard. Look, we, when we moved away from the Blackberry, I think we messed up. I think we messed up. Honestly. That was, that was my first, uh, Lux, uh, uh, you know, device. Yeah. Was it old school, the OGE Blackberry? I still have it in my store. When Blackberry came out, I think I was in...
00:01:56
Speaker
for context, maybe even middle school. So, speaking of Hitchhiker's Guide to the Galaxy, did you see the new Elon thing? He trained an AI, a chat GPT clone, but quote, made it snarky like the Hitchhiker's Guide to the Galaxy. I did not see that. He specifically referenced Hitchhiker's Guide. Of course he did, yes. Yeah, it's predictably terrible. Or just like sort of, I don't know, stupid.
AI Snark and Sustainability Forum
00:02:28
Speaker
But we have better things to talk about than the world's sometimes richest man slowly becoming not the world's richest man. Or maybe quickly in the case of Twitter, I don't know.
00:02:40
Speaker
But we had a couple of things we wanted to talk about, which most recently we're recording this on November the 16th, which means that I just got back from the fair continent of Europe, where I was for our forum Amsterdam, which was super nice. The forum was good. We had a really good set of discussions. I also visited Brussels, which we can talk about. My visit to Brussels was just confirmed all of my negative sentiment about Brussels.
00:03:08
Speaker
Long time, long time enemy of this podcast, Brussels is going to be once again in the cross areas. Hey, don't talk too much trash. Our next Europe forum in the spring might be in Brussels. So you have to prepare yourself for that.
00:03:24
Speaker
I know I'm not looking forward to it. I may have to skip that one.
Challenges in Decarbonizing Sectors
00:03:28
Speaker
But I think the thing that really stood out to me about the forum in Amsterdam was just how
00:03:38
Speaker
in a lot of ways still divided the consensus is on the future direction of sustainability. I think it's easy to look at the roadmaps and look at something like the energy sector, look at these big industrial sectors like steel and cement and say, okay, we basically know what we need to do in terms of decarbonizing these things. Like we have a set of technology roadmaps, we have a set of technology actions,
00:04:06
Speaker
it's going to be difficult, but we have a plan. We can scale up and make things work. And I think the reality is that
00:04:15
Speaker
That's not really the case. We have still a huge amount of uncertainty, first of all, on the technical side, which is something I want to talk about later and maybe close on that idea. But there are still a huge number of differing opinions and differing approaches. We had this panel where we were discussing what would you do if you could stab your fingers and make one change to the
00:04:41
Speaker
either the energy ecosystem or take one new technology and bring it forward. And everyone just gave a completely different answer. And they were all fair answers, right? But yeah, it was just a- What was your answer to that? I was not on the panel. I think my answer to that question, I would probably be
00:05:01
Speaker
just like, I don't know, something around the lines of eliminating coal or investing in some kind of methane leak detection slash abatement type of technology. Although I'm not completely convinced that's a technology issue. That might be
Investment Barriers in Sustainability
00:05:16
Speaker
one of those difficult problems of incentives more than technology.
00:05:22
Speaker
To me, those are the two most important things we can do in the near term to decarbonize society as a whole, right? Get off coal and stop putting a ton of methane into the environment, which is an extremely potent greenhouse gas if you're not up on methane. I'm curious your answer for that question, though, Mike. What one thing you would do, one technology you'd invest in, or one thing you'd do to snap your fingers and make things different to actually drive sustainability forward or to make a positive impact?
00:05:52
Speaker
lower interest rates? That's not a bad answer. That's definitely not a bad answer. I mean, is the actual issue interest rates or is the actual issue return on investment relative to other options, right? Well, yeah, those are obviously linked. But I think it's, you know, I think there is a willingness to invest in, well, that might be the willingness to invest might be the other issue. I'll give that a sec.
00:06:20
Speaker
I mean, there is definitely, in a lot of places, a willingness to invest in technologies that are beneficial to the climate for climate change if they have a positive ROI, even if it's not necessarily the highest positive ROI available. And I think in particular, governments can be willing to do that, though.
00:06:44
Speaker
I mean, that is the other thing that comes to mind, particularly in the European context, is some of that willingness to invest.
Oil and Gas Mergers and Sustainability
00:06:52
Speaker
We just had the news yesterday, I think, that the German High Court overruled this plan to
00:07:02
Speaker
that Germany had about $60 billion. I think it was left in extra COVID funding, right? They were able to secure a certain amount of COVID funding that didn't have to be constrained by the debt break in Germany, and they wanted
00:07:20
Speaker
to use some of that leftover money for climate funding and the high court there said that's unconstitutional. So stuff like that, we could stop happening. That would be. Is a real one. I mean, literally like, well, you know, we did destroy the planet, but we followed the rules while we were doing it. So isn't that what's most important? I think you're right, especially in the European context. I mean,
00:07:46
Speaker
You said that there's people willing to invest, but we did have a decade of low interest rates, right? And during that decade, famously, that was the decade of austerity, right? Especially in Europe. And we had Germany in particular, or in Europe in general, failed to invest in solar during that whole decade, right? I mean, solar investment in Europe peaked in like 2012 and didn't get back to that peak until like 2019 or 2020. That was the whole period of ZRIP, right?
00:08:13
Speaker
They just completely failed to invest. That's why I said, I'm not really convinced it's an issue of interest rates. Interesting and related to that, you may have seen the news.
00:08:24
Speaker
There's been these big, big acquisitions of oil and gas players. Exxon bought, I can't remember, I want to say. Pioneer. Pioneer. And then Chevron bought Hess. And a lot of people were like, oh, this isn't really a commitment to sustainability. They're really doing green washing. Doubling down on oil and gas. They're doubling down on oil and gas.
00:08:51
Speaker
think that's true, actually. I mean, they're specifically not drilling new wells with this money. They're just buying existing wells. The net number of wells is going to remain the same as a result of this. I mean, they're transferring money to shareholders as opposed to transferring it to investing in sustainable technologies. So I don't want to get ahead of like- It's not the optimal choice. I'm not saying this is the most sustainable thing that they could be doing with their money.
00:09:15
Speaker
But I do think this reflects a shift in when you're coming back to this theme of investment, right? This does reflect a shift in the willingness to invest in certain types of projects. Like oil and gas wells, drilling oil and gas wells is a relatively high ROI thing to do in pure financial terms. And it's especially a fairly high ROI thing to do for Exxon. Now this assumes the oil price remains high and like, you know, the last time
00:09:42
Speaker
The last time the US oil industry drilled a bunch of wells, it turned out to be a not very high ROI thing. They ended up losing a ton of money by driving down the price of oil. But in general, it's a relatively high ROI thing. Exxon could have invested $50 billion in its own core business. I think it has the capacity to do that. And presumably, it's paying a higher price to access someone else's wells. You're going to pay a premium for that. And I think the point I'm trying to make here is that
00:10:12
Speaker
that we're already seeing a change in the level of willingness, right? We're already seeing a change in the level of willingness to invest in new non
ExxonMobil's Lithium Ambitions
00:10:22
Speaker
-sustainable assets.
00:10:23
Speaker
And the reasons for this are not entirely altruistic. I think a big, big reason, maybe even the main reason is they are looking at the past scarring of the frack boom and the failure to really generate good returns for a long time on those investments and saying, yeah, we don't want to repeat that. But I think they're also looking at that in the context of, hey, maybe oil demand growth isn't that good in the next decade or two. And if we drill a bunch of wells,
00:10:49
Speaker
Even if we're careful not to avoid the mistakes of the past, we're going to stumble right back into it because we're going to end up oversupplying again because of a combination of demand weakness as well as increased supply. I think that's why gas prices have been high. There's been that reluctance to invest in new production, which reflects, I think, both the scars from, like you said, the poor returns that they saw in the previous
00:11:18
Speaker
from a lot of previous investments and also just, and that's what I think both, you know, these Exxon and Chevron deals reflect is kind of a fundamental pessimism about the oil and gas business and the long-term demand trajectory, you know, that it's going to be a more challenging and eventually declining business. And thus, consolidation is going to be more important for companies to continue to earn it.
00:11:46
Speaker
try to earn a decent return on it. While we're on Exxon, did you see the other interesting Exxon news? Which is the lithium. They're drilling for lithium, baby. They're going to take the lithium out the ground and we are going to turn it into batteries. This is a really interesting one for a couple of reasons for me. One, it's obviously very splashy in a certain way, right?
00:12:15
Speaker
We're not drilling for oil, we're drilling for lithium now. There's a nice PR element to it, undeniably. But I think more than that, first of all, it's something we predicted, so good on us, obviously. But I think the
00:12:38
Speaker
biggest thing that surprised me about this is really that the timeline, you know, it bought this, the smack over formation last year. It has this geological sort of these geological features that make it rich in lithium. It wants to produce battery grade lithium by 2027, right? And then basically scale up by 2030. That's really, really fast. And when we talked about the geothermal,
00:13:07
Speaker
We had, I think, Jim Hollis on some weeks ago, some months ago now, to talk about geothermal energy. One of the key points he made in that is that there's a lot of expertise that has been developed in subsurface sort of exploration. You can put it to use for other things, right? But it's not that easy. I don't think it's trivial to be like, oh, we know we can find the oil, so now we can just go find the lithium.
00:13:35
Speaker
Like, those are very much, I think, different skills, right? And there's still 120,000 acres of land that they need to figure out where exactly the best place to drill is, you know, this kind of thing. And then they also have to scale up the actual direct lithium extraction process, right? Which is extremely non-trivial. We were, I mean, we've been talking to a lot of startups who've been saying, and I think our, even our sentiment is, yeah, this is a very important potential piece of technology for the future supply of these critical minerals.
00:14:06
Speaker
It's very strategic in a way for the United States to do this and for other countries to try and do this where they have the resources.
00:14:13
Speaker
It has all these benefits in terms of reduced environmental footprint, but it doesn't necessarily work, right? It's really expensive. It's really challenging. Total production volumes have remained really low. It's highly risky, right, in that sense. And some would say, you know, foolish. And so I guess, I'm curious, you put yourself in Exxon's shoes, right? Is the thinking that we as Exxon are simply just the best at drilling stuff out of the ground
00:14:40
Speaker
and also the best at doing this kind of chemical processing and scale production of tough materials. And we could build infrastructure in the middle of nowhere because that's what we're extremely good at. And just that we're just built different. And that all these lithium juniors are like bootstrap operations by five guys named Hank. And we're simply going to do it much better than them. Or is Exxon going to run into these same challenges? Can it deliver, I guess, is the biggest question on this. So I'm curious for your read here.
00:15:10
Speaker
I think their secret sauce here is partially in the technology expertise. There's definitely some relevance there, petroleum and chemical processing. And I think it's a little bit more in just their balance sheet and maybe even more so just kind of their corporate financial structure where it's set up to invest in these extremely large
00:15:36
Speaker
capital projects that are going to pay out over very long time periods, right, which is not something every firm is well positioned to do. But that's what, I mean, all these oil and gas majors really do. And, you know, there's definitely expertise, both I think, sort of technical and just, you know, project management, managing these really
00:16:01
Speaker
Large complex projects, but a lot of it I do think is just that kind of ability to invest in these these longer time horizon. Sort of vehicles and whether they're going to be successful.
00:16:16
Speaker
I think it's probable, just given the challenges with new technologies, that these initial projects are not going to be as high an ROI for them as another offshore oil platform would be. That's really down to a science, of course.
00:16:39
Speaker
Yeah, I think I think it's definitely possible that they will and the fact that they have the you know, they aren't going to run out of money. They aren't going to sort of lack the the expertise to to to coordinate this type of complex project. It's less risky, still risky, but less risky
Plastic Waste Lawsuit and Impact
00:16:56
Speaker
probably for for ExxonMobil than it would be for a startup or or a relatively new entrant trying to do this ExxonMobil.
00:17:06
Speaker
less risky than a startup. You heard it here on the Innovation Madness podcast. I guess, though, I want to push back a little bit on one of your points, which is that these companies are set up to do this long term value extraction. This is true.
00:17:22
Speaker
But we saw recently with Shell, it sold off its utilities business, right? And we were talking about this a lot in the Amsterdam office when I was there. And our basic sentiment was that Shell's shareholders had changed and those new shareholders had demanded different types of results. I think specifically the pension funds who used to hold Shell stock have now divested themselves from the oil and gas industry entirely.
00:17:52
Speaker
those pension funds are the very sort of long-term results focused holders, right? I mean, they're literally 30, 40, 50 year timelines, right, for success. And they're these large institutions. And, you know, I think the idea like, hey, like, this is a business, we're going to grow this business and by 2030, 2040, 2050, this business will be really valuable. Yes, it has lower ROI, you know, utilities business just has a 6% return instead of an 8% return.
00:18:15
Speaker
compared to our oil and gas business. But A, it's more sustainable, B, it's more business sustainable in the long term because utilities businesses are definitely gonna exist in 30, 40, 50 years and maybe energy businesses aren't. And all that stuff basically just didn't fly with the new shareholders. When the pension funds left and they sold it to someone and just more general investors bought it, they took one look at the balance sheet and they're like, dang, you could be getting a 8% return and you're choosing to get 6% return.
00:18:45
Speaker
that seems like a problem, or that seems like a failure, right? So, you know, shell pivoted, right? So, you know, in the context of Exxon drilling for lithium, it's like,
00:18:56
Speaker
Yeah, Exxon, the organization, is well suited to do this. But as a public company, and as a company that's responsive to shareholders, are they well suited to do this? Are they going to run into those types of issues that Shell ran into with their... I mean, I think they're probably investing less in this DLE thing than Shell invested in the utilities thing. Yeah, that was...
00:19:21
Speaker
But, yeah, I'm just curious for how you think about that. Won't shareholders say it should be a separate venture for shareholder reasons? Yeah, though, I mean, like you said, there's a risk that the oil and gas... I mean, I think it's definitely a hedge against... It's less of about what the return this or the next quarter or even the next couple of several years
00:19:43
Speaker
is going to be and more as a bit of a hedge against the possibility and maybe probability that they're not going to be able to continue to earn an 8% return on the oil and gas business in the future. But yeah, I think that's kind of the key point is that it's not as big a bet as the one that Shell made on the utilities business. I don't know what percentage of ExxonMobil's total capital budget is going to the Smackover project, but I'm sure it's tiny, right?
00:20:09
Speaker
And probably the first project's not going to be the most profitable. But if they learn it often, they become confident that like, and I think it's more plausible in that case, that you could earn higher returns in lithium than you could in a utilities business, and maybe even oil and gas type returns there.
00:20:28
Speaker
The story is also a lot nicer. It's like we're going from the fuel tanks of combustion engine vehicles to the battery packs of electric vehicles, you know what I mean? It's very, even more sort of an obvious parallel than the shell utility thing. Yeah, that's a nice symptom. ExxonMobil actually did do, you know, back in the 70s, 80s, some pretty important early work in lithium ion batteries, like separator technology and stuff like that. Yeah, so.
00:20:56
Speaker
That was a bit of an oopsie on their part, probably not following up on that business or whatever. I mean, maybe it wasn't. Price would still be a bit of a drop in the bucket. I don't know. I guess if they had cornered the lithium, the whole industry, it would have been different, but who knows, right? Maybe we'd be talking about America's dominance and gigafactory manufacturer instead of China, right? Yeah, the whole lithium supply chain. Yeah, it could be different. Things could be different.
00:21:21
Speaker
Speaking of things being different, it's probably worth moving on to our next piece of news, which is the great state of New York, your homeland. Where I reside. The Empire State. I guess not your homeland. Technically, your homeland is the Cleveland Browns, right? No.
00:21:44
Speaker
I can never remember. Is it the Cleveland Browns? No, no, Cincinnati. I grew up in Cincinnati. I grew up in Cincinnati. Play in the Ravens tonight. For the listener. I've been telling Mike that he grew up in Cleveland for like, basically the entire time I've known him. And like, I genuinely cannot remember which one it is, if it's Cincinnati or Cleveland. Just like nose blind between Cincinnati and Cleveland.
00:22:11
Speaker
I'm face blind for all Midwestern cities. I hate to tell you this. But New York has been. New York, a real true East Coast liberal elitist state, is suing PepsiCo. This is the state, not the city. The attorney general has accused PepsiCo of contributing to public nuisance.
00:22:38
Speaker
by generating a significant share of plastic waste found in and near the upstate Buffalo River, including more than 17% of the trash that could be traced to PepsiCo brands. It's not super clear to me what sort of redress they're seeking.
00:22:59
Speaker
They want them to, quote, stop causing a nuisance, clean up contamination and pay for damages caused by plastic waste. It's also seeking a ban on the single use, like the sale of single use plastics in Buffalo in particular, which is interesting. And I want to sort of touch on that in a moment. But Mike, what was your initial reaction to this story? Because I know what my initial reaction was.
00:23:26
Speaker
Yeah, I mean, I think it's, you know, I'm not not a lawyer, I don't know what the merits of this case is, I suspect it's more, you know, from a legal standpoint, I suspect it's more, it's more of a PR problem than a legal problem for PepsiCo, and probably more of a, of a PR opportunity and than a legal one for the, the Attorney General.
00:23:52
Speaker
But yeah, it's a way and I think an effective one to kind of shine a light on this issue and pressure companies to try to do more to
00:24:07
Speaker
to address plastic waste, I think there's probably going to end up getting some sort of settlement around this that'll hopefully provide some funding to address some of the waste issues and drive some more investment.
00:24:25
Speaker
in waste management or other other approaches to reduce single use plastic but yeah it's a little unclear why PepsiCo was singled out. I mean she did say there's a study where the largest you know of the waste they analyzed in the Buffalo River a lot of it was the most of it was from PepsiCo.
00:24:45
Speaker
products, the largest share of it. Yeah, 17%. And I'm sure there's tons of stuff from Coca Cola and everybody else to, um, you know, PepsiCo is headquartered in New York, which is probably another reason again, particularly from the PR or angling to get a settlement out of this kind of deal gives gives gives the state a little more leverage over them than it would over, you know, a company from out of state as well.
00:25:13
Speaker
Yeah, I think what's most interesting to me about this lawsuit, because I broadly agree with you, I think this is mostly a PR stunt. What's most interesting when you look at the redress and you look at the action they're seeking, like clean up the rivers, whatever, that's like a couple million dollars, like not that impressive, ban or stop causing a nuisance essentially would be like basically change your product line or change your
00:25:40
Speaker
your packaging situation, right? You would have to stop using single-use potato chip bags, that kind of thing. So that's a pretty meaningful thing. But what's most interesting is the ban on single-use plastics and Buffalo as an option. It kind of brings me back to Held v. Montana, which is the climate case from earlier this year in September, where they won. I think it's still probably ongoing, but there was a big victory.
00:26:05
Speaker
And in that case, there was this sort of recognized right in Montana from Montana State Constitution to a clean environment. I think there's a there's a clause in there, you know, sort of the Bill of Rights, the Montana Bill of Rights to a clean environment. And under that statute, they're basically ordered, they're able to argue like, hey, like Montana failing to go green in terms of its electricity generation is a breach of this right.
00:26:32
Speaker
And they're able to force essentially a policy action, which is a decarbonized energy system and investment into other forms of clean energy and just shutting down of like coal plants and stuff through this sort of legal exercise of the rights ensconced, whatever the word is in that constitution. And you kind of see something echoes of that here, right? Where I don't think there's
Misleading Recycling Claims Lawsuit
00:26:56
Speaker
actually a similar right in the New York state constitution,
00:27:00
Speaker
I don't think they actually have the standing or the legal argument to make this work, but what they're trying to do is basically enact policy through the courts, right? Which is not, I mean, that's what the courts do, right? The courts enact policy, this is.
00:27:16
Speaker
their function. But it's a different legal kind of avenue. They have maybe a greater ability in some cases to stop particularly harmful actions than maybe the state legislature
00:27:33
Speaker
for political reasons does. Or, you know, maybe they have a capability to sort of compel, if you start by fighting in the courts, you don't have to maybe fight in the courts later, right? Because that's what we've seen is that, you know, anytime there is a
00:27:51
Speaker
an attempt by a legislature to do anything good for the planet, it always immediately goes to the courts. I mean, we were talking about this with Germany, right? Which is not in the U.S., but, you know, yeah, just so you start to fight in the courts, right? And you just end the fight in the courts. You don't have to
00:28:11
Speaker
pass the law first and then defend it for years in the courts. So I think we are going to see more of this, right? Especially in America, where A, the government's really dysfunctional, and B, the courts are kind of at a high ebb in their power right now. The legislature in general is not particularly willing to curb the power of the court.
00:28:38
Speaker
I think we're going to see more and more of this sustainability action start and end in the legal arena. And there was another lawsuit that we wanted to talk about from Client Earth, which is a nonprofit funded by a number of different other nonprofits that basically
00:28:58
Speaker
is targeting with a lawsuit Coca-Cola, Nestle, and Danone for their quote misleading claims about recycling, right? And particularly the 100% recyclable claim in addition to the 100% recycled.
00:29:15
Speaker
This gets into a bit more of a technical argument about A, what is possible with plastic recycling? If you call something 100% recyclable, are you implying that it can be recycled an infinite number of times, for example? Also, if you say it's 100% recyclable, do you actually have to sort of
00:29:39
Speaker
in the real world have an actual ecosystem that can support that claim? Like how much recycling infrastructure do you actually need to have before you can make that kind of claim? But I think, you know, it's just, we're gonna see
00:29:54
Speaker
It's just another example of this type of action. We're going to see more and more of these lawsuits. We're going to see them proliferate, and we're going to see them, I think, meaningfully push companies to change their packaging, to be more careful, and to hopefully move in a sustainable direction.
00:30:13
Speaker
Yeah, and I mean, that's the thing that both this Climate Earth lawsuit, Client Earth lawsuit, and the New York one both call out as the labeling on the package. Leticia James, the New York Attorney General, is calling for products to contain adequate warning labels. It almost makes it sound like it's like these cigarette style. Yeah, you're going to have to buy a water bottle with a big picture of a kid.
00:30:41
Speaker
It's going to be like a cigarette packaging, you know, it's going to be like a block. Yeah, it's like there's like pictures of turtles chucking on plastic bags and on all of your potato chips and something like that. I don't know if it's going to go quite that far, but it's that sort of thing, right? It's about we are going to
00:30:56
Speaker
Because one of the fundamental reasons that single-use plastic is so widespread is it's really desirable for consumers. It's very convenient and all of that. And people do care about sustainability, but if they see, oh, this is recyclable, I don't have to feel bad about buying and using this single-use plastic bottle.
00:31:20
Speaker
Uh, or bag or whatever it is. And, um, you know, so I think that, uh, you know, you see, and this has been a long standing and I think pretty fair complaint and a lot of like, it is very misleading and hard for consumers to understand what, what is and isn't recyclable. I still think a lot of.
00:31:37
Speaker
people look at, hey, it's these packages. It's got this like, you know, the little chasing arrows recyclable symbol on that. That means it's recyclable, right? And it double depends if it's a one in the middle of those chasing arrows. And yes, it's recyclable if it's a three or a six. Super is not. If it's a, if it's a water bottle specifically, right? Yeah. If it's a rigid PET, it probably isn't even recyclable, or it probably won't get recycled in a meaningful sense.
00:32:03
Speaker
Yeah. And I think, I think there's a good point here, which is that this type of stuff I think is effective. Like if you look at cigarettes as sort of if sustainable or single use plastic is the cigarettes of the environment or whatever, like a lot of these anti-cigarette, you know, public awareness campaigns were fairly effective and stuff like changing the labeling, making it more stark, making it less appealing to consumers does help consumers make
00:32:30
Speaker
choices, right? And you have to have better alternatives available, which is I think the challenge here. There's a better alternative available than cigarettes. It's not smoking cigarettes, right? Well, that sounds good to ask, though, actually, I mean, it's like, there's, that's the best alternative, just as you know, not using single use plastic in some sense is the best alternative. But like, if single use plastic is the equivalent of a cigarette, you know, what's the equivalent of a vape pen? A vape pen is paper packaging.
00:33:01
Speaker
You think it's good for you. You think it's good for you, but it's not, okay? And TikTokers are doing it and they're going to have serious issues in a decade. No, I mean, I think the real thing, I jokes like, hey, there's not a good alternative, but there is a good alternative, right? Which is don't buy a water bottle, right? That is the thing you should be doing. You should not be buying water bottles. I'm sorry. There are very, very few situations where it's, I think, appropriate to buy bottled water.
00:33:29
Speaker
And it's become so normalized, you get a drink with your McDonald's order. It just comes with a meal. And it's like, do you need a drink? Are you thirsty? Legitimately. It
Consumer Choices and Packaging Tensions
00:33:41
Speaker
sounds wild and it's very anti-consumer in a certain sense, but just don't do stuff. Don't do stuff you don't need. And I think some of the labeling and packaging stuff can actually help that get there. The last thing, and this is, I think, related, just don't do stuff.
00:33:58
Speaker
I've had this idea bouncing around my head for a while, which is there are a lot of bad technologies out there, technologies that we know are not going to work. And I think are pretty well understood not to work very well. I'm thinking of plastic pyrolysis here. I would also kind of put carbon capture in this category. We know- A little more controversially, but- This is more controversial, for sure. First of all, there's a bunch of concerns about leakage or whatever. How effective is the carbon capture actually?
00:34:27
Speaker
But then, when you look at carbon capture, I think it's pretty well understood, even in our own analysis, that you basically need a carbon price of $100 a ton to make carbon capture and storage work. $50 a ton to capture it, $50 a ton to transport and store it. Those are pretty solid estimates that we have for a lot of different sources and our own analysis, like our own calculations.
00:34:49
Speaker
It is also the case in our own analysis and our own forecasting and prediction that we're not going to have a $50 or $100 per ton carbon price basically anywhere in the world. Certainly not in America, certainly not in the developing world, certainly not in India or China, maybe in Europe, that's the only place. So we're in this situation where we know that the conditions for this technology to work are essentially not going to be met.
00:35:14
Speaker
Right. And and we know it specifically us at Lux and like the industry knows it as well. Right. And we're building it anyway. You know, like this is not seemingly factoring in much into the discussion and you have some like NGOs and you have some reporting like pushing this point. But there's a real membrane between that type of criticism. You know, the industry. Right. And I think that's in part because there's kind of criticism of everything. And it's easy.
00:35:44
Speaker
I think there's criticism of a lot of very good stuff like solar and wind. You see people out here, oh, it's going to kill whales or whatever. And then you see people like, oh, carbon capture just doesn't work. And it's like, yeah, man, loony cranks are complaining about everything we do. But there's actually very material differences between some of these arguments are really good and some of them are really bad. And it's very easy. I think the innovation ecosystem, this group of companies and individuals we work with basically tunes out all of it.
00:36:15
Speaker
I don't know, it just seems like it's a big problem. What's the feedback mechanism for these technology ecosystems? We've
Criticism of Ineffective Sustainability Technologies
00:36:24
Speaker
talked a lot about startups going public and early stage startups going public and running into a lot of problems because they have these technologies and approaches that don't work well and then the public markets hammer them and they run out of money and things are bad.
00:36:39
Speaker
I think the challenge for the people in the ecosystem is how to distinguish from technologies that don't work, from technologies that don't work yet.
00:36:51
Speaker
There's a lot of people who tell you, like, well, yeah, I mean, the energy balance and all this for paralysis is not great now, but we're inventing these improved forms and we've advanced, at least in part, this argument. Also, it's like, hey, if you can get some of these more hydrothermal processes that have higher yields,
00:37:11
Speaker
working, then yeah, maybe it does make sense as a solution for some types of mixed plastic waste. And there's at least, and the same with carbon capture, right? It's like, yes, it doesn't make sense at 100, but hey, we scale it up, we continue innovating, maybe it only costs 50 in, you know, five to 10 years, and then that is a different picture.
00:37:33
Speaker
I think you could make this argument about solar in 1990 or 2000. The levelized cost of solar is like two orders of magnitude greater than coal. This is never going to work. A decade later, it's like has literally come down towards a magnitude that is cheaper than coal.
00:37:56
Speaker
Yeah, though at the same time, I think everybody,
Thanksgiving Plans and Episode Wrap-Up
00:37:58
Speaker
you know, there could also be a tendency on the entrepreneurial side to just sort of assume that everything is going to follow those
00:38:08
Speaker
you know, I mean, especially because we've been living Moore's law for the last 50 years. And that's that's been the pattern in a lot of areas precisely because of the because of because of Moore's law, a lot of a lot of product categories have just been getting cheaper and cheaper and cheaper. And you know, things will come down and cost with scale, but it's it's certainly not a guarantee that you know, carbon capture is going to be in order of magnitude cheaper 10 years from now than it is today. That's probably not likely.
00:38:36
Speaker
I'm going to write more about this. We're going to come back to this point. I think this is important. How do we tell? Because lithium ion batteries, right? They dropped an order of magnitude. Another great example, yeah. We're going to have to come back to this point. But for now, I think we're going to leave it there. Any Thanksgiving plans, Mike? I'm actually going down to your state of origin. Oh, really? Visiting the Indian laws in Richmond, Virginia.
00:39:03
Speaker
Richmond. Wow. It's a nice city, Richmond. Not like Brussels where I almost died. A taxi driver, we had this taxi driver in Brussels and I swear to God, man was trying to kill me. He took, among other things, a blind left turn around a bus into a one-way, going the wrong way down a one-way street.
00:39:27
Speaker
into traffic and we ended up almost getting into a head-on collision with another taxi. We literally stopped nose to nose with each other and the guy had to back up out and let the other guy pass. That was my experience with Brussels. That was my moment, my Brussels moment. Sounds like just more irrational Brussels slander to me.
00:39:54
Speaker
Innovation Matters is a production of Lux Research, the leading sustainable innovation research and advisory firm. You can follow this podcast on Apple Music, Spotify, or wherever you get your podcasts. If you want more, check out www.luxresearchinc.com slash blog for all of the latest news, opinions, and articles.