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Will the Antwerp Declaration make a difference?
71 Plays1 year ago
Anthony, Mike, and Karthik try to figure out the future of plastics recycling, industrial policy, and why policy is currently, you know, like this.
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Transcript
Alternative Opening and Weekend Highlights
00:00:11
Speaker
Hello, welcome to Innovation Matters. It is the innovation podcast that can land an opening bet the way a private company can land some kind of spacecraft on the moon. That's the alternative. That's the alternative opening that I decided because the other opening has been, I think, too mean. Cardek, how are you doing? Yeah, I'm doing good. It's a great start of the week. You know, Liverpool won the Cup.
00:00:39
Speaker
It was a very intense final. India won a game and a series after escaping the jaws of death, as you would say. Two days ago, it looked really terrible. So I was so happy that the week started off on a good note.
00:00:54
Speaker
Wow. The positive vibes, you can't see this, but we should, we should truly switch to a video podcast video because the grin is like occupying a huge, huge portion of the, of the screen space here. This is a very happy guy. What about you, Mike?
Mike's Conference Experience
00:01:10
Speaker
How was your weekend? My weekend was, was pretty good. Pretty low key. We were, we were out of, was working remote all last week because of, uh, the kids off school, but, uh, working nonetheless.
00:01:25
Speaker
I am glad to hear it. Yeah, it seemed like a pretty good week. I was in Houston last week, which was interesting because I went south of Houston this time. I've only ever driven north to the woodlands from the airport, which is a unique experience in urban design, I guess you could call it. And then this time I drove south through Houston and actually spent time in Houston and then down to Galveston, which is also a unique experience in urban design.
00:01:54
Speaker
in a kind of radically different sort of access. It was an all right trip. I was at the Society of Plastics Engineers Conference in Galveston, which was always a good time.
00:02:14
Speaker
Always a good time, actually some really great, really great talks and research. And, um, you know, I learned some stuff for me, did some good networking.
Chemical Industry and Recycling Goals
00:02:25
Speaker
I was kind of surprised. I think the big thing, just to get into it, the thing that surprised me was kind of how the top level goals from the chemical industry haven't really changed. And we're going to talk about this.
00:02:39
Speaker
in the European context in a second. There was a presentation from Chevron Phillips Chemical, and I don't think this is undisclosed information, but basically they said, hey, look, our big accomplishments, our big goals, we're building two world scale facilities for polyolefins, right? We're spending eight and a half billion dollars on two world scale facilities, two giant crackers, right?
00:03:07
Speaker
And also we're going to try and recycle a billion pounds or let's say 450 million tons of polyolefins by 2030.
00:03:19
Speaker
Those two goals are kind of at odds with each other, and there's not really a consideration of what the actual circular economy looks like in practice, what it looks like in the context of demand for plastics, right? And what it really looks like, basically the fact that if you do you and every other polyolefin company,
00:03:42
Speaker
do end up recycling about 400 million pounds of polyolefins. Demand for polyolefins coming out of your cracker is going to go down. Those investments in world-scale facilities are going to have to be offset by reduction in capacity somewhere else.
00:04:00
Speaker
and maybe recycling 400 million pounds does a bunch of other stuff, unless you do pyrolysis and you put that material through those world scout crackers, which is, I think, the thing. I don't know. Yeah, if you ask them, that's what they would say is the plan, right? Presumably. Right. But there's no real recognition that
00:04:23
Speaker
I mean, I think there's no recognition that a mechanical recycling is going to increase. And all these people say, like, hey, pyrolysis is complementary to mechanical recycling, right? Because they don't want to say we're going to take, they can't say we're going to take good quality feedstock out of the hands of
00:04:40
Speaker
mechanical recycling. So even if you take those three things as true, the three things they're saying are, we're going to scale production. Mechanical recycling is also presumably going to stay around at least the same level that it currently is, if not more, presumably more. And a lot of them are saying that mechanical recycling also has to scale.
00:04:59
Speaker
Um, and they're also saying, you know, yeah, we're going to do a ton of plastic pyrolysis as well. Like if you scale mechanical recycling, basically, you're just not going to have the demand for these recycled plastics or these, these primary plastics, I should
Recycling Challenges and Industry Contradictions
00:05:16
Speaker
say. So it was, it was funny because, and there was a big gap between like, I feel like the people on the ground, like everyone, almost everyone I talked to one-on-one was very, very aware of these issues and like,
00:05:27
Speaker
seemingly spending a lot of effort in either making the pyrolysis work the way it needed to or making mechanical recycling work for them. There's a ton of mechanical recyclers there who are pretty uniformly grumpy old men in a way that engineering industry can produce. Very brilliant, but grumpy old men. I have no fear that any of them are listening to this podcast.
00:05:53
Speaker
But yeah, it was a funny experience. There's a lot of contradictions that need to be worked out in the industry still. Yeah, just wanted to ask you, Anthony, I mean, I don't follow the plastic recycling space much, but at least what I know from solar panel recycling and what they do there is mechanical recycling is sort of like the first step where you sort out the different layers of a solar panel.
00:06:14
Speaker
And then you can use different processes, for example, pyrolysis or any other thermal treatment or chemical treatments to upcycle the materials that you have just sorted. Was there no talk of chemical recycling or using novel solvents and things like that to upcycle or separate materials? Or was the focus just on pyrolysis?
00:06:33
Speaker
There was a lot of focus on the whole value chain. So there's actually a lot of focus on sorting and separation, that kind of stuff. There's a whole track, multiple tracks even on sorting and separation. And there's a ton of focus on design, right? And that's really the biggest challenge in the plastic space compared to solar.
00:06:50
Speaker
is that it's not worth it on an individual package level to deconstruct them the way you would deconstruct a solar panel. Just because solar panels worth a lot of money, a chip bag is generally worth less than a solar panel. Of course.
00:07:05
Speaker
You know, you have to design these things in order to be recycled, right? It means it's a lot about what you don't do, what you choose to eliminate. So like inks and coatings, black colorant is typically pretty bad. You know, multilayer packaging is really not recyclable. So there's a lot of focus on that, both design and sorting and separation elements. I mean, that's all good. I like and that's kind of like the disconnect. Like I think from a technological level, actually, the chemicals industry is doing a lot of the right stuff.
00:07:33
Speaker
It's not like the people aren't thinking about how do we design plastics to make them more recyclable. That was clearly a top focus for the people at the conference. It's not like they're not thinking about how do we actually get this ecosystem to produce the recycled feedstocks that we need. That's pretty clearly a focus for the people at the conference. You could have these things happening at an R&D level or an innovator level, but then a chemical's enterprise is this huge ship
00:08:02
Speaker
that needs to be turned very slowly, right? And has these extremely big assets and these extremely expensive things. And so it's just like that change has not caught up with the biggest picture strategic direction just yet.
Critical Review of Plastic Recycling
00:08:16
Speaker
Yeah, and it's interesting. So the other thing that that I saw last week and was reading is there was this report that came out from the
00:08:25
Speaker
Center for Climate Integrity that is about plastic recycling, which is not pulling any punches. It's called the fraud of plastic recycling. How big oil in the plastics industry deceived the public for decades and caused the plastic waste crisis. I feel like this is the same report that was published by Reuters.
00:08:58
Speaker
Like years ago or like in 2019 18 maybe 2020
00:09:04
Speaker
It's very much the same story that was in that investigation. It might even cite it because it actually cites quite a bit of popular journalism on it more so than the technical literature. But yeah, I mean, it's that same point. I don't just read the headlines, you get the flavor or the section headings, you get the flavor of it. The majority of plastics cannot be recycled. They never have been and never will be.
00:09:35
Speaker
petrochemical companies created and perpetuated recycling as a false solution to plastic waste management. And petrochemical companies ran and continue to run a decades-long campaign of deception and disinformation on plastic recycling.
00:09:49
Speaker
which I think as that Reuters thing, there's definitely some truth in that narrative that if you go back and look at like in the 70s and 80s, there's all this concern about plastic waste and the industry created those resin identification codes, the chasing arrow symbol, which kind of made people feel better about putting plastics in the recycling bin, even though a lot of them were and continue to be recycled at pretty low rates. And the ACC, the American Chemistry Council put out a statement on this, which is kind of
00:10:19
Speaker
little. It doesn't rebut it that much, that thoroughly. It's like, oh, this is changing the way plastics are made is a top priority
Innovations and Climate Impact
00:10:27
Speaker
for business as usual won't fix the problem. This flawed report cites outdated decades old technology, which I think that is kind of a fair point. And especially, you know, as the report says,
00:10:41
Speaker
plastics cannot be recycled never have and never will be, I think is too strong. Like as you were describing from the SPE conference, there are actually a lot of innovations that are going into not just trying to do these advanced recycling solutions like paralysis and things which this report is also quite critical of and there's certainly fair criticisms to be made of, but there are innovations in improving mechanical recycling and things like that and solvent-based approaches for
00:11:11
Speaker
know, that can help to increase recycling rates. So it was an interesting little, you know, a kind of another go round of, like you pointed out, a similar debate that's been going on between activists and the industry for a while. And I think there's points being scored on both sides to some degree, but
00:11:35
Speaker
It goes to the point that it is a big change for the industry. You're turning this massive ship of the entire chemical enterprise and entire industry.
00:11:49
Speaker
It's going to be slow going and it's going to be pretty imperfect.
European Industrial Policy and Regulation
00:11:54
Speaker
There is still, I think, a fair criticism to be made that a lot of the industry propaganda or marketing materials kind of oversells the extent to which these recycling solutions are effective today. But you are seeing these changes happening. The companies investing big in mechanical recycling facilities and investing in advanced paralysis and approaches that I think
00:12:19
Speaker
can make it more successful. And I think like to your talk at this, that you gave at this event, right, talked about the evolving regulatory landscape and how at least in some areas, like actually Europe, there could be more favorable opportunities for some of these types of advanced recycling technologies that could really kind of actually move it forward.
00:12:43
Speaker
So Mike, I guess I'm curious because I haven't fully read the report, but this is from the climate protection, whatever, climate conservation, climate, whatever they were. They're climate guys, right? Center for Climate Integrity, yeah. Center for Climate Integrity.
00:12:59
Speaker
I think the most compelling argument for plastics is that their carbon footprint's really low. And they generally do a lot of carbon footprint-positive things like preventing food waste and preventing transport emissions by being super-duper lightweight compared to glass and stuff.
00:13:20
Speaker
And this is something I think I heard from a lot of people at the conference, which was like, hey, like, you know, the systemic benefits of plastics are actually net positive relative to a lot of other things. And they have these positive features and we don't want to lose them because if we end up losing those positive features by switching to like paper packaging or back to glass packaging or whatever, then there's going to be a lot of negative consequences.
00:13:50
Speaker
And I think that's only sort of true. Like some of the stuff is like, well, what if we decarbonize electricity production and we decarbonize transport? It's like, okay, well, then, you know, the relative transport emissions aren't that big of a deal. But I think it is fair to say there are real advantages to plastics and, you know, especially in the context of climate change. So I guess I'm curious, did the climate integrity guys engage with that at all? Or was it just like rah rah stuff?
00:14:18
Speaker
No, it unfortunately doesn't really get into that. And yeah, I think that is I mean, we've, you know, colleagues at Luxier have done research on, you know, things like the switching to paper packaging, even that can have a lot of
00:14:38
Speaker
other environmental impacts that plastic doesn't because you need, of course, to grow and process. You need a lot of water and a lot of energy to process all that, grow all that biomass and process it into paper packaging. So it's not the alternatives to plastic as much as everybody is grossed out or repulsed by seeing waste plastic bags in the rivers or oceans.
00:15:08
Speaker
Things like that, the other options do have these concerns. And I, as like Marsha and Lee, our colleague who's just done some good reports on this has pointed out, like the plastics, if you're looking at it purely from a climate standpoint, there are a lot of cases where the plastic solutions are better.
00:15:26
Speaker
Maybe curious to ask you because you mentioned environmental impact, Mike, do these people also look into the environmental impact of recycling plastics? Like for example, with pyrolysis, you can have fluoride gas emissions or things like that, that are bad for the environment. Microplastics for mechanical recycling.
00:15:45
Speaker
Yeah. So do they also use that as an argument to say recycling is bad and that's why they're frauds also? Yeah. I mean, I think in particular, the impacts from advanced recycling, paralysis facilities and the waste products that can be produced from that or the emissions from it is something that's been a big focus of the pushback on advanced recycling. That was a big reason that that Brightmark advanced recycling paralysis facility
00:16:15
Speaker
that was planned in Georgia got canceled a couple of years ago was because of the big part of that was concerned about the impact on local waterways. So that's definitely an issue and it's something the industry does have to address, particularly when you get into the concerns about where these things are, these facilities are being located, is it disproportionately impacting certain communities and so on.
00:16:45
Speaker
So Mike, I think what the climate integrity people are pushing for is some kind of regulation. And the chemicals industry also has a view on what the regulation should be. And I think industry have been more broadly. So you posted this Antwerp declaration in the chat to us a little while ago.
00:17:07
Speaker
Can you just break us down? What's going on with the answered declaration and maybe how does it fit into this broader question of what does sustainability actually look like and who's responsible for it and how should it be paid for it?
00:17:21
Speaker
Yeah, so the Antwerp Declaration came out last week now. So 73 industrial companies in Europe, including basically all the big chemicals companies that you'd think of BASF and Covestro and
00:17:39
Speaker
Solve, Science Co., and all the rest put out this call for basically better industrial policy in Europe, holding up the – in response, as there's been a lot of discussion about, including on this podcast, the competing with the impact that the IRA has had in the US.
00:17:59
Speaker
And my initial reaction to this was a little bit skeptical because it's basically deregulate us, please. Deregulate us, but also give us a lot of money, presumably.
00:18:15
Speaker
Well, I mean, if it were deregulate us, but give us a lot of money, like I could almost get behind by that more. I think in general, Europe has been too reluctant to focus on the fiscal aspect of this. And the reason the IRA is successful, and it's having the impact it has, is it spends a lot of money on this. And that is something that
00:18:39
Speaker
on climate technologies, manufacturing technologies, right? That is something that we as a society are going to need to do to make this energy transition successfully. That's not easy to do. It's going to require a lot of money from government, frankly, to invest and get these technologies over the hump and create the right sorts of incentives for industry to deploy them.
00:19:10
Speaker
And I think there's been a general reluctance in Europe. A lot of countries have this very strong resistance to deficit spending. And in the political culture there, I think that's been a limitation of the European response. And so I think if they were asked, if they were calling for the EU and member governments to actually go out and spend a lot of money on making this transition, I think that would be a big step forward.
00:19:38
Speaker
the fiscal parts of it as best I could tell were more about kind of moving money
Regulatory Challenges in Europe and US
00:19:44
Speaker
around. And this is how, you know, some of these funds from these existing programs like the, you know, recovery and resilience facility and repower EU programs should be spent and allocated. And even in things that's like, increase the EU's raw material security. And most of that, it's kind of like, well, you know, you've got to
00:20:07
Speaker
make it not so difficult to open up mines or processing facilities in Europe. So to me it seemed at first like you got to spend the money and this sort of call for deregulation is a little bit of a weak way of approaching it.
00:20:25
Speaker
I was talking with one of our colleagues this morning and he brought up the, as we've talked about before, I don't know if on the podcast or off, the Eneos cracker that they've been trying to build, one that is more advanced and has really high.
00:20:41
Speaker
environmental standards that they've been trying to build an antwerp and that's been blocked repeatedly by and is still blocked by the regulations related to the impact on nitrogen emissions. That is a real important issue.
00:21:00
Speaker
you know, concerns around that. But I think that, you know, what our colleague was saying is that, you know, he talks to clients who and companies we work with, he could say like, for some of these programs in the in the US, the IRA programs, I can go on, I can fill out a form online and with the if I have the right documentation, get approved for my tax credit within 24 hours. And that's like the equivalent process that can just go on for months and months and in some places in Europe. So I do think there's a fair
00:21:29
Speaker
you know, a need to maybe not to deregulate or however you would want to frame it but but there is there is a need for
00:21:37
Speaker
regulations to be smart and effective and flexible and decisions to get made quickly on them. And that's something the IRA struggles with also, right? There's a lot of projects that are waiting to get approval for interconnection and things like that or that have been blocked by NIMBYism and things as we've talked about on the pod as well. So it's not to say that the US doesn't have that
00:22:02
Speaker
that issue. But I do think it's fair to draw some attention to that, even though I think ultimately the fiscal element and the need to make these collective investments I think is still a pretty important one and one of the key things that the IRA in the US gets right.
00:22:20
Speaker
Maybe just curious to know is because the IRA basically talks about, or if you want to explain the IRA to a layman, it's just throwing money around the different technologies and try to scale them up as quickly as possible. But what I saw with Europe and the critical mineral space in general is that Europe is so far behind like 98%
00:22:40
Speaker
For instance, in the wind turbine industry, 98% of all critical minerals they need come from China. Even if Europe decides to throw money at this point, I think they're so far behind that they're never going to catch up. Or do you think that even if they do that, there is some hope for Europe to
Europe's Critical Minerals Market Dependence
00:22:57
Speaker
catch up?
00:22:57
Speaker
in critical minerals in general, future demand compared to currency supply, like we really don't produce that many of that much critical minerals, right? It's not like steel, where in steel, China has such an overwhelming capacity lead, but also it's like
00:23:19
Speaker
the raw scale of it is like billions of tons or not billions of tons, but like millions of tons, right? It's like this huge, huge, huge volume of stuff, right? So critical minerals, it's like, okay, yeah, China produces 98% of the world's supply or whatever it is, but you're talking about 100,000 to 200,000 tons of materials, right? Like total critical minerals production is like only a couple of hundred thousand tons, right?
00:23:44
Speaker
I think it's a very different thing to say, we're going to scale up our own production because you're not talking about that much raw stuff. It's obviously hard to get. It's hard to process. It's chemically very nasty to process with the current techniques. And that's one of the reasons why I try to as a leader. But to me, it's just much more realistic to say, oh, we're going to
00:24:07
Speaker
produce our own critical minerals, as opposed to say, hey, we're going to stop importing steel from China. That just doesn't make a ton of sense, structurally. So I think it's a lot more possible. I guess on a higher level, Mike, it's curious because what is the mechanism that they're actually aiming for here? It's like, OK, boost demand for net zero, low carbon, and circular products. And it's like, empower customers to choose net zero and circular products.
Carbon Taxation and Industry Readiness
00:24:32
Speaker
Is that really the solution? Do market stuff? One way to boost demand for net zero products is to make non-net zero products illegal. You know what I mean? You can just say, you can just put a carbon tax on it. That was one of the crazy things. I was at this talk, and this guy, this Chevron Phillips top-level guy, gave this talk. One of the things he said is,
00:25:00
Speaker
Just straight up. We're not gonna do any carbon. Well, we've He showed this graph. He's like we've mapped out every single carbon emissions reduction project we could do These are the ones that make money. These are the ones that cost money We're not gonna do any of the ones that cost money until there's a cost of carbon It's like okay like yeah like cool like that's that's great like I was like, all right like that's
00:25:25
Speaker
I'm glad he's saying it. Like, you know what I mean? Like just put a cost of carbon on, you know what I mean? Like it didn't even seem like he was. It's like at this point, like the businesses are practically just like, yo, you know, it was a carbon tax. Like we're basically ready for a carbon tax at this point. Um, he said, he said one other thing, which was funny, but I can't remember. But anyway, it's just like, yeah, like these, these companies are ready in a lot of places. And I feel like the European companies are ready too. They just need to like,
00:25:55
Speaker
get that different. They just kind of need to get their minds right. Well, I mean, they they have it, right? There's the the yeah, I mean, more in general market, there's the border, the border adjustment mechanism, which is, you know, which is a real thing and it is happening. And I think that's sort of, you know, as you've pointed out, I think in some of the the webinars and talks that you've gave on this given on this.
00:26:20
Speaker
There's a real opportunity for Europe to be a leader in part because of some of these mechanisms that are in place. A lot of the companies do have really good capabilities and technology for low carbon products and climate tech in general that actually will be really valuable and necessary in the energy transition.
00:26:45
Speaker
So yeah, some of that I think works, but I do think that there is still that need for some level of, and I think a higher level of public investment to really help make that transition. Here's a conversation sort of related to this that I had at the conference, which is people were like, who's going to pay for all this, right? And what I said is like, look, the consumer
00:27:13
Speaker
always pays for everything because people, general people are the source of money. Like that's like income is generated by people spending money on goods and services and by people working. Right. Like that's where like the flow of money originates. Right. And like to the extent that value is created, if money comes, you know, from anywhere, it comes from people working jobs and creating value for the economy. And like,
00:27:40
Speaker
adding their labor to like raw materials to turn into products, right? That's where all money comes from, you know, like on a sort of mechanistic level. So like the consumer always pays for this stuff, either through taxes or through increased prices. But the question is what is the, how is that economic pain? How is that cost distributed throughout the economy, right? Like you can imagine the cost being distributed between different industries, right?
00:28:09
Speaker
in different ways. Like the cost of certain products is not gonna go up at the same rate across different industries. The cost of these different, you know, the profitability of certain industries is not gonna go up and down. They're gonna go at different rates. And like the costs that are upfront to the consumer versus the costs that are hidden to the consumer can change a lot. Like carbon, emitting carbon is, the thing about carbon taxes is that there is a price on carbon, right?
00:28:37
Speaker
When you emit a ton of carbon, you cause climate change. And that ultimately comes back and costs some amount of money, depending on who you ask and where you live.
00:28:48
Speaker
I don't know, as low as $30 a ton or as high as $120 a ton. But I think the global estimated cost of carbon emissions is around $100 a ton. It causes $100 of damage measured in more intense weather. Net present value of future climate disasters, basically. Yeah, basically. It's about $100 a ton. So the reality is people are bearing those costs.
Carbon Tax Impacts and Political Challenges
00:29:16
Speaker
equation. There's no like, it's not like if you don't have a cost of carbon, someone isn't bearing those costs. Someone is bearing those costs. They're just not paying him money, necessarily. Immediately they're paying in damage. You know, they're paying him money 20 years down the line, right? When a climate disaster happens, right? Like the question of who pays is really one of like, who pays geopolitically?
00:29:42
Speaker
Right? Like, do we damage the third world? Do we damage developing economies? Which is what we've been doing, you know? Or do we actually, like, you know, make Western and first world consumers responsible for their carbon emissions?
00:29:58
Speaker
But yeah, I mean, I think what the challenge with that is the politics, right? I mean, if you're going to put a carbon price and it's going to lead to increased costs for a lot of the things that, you know, sort of the regular people buy in here and now, that has a political effect in the way that, you know, people and, you know,
00:30:18
Speaker
Bangladesh or wherever, suffering in 20 years in the future. It has a very real cost, but it's not one that has the same, just to be blunt about it. It doesn't have, for good or for ill, it doesn't have the same political effect in the countries that are making these decisions. For ill, I think. No, for ill. Fair enough. Pretty clearly for ill as far as I'm concerned. Fair enough. Fair enough.
00:30:44
Speaker
But I think the IRA in the US reflects the fact that this sort of money spending approach is a lot more palatable than the cost approach, even though it does end up, as Anthony said, going towards affecting people in the form of perhaps higher prices or higher future taxes. That does still, of course, come from somewhere or have some effect.
00:31:13
Speaker
And it's going to be interesting to see, I think, sort of what the limit of that approach is. I mean, there's been a mix of, you know, there's always a mix of keratin sticks, right, in the U.S. is, you know, certainly the, you know, Obama era plans that have helped to, you know, have encouraged shutting down of coal plants and things like that. You know, there's been some sticks, too. It's not, you know, it's not unfamiliar, but I do think
00:31:43
Speaker
at some point there is a chance that the politics does come back around to simply because running higher deficits is at some point unpalatable. You could come around to the point of there being a real carbon tax as one of the least unpalatable ways in that sense to balance the budget or to address the
00:32:13
Speaker
the need for revenue may be better to say. But that's not something I think is in the political landscape in the US in the foreseeable future. I think it would be nice to have like a very high carbon tax and then use that money to fund an RE project.
00:32:29
Speaker
where every pound you spend goes to building a solar panel or something like that. I don't know. I mean, that's basically what we should do. It's not even really controversial. We're just not really capable as a society of doing anything all the time.
00:32:47
Speaker
It's tough. Just a carbon tax by itself. A carbon tax and you just took the money and lit it on fire and you removed it from the economy would probably be a net benefit to society. The fact that you can then turn around and spend that money on stuff that's even more beneficial to society is icing on the
Public Investment and Policy Gaps
00:33:08
Speaker
cake.
00:33:08
Speaker
Right. I mean, and that's the, you know, the US doesn't have as sharp a problem with this as a number of other countries do, but, you know, we still have an aging society. We still do have, you know, without going sort of full Paul Ryan here, I think you can say there's definitely going to be some needs to think about how we fund
00:33:34
Speaker
you know, some of the just the general social programs and operation of the government that we need in the future. And that's why I do think that that carbon tax option is something that it could make sense for. Because I think it's something as you pointed out, Anthony, the industry is pretty open to. Yeah, I don't even that's the thing that's crazy. It's like, who at this point,
00:33:55
Speaker
It just seems like the institutions that are supposed to govern this kind of thing have broken down to the point that they're not even really capable of delivering the kind of policy that everyone is pretty much aligned on. Like that's the thing that's crazy about the Antwerp stuff. Industry is talking to government and like government is not, it's not like we're in this era of, you know, antitrust regulation. We're not in this era of like,
00:34:22
Speaker
big socialism or anything, we're not in this era. These governments, you ask any of them, and they're like, yeah, we're pro-business. We're the most pro-business government around. No government has a confrontational or an antagonistic relationship with big business. That's not the relationship that governments have at this point.
00:34:45
Speaker
Even the Democratic Party in America, they're the party that did the IRA. You look at these declarations or any of the things and it's like, why can't government deliver on some of this stuff? Why can't government deliver on some of the least contrary? The money stuff, it's like, okay, you have to raise taxes, you have to fund it. If you're German,
00:35:12
Speaker
the government's just never allowed to spend money, like, you know, like this cultural thing there. It just seems like the institutions are really failing to meet this moment of
Social Trust and Policy Effectiveness
00:35:22
Speaker
demand. And I don't even really know why, because the stuff they're failing to meet is not even like, it's not even the hard stuff that they're failing to do is basically, is basically where I'm coming from here. And I'm just, I don't know what it means. It's just like hard to imagine where we go from here.
00:35:39
Speaker
there's stuff that there's sort of consensus around with respect to quote unquote elites, right? There's things that business would actually be pretty much fine with, but there is, I think, a bit of a broader breakdown of kind of social trust and cohesion. And you have all of these populist movements that are rejecting a lot of the things that may be consensus amongst the sort of
00:36:09
Speaker
know, business and political leaders. And that is one of the things that's throwing politics, throwing some of the politics around these things into a state where it's harder to get them to work. You know, it is kind of a new era in terms of, yeah, the roles of some of these different kinds of ideologies and without getting too political here, a different era in terms of
00:36:32
Speaker
the role that some of these kind of ideologies and movements play. And I think a lot of politicians haven't really figured out how to operate in that environment. And I certainly don't have the answers for that either. But I think there is this sort of kind of underlying uneasiness that's certainly not helping the political system to respond the way I think
00:36:58
Speaker
Like you said, there's often a lot of consensus that it should, at least in certain circles, or the circles that would have traditionally been influential.
Market Dynamics of Carbon Taxes
00:37:10
Speaker
If I were to put myself in the shoes of a climate doomer, let's say, are carbon taxes that effective? Because at least in Europe, as far as I understand it, it's an unregulated market, right? The market decides, as in the players who are part of the market decide, you know, and how that thing goes, like the stock price, right? That's how
00:37:28
Speaker
you know, the price of carbon is dictated. Is it too low? I remember on the podcast we discussed, you know, carbon prices were at $89, $90 or $84, something like that. Is it too high? Is it too low? So what should be the cost of carbon in reality? Like how do they make up for that? That makes everyone happy.
00:37:48
Speaker
The reason why I asked that was because when I was at the conference, I remember the general idea I got when people were talking about the CBAM and not just that, but the EU emissions trading scheme was that it's the best scheme in the world. And this is how everyone else should adopt it. But I was like, that's not true, because if that were the case, then the carbon crisis would be way higher. And we would be implementing Morari projects at this point, which we are not.
00:38:09
Speaker
I'm sure the prices are going up and good credit to that, but it's not the best system, right? That's the funny thing about like, what is the best system, right? Where it's like, is it the best system that's possible in reality? That's achievable in the political reality that we live in? Or is it the best system in abstract, right? And I think you can make a fair argument that it's the best. I mean, it's the best system that currently exists. I think that's totally fair.
00:38:38
Speaker
Is it the best system that could ever exist? Maybe, maybe in our political reality, it's the best system that could ever exist, but I think it's certainly pretty far from the best system that could ever exist in theory. And I think, you know, I mean, just put a flat price on carbon, like, like not flat as in terms of just like the dollar value never changes, but flat as in you just get rid of all the exemptions, right? And just, just crank the carbon price up every year, because I think that's,
00:39:04
Speaker
Like, this is kind of where I'm at with a lot of government stuff these days anyway. It's just like, make it as simple as possible. And that's like one of the things I appreciate about the IRA. It's like, so in some ways it's really simple. Like it really is this sledgehammer of just like, you're going to get this much tax credit for like doing this activity. And like, there's not much to contemplate.
00:39:23
Speaker
outside of it. You don't have to apply. You don't have to get approved. There's no yes or no. It's like if you're doing the thing and these are the criteria to demonstrate that you've done the thing, you get the money. And the money goes away after a certain point, but it is what it is. And it's just very straightforward in that way. And to me, so much of the European funding, because the Europe funds so much of
00:39:51
Speaker
like innovation, like they do as much roughly innovation funding as the United States, even factoring in stuff like the IRA. But the way that innovation funding is structured is like just not very user friendly. Like it's a lot of like layers of funding and like different sort of rings of concentric rings of
00:40:15
Speaker
Complexity but also like stakeholder alignment and it's good at like creating stakeholder alignment But just like sometimes you don't need to align
Simple vs. Complex Government Interventions
00:40:23
Speaker
the stakeholders. You just need to tell the stakeholders what to do like At this point, you know the like carbon emissions bad like stop doing it and Like we're gonna punish you more and more and more every year for that and like green electricity good And we're just gonna pay you to build green electricity, right? there's all these systemic effects that like
00:40:45
Speaker
we're trying to compensate for. And I don't know that actually doing any of that stuff produces a better system than just doing the simplest thing. And it's like, oh, there's all these fears about the IRA, where it's like, we could get oversupplied on electricity.
00:41:01
Speaker
We're not going to be able to build grid interconnects. We could be oversupplied on hydrogen. We're not going to be able to consume all this hydrogen. It's going to encourage people to build bad hydrogen capacity that's higher carbon emissions. And it's like, OK, sure. There are these negative system effects that are better.
00:41:16
Speaker
potentially gonna happen. Maybe they're even likely to happen, right? Maybe they're gonna, then maybe they're guaranteed to happen. But there's so much urgency around the climate issue that like, it's probably just worth it just to like, take this ledge hammer and break down the wall and like figure out what happens next after you've done that. Yep.
Conclusion and Call to Action
00:41:34
Speaker
All right, that's all we have time for. If you like this podcast, I encourage you to like it, subscribe to it, please rate it. That does help us out on Spotify, on Apple Podcasts. We really appreciate it. And we have some great episodes lined up in the future.
00:41:50
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.