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“Carbon-neutral” natural gas? Really?

Can a container ship filled with liquified natural gas be “carbon neutral”? Shell Oil and Cheniere Energy want you to believe that. In May, the two companies delivered a shipment of gas to Europe in which emissions associated with the upstream costs of processing and liquifying the gas were offset by carbon credits purchased from Shell’s portfolio of nature-based projects. Emissions were offset to the “FOB delivery point”. This means that Shell and Cheniere have offset the emissions all the way to the point of delivery, as indicated by this statement in their joint press release.

The companies worked together to offset the full lifecycle greenhouse gas emissions associated with the LNG cargo by retiring nature-based offsets to account for the estimated carbon dioxide equivalent (CO2e) emissions produced through the entire value chain, from production through use by the final consumer (all scopes).

Shell Oil Press Release, May 5 2021

Really carbon-neutral?

What they’re claiming is that independent of how the customer uses the product they’ve delivered, the product itself has been produced in a carbon-neutral fashion. And, of course, their shipping partners are eager to tout their new green credentials too. Astomos Energy, for example, put out a press release stating that they are now purchasing “carbon-neutral LPG”. The appetite for Cheniere’s new products was strong enough that they posted a 40% increase in revenues from a year ago, and bumped guidance, rewarding investors with a 74% increase in the stock price from this time last year.

Naturally, this has commentators crying foul. Salon labelled it a greenwashing scam. Cleantechnica simply said A tanker full of fossil fuels isn’t carbon neutral. That’s not how it works.

I agree.

Decarbonizing supply chains is hard.

What this illustrates, quite neatly in fact, is the complexity of decarbonizing supply chains. At Davos this year, the WEF unveiled a report titled “Net-Zero Challenge: the supply chain opportunity“. The central thesis was that 8 supply chains accounted for over 50% of the world’s emissions, and that decarbonizing those supply chains would have impact. The energy industry wasn’t one of the eight supply chains named directly. Why not? Energy is an input into every supply chain. You literally cannot decarbonize supply chains without decarbonizing energy itself.

Let that sink in.

It’s good that Shell and Cheniere have taken the small step of offsetting the emissions associated with creating and shipping their polluting products, even if the marketing of those products as net-zero LPG is deceitful. The next step is to decarbonize energy generation itself — Shell and Cheniere’s customers.

Policy is part of the answer

So how do you decarbonize energy itself? Aside from technology solutions, policy is an incredibly important tool. Yesterday the UNEP Net-Zero Alliance, a group of investment managers representing $6.6 trillion of assets under management, released a position paper calling on governments to adopt common approaches on emissions pricing, to apply emissions pricing to every sector of economies (not just the heavy emitters), to swiftly phase out fossil fuel subsidies, and to fund research and create incentives to decarbonize hard-to-abate sectors. This approach — carrot and stick — works. You can see it visually by checking out the current price of European Usage Allocations futures (as at July 7). Emissions in Europe are now nearly $60/ton, up from $20 in April.

EUA December Contract prices, courtesy Ember

What’s next?

We’re still a long way from where we need to be. Analysts say that the price today needs to be closer to $85, rising to $145 by 2030, in order to reach a 1.5C global warming target. Emissions pricing schemes still only apply to 17% of the world’s carbon emissions. So long as emissions prices stay low, and customers exist that aren’t covered by pricing schemes, there will be a market for green-washed inputs like (unfortunately) fossil fuels.

As individuals, there are are two actions we can take.

  1. When emissions trading becomes a political issue in your country, vote in favor of emissions markets, or cap-and-trade solutions. There will always be those who claim that “the market” is the solution. The market is clearly not infallible, as the Shell / Cheniere announcement shows. Vote for emissions trading schemes with teeth, not un-regulated markets.
  2. When you have the option, buy green energy from your local supplier. Do your homework first, though. Make sure that you aren’t being sold green-washed fossil fuel energy, but rather energy from non-emitting sources like wind, solar, or nuclear.

And Shell, Cheniere… we know you have to serve your shareholders, but shame on you for such cynical marketing tactics. We deserve better.

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Batteries

Electric vehicle critics will often tell you that the environmental cost of the batteries is the “dirty little secret” that nobody is telling you about. The claim is that the manufacturing impact of the batteries is so high that we might as well just keep burning gasoline. The origin of this statement is an early and flawed study from 2017.

Let’s examine their claim in more detail.

Battery trends

Battery technology is advancing rapidly. You can see this in the price curve. In December of last year, Bloomberg NEF reported the first instances of vehicle batteries priced at below $100/kWh. At $100, most analyses show EVs priced equivalently to internal combustion engines. For comparison, a decade early that price was $1100/kWh. That means that 10 years ago, the price of the 53 kWh battery in Tesla’s original roadster was over $50,000. It’s no wonder those early Roadsters were so expensive!

The environmental cost of manufacturing vehicle batteries is also falling. A recent study estimated the manufacturing impact of current battery technology at 75 kg CO2e/kWh of battery capacity, down from 89 kg in 2019.

Analysis

The assertion made by the EV industry is that the increased environmental impact of manufacturing the vehicle is offset by the decreased impact of using the vehicle. Is that true?

To figure out the answer to that question, we need to know the CO2e impact of running a conventional vehicle vs an EV. Then, let’s add in the CO2e impact of the battery pack, divided over the expected lifetime of the battery, and we should have our answer.

For the sake of simplicity, let’s assume that the manufacturing impact of a conventional vehicle and an EV is roughly the same, excepting that the EV has the added impact of the battery pack. It’s not entirely true, because the conventional vehicle has a higher carbon cost to build than the EV (without the battery), but for the sake of simplification, let’s assume that they are the same.

My previous vehicle, a 2015 Ford Fusion, averaged about 23 mpg in actual usage. Ford rated it for 28 mpg, but I tracked my gasoline purchases over the lifetime of the vehicle, and it was roughly 23 mpg. I may have a bit of a lead foot. Gasoline combustion produces an estimated 18.95 lbs of CO2e per gallon used. Annually, I drive around 10,000 miles, which means that car was producing 8,226 lbs of CO2e annually.

My new vehicle, the Tesla Model Y AWD, is rated by the EPA for 28 kWh / 100 miles of driving. The Tesla should use about 2,800 kWh of electricity to drive the 10,000 miles I drive in a year. Now all we need to know is the CO2e costs to generate the electricity. According to the EPA, in the United States, the electricity industry as a whole produced an average of 0.92 lbs of CO2e per kWh of electricity generated. So, assuming that my power utility emits the same CO2e as the EPA average electrical utility, my CO2e costs will be 2,576 lbs. More on that in a minute…

FordTesla
Miles Driven10,00010,000
Electricity Used0 kWh2,800 kWh
Fuel Used435 gal0 gal
Unit Emissions18.95 lbs / gal0.92 lbs / kWh
CO2e Emitted8,226 lbs2,576 lbs
Annual operating emissions comparison

So for me, my old Ford emitted 5,650 lbs more CO2e annually than my new Tesla does.

Now let’s get back to that battery pack. Recall that the manufacturing CO2e impact of a battery is about 75 kg CO2e / kWh of capacity. So manufacturing the Tesla’s 75 kWh battery will emit about 5,625 kg of CO2e, which converted to lbs is 12,375 lbs. And then we have a simple calculation.

Years to "break even" = Battery Manufacturing CO2e / Annual CO2e savings.  

So, for me, it will take about 2.2 years before the manufacturing impact of the battery is recovered completely.

My Utility is PSE

I buy my energy from Puget Sound Energy here in the King County, WA area. PSE’s generation mix is roughly 1/3 renewable, 1/3 coal, and 1/3 gas.

SourceEmissions
Coal2.2 lbs / kWh
Natural Gas1.0 lbs / kWh
Renewable0 lbs / kWh
Blend1.06 lbs / kWh

Compared to the national average, PSE is actually a pretty dirty utility. My Tesla driving will generate 2,968 lbs of CO2e annually. And my emissions “payback” will extend to 2.35 years. What a calamity!

Fortunately, PSE has a green energy option, which we have chosen for our household. For an extra $.01/kWh (about $15/mo) we buy an energy mix which is generated 95% from solar and wind, and 5% from biogas. Biogas has about the same emissions profile as NG, which means that the PSE clean energy option produces about 0.05 lbs CO2e / kWh. Some folks consider biogas neutral environmentally, but let’s leave that for another day. In any case, my new Tesla’s CO2e footprint using PSE green energy is now reduced to just 140 lbs CO2e annually, and the “pay back” time for the battery is now just 1.5 years.

Over the 5 years I owned the Fusion, I estimate my emissions at about 41,000 lbs CO2e. I expect the Tesla to be a third of that. Automobiles have a lifetime of about 200,000 miles. Over 200,000 miles the Ford will emit 165,000 lbs CO2e. And if I own the Tesla that long? 15,000.

Your numbers will vary, but the calculation is not hard to do. And no matter how you do the numbers, there simply is no case that the environmental impact of EV battery manufacture outweighs the benefit of not burning gasoline to run a vehicle.

Case closed.