Please ensure Javascript is enabled for purposes of website accessibility

Why Capitalism and Fossil Fuels Will Drive Climate Change Action

By Maxx Chatsko - Jan 24, 2015 at 10:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Do we need to stop emitting carbon dioxide? Yes. Do we need to transition away from fossil fuels to do it? No. Here's how.

Source: Kamil Porembiński/Flickr

When it comes to man-made climate change, I am confident of two things:

  1. The world needs to quickly and drastically reduce carbon dioxide emissions.
  2. That makes fossil fuels more valuable than ever before.

You're probably confused, but it's not your fault. Whether or not you think man-made climate change is real or part of a global conspiracy, we can all agree that it has become a polarizing issue. That has made it easy to view climate change or potential solutions for curbing CO2 emissions as black or white topics. You can choose between two options:

  1. Climate action will cost the world trillions of dollars this century, but that's the price companies and consumers must pay to save our rocky home. Get over it, stop using fossil fuels, and give us your money.
  2. A lot of really smart individuals throughout the world who dedicated their entire careers to physical and atmospheric chemistry are just pranking us. Wait and see, although, you know, we might be wrong.

There is no sensible middle ground. The first option (action) places unnecessary economic burdens on fossil fuel consumption without providing realistic alternatives, while the second option (inaction) ignores the serious consequences of rising CO2 levels. Luckily, capitalism and fossil fuels didn't get us this far only to whiff at what may very well be the greatest economic opportunity in human history. It may sound too good to be true, but we could have our cake (substantially reduce CO2 emissions) and eat it, too (create economic growth while using our fossil fuel reserves). Let's explore how good ol' capitalism and fossil fuels give us the best shot at climate change action through waste carbon manufacturing technology.

How not to cut CO2 emissions
Since combusting fossil fuels remains the single worst behavior for generating carbon dioxide emissions, politicians, scientists, and activists have proposed taxing their use or, more absurdly, leaving them in the ground. A study published in Nature estimated that humanity would have to forget about using 33% of its petroleum reserves, 49% of its natural gas reserves, and 82% of its coal reserves by 2050 to have a 50/50 shot at limiting warming to 2 degree Celsius. How encouraging.

That's not moving Big Oil companies such as Royal Dutch Shell (RDS.A) to take action. When pressed about the possibility of "stranded assets," or fossil fuel reserves discovered but labeled "unburnable," Royal Dutch Shell released a letter describing why the world needed fossil fuels through 2050 (that's correct) and assured investors that we had the "rest of the century to resolve climate change" (probably not).

If the world wants to have the best shot at abruptly slashing CO2 emissions, it needs to incentivize the worst offenders -- governments, oil refineries, power plants, chemical manufacturers, and the like -- to join the cause. To do that, you need to convince them that they're already losing money.

Keep it simple, stupid
Like it or not, the global economy is powered by carbon. Here's how it works:

  1. We purchase carbon for its energy content (heat, electricity, and transportation) and chemical derivatives (when sugar or petroleum is used as a feedstock, for instance).
  2. We combust or convert the carbon we purchase.
  3. We freak out about the gaseous byproducts created from combusting or converting the carbon.

There's nothing wrong with using our vast fossil fuel reserves, but there is something wrong with the lack of efficiency we accept. That makes the concept of waste carbon manufacturing best explained with a simple, illustrative mass balance. Consider what happens when a power generator burns one molecule of methane, the most abundant compound in natural gas, in a gas-fired power plant. Methane, oxygen, and a flame (not pictured below) are combined to produce CO2, water, and heat (not pictured below). Power plants use the heat generated to spin turbines that create electricity and vent most of the water and CO2 into the atmosphere.

"C" denotes one carbon atom, "H" denotes one hydrogen atom, and "O" denotes one oxygen atom. Source: Jynto/Wikimedia Commons.

Funny thing is, the power generator paid for the carbon atom in the CO2 molecule when it purchased methane from a pipeline. Allowing it to flutter off into the clouds is inefficient and wasteful, or akin to not insulating pipes carrying steam to the electricity-generating turbines. The difference is that it's easier to see the monetary value of heat created in the process -- and therefore the consequences of inefficiency -- than for the CO2 created. Waste carbon manufacturing promises to change that.

We need more efficient fossil fuels, not fewer of them
They may never be included in climate change models or carbon tax scenarios, but dozens of companies are developing technology platforms that capture CO2, carbon monoxide, and methane from industrial processes, feed them to an engineered bacteria or electrochemical cell, and produce valuable chemicals. Survey the emerging yet under-the-radar industry, and you'll see familiar names among investors including Google, BP, Siemens, Mitsui, and some of the most prominent venture capital firms. In other words, capitalism appears to be more than capable of funding novel technologies to help the world limit its CO2 emissions.

For instance, ethanol manufacturer Green Plains (GPRE 0.24%) owns 63% of a company called BioProcess Algae, which is proving its novel biomass manufacturing capabilities at the company's Shenandoah, Iowa ethanol facility. The systems aim to capture waste heat and CO2 from the ethanol plant, feed it to algae, and then harvest the biomass for use as animal feed, nutritionals, or chemical and fuel feedstocks.

BioProcess Algae and Green Plains are far from alone. Here's what several other leading platforms are up to:

Company (Type)

Products Targeted

Development Stage

Key Investors and Partners

Key Economic Stat

Proterro (biological)

Sucrose from cyanobacteria, other sugars



Target price of $0.05 per lb, 67% lower than sugarcane

LanzaTech (biological)

Ethanol, BDO, >20 others

Two commercial facilities in 2015

Mitsui, Siemens, Posco, Invista, China Steel

Asked for $60 million in Series D financing, raised $112 million

Liquid Light (electrochem)

Ethylene Glycol, >60 others


BP Ventures

Ethylene glycol input costs 80% to 90% lower than using crude oil

Novomer (electrochem)

Polymers, building block chemicals


Saudi Aramco, DSM

First products cost 20% to 30% less than incumbents

Note: "Electrochem" means electrochemical catalysts are used. Source: Companies, compiled by author.

You'll notice that the products created from these platforms are produced at substantially lower costs than market incumbents, which are typically created from petroleum feedstocks. That's because CO2 is cheap (it's currently viewed as a waste product) and abundant (few markets available). As you may already be imagining, these technologies have major implications--they could not only reset how we view CO2, but forever alter global economics, supply chains, and rekindle our love affair with fossil fuels.

What it means (and what it doesn't mean)
Waste carbon manufacturing will make the carbon inefficiency of current energy generation or chemical processes--expressed as CO2 emitted--increasingly transparent to the global economy. Because the processes monetize CO2 they create a more realistic economic incentive for the worst offenders to cut emissions than unnecessary taxes or government-imposed limits on the volume of fossil fuels that can be safely extracted.

Consider that the coal power plant down the road could install equipment to capture and clean its CO2, co-locate a waste carbon platform onsite, and manufacture chemicals and fuels to create additional value (and payback capital spent to install the systems). Consumers continue to get cheap watts from the grid, coal becomes much cleaner, and coal power plants become important suppliers of chemicals needed for everyday life. And since CO2 is used as the chemical feedstock, it further lessens a country or industry's dependence on petroleum. Would coal suddenly become more valuable? Global supply chains would be turned upside down.

In the near future, trains could deliver coal to power plants and leave with valuable bulk chemicals. Source: jpmueller99/Flickr.

While I'm optimistic about the possibilities--the technology is being successfully commercialized right now-- it's important not to overhype waste carbon manufacturing platforms as the world's climate change savior. Carbon capture systems still don't avoid 100% of a facility's CO2 emissions, and not all industrial plants generate enough CO2 to make chemical manufacturing economical. That could be avoided with modular systems -- as some companies above are doing -- but larger industrial operations remain the low-hanging fruit.

Additionally, the world emits most of its CO2 and other greenhouse gases from sources that remain out of waste carbon manufacturing's reach. Energy, industry, and waste handling accounted for 48% of the world's total emissions in 2004, while forestry, agriculture, residential buildings, and transportation accounted for the remaining 52%. While that is a meaningful chunk to set our sights on initially, we must be realistic, too. The world must continue to invest in renewable energy, novel transportation technologies, and shift to cleaner burning fossil fuels -- until waste carbon manufacturing systems can be deployed more widely.

In the meantime, brave companies are going full-steam ahead.

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, CAPS page, previous writing for The Motley Fool, and follow him on Twitter to keep up with developments in the synthetic biology field.

The Motley Fool recommends Google (A shares) and Google (C shares). The Motley Fool owns shares of Google (A shares) and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Alphabet Inc. Stock Quote
Alphabet Inc.
$116.63 (-0.57%) $0.67
BP p.l.c. Stock Quote
BP p.l.c.
$30.57 (1.36%) $0.41
POSCO Stock Quote
$46.80 (1.50%) $0.69
Siemens Aktiengesellschaft Stock Quote
Siemens Aktiengesellschaft
$54.24 (-2.49%) $-1.39
Green Plains Inc. Stock Quote
Green Plains Inc.
$37.84 (0.24%) $0.09
Alphabet Inc. Stock Quote
Alphabet Inc.
$117.50 (-0.54%) $0.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.