CO2: from a pollutant emission to a trading commodity -

CO2: from a pollutant emission to a trading commodity

17 Feb 2023

A new trading commodity in the global market

To begin with, commodities are basic goods and materials used in commerce and are most often used as inputs in the production of other goods or services. Most of them are raw materials, basic resources, agricultural, or mining products, such as iron or sugar, or grains like rice and wheat; they can also be mass-produced unspecialized products like chemicals and computer hardware. Since they are so many, they are grouped into three major categories: agriculture, energy, and metals. Given that energy sources like crude oil and metals such as steel, are used for cargo ships, that transport agricultural goods around the globe, we can understand that the three markets are intrinsically linked.

Commodity trading is the buying and selling of raw materials, which means it is the foundation of the primary global economy; the trading can generally be split into the physical one (transportation of raw materials and products around the globe) and the financial one (commodities exchange, or so called “stocks market).

Freight forwarding is the service of moving cargo between stages in the supply chain. As the captured CO2 must be transported, either for storage or utilization, pipelines may be the cheapest form of transport for short distances but most of the time commodities are transported by sea freight, mainly because it is much cheaper than all other options. Other onshore transfer methods, such as via railways and tanker trucks cost about twice as much as pipelines or ships.

Now, if we take a closer look at carbon dioxide, it is evidently mass-produced by many industries around the globe and the amount of it, that is captured, continuously increases. As most of these industries use carbon dioxide for other processes and products, they are capable of using captured CO2 in order to achieve net zero carbon emissions. Of course, a global transportation network will inevitably be developed both onshore and offshore, with ships and sea trade having the leading role. A very simple, yet very explanatory, diagram may demonstrate the path of CO2 as a trading commodity.

So far, all indications point towards a new, strong, fast-developing carbon market that will introduce CO2 as the trading commodity of the near future. In short, it is worth mentioning that start-up, technological companies develop more and more efficient and cost-effective systems for carbon capture and storage. Even more, six of the world’s biggest energy companies have joined forces on a project that could cut the UK’s industrial emissions in half. The project features production of green hydrogen via electrolysis and renewable energy sources or blue hydrogen via steam-methane reforming and transport of the captured carbon to offshore geological storage beneath the UK North Sea (BP, 2021).

A similar project consisting of the collaboration of companies from France, Netherlands and Germany aims to the development of huge facilities to produce hydrogen and e-methanol, a zero-carbon fuel. More precisely, inside this facilities, large-scale electrolyzers, powered by offshore wind turbines, will produce hydrogen, which will either be delivered to the local mobility and industry sectors or it will be combined with captured CO2 to produce e-methanol. Moreover, Germany’s demand for hydrogen is also on the rise since it is actively seeking for a more secure and flexible energy supply. Thus, a major German oil and gas company is investing in the development of LNG infrastructure across the country, aiming towards the mass production of hydrogen, from natural gas, via steam-methane reforming. The produced carbon from the reforming process will be captured and stored inside depleted oil wells in North Sea (Wintershall Dea, 2022).

In parallel, the European Commission, the Hydrogen Europe organization, and other relevant companies, have all signed a joint declaration with the goal of doubling the previous EU renewable hydrogen target to 10 million tons of annual domestic production and an additional 10 million tons of annual hydrogen imports (Hydrogen Europe, 2022); European electrolyzer manufacturers agreed to increase their manufacturing capacity in an effort to have, by 2025, a combined production of 17.5 GW in Europe.  At the same time, they have also agreed to further increase that capacity, by 2030, keeping in line with the projected demand for renewable and low-carbon hydrogen. Last but not least, taking into consideration that most of the captured carbon will be transported via sea, more than a few concept designs of CO2 carrier vessels have been completed and as many shipping companies have been expressing their interest, it will not be long before these concepts enter the production phase, in the shipbuilding yards.

Andrea Cogliolo