Fund managers play a critical role in supporting private companies to implement green technology, as the transition to net zero will require $125 trillion of investment by 2050. In comparison, global expenditure on green technology in 2021 was only $0.8 trillion, marking a 27% increase from the prior year (IPCC 2023). Therefore, the deployment of green technology must be urgently accelerated to mitigate major climate catastrophes.
The exact green technology solutions required by a company will vary. However, the most common and impactful solutions are listed below. For most companies, green technologies will fall into one of the following three categories: electrification, substitution of hydrocarbons with green molecules, and carbon capture.
Electrification
Electrification involves switching a process from using a fossil fuel to using electricity, for example, moving from a petrol vehicle to an electric vehicle ("EV”). Therefore, it is very important that before pursuing electrification, electricity is procured or generated through zero-carbon methods such as green tariffs or onsite solar. This ensures that the carbon-intense fossil fuel is replaced by zero-carbon electricity, giving the maximum carbon reduction.
One of the main opportunities for electrification lies within the transport sector . Companies need to transition away from using petrol and diesel vehicles to electric ones. The EV market is becoming increasingly established however there are still areas such as long-distance haulage where electrification is not yet a viable alternative.
Another common electrification solution is in building heating or low-temperature process heat, where heat pumps can replace fossil fuel boilers. Heat pumps produce low-temperature heat very efficiently which makes them ideal for applications such as building heating. Industrial heat pumps are becoming increasingly available for high-temperature applications , however, there are still use cases where they are not applicable and other options have to be explored.
Green molecules
There is increasing demand for green molecules from specific sectors such as aviation and maritime . Green molecules offer a lower carbon substitute for more carbon-intensive fossil fuel sources, such as kerosene and bunker oil. Examples of green molecules include green hydrogen and biofuels such as Sustainable Aviation Fuel (“SAF”). Green molecules often play a role where electrification is currently not technologically viable. However, these technologies are often not deployed at scale, and it is essential to accelerate the deployment of green fuel infrastructure since green molecules must also be transported to where they can be useful. Companies can positively influence deployment by, for example, initiating market demand for cleaner long-distance trucking using Hydrotreated Vegetable Oil (“HVO”) diesel and opting for SAF on business flights.
There are also pitfalls for specific green molecules. For example, hydrogen is seen by many as the silver bullet for decarbonising everything. However, there are many negative factors to its deployment such as cost, safety, ease of transportation, and limitation of supply. This means its use in decarbonisation is likely to be limited to specific sectors like chemical processes such as fertiliser manufacture and steel production.
Carbon capture
For some processes, it is hard to implement the above opportunities (e.g. electrification or green molecules), so Carbon Capture Utilisation and/or Storage (“CCUS”) is an option. This is where the carbon emitted from a process is captured and used or stored by a third party, however, this technology only fits very specific use cases.
Apart from CCUS, there are other carbon removal technologies, also known as negative-emission technologies, such as Bio-Energy with Carbon Capture Storage (“BECCS”), and Direct Air Capture (“DAC”). Currently, BECCS and DAC companies are still in their infancy stage and need significant (venture) investment to prove to scale from lab to pilot and, subsequently, to commercial.
Companies will be required to implement key green technologies to reach net zero by 2050, mainly in three categories: electrification, green molecules, and carbon capture. Both businesses and investors need to play a key role in the acceleration of these technologies.
It is clear that a variety of green technologies are necessary for a successful net zero transition, and significant investments are required. Would you like to know more about how technology can play a role in achieving your net zero target?
