Well, ladies and gentlemen, good afternoon. If I could ask everybody to go ahead and take a seat. Welcome back for the energy and carbon session. I recognize that most of you were here in the morning session. For those that were not here, if I could just very quickly recap some of the administrative items. First, as it relates to safety, again, you'll recall that we have two exits out of the room, one that will take you down to the street. Again, if there's an emergency, you'll hear an audible, and there will be some staff here that will guide you as well. Again, I'll ask you to go ahead and silence any type of your electronic devices at this point. Next, I'll draw your attention to the cautionary statement, which can be accessed along with the presentation on our website.
I'll also note that you should have, what we call the 2nd edition of our Energy & Carbon Summary in the back of the room. For this afternoon, opening remarks, and I'll also introduce the presenters. As shown, we plan to cover our outlook for a lower carbon future and discuss the important research that we pursue to identify solutions that will provide for lower carbon energy. We'll wrap up with an open discussion period, and the plan will be to conclude this session at 2:30 P.M. today. With that, it's my pleasure to go ahead and invite Darren back up to the stage for his opening comments.
Thank you, Jeff. Well, good afternoon, everybody. Welcome back to those from the morning session, and for the new folks, welcome. In a moment, I'm going to hand the stage over to two of our company experts. Pete Trelenberg is an expert in the climate change field, and Dr. Vijay Swarup is our expert on low emissions technologies. They'll describe how we look at, how we evaluate, and how we address the demand for energy and the risk of climate change. That demand for energy and risk of climate change is what I have referred to in a number of the things that I've written. Conversation today, hopefully, that you'll see we study that pretty intensely, and we have a pretty deep understanding of both sides of that equation.
Before I give the stage to them to let them take you through that, I want to spend just a moment talking about the dual challenge. I want to start with the fundamental, which is energy is essential to human progress. Most people agree with this, and a very quick review of history will clearly. It's the UN Human Development Index plotted against energy use per capita. You can see the very clear correlation. As standards of living rise, so does energy use. I always think it's important when we talk about this to keep in mind there are over 1 billion people, more than half of the world's population, are living at standards well below what any of us in this room would deem as acceptable. You can see some of that in the red dots there.
Consistent with that need, majority of the energy demand is in the developing world, driven by growing economies, improved living standards, improved health, improved educational standards. That's what makes this problem so hard. Communities that desperately need affordable energy are growing their use of it, and that is a good thing. Lives are improving. At the same time, they're driving the growth of CO2 emissions. You can see that in the chart on the right. In line with their energy demand growth, the majority of emissions are coming from non-OECD countries. That's the essence of the dual challenge. Providing affordable energy to people that desperately need it and maintaining the living standards. We believe that we have an obligation to help address this challenge. We also believe very strongly that we're part of the solution.
I'm going to hand it over to Pete and Vijay to take you through how that manifests itself in our company. Pete?
Thanks, Darren. It's a pleasure to be here. Kind of the climate issue for the corporation and advise Darren and the management committee and the businesses in this space. I work very closely with the team that puts together our annual outlook for energy so that we can embed thinking about how the evolution of the energy system might happen as the world tries to address the dual challenge that Darren laid out. How do you supply energy for a growing mix of greenhouse gases and climate change? In February, we published our annual outlook for energy, which I'm sure most of you are familiar with. We also published for the second time and in a much more enhanced version, our Energy & Carbon Summary.
Today, I'm going to take you through about nine or 10 slides that have some highlights of the energy outlook. What's driving energy use, what's driving emissions? Talk a little bit about the evolution of energy sources, a couple slides on that. For the first time, we added into our energy outlook and then pulled those into the Energy & Carbon Summary sensitivity analyses. I'll take you through one of those. There are three of them that are actually included in the energy outlook in the ECS this year. The one I'm going to take you through is electric vehicle penetration, because I can't go anywhere and talk without having a question about electric vehicles. I'll take you through that. We also included a two degree centigrade scenario analysis, a very in-depth analysis against a number of two degree centigrade scenarios.
I'll take you through that. I'm going to close by just talking about kind of at a high level, how we position the corporation to compete in the evolving energy landscape, and in particular, in a lower carbon future. I'll then hand it over to Vijay to talk specifically about the importance of technology and innovation at helping us compete in that arena. Let me just start by covering some macro trends from the energy outlook out through 2040. We run our energy outlook out through 2040. You look here, population, we think increases by about 1.7 billion people, goes up to about 9 billion globally. More profoundly, the global middle class grows by almost 3 billion people. Middle class consumers are what drives a lot of growing energy demand.
They're the people that enjoy the things that we enjoy here today, lighting, heat, cooling, refrigeration, washing machines, cell phones, computers, TVs, mobility, all the kinds of things that drive demand for energy and for petrochemical products. GDP about doubles, led particularly by developing economies. OECD does develop as well, but developing economies grow at about twice the rate of developed economies. Energy demand increases much less than GDP. The difference between those lines, quite simply, is efficiency gains. We think efficiency gains accelerate across this period. I'll show you a couple. CO2 emissions increase even less. They only increase about 10%. The difference between in the carbon content of the energy sources that we use, I'll show you that as well on the next chart.
If you look at efficiency and the gradual reduction in carbon content, you get just shy of a 50% reduction in overall CO2 intensity of the global economy. You just look at global primary energy demand. You can see the growth here kind of stacked up by transport, power generation, industrial, residential, and commercial. Energy demand is particularly driven by growth in transportation demand as well. Overall, the energy demand, as I mentioned, increases about 25%. What we've shown here with the black line is what would happen if we didn't capture energy efficiency. In other words, if the global economy did not continue to get more efficient, would remain stagnant. The importance of that, if you look at the gap between about the amount of energy that the global economy consumed in 2010. I can't underscore enough the.
The mix shifts. Here, you can see we think coal declines down to about 20%. Oil remains about the same. This lower CO2 emitting sources of energy, in particular gas, but also nuclear, wind and solar and other renewables actually grow and gain share. If we look at CO2, OECD and non-OECD, you can see we think global energy related CO2 emissions actually peak sometime in the 2030s. They flatten out, get pretty plateau, and sometime in the 2030s we actually think they'll peak. We're relatively optimistic in our assessment of that versus some others, say, for example, the IEA. Energy sources continuing to evolve. You saw that mix shift in the middle chart. Oil, we think remains the largest source of energy.
Natural gas grows the most, so the most by size, it grows and actually overtakes coal as the second largest source of energy. Coal peaks in about 2025 or so, it actually then starts to decline. First time in history we'll ever see coal use actually peak and then decline. Coal use in the OECD has already peaked and is already declining. On the right-hand side, you'll see the non-fossil, so nuclear, biomass, solar, wind, biofuels, hydro, and geothermal. All those sources of energy that don't produce greenhouse gas, they grow at the fastest rate. We think solar and wind will grow very rapidly through this period, albeit from a relatively small base. We talked about one of the sensitivities I mentioned. We've done sensitivities for many years.
For the first time this year, we actually included that we look at beyond what Darren and the management committee members talked about as far as looking at a broad price set where we evaluate our projects to see if they were robust. We also look at a number of sensitivities to test both our strategies as well as our projects to make sure that they're robust to these various sensitivities. This shows a chart of liquids demand by sector. First of all, you see that primary growth in this sector for liquids is driven by sector growth in chemicals, petrochemical demand, and in commercial transportation. One sensitivity we ran was a sensitivity that hypothetically assumed that all light-duty vehicles by 2040 would be fully electric. That would require that starting about 2025, every light-duty vehicle sold would need to be a fully electric vehicle.
I say this is a hypothetical sensitivity because we do not yet see the vehicles to make that happen. However, we wanted to test versus what we thought was an extreme sensitivity. Even assuming 100% penetration of electric vehicles by 2040, fuels demand in 2040 is about where it was several years ago, about 5 years ago or so. 2010 to 2012. One thing that's interesting when you run this sensitivity is you shift power source from liquid fuels from the electricity sector. Because in 2040, the electricity sector is not fully transitioned away from fossil fuels, you actually have an upside for natural gas. Natural gas use actually increases with increased electric vehicle penetration, effectively because of increased power requirements. As I said, we included a couple other sensitivities in the Energy & Carbon Summary and in our energy outlook.
You can take a look at those as time permits. Let me now transition to talking about how we looked at 2 degrees centigrade scenarios. This again, for the first time, we've looked at scenarios for many years. We've been very deeply involved in the community that looks at these. For the first time, we published an analysis versus 2 degrees centigrade scenarios. We put this both in the energy outlook and then brought it into the Energy & Carbon Summary as well. To do this, we thought we wanted to look at a range of different scenarios, and there are literally an infinite number of scenarios that can be created to try and achieve a 2 degree centigrade pathway.
The suite of scenarios that we looked at was from a group that Stanford University runs called the Energy Modeling Forum, and the Energy Modeling Forum has been around since the late 1970s. It is one of the premier groups or premier forums where modelers in this space get together. This set of scenarios we thought was particularly valid because it was used to form the basis of the Intergovernmental Panel on Climate Change, the IPCC's AR5. This suite of scenarios represents a broad range of outcomes, a whole 13 different pathways, and each are a complete 2 degrees C. What you see here is the suite of business as usual. No additional policy scenarios shown here, and there's 13 scenarios. These are the 2 degrees centigrade scenarios, and you see they're very different from business as usual. Very heavy dose of policy, very technology.
The emissions pathways actually go negative in the second half of the century. What I've overlaid here is our outlook for energy. A couple observations or a couple points to make. Our outlook is not a business-as-usual outlook. Let me repeat that. Our outlook is not a business-as-usual outlook or a tightening of policy very much consistent with the architecture of the Paris Agreement that was signed several years ago. Our outlook also does not yet foresee a 2 degrees C pathway. We don't see the policy stringency. We don't see the finance flows. We don't see the technologies driving towards that yet. We also don't see that in the Paris Agreement. We looked very closely at the nationally determined contributions. In other words, the inputs from every country that signed the treaty to the Paris Agreement, the policy intentions as submitted in the NDCs.
This is a whole suite. These are the scenarios. These are actually the output, one thing to notice is there's a lot of green. That's oil, there's a lot of red. That's gas. All these scenarios require oil and gas out through 2040. We looked at the average of these, you can see the variety. I said there's a lot of different ways. There's actually an infinite number of ways you can model this suite of 13 models. We had modelers four or five from North America. We had a variety of approaches, even geographically. We looked at the average. We actually see an average decline rate of 0.4% per annum. For gas, we actually saw an increase. Gas actually grows in this scenario, and it grows about 0.9% per annum.
Remember, these are the average of the 2 degree C scenarios. Let me just talk a little bit about why invest in this business. I get asked this question all the time. Why keep investing in the oil and gas business? Well, it's because there's demand. Historic production of liquids since 1970. Up through about 2015, 2016. Our industry is unique in that you have natural field oil and gas industry. We're on a treadmill of trying to replace natural field decline. We're in a depletion business. We need to replace that, and we replace that to meet demand. On the right-hand side, you can see what would happen if globally the oil and gas industry stopped investing in liquids production. What we've done here is looked at the average demand. Remember, I told you average demand declines at 0.4% per year.
That ends up being about 78 million barrels a day of demand, even in a 2 degree C scenario, or in this case, the average of the scenarios that we looked at. In that demand, we've kind of marked it. It's about the same as demand in 2003. Even on lowest case demands, we overlaid this is the range. Remember, there were all those scenarios. That's the range. And the range, actually, even in that lowest case demand, it's still about the demand for liquids that the world saw in 1973. This natural field decline requires trillions of dollars of investment for new liquids capacity to be brought online between now and 2040, even under a 2 degree C scenario.
We didn't calculate this, the IEA has recently come out with an estimate, and they would estimate, based on their 2 degree C scenario, that about $14 trillion of reinvestment in liquids capacity is required, even under their 2 degree C scenario. It gives you a feel for how much reinvestment is required to meet demand and to offset natural field decline. This is the same similar chart for gas. In gas, again, I've shown gas production from 1970 up until the present. What I said, natural gas demand actually grows. The average of our 2 degree C cases, natural gas demand actually grows, and it grows by 0.9% per year. That's about 20% above where we are today. It goes from 270 up to about 445. Even under the lowest, I overlaid the low and the high.
Even under the lowest demand case, natural gas demand is still about equal to natural gas demand in 2000. In the gas space, we need reinvestment to meet demand as well. We got two more charts here. I'm going to talk about the importance of efficiency and reducing carbon. Modelers basically have two levers at their disposal to try and drive greenhouse gases out of the atmosphere, driving emissions down while meeting demands for energy. You can get more efficient across your economy. That would be moving downward, down the Y-axis, and you can get lower carbon content, and that would be moving to the left on the chart here. What we've shown here since 1980, the last 35 years, is what's actually happened in the world in the blue dots.
You can see the world has gotten much more efficient and a little bit less carbon intensive. You're probably wondering what the little jog to the right is, and that's actually China. You can see what happened when China electrified at a very rapid pace, did that mostly on coal-fired power generation and built an economy that had a lot of heavy industry. You see the impact of China, how they drove carbon emissions or carbon content of the global energy system up. What do we think is going to happen in the future? We've overlaid that as well. We think the trends, we're going to get back on trend. We're going to get significantly more efficient. I showed you the magnitude of that. We think we'll gradually decarbonize.
I also said our energy outlook doesn't project we're yet on a two degree centigrade pathway. That's what this shows. This is where we would have to be, either much more efficient, so move farther, faster down the page, or much less carbon intensive, or some combination of those two. That's where we would need to be on this purple line. Now we'll be watching this closely. This summer, there will be a new set of commitments by the countries who have signed on to the Paris Agreement. We'll watch those closely. We'll build that back into our energy outlook. One of the reasons we do our energy outlook every year is so that we can take the latest policy, the latest technology evolution, and we can build that into our long-range planning.
Even if you're on that purple line, you're not finished yet, because as you recall, two degrees centigrade, 450 parts per million is a 2100 target. There is a lot of work to be done, and you need to continue to move farther and faster. How do you know how close you're getting? We watch indicators, and in the Energy & Carbon Summary, we put some signposts. Again, you can take a look at those. I pulled a couple out of there. If we were approaching that purple line versus our energy outlook, energy use per unit of GDP would be down about 50% from 2010 to 2040. Our energy outlook projects that number about 40%. Pretty aggressive on efficiency, not quite there yet.
One of the core strategies is to reduce the carbon content or the greenhouse gas emissions of the power generation system through low greenhouse gas electricity, nuclear, solar, wind, biofuels, hydro, natural gas, carbon capture and sequestration. All of those are methods to dramatically reduce greenhouse gas emissions from the power sector. That low greenhouse gas electricity, so the portion of that that effectively has low or no greenhouse gas emissions. Gas with CCS and then all those sources that don't emit greenhouse gases, that would need to go from right now in our energy outlook, we see that just shy of 50%. Again, making progress, but not yet there. Lastly, biofuels. Biofuels actually would have to increase from about 1% of the global mix, primarily used in liquids, to about 15%. In our energy outlook, we have that at about 3%.
Lots of work to do in the biofuel space. Dr. Swarup will talk a little bit about the work that we're doing in that space, given the importance of that. Let me close with one slide on how we're positioning for a lower based on these four pillars that I've shown here. The first is to reduce our own emissions. Darren and the other management committee members talked about the importance of running our facilities well, and that is a lot underpins mitigating emissions in our operations. For us, this really falls into three areas. One is reducing energy use. The majority of our emissions in our operations come from energy use. We heat things up, we pump them around, we use pressure, we use temperature to make the molecules in.
Reduce we work this all the way down at the shop floor at the operator level. We've been doing it my entire career, so we've been doing it for almost 40 years at least, and we do it day in and day out. Driving that down, just like we do ownership of safety, driving that energy efficiency and energy use down to the shop floor is important for us. We reduce flaring. Very important in our upstream business that we reduce flaring. We don't like to flare. We like to save and use the gas, and we reduce flaring across our operations, particularly important in the upstream. Lastly, and you may have noticed some announcements recently, we reduced methane emissions. Methane is, while they're a relatively small portion of our overall greenhouse gas emissions across the corporation, they're important.
It's important that we manage those well, and we've announced a couple of initiatives voluntarily to drive our methane emissions down. We have over 100 cogeneration or combined heat and power. It's very amenable to our operations where we have large amounts of heat, large amounts of electricity, and we've deployed that for many decades across our operations. The second area, provide solutions for our customers. We help them reduce emissions across the value chain. Chemicals and lubricants, great examples of this. Chemicals, we reduce weight. We reduce it all through the value chain. It might not sound like much to reduce the gauge on the plastic that's used in packaging, but you multiply that by billions and billions. Our chemical products leverage a lot of greenhouse gas reducing, create a lot of value by reducing greenhouse gases across the value chain.
Our Mobil 1 franchise with synthetic lubricants, another great example of how we're positioning to help customers reduce their greenhouse gas emissions, in that case, by reducing friction within the engine. We also have to meet society's energy needs. Jack talked about the shift in our downstream portfolio and the output of the yield patterns there, shifting away from motor gasoline, recognizing that motor gasoline for light-duty vehicles is likely to peak sometime in the 2020s, and to shift that towards chemicals and towards distillate, where we think most of the growth in liquids demand is. We engage constructively on climate policy. It's where I spend a lot of my time. By and large, we're trying to harness the market Because everyone across the global economy to reduce greenhouse gas emissions. Lastly, we develop scalable low carbon technology solutions.
Dr. Swarup, my friend Vijay, will now cover this in more detail. Thank you.
Thanks a lot, Pete. Wow, it's a real to Exxon Mobil. I'm going to give you an overview of our approach to research and how we translate it to competitive advantage. A lot of what you heard this morning is the outcome of years of research in the lab to develop the catalyst and the processes and the computational capabilities that you heard this morning. I'm also going to talk about our focus on where we focus, and how we look to make scalable solutions that can have big impacts as we translate them from the research labs to commercialization. As I do that, I'm going to get into some of the programs we have.
I'll keep it high level, but just give you a flavor for some of the things we're working on, some of the things that are exciting us in the lab, and we're convinced are going to be part of the solution mix as we move towards a lower carbon energy future. This is a technical industry. I think it's often underappreciated, the disciplines that come together to provide energy. It is a geology, chemistry, physics, all of those, some ologies I don't even know, as well as every engineering discipline, chemical, civil, mechanical, electric, nuclear. All of those come together in order for us to have the energy that we enjoy. It is certainly not new. We've been at this for decades. We continue to believe that it all starts with fundamentals.
Science-based fundamentals, understanding the basics, understanding what drives, what are the mechanisms that drive the chemistries to that we're getting. We take that science-based fundamentals, then we start moving it down the value chains that you heard this morning. By working on catalysts, low emission processing, and visions to scale. That's the [inaudible] talk about it a little bit this morning. To do the efficient resource capture, development, and production, you need to have deep understanding of subsurface, and you have to have advanced computational capabilities. Two areas that we were pioneers in, we continue to lead in that research area. In chemicals technology, advantage feedstocks is actually taking advantage of feedstocks. It is understanding the unique integration of a refinery and a chemical plant, how they work into a chemical. No two refineries are the same.
Understanding the composition of the crude, how you can take that crude, feed it to the chemical plant, understanding the heat integration, the pinch point around how do you mitigate emissions in your own operations. One is heat integration, is maximizing, optimizing what you're doing in your plant. That's the unique thing we can do because of a refinery and a chemicals integration. You take that feedstock, you get the right process to upgrade that feedstock. As you upgrade that feedstock with the right process, you end up with the product that you want, that we can then put into the marketplace. We've been pretty good at this for a while. The chart on the right shows just some of the innovations that we've had as a corporation.
Going back to the '40s, we could actually go further back, but when you're left with half a slide, you try to fit it on half a slide. If you go back to the '40s, we were the innovators of high octane gasoline and the rubber, butyl rubber, which is the essence of a tire. Those were two '60s brought two critical platforms into our capabilities, platforms and push the limits of. The first is catalysis with the synthetic catalyst. You heard a lot this morning about catalyst. Catalysts help you drive reactions, improve selectivity. In the computational phase in energy. That's actually a digital simulator. That is how you did one back in the '50s and the '60s. Of course today, we're using ultra-high performance computers to improve our seismic imaging, to improve our reservoir management.
We continue to extend the use of these advanced processing capabilities to get, we were pioneers in lithium-ion batteries, the essence of the technology that's still used today. As we move into more recent times, we continue to extend what we're doing better and better and better. Go to deep water development, extended reach drilling, two things you heard about this morning. We keep pushing the envelope. Pushing the envelope based on fundamentals, understanding the science behind the physics, the physics behind the engineering, then that lets us understand how to do this safely. Then specialty plastics. You heard a little bit of that this morning. We continue to push the boundaries of lightweight and strength, doing two things at the same time, make it lighter and make it tougher. What does that let you do?
That lets you make cars lighter, which is huge for fuel efficiency. Allows you better air retention in tires that helps you get, again, better fuel efficiency. Also lightweight packaging. As you're shipping goods and you're trying for food preservation, a lightweight plastic wrap is huge when you're looking at overall emissions reductions. We've been at this for a while, we continue to do the research. What I want to do is just tie back real quick to this morning, because what you heard this morning Was the outcome of several years, in fact, some cases over Are rooted in advantage technologies. As you heard, Jack talked about the catalysts and the processes we're deploying. What he described to you this morning was taking resid, which is the bottom of the barrel. It's the heaviest portion of the barrel.
It's the portion of the barrel that has the most complicated interrelated structures, very complicated materials. You want to take that, you want to process it to make something that is in the essence of the feedstock of a motor oil. You're going for something that is very complicated to something that has to have a purity, the specification is very narrow so that we can meet lubricant specifications. That is not easy to do, the only way to do that is to have tremendous catalysts that can break the rings, can get you the selectivity you want, that can get you the exact product quality you want, then have separation schemes on the back end that allow you to get the purity. The reactors do the conversions, the separators do the purity. We're pioneers in both of them.
We keep extending the catalysts. Those are just some types of catalysts of what you see in the upper right. What we do is it's not just a catalyst. Our processes can have up to 10 different catalysts. Using those catalysts in the right order is critical to what we do. We're able to understand that through our lab work, through our modeling, in order to take the bottom of the barrel and upgrade it to feed the lubricants or to diesel, as Pete mentioned a minute ago. Neil talked about the advanced computational capabilities that underpin our upstream business. He mentioned full waveform inversion and reservoir simulation. As I showed on the earlier chart, we've been doing digital reservoir simulation for 50, 60 years now. On the full waveform inversion, that just continues to extend our expertise in understanding subsurface through seismic interpretation.
In both cases, these programs that we're about to commercialize, these projects that are about to go into the field, the essence of the R&D is over 10 years old. That's the timeline we're on to go from concept to challenge a paradigm. It takes time. It takes patience. It takes commitment to the fundamentals. The fundamentals ultimately drive and underpin the projects. We know the world's changing. As Pete said, we've got to start looking at the low-carbon future. I want to shift now to our emissions reduction research with the focus areas right on that, the emissions reductions. The two levers that Pete talked about, energy efficiency, which is reducing CO2 reducing processes, and decarbonization, which we look at it and say, let's find processes that actually consume CO2. Can we make CO2 as a feed?
Below these, you see some program areas. I'll get in a minute, but I want to. We don't do it linear. We want to go wide with a range of ideas, sort of put them through a funnel, let the best ideas come out. In the energy efficiency piece, we're looking at existing manufacturers. There's a lot of energy in energy. We're saying we want to reduce manufacturing emissions by over 25%. That's a big bite out of the emissions. There are three processes we're looking at. Liquids conversion, essentially refining. The steam cracking portion, the first part of the chemical plant. The polymerization. How you take that ethylene or the propylene and turn it into polymers into the plastics that we use. On the right, you can see a membrane for separations.
Today, we use temperature, we use distillation. We boil to separate. That's largely the way we do separations. Instead of using temperature, which in itself implies energy, what if you use shape or size? A membrane is nothing more than a fancy filter. Imagine a filter. You got the red balls and the blue balls. You want the red. Don't use temperature, maybe a little bit of pressure, but you can do it at far lower energy. We're making progress in this space. In fact, we've had some critical publications in Science over the last year, demonstrating the proof of concept at a very, very small scale, at lab scale, but demonstrating that you can separate hydrocarbons using size as the property.
On CO2-consuming processes, decarbonization, two big areas we're working again, portfolio approach, lots of ideas, a couple of them are beginning to emerge as things we're looking at a little harder. First one is carbon capture and storage. I'll talk more about that in a minute. The other is the advanced biofuels. On the right, you see a picture of the carbonate fuel cell that many of you might have heard of or seen on TV. That's Tim Barckholtz, the primary scientist behind it, standing in front of it. It's essentially a big battery. It's a cathode, anode, CO2 becomes the feed. As you're collecting the CO2, you're concentrating the CO2, and you're generating electricity. On the right is a journal. It's called Nature Biotechnology. It's a peer-reviewed journal, highly respected journal in the bio field.
We had a critical breakthrough last year in our biofuels program, in our algae program, where we discovered a way to regulate the growth of algae so that you can partition the algae to grow more lipid. We published it in this journal. This is a peer-reviewed journal. It's very difficult to get published in it, and it's even harder to get on the cover. That may not mean a lot to you guys, imagine that was Fortune Magazine. Okay? That's what this is like. This is getting on the cover of a big-time magazine in our field. It just shows the quality of that breakthrough, that it was recognized as a cover-worthy publication. We're very excited about that, and I'll get into both of those programs in a little more detail in just a minute. That's the blanket area.
That's the playing field that we're on, working in these areas, portfolio approach, looking for the best ideas, promoting those best ideas, still in the research phase, working down the pathway to development. Let me start with industrial processes with lower emissions. In articles out there, you'll see process intensification. That's what we're talking about here. Because the essence of energy and energy conversion in itself is energy intensive. In some ways, we're trying to take energy out of energy conversion. There's two key components to an industrial process, a reactor and a separator. A reactor is where you do the conversion, and a separator, the separation place is where you do the purification. In order to rethink the way we do this, we're going to need new catalysts.
That happens to be what we've been doing for the last 100 years, it's right up our alley, we're pretty confident that we can do something in this space, we're making some good progress. The chart here shows I want to talk about this because instead of starting with crude as the feed or even ethane as the feed, here, we're starting with methane as the feed. One of the things about natural gas is it's clean. There's no metals, there's essentially no sulfur, no nitrogen. The first part of this energy process is taking out the impurities. If you can start with a cleaner feed, you've already moved yourself down the field a good way to reducing energy. The challenge with natural gas or methane is it's one carbon. One carbon is very hard to activate.
With our knowledge of reactors and knowledge of catalysts, we're actually making progress here. Still early days. We're making progress with some novel reactor designs. You follow that up with that membrane-type separation that I talked about before, and you can start doing the first step of research in this field, which is what's called a flow sheet. Can you draw a flow diagram that conceptually shows a blueprint, if you will, that shows you what you're trying to do? Can you take that blueprint and boil it back and say, "What's the fundamental science question I'm trying to answer?" You set up your teams, and you go after it. That's what we're doing here.
We're excited about the progress, and I hope we move to the next phase, which is a pilot plant, in the near future because this is a technology that could really make a big impact. Let me now turn to carbon capture and storage. Carbon capture is likely going to be a key component of decarbonization, as Pete said, in just about any scenario. We use carbon capture today. We also know that today's process is complex and actually consumes energy. You're concentrating the CO2, but you're actually using power to concentrate the CO2. That's a paradigm that we've been challenging for years, saying, "Wait, we got to break out of this." We have to be able to generate power while we're concentrating the CO2. A way to do that is to use CO2 as a feed.
Now you're trying to find the right type of material, the right type of system that can take CO2 as a feed, concentrate it, and generate power. That's what's shown on the right there with this carbonate fuel cell, and the keyword is carbonate. What does carbonate implies? Carbonate implies that you're taking CO2 as a feed in order to make the fuel cell to make the battery work. As you're doing that, as you're taking the CO2 through, you're concentrating the CO2, so it comes out as concentrated CO2 that can then go into storage, and you're generating electricity. That holy grail, that paradigm that we thought couldn't happen, we're actually doing in the lab. Let me talk about something else we're doing that is different. You have to evolve as an R&D organization. We don't have time to be truly linear.
R&D historically has been very linear. You go station to station. You do the lab, then you do a little bigger, then you do a little bigger. We're taking a different approach here. We're still in the lab. We're still understanding across the fuel cell. At the same time, we're constructing a pilot plant in an actual power plant because we want to understand the engineering aspects of how this fuel cell will integrate in with the power turbine. We're already seeing dividends for that. As we're progressing the pilot plant to the engineering drawing phase issue. Can you design your fuel cell to do this? The scientists are going to the engineers and saying, "Look, this is probably the highest temperature. This is how the heat's going to integrate.
What's fascinating to me, because this is sort of the new process for us to do things in parallels that are series, is we're actually asking questions at the science level that I'm not even sure we knew we were supposed to ask. We get that we have to get onto the low carbon solutions. We know this is going to take time, but we're doing whatever we can to speed up the learning to do the cross-fertilization Development chain. Let me be honest with you, it's still a long way to go, but the early results look promising. I know that this is going to be something further down as we go, but we have to stick to this because we're onto some ideas. Again, this is just one of our ideas.
We have portfolios of ideas in this space. We continue to progress our ideas. The last vignette is on advanced biofuels. Pete talked about the need for diesel, Jack and Darren this morning. Start with just the basics, okay? You need a high energy density liquid fuel to move trucks a long distance or to move our planes. That's just physical chemistry. There's no getting around that. You need an energy density to be able to do that, and that's going to be a liquid fuel for a long time. We're working on this. Working on how do you make this with a biofuel? Because a biofuel is going to consume CO2, because that's the nutrient, that's the food. We're working, again, portfolio, cellulosic, as well as algae.
Our core principles when it comes to biofuels is we don't want to compete with food. We don't want to compete with fresh water. It needs to be scalable, and it needs to be globally deployable. Cellulose, don't use the food, don't use the crop, use the crop residue. Essentially, all crop residue is some form of a cellulose, which is just another intricate string of carbons connected that you then have to break down to sugars from which you can convert to a fuel. Algae, which is what you see in the schematic there, basically sunlight plus CO2, core components of photosynthesis. Algae grow in brackish water. They do grow fast, so they're scalable, and they grow in all geographies, so they're globally deployable. In the algae to grow the types of feed, what we call lipids, the oils that we can then feed to basically an existing refinery.
By the way, let's start connecting dots now, because if you start with algae, there is no metals, there is very little sulfur, if any, there's no nitrogen. You have a cleaner feed. Again, the first part of a process, you're going to be taking a lot of energy out of that. With the algae, we're making progress. I talked about the publication in Nature Biotech. We are expecting a series of publications this year as we continue the research. Just yesterday, we announced, again, parallel approach. While we'll continue in the lab working on the algae research, we're now going to start progressing an outdoor pilot plant, outdoor testing with a target of 10,000 barrels a day by 2025. Now, that's a lot by today's biofuel standards. That's world scale by today's biofuel standards.
We see that as a small step because we have to get to much, much larger scales to make a material impact. 10,000 barrels a day, we think, will teach us the fundamentals of the engineering, which we haven't really gone after yet. We've really been going after the biology the last nine years. We've been at this since 2009, almost entirely at the biology. We think there's huge opportunities, again, building off of our process knowledge. An algae pond is essentially a reactor. You have a solid, you have algae, you have a liquid, which is the water, and you have a gas, which is CO2. How do those all work together? In fact, today, the term is actually algenere, because we think our process engineering is going to allow us to really improve that. Again, we're going to start that cross-fertilization.
The engineers are going to look at it and say, "I think I can get this depth of sunlight into the water." That's how much depth you're going to get for the algae, and the scientists are going to say, "Okay, but if you give me this type of CO2 levels, I'm going to be able to get the growth faster." Now you're starting to connect again. Again, let's talk about connecting. My previous chart was on CO2 capture. You can start thinking of having an algae pond. The algae then gets processed to fuel, and you can start looking at different configurations. The key is all three of these, lower emission processing, carbon capture, and biofuels become platforms for the low carbon future.
We're still a long way away, but we're pretty optimistic about what we're seeing, and we can certainly see how this can connect going forward. We can't do this alone, and I don't want to give you the impression that we're doing this in a vacuum, that it's just the scientists of Exxon Mobil that are working on this. We have always collaborated, and we're continuing the collaborations. In fact, increasing our collaborations. There's two types of collaborations I want to describe here. On the left-hand side of the chart, what we call collaborations targeting capabilities. We're a capability-based organization. Every so often, and in fact, more often than not, we are looking for who can complement that capability. Then we'll go do a targeted program with them. You can see we have over 80 R&D collaborations complementing our capabilities.
What I have is I have sort of a matrix here, two columns and three rows, and they tie back to the previous three charts. Missions and processes. We're in two of the leading universities. Georgia Tech is where we're doing a lot of our membrane work. In fact, the publication we had was a co-publication with some authors from Georgia Tech. Then Purdue University, which is leading edge on plant configurations and how you can reconfigure manufacturing footprints in order to improve efficiency. On the carbon capture, two examples of small companies that we're working with. TDA Research, which is working on a sort of separation scheme to be able to concentrate the CO2, and then FuelCell Energy, the manufacturers of the carbonate fuel cell, who we're working with on the carbon capture. On the bottom, our biofuels approach.
On the algae side, working with Synthetic Genomics, who are pioneers in a lot of the sequencing and a lot of the understanding of the annotation of why a genome does what it does. REG is our key partner on our cellulosic route. Again, extending to where we don't have the core capabilities so that we can bring the right people together to take on these challenges. On the right is how we widen the aperture. Energy is wide. There's a lot going on, and you want to stay on the cutting edge of what's going on so that you can understand how everything is going to integrate together in the future. You see four leading universities there at what we call energy centers. Energy centers provide efficient access to broad range of capabilities at a particular university.
You can see these are leading universities. We were pioneers in this space, by the way. 2002 was essentially the first energy center at Stanford, and we were the founding member there. In fact, just last week, we announced that we're going to be the founding member of the new Stanford Energy Center called the Stanford Strategic Energy Alliance. We joined MIT, Princeton, and Texas. This gives us the range. This is where they're studying advanced batteries, they're studying grid-scale storage, they're studying grid optimization, they're studying advanced photovoltaics, they're studying wind, all the landscape. In fact, a lot of the pioneering in this space actually happens at the academic or the national lab level. When we say we're engaged there, we are physically engaged there.
We have scientists going up to these universities all the time, and they're engaged with the faculty, working at the bench with them to understand the state of the science. On the left, directly tied to a program. On the right, how we widen the aperture to make sure we're aware of what's going on. We have the map covered. Earlier, I showed you our history, and I kind of left off where Jack and Neil talked this morning. Near term, it's about the stuff you heard about this morning. It's taking the technologies we've been working on for the last 10+ years and putting them in the field. In the midterm, likely it's going to be looking at our processes and reconfiguring them to do it with lower emissions.
That could be new separation schemes, that could be better catalysts, that could be better heat integration, that could be newer materials. It's an extension of what we're doing today, and I think we're going to make tremendous progress over that. The longer term, as Pete said, we're going to need scalable, widespread biofuels and carbon capture. In both those areas, we have significant programs that are looking really promising, and we're excited about where it's going. As I said earlier, this is a technical industry, and the root of our competitive advantage is based on advantage technology that starts with some pretty hard work. Task ahead of us.
I'm absolutely confident that just as we have been for the last 100 years, been the center of a lot of the pioneering in energy, we will be in the future, because you just can never underestimate the power of technology. Thank you very much. I'll turn it over to Jeff.
Thank you, Vijay. Thank you, Pete. Next, we're going to open it up for another open discussion and go ahead and address your questions. Once again, I just ask. Go ahead and start with Sam there.
Hi. Thanks a lot. Sam Margolin with Cowen. Look, I don't want to ask you to get ahead of your skis at all. This is an analyst day, I have to ask about the commercial strategy and carbon capture. It seems like you have a lot of options should this technology scale. You could simply license it, or you could even bundle it to end users of your gas if you wanted to pass it through on a unit basis.
Right.
What do you guys think is the optimal commercial strategy for something like carbon capture that's really on the frontier, has a lot of, obviously, benefits across the board?
I think it's all of those. Okay? We didn't even talk about some of the other things that I think are going to be part of that. There's a lot of academic work right now on just actually CO2 conversion. Take the CO2 and through electrochemistry or something like that, actually use that as your carbon. You're asking to get ahead of the skis, the key is you've got to be able to concentrate the CO2. You've got to be able to do it at scale. You've got to be able to do it in economics that make it work, whether it's the algae pond to 10,000 barrels or this carbon fuel cell, it is modular. That's probably going to be the next step, is to start deploying it in modular levels to understand how it best fits.
Our job in R&D is to provide options for the business. The business will then write the business plans in terms of whether it's licensing or whether it's really a hard problem. This has been something that people have been chasing for a long time. It's advanced materials, it's integration, it's all the things we talked about. Quite frankly, from an R&D standpoint, we want to be laser-focused and just drive to make sure we have a solution and a solution that can be scalable. Quite frankly, I think the rest will take care of itself.
Let me add to that. When we look at carbon capture, it's It's thought by the IPCC, the Intergovernmental Panel on Climate Change, that that's probably the single most important technology to make the energy transition to net zero carbon affordable. It's apparent that's an extremely important technology. The other thing that I've realized is the oil and gas industry is uniquely positioned to understand that entire value chain. We already run, as Vijay mentioned, we run about 25%, just under that, of the world's CCS capacity now. We know this technology. We know how it runs. We know how the current technology works. Vijay talked about some advanced technology that could lower that price point and make it simpler. We know that, and we know the midstream, and in particular, we almost uniquely know the subsurface.
It's going to be important to understand that entire value chain to make this technology work and to allow it to be deployed at the scale that it really needs to be deployed to help tackle the dual challenge. Where exactly we think we're going to play in that value chain, too early to say. Be thoughtful about that. CCS comes into the mix, we think, into the late 2020s, 2030s. By the time you get to the price point that pushes that into the mix and it starts to be deployed. We've got a little bit of time to figure that out, how we think we can extract the most shareholder value out of that whole value chain. Beyond that, I can't tell you. We don't know yet, is kind of the answer.
Thanks a lot. Then just a quick one on algae. Whatever you're willing to disclose as far as current yields, annual barrels for a one-acre pond, and then, what your target is to get it to scale, if that's your process and-
Let me answer the second one, current one-acre pond is. I'd have to calculate that and get back to you, but-
Let me give you just a feel for it. This is about, I want to say, about 40 times as efficient as growing soybeans on a per acre basis, and it's about three times as efficient as palm oil on a per acre basis. That's sort of the current yields. Of course, Vijay and his organization are-
He's going to follow up and say, "What's the yield of soy?" I don't know the yield of soy either.
Okay.
On the pathway, though, I think the key here is we have to get two things on the algae. The nature, but we think we probably have to double it again to get where we want to go. The second thing is the photosynthetic efficiency. That's where the engineering aspects come in. That's basically how do you get the light to come through the water and get to as much of the algae in a uniform way as you can. Think about the fundamentals of that. It's mixing, it's light penetration, which is just physics. By getting out to the outdoor pond and actually true light conditions, I think we're going to learn a lot about what the optimal mixing is and how do we get those lights. Those are the two levers we have to turn.
With the gene editing, which is the big breakthrough in that whole field. With the new gene editing tools, we actually anticipate the gene editing tools to get even better. Where we are today gives us line of sight to getting to that next step. We're not actually there today. We know we have to make improvements in all three of those areas, but we're confident we'll make those improvements.
Great. Jon?
Thank you. Jon Rigby from UBS. Two questions. The first is, I think you talked about part of the important part of with policymakers, I guess with everybody who has any stakeholder in the whole debate. I wonder whether you could talk a little bit more, sort of characterize where you are with that. I say that because it was very clear that one of your peers sort of put out a view of energy not dissimilar to yours and was almost accused of being a climate change denier because the scenario they were showing, which was a practical one, didn't accord with what people wanted to see. I feel that probably direct engagement, not what everybody wants. The second one, which I guess is related to that is, do you need a price for carbon for all of these things to work?
Do the kind of prices for carbon that I think some countries currently aspire to have in place or have in place, sort of the $50 of this work can be viable? Thanks.
Let me take the first question on engagement. You are absolutely correct that this is a space where you need to talk about real practical solutions. When we engage, when I engage, Vijay, others, we engage and we like to talk about real practical solutions because that's what's going to solve the dual challenge. You saw our analysis. Right now, we don't see the yet pushing the world towards two degrees. We're turning the curve over, we very clearly don't see the ambition as indicated by the nationally determined contributions as pushing that curve over. We engage across a broad spectrum of stakeholders. We engage with environmental NGOs, we engage with shareholders who are activists. We engage with groups like this. Broad-based investment community. We engage with policymakers in major thought leadership capitals of the world, whether it's Washington, Brussels, London, Asia.
We engage with academics. There's think tanks, a whole host of engagements that we try and talk, but we always try and talk about what are real practical solutions, and they need to be scalable, and scale in the energy industry is something you cannot underestimate. Scalable, and then they need to be sustainable. They need to be something that is sustainable in the environment. That's kind of how we engage. We're looking for practical solutions, and we're looking for efficient solutions. If the world economy or the world society had unlimited resources, we could solve all kinds of problems. We don't have unlimited resources, and so that implies a need for efficient resource allocation. Of course, we tend to think the market is an efficient allocator of resources.
When we're engaging on specific climate policy, we're trying to engage in a way that tries to harness the power of the market broadly across all sectors of the economy to try and drive the types of change we're looking for, while recognizing people need reliable, affordable, scalable energy. That's hard. That's just hard. It's a hard problem, but it requires engagement, and it requires discussion on real solutions. Second question around price on carbon. That is what we advocate for and have advocated for. We advocate for policy structure that allows a price to be put on carbon broadly across the economy. We just think that's the efficient way versus sort of the patchwork of shotgun regulatory approaches that we see all over.
We just think that's a more efficient, more effective way to drive both changes in the economy, as well as send a long-term signal for the kinds of investments in technology and capital stock that need to be made. I can kind of give you an idea around price point on CCS. Around $100 a ton, we think current amine technology, coupled with gas-fired power generation, becomes economic. That's $100 a ton CO2 avoided cost. The technology Vijay was talking about strives to bring that cost down by 25%-30%. You could think somewhere around $75, $70 a ton. It's sort of that thinking why we think CCS comes in kind of later in the energy outlook period, starts coming in and maybe be going with the NDCs. Biofuels probably needs a higher price point than that.
I don't have a number in my head. The higher the productivity, the more productive the algae. Again, the technology seeks to try and bring that price point down so it becomes a viable, economic, scalable, reliable solution sooner in the mix, because we need solutions. This space needs solutions. That's what we look for.
Okay. How about the front here?
Darren You said with the biofuels gearing out, maybe 2025. Do you go through analysis that, well, what's the return if we could get that to 2020? In other words, you throw out some dates, 2025 biofuels, 2030 carbon capture. Well, what if you could bring those dates closer? What are the returns? What is the urgency?
Right. Let me do the resource, and you can do the policy. Research is one of those things where you go as fast as the science lets you go. One of the breakthroughs in the algae is actually these gene-editing tools, that when we started the program in 2009, gene-editing tools weren't even invented yet. What you have to do is We talk about going wide, and then you go deep. When we see an opportunity to go faster, we will go as fast as the science allows us. I don't feel like we're limited. We have tremendous support from that side of the table.
If we have an idea and we want to go faster, we have tremendous support that says, "Go as fast as you can go." There's nothing magical to 2025 other than Like I said, we're anticipating improvements in all three of those areas. We'd be absolutely enough incentive from our management and from, quite frankly, society, that we need solutions, that we're going to go as fast as we can go. I don't think this is one where if you put additional, quite frankly, just money on it, I don't know if we'd go any faster because It just takes time to get those scientific breakthroughs. One of the hardest parts of the scientific breakthrough is actually understanding what you're trying to do.
It takes a long time just to define the question and then boil it down to that fundamental science question you're trying to answer. We're making a lot of progress there, and like I said, we now have line of sight to get there. We'll get there when we get there, because 2025 is the target year. We get there sooner, we'll get there sooner. Again, it's going to be a combination of biology tools, computers. We can sequence genomes, we can sequence the DNA so much faster today that as you're trying to understand how to up-regulate, down-regulate, you just do it so much faster. All those are going to come together, and I'm confident
That we will go as fast as the science allows us to go. There's upside potential given how many breakthroughs we've made in all three of those areas the last five years. You want to talk about that?
Yeah. Question, incentives. Of not having the incentives in place to push that technology into the marketplace. We have technology that works. There are deploy it only where those exist. There's an $80 a ton carbon tax in Norway, and we participate in carbon capture and sequestration in Norway. There's some incentives in a market for CO2 up near our large facility in Wyoming. We already separate CO2, so we compress it and put it into a pipeline where it's sold for EOR and eventual sequestration. There's enough incentive there to make those viable businesses that are good for the corporation, good for the shareholder. By and large, we don't yet see adequate incentives to drive a dozen different ways you can drive. You could mandate it, you can have targeted incentives. You can have tax incentives. There's all kinds of different schemes.
Of course, as I mentioned, we tend to like broad-based market schemes because we just think those are most efficient.
Okay. Al.
Alastair Syme at Citi. Can I just begin by saying, I really do appreciate the energy outlook and appreciate the fact that it's externalized. It's a very good document. A couple of questions. The first is just on your wind is quite a small part of the mix. Some of the advocates of that technology argue that that sort of understates it because of the low losses and the fact that it's very concentrated in electrification, that its impact on the power generation sector is magnified. I don't know one way or the other, but can you help with your view around that?
Yeah. Don't quote me on the exact numbers, but I think through 2025, we've got solar and wind growing around 9% per annum, then they get bigger, so it's just harder to grow at that kind of rate. They grow maybe slow to 6% or 6.5% from 2025 to 2040. We have pretty substantial 40. We've been pretty accurate on wind. In fact, I think we've overestimated wind. Well, I think we've overestimated solar growth over the last couple of years as well. We're starting to get both of those pretty well dialed in. The thing that limits in that stacked bar that I showed on one of the charts is you only get about, on average, about 17% utilization out of a solar. If Arizona or Nevada, you'll get a higher utilization. If you go to Germany, you'll get a lower utilization.
It's very sort of geographically resource dependent. Wind is the same way. It's very diverse across the continental U.S. It's great in the mid-continent. It's not so windy in the west, not so windy down in the southeast. Utilization in general on windmills will be about 30% or so. Those low utilization rates, relatively speaking, compared to, say, a base load nuclear plant that runs at around 95% of the time, 90-plus% of the time. You have to build a lot of capacity just to get the output because of the low utilization rates. The other thing that you struggle with in those, and that can be limiting, and there's a lot of work going on to try and maximize utilization. Time shifting and location shifting are both important and will both limit how deeply and quickly they can penetrate.
For solar panels, for instance, they actually match the load reasonably well. What do you do at night? What do you do on a cloudy day? Seasonal variation can actually be really significant, particularly if you're up at higher latitudes. The Holy Grail answer there. We don't yet see this really cheap, widely deployable storage mechanisms to sort of allow that to the whole economy to be run on those kinds of sources. You're going to need all integrated molecule to pair with intermittent renewables because of its flexibility and availability. Part of the reason we think gas is going to grow is because it pairs well with renewables. It also gives you a whole lot of environmental benefits versus, say, coal as well.
My follow-up was actually on storage because I noticed it was absent from the technology forward look. From a scientific standpoint, where do you see the technology?
We see a lot of research. Again, this is one of the things when you work with universities like MIT and University of Texas, they are leading institutes in storage, in batteries, and now we're talking about large scale. As Pete said, we are watching that space. We understand that space pretty well. We understand the trade-offs and the materials that are being used. We monitor that space to understand how it'll all fit together going forward. It will be part of the mix going forward. The challenge there is getting it to gigawatt scale-
Yeah
storage capacity is really the challenge there.
Let me just give you a try and dimensionalize the scale of battery. For that sensitivity that I showed for the full EV case, and again, it's sort of a hypothetical case, but battery capacity globally would have to be 50 times bigger than it is now for that case to come about. 50 times on the capacity. I think passenger car energy use is somewhere 10% or less. Think about providing all the rest of that energy using batteries, and you can kind of get your head around the scale of batteries for storage. Scale is going to be a limiting factor in the materials and the whole supply chain that goes into manufacturing of whatever kinds of storage might be deployed in the future. Scale and ramp-up and investment will be a huge issue to try and put that in.
That'll just limit the rate and pace at which you can do this.
Okay. Paul.
Thank you, Paul. Thank you. What's the budget around what you guys do? Is it part of CapEx and how much is it annually?
We typically don't talk exactly about what the R&D is for these programs. We do talk about the $1 billion and the constancy of the $1 billion that we put into our overall R&D portfolio, of which these programs are a subset. I think the more important question than how much is where. How are you deciding where to allocate it, then when you see an opportunity, because it's not a $1 billion that's set to be divided this way, right? This is the call that we make in R&D, and we make the proposals to our management, and then they thankfully usually support us. The idea here is go wide and then you go deep. We just make the call based on where we see the science and where we see our capabilities.
For instance, the announcement we made yesterday on the biofuels, that was actually a break-in. The gene editing and the capabilities just are moving a little faster than we thought. We said it's time to go to augment it with the separate agreement with Synthetic Genomics so we can go to the outdoor ponds. We have a very fast-track approach to go get the funding for that. That just does a lot of things. The R&D community, we get excited because we see something we want to go, and we have strong support to do it. I think that's what the signpost that I'd be looking at are not the actual $, because the overall number and again, the constancy of purpose to the overall $ is the important thing there, that we don't sawtooth R&D.
It's that constancy of purpose so we can maintain our core capabilities while we look at the programs. We see programs that have promise. For instance, the biofuels announcement yesterday. We're able to accelerate and go after the next hurdle that we want to get after.
Understood. Thanks. I assume that the Houston campus mothership thing that you've built has accelerated your R&D process, I guess.
It certainly has helped. It certainly helped us sort of for the integration with the business. Our R&D center is actually just down the road from here. It's about an hour west of here in New Jersey is where we do our research. Certainly, the Houston campus has enabled us to integrate a lot better with an understanding of the business challenges that we can then turn those into the science challenges that need to be solved.
I have a [inaudible] . I think it's a very good message for the company to send, equally it's likely because you don't think a carbon tax will ever happen. Is that fair?
No. Short answer, no. We advocate for what we think is effective policy. It's just we need policy that harnesses the power of the market. It doesn't have to be a carbon tax. You can have a really well-designed cap and trade that would have a similar output. We're not sort of wed to a carbon tax. We do think that this is at its core is a resource allocation question and a question that needs solutions. We just think a long-term price signal in the marketplace is the way to sort of incentivize both of those things. Incentivize people across the economy to be more efficient, to reduce carbon emissions, to reduce other emissions of other greenhouse gases as well. This is a long-term game. We're talking about between now and 2100. You need constancy of purpose.
You need a policy that's durable, you need a policy that incentivizes the types of things Vijay's talking about, long-range research. The energy system is capital intensive, you need to incentivize long-term capital investment as well. Both of those things, we think a price signal is the most effective and perhaps the only way that we can get that curve turned to even approach those 2 degrees C scenarios.
Something to think about when it comes to cost of carbon in society today is an implicit cost that's hidden. Our view with a carbon tax is making it explicit is a much more effective way. Our advocacy for a carbon tax is let's get rid of the inefficient ones that are hidden and buried that society is paying today, and is not motivating and driving the right kind of behaviors, and let's make it explicit.
That is a more efficient process, and the economy benefits from that, and business benefits from it, and it drives better solution sets. That's why we're advocating for a carbon tax. Okay? Ryan, all the way in the back.
Thank you. It's Chris Cooper from Bank of America. You've outlined you expect coal demand to decline. Wouldn't you expect that to be reversed, at the least, if we assume large-scale commercial availability of CCS technology?
Let me give you a technical answer to that, okay? That is that gas is clean burning. Because of that, you make the downstream processes that much easier. The first thing you have to do downstream of the coal processing is take out all the impurities, take out the sulfur, take out the nitrogen. You're taking a step backwards when you do that, because you have to cool down the stream, clean it up, heat it back up to do whatever CO2 conversion you want to do. If you actually are absolutely trying to get the lowest CO2 footprint, and you want a scalable solution, gas is the preferred choice for that reason, number one. The second reason is, we didn't really talk a lot about storage here today.
We certainly know a lot about the subsurface, which is what the sequestration and storage is going to be. Remember, with natural gas, you get half the CO2 of coal. It's a better quality CO2, if you will, cleaner, less energy intensive to process. Scientifically, you'd go after gas.
I suppose assuming they both cost the same.
Well, you have advantages with the gas, which should also level that off. Again, from a science standpoint, you say, "What's the right science solution?" Then you get to the things that Darren was talking about, that should level it off. Technically, you want to start with as clean a fuel as you can. That's natural gas.
Yeah. A quick second question, if I may. You've also outlined one of the first steps as part of your policy is to reduce your own emissions. A large cap peer of yours has announced 2050 targets that include not just cutting their own carbon footprint, but also the carbon footprint of their customers. Is this something you would ever contemplate, or do you think this is not a smart communication strategy?
Well, I think we want to go to a lifeline. I think if you listen to the things that the guys have talked about, what this program is focused on is, first of all, understanding the size of the problem, understanding what the applicable solution sets are, and where the technology solution sets are. If you look at one of the charts that Pete showed on the carbon emissions, you've got three sectors, power generation, transportation, and industrial. The point of the discussion is there are gaps in solution sets in all three of those. If you're going to get to two degrees C, if you're going to meet the aspirations that came out of the Paris Accord, you got to find a new solution set. You have to augment what's out there today.
That's what we're talking about doing today, is finding a way to fill the gap that exists today for no technical solution. The work that we do around [inaudible], and that continues to be a grassroots activity that we continue to drive. The growth that we talked about this morning on the chemical front is driving all the emissions reductions with lighter materials, more efficient processes. That whole package is driving emissions down. That's what we're focused on, driving that as far as we can, as economically as we can. Okay, we've got time for just one more question. Rob, go ahead.
Hi, it's Rob West from Redburn. I'm going to ask a question that exposes my own ignorance. It's how the enormous attention towards algal biofuels. In your presentation, which was great. Sorry for asking a hostile question. I know it's really good, but I just genuinely don't understand it. There's a fuel that's come down the cost curve. You can go to sunny places around the whole world. You can produce usable kilowatt hours straight away. What are the metrics where algal biofuels could beat that in terms of overall energy into energy out or cost?
Yeah. What I'm going to give you come down to is photosynthetic efficiency is really what you're asking about, okay? You're basically asking, are you better off with a solar panel that's absorbing in the photon and turning it into an electron, or are you better off by taking the sunlight plus the CO2 and turning it into a lipid that can be further processed?
sorry.
Yeah. Solar panels, the physics behind the solar panel, we studied for years, and we continue to study. They keep getting better with the triple junction, is what they call it now, so you can do more conversion. We think that you're going to hit a limit of physics there. The algae, where you're bringing in CO2 and sun, now you're taking two things that are essentially out there, and you're converting it into the fuel, we think has higher upside potential for the scale that we want to get to, is really what it comes down to. The scalability aspects of algae for a biofuel, we think has tremendous upside potential.
You talked about having to double it again. Could you give us anything around the sense of what is the full cycle capture rate of sunlight to usable energy as you have it on today's technology? It wasn't a well-phrased question, was it?
No.
If the sunshine comes in and hits a solar panel, you convert.
You're talking about the solar efficiency, the solar efficiency of a cell?
On a photovoltaic panel, you're getting maybe 13%?
Yeah, 13. Yeah.
That's what I see.
Right.
What's the number today on if that same amount of sunlight hits your algae?
Oh
you burn your algae, what percentage do you end up at?
Yeah. Don't look at that. What we look at is we look at basically photosynthesis, which is sun plus CO2, that gives you the lipids. We're trying to take a fixed sunlight, and we're turning it into the lipids. I'd have to get back to you, if that's okay. I'm exactly trying to make an apples to apples comparison on that.
Yeah. Let me just give you one thing to think about. Energy density, transferability, the rate and pace at which you can transfer energy are all important in certain applications. Energy density is paramount. Weight and time are paramount. That's how that industry operates. It's hard to envision, in our lifetime, electrifying aviation. For those kinds of applications, and by and large, commercial applications, so commercial transport, time and weight and energy transfer rate are all important. A liquid fuel where you store energy in the hydrocarbon bonds is hugely valuable in those applications because of that energy density. While declining costs of solar photovoltaics are important for us to understand, and we build that into our energy outlook, there are applications where you just can't store electrons very effectively. That's getting better, but that'll have its limitations.
Just the ability to transfer electrons into batteries, I think, will end up being an important limiter. Infrastructure ends up being important. If we can produce an algae biofuel, and we can produce a distillate that looks like current distillate, all your infrastructure's already in place, you get a scalable application that utilizes existing infrastructure. All of those things are things we think about as we do the energy outlook. I think there'll be a place for solar photovoltaics, no question about it, in the energy mix, but there will also be a very important place for liquid fuels of some sort, both in transport, but also important in industry as you think about how would you reduce carbon across industry. With that, we're probably out of time, huh?
Right. Ladies and gentlemen, thanks again for your interest, your time, and of course, we are looking forward in the future to meeting with you and talking about the progress on our business. With that, thanks again, and be safe.