Electric Vehicle Market Share

In 2020, China sold 1.3 million EVs — 41% of global EV sales.  That number seemed impressive at the time.  It looks quaint now.  China’s NEV market hit approximately 16 million units in 2025, representing nearly 50% of all new cars sold domestically.  BYD alone sold 4.6 million vehicles globally — more than Ford sold in its entirety.  China now controls 69% of the global EV battery market through CATL and BYD combined.  This did not happen by accident.

Tu Le, Founder and Managing Director of Sino Auto Insights, a global mobility advisory firm founded in Beijing in 2017, said, “China’s dominance in EVs is not a product story.  It is a supply chain story, an industrial policy story, and a geopolitical story — with a car on top.”

China's EV push is an industrial policy executed with the patience and precision that Western democracies structurally cannot replicate.  The objective was never to sell more cars.  It was to leapfrog the internal combustion engine — a technology where Germany, Japan, and the United States held century-old competitive advantages — and establish dominance in the next platform before the incumbents could react.  It worked.  China controls the battery supply chain from lithium extraction through cathode chemistry to cell manufacturing and pack assembly.  It controls 80% of global lithium refining capacity, 70% of cobalt processing, and the dominant share of rare earth processing essential for EV motors.  The car is the visible product.  The supply chain is the moat.

Beijing subsidised EV purchases, built charging infrastructure at scale, mandated EV quotas for manufacturers, and provided cheap financing, tax breaks, and preferential land access to domestic producers.  The EU’s anti-subsidy investigation concluded exactly this — and imposed an additional 17% tariff on BYD on top of the standard 10% import tariff.  BYD’s response was to open factories in Hungary, Turkey, and Brazil — manufacturing inside the tariff wall rather than exporting over it.

Tesla’s China market share fell from 6% in 2024 to 4.9% in 2025. EU sales collapsed 38.8% in the first eleven months of 2025.  Tesla’s net profit fell 40.5% year-on-year in the first three quarters.  Its US market share hit an eight-year low of 38% in August 2025 — down from approximately 80% in 2020.  Three forces compressed Tesla simultaneously.  First, Chinese domestic competition intensified beyond BYD — Geely surged 90%, Xiaomi EV grew 200.9%, Huawei-powered models exploded.  The Chinese market became a 150-brand price war that eroded margins across every participant, including Tesla.  Second, Elon Reeve Musk’s political activities generated sustained consumer boycotts in Europe and the United States — Tesla showrooms faced protests, vandalism, and brand damage that no marketing budget could quickly repair.  Third, BYD competed on price at quality parity.  The BYD Seal sits at €42,700 to €48,200 in Europe — comparable to or below equivalent Tesla models — absorbing the EU tariff and still offering competitive pricing.  Battery pack costs fell to $115 per kWh in 2024.  At US$80 to US$99 by 2026, Chinese manufacturers achieve price parity with petrol cars without subsidies.  That eliminates the last structural barrier to mass adoption.

Volkswagen delivered 1.9 million vehicles in China in the first three quarters of 2025 — down 4% — now below its Western European volumes.  VW’s largest single market is contracting as domestic Chinese brands consume its share.  FAW-Volkswagen retail sales fell 4.8% in 2025. European automotive exports to China fell sharply in both volume and value.  The German response — joint ventures with Xpeng and Horizon Robotics, a full R&D centre in Hefei — is the correct strategic direction.  It is also an admission that German automotive engineering alone is no longer sufficient competitive advantage in the world’s largest car market.  Chinese brands now hold 7% of EU market share, up from 5% in 2024.  In May 2025, BYD registered more EVs in Europe than Tesla for the first time.  In February 2026, it did so again.  The tariff wall slowed the entry.  It did not stop it.

Global EV sales are forecast to reach 40 to 50% of total car sales by 2030 — up from approximately 20 million units in 2025.  Chinese automakers collectively commanded 43% of global EV market share through August 2025.  Five Chinese brands — BYD, Geely, SAIC, Changan, and Chery — are expanding across Southeast Asia, Latin America, the Middle East, and Africa simultaneously.  The geopolitical dimension is explicit.  EV dominance gives China control of the technology platform, the battery supply chain, and the manufacturing cost curve for the primary consumer durable of the next fifty years.  It reduces China’s dependence on Middle East oil — a strategic vulnerability the country has been managing since the 1990s.  And it gives Beijing an export industry that generates trade surpluses without the currency and IP friction that semiconductor and defence exports attract.  China did not enter the EV market to compete with Tesla.  It entered to render the entire ICE-era competitive landscape irrelevant.

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Terence Nunis | Executive Chairman, Equinox Zenith & Red Sycamore | Author, The 1% Playbook: The Billionaire Cheat Code

Electric Vehicles Gaining Acceptance

As people become more environmentally aware, and the technology matures, more people are considering electric vehicles for their next car.  The issue that needs to be addressed is branding the vehicles.  Activism alone does not secure market share.

Electric Vehicles with Lithium Batteries is Not the Solution

Current electric vehicles are not as environmentally friendly as advertised.  Most modern electric vehicles use what is essentially a souped up compound handphone battery.  That means lots of lithium in all those batteries. 

The battery of a Tesla Model S, for example, has about 12 kilogrammes of lithium in it.  The grid storage needed to help balance renewable energy would need a lot more lithium given the size of the battery required.  Because manufacturers are secretive about the technology of their batteries, effective recycling is virtually impossible.  Most of all that lithium ion batteries end up in landfills, where then seeps into the environment as they break down, poisoning the water table and contaminating the land. 

Lithium cathodes themselves degrade over time.  That is why they cannot be placed into new batteries.  Lithium is a rare earth metal, which means it is reactive.  As such, there have been a number of fires at recycling plants where lithium-ion batteries have been stored improperly, or disguised as lead-acid batteries, and put through a crusher.  Not only have these batteries burned at recycling plants, but auto makers are seeing battery-related fires leading to vehicle recalls and safety probes.  Teslas have this unhealthy tendency to explode on impact to the battery, spewing out toxic gas and acid which cannot be put out by water.  Chevy Bolts spontaneously combusted the back seats where the batteries were. 

The mining of lithium is even more environmentally damaging than drilling for oil.  The land is effectively strip mined and rendered useless for everything else.  Lithium extraction uses a lot of water, approximately 2 million litres per metric tonne of lithium.  Miners drill holes in salt flats and pump salty, mineral-rich brine to the surface.  After several months the water evaporates, leaving a mixture of manganese, potassium, borax, and lithium salts, which is then filtered and placed into another evaporation pool.  After from 12 and 18 months of this process, the mixture is filtered sufficiently that lithium carbonate can be extracted. 

There is the potential leak of toxic chemicals, such as hydrochloric acid, from the evaporation pools into the water supply.  In Australia and North America, lithium is mined from rock using chemicals to extract it into a useful form.  Lithium mining has proven negative environmental impact in water sources, streams, the sea and land for hundreds of kilometres around.  Lithium extraction also harms the soil and causes air contamination.  For example, in Argentina’s Salar de Hombre Muerto, lithium mining contaminated streams used by humans and livestock and for crop irrigation, leading to a significant spike in cancers and other disease.  In Chile’s Atacama salt flats, one of the most beautiful places in the world, mountains of discarded salt and canals filled with contaminated water with an unnatural blue hue.  It is estimated that between 2021 and 2030, with this global push towards electric vehicles, about 12.85 million tonnes of EV lithium ion batteries will go offline worldwide, and over 10 million tonnes of lithium, cobalt, nickel and manganese will be mined for new batteries. 

This is not a green solution.  A green solution is electric vehicles using graphene batteries.  Graphene is a near superconductor at room temperature and pressure, powering a vehicle that will have consistently superior performance as the technology matures.  Graphene is made from carbon, which comes from trees.  At Quantum Age, we grow those trees, reforesting hundreds of square kilometres, and harvest them sustainably for the carbon fibre bodies of our vehicles, and the graphene for our patented batteries.  We are that solution; we are the future – a quantum leap in technology.

Problems with English: “Building”

Why is a building called a building when it is already built?  Why is the style of the building called a build, when they are no longer building?

Over-Emphasising Shareholder Value

One of the mistakes from the 80’s “Greed is Good” era of Corporate America was this excessive emphasis on shareholder value.  Shareholders are one of several stakeholder.  Customers and clients are stakeholders.  Vendors and partners are stakeholders.  Employees are a major stakeholder of a business.  A company that only emphasises shareholder value will inevitably fail since the focus is on immediate gain, not long-term market growth.  This sort of thinking still plagues investment banking, and fund management, which leads to excessive risk, and eventual cost that affects shareholders as well.  An overt emphasis on shareholder value to the exclusion of everything else is self-defeating, and kills the business, the environment, and even people sometimes.

The Concept of Quantum Mobility

Part of the process of putting out a superior electric vehicle is not merely creating one with superior specifications, but considering the manufacturing process, to bring down costs, and increase margins.  This means having a distributed manufacturing system of micro factories, and materials from our own Q-Paulownia trees for the carbon fibre bodies and graphene batteries.

Thailand’s Electric Vehicle Push

Quantum Motors is looking to base one of its manufacturing in Southeast Asia in Thailand. This makes perfect sense.  As of 2017, the Thai automotive industry is the largest in Southeast Asia, and the 12^th largest in the world., with an annual output of near two million vehicles.  Over half the market is pickups.  Thailand manufactures for many foreign car companies under license.

Due to the large number of pickups, which use diesel, Thailand has dangerous air pollution levels.  Because of this, Thailand is promoting an ambitious electric vehicle programme.  This is an excellent opportunity to stake a position here, and create strategic partnerships within an established ecosystem.

Singapore Study on SPAC Exits

This is important for us because we have SPAC proposals for our verticals.  The primary concern about SPAC exits is the interests of initial shareholders, and the dilution of controlling interest.  For those seeking an early exit, a SPAC is an attractive option for a healthy return on investment.  For those seeking to gain in the long-term, and cash cow their investment, they want to ensure their interests are secured.

Leadership Begins with Giving

For leadership to work in the modern era, the people being lead need to feel that their leader is invested in them.  We have moved past the time of strict command-type environments.  In a capitalist society, the best and brightest have options.  To lead that best and brightest, to even attract them, involves selling them of vision of a collective that is greater than the sum of its parts.  To keep them involves living up to it.  Leadership in such an environment involves putting ourselves in the shoes of the other.  People are motivated when they are made to understand what is in it for them.

Quantum Motors Micro Factories & Product Comparison

Quantum EV intends to put out a product superior to any electric vehicle in the market.  Our vehicles are superior in terms of purpose, due to our graphene batteries.  The use of graphene, as opposed to a reliance on lithium ion batteries eliminates a supply bottleneck, and is more environmentally friendly.  Graphene is a superior conductor, and that translates into superior performance. 

Our vehicles are also superior in terms of environmental impact, from manufacturing process to finished product.  Because of the use of genetically created Q-Paulownia wood, we essentially use carbon fibre bodies, as opposed to mild steel, which is stronger and lighter.  This is friendlier to the environment. 

Our production technique does not require a massive assembly plant, but micro factories that can be deployed anywhere, to assemble kits.  This means we are on the ground, manufacturing in a new market in a matter of days, as opposed to months, reducing infrastructure risk or political exposure in certain markets.

Our Quantum Motor Graphene Battery Generates More Torque than a Porsche 911 Turbo Engine

Quantum Age’s graphene battery is superior to any electric battery in the market for vehicles.  In the International System (SI), work is measured in joules and, in rare instances, newton-meters (Nm).  Torque is a rotating force produced by an engine’s crankshaft.  The more torque an engine produces, the greater its ability to perform work.  The measurement is the same as work, but slightly different.  In this instance, our Quantum motor produced more torque, at 850 Nm than a Porsche 911 Turbo S.  This allows our cars to go from 0 km/h to 100 km/h in 3 seconds or less.  With an autonomy in excess of 100 km, we could build a race car.

Generating Revenue from Q-Paulownia

Our Q-Paulownia programme will eventually be a complete ecosystem.  We plan to have up to 125 million trees planted over 625 square km, almost the area of the entire Singapore, and this is for phase one.  Phase one is projected to generate an annual revenue of US$40 billion from the 6^th year.

Why a Wealth Tax is the Wrong Answer to the Right Question

The wealth gap is real.  The data is unambiguous.  Singapore’s Gini coefficient for wealth sits at 0.55.  The top 20% hold an average total wealth of S$5.264 million against the bottom 20%'s S$293,000.  The political instinct to tax the difference is understandable.  It is also structurally misconceived.

Who Does a Wealth Tax Actually Hit

The UHNW client — the family office principal, the Gulf dynasty, the Taiwanese industrialist who moved NT$10.4 trillion to Singapore — does not pay wealth taxes.  Their advisers ensure that.  The assets sit in trusts, foundations, VCCs, and holding companies across multiple jurisdictions.  A legal entity other than a natural person is taxed after expenses.  The architecture that protects wealth from creditors protects it equally from tax authorities.  The more sophisticated the wealth, the more impenetrable the structure.

The person who pays the wealth tax is the cardiologist who earned S$800,000 last year, owns a condominium in Orchard, holds a S$1.2 million investment portfolio, and has not yet accumulated sufficient wealth to justify a family office.  The lawyer.  The engineer.  The specialist professional who got wealthy the conventional way — by working extremely hard for thirty years in a high-skill profession.

These people do not have access to the structural tax planning available to the tier above them.  They hold assets in their own names.  They earn professional income subject to personal income tax.  They are wealthy enough to be caught by a wealth tax and precisely not wealthy enough to architect their way around it.

A wealth tax designed to address inequality ends up taxing the aspirational class — the people society most wants to produce more of — while leaving the genuinely wealthy architecturally insulated.  The policy achieves the opposite of its stated intention.  This is not conjecture.  It is the documented experience of every European country that has implemented and subsequently abandoned a wealth tax.

France introduced its ISF wealth tax in 1982.  It drove capital flight — an estimated 10,000 millionaires left France between 2000 and 2012.  Emmanuel Jean-Michel Frédéric Macron abolished it in 2017.  Sweden abolished its wealth tax in 2007.  Germany, Austria, Denmark, Finland, and Luxembourg all abandoned wealth taxes between 1995 and 2006.  The pattern is consistent: the tax raises less revenue than projected, drives mobile capital and talent to lower-tax jurisdictions, and disproportionately burdens those too wealthy to be exempt but insufficiently wealthy to escape.

Singapore’s Competitive Architecture

Singapore’s competitive advantage is not its port, its location, or its weather.  It is its tax regime, its rule of law, and its institutional credibility.  These three factors have attracted capital from mainland China, Taiwan, Indonesia, India, and the Gulf — capital that generates economic activity, employment, and tax revenue through the consumption and investment it funds domestically.

The UK and the US sustain higher tax rates because their capital markets have depth that smaller economies cannot replicate.  The London Stock Exchange and the New York Stock Exchange provide secondary market liquidity, institutional coverage, and price discovery that justify the additional friction of operating in high-tax jurisdictions.  Nobody lists on the Tokyo Stock Exchange for access to global capital. Nobody lists on the SGX for the secondary market liquidity, as the SGX’s own data makes painful reading. Only four companies listed in Singapore in 2024.  Twenty delisted.  The secondary market is structurally thin outside the GLC complex.

Singapore’s capital markets cannot compensate for a deteriorating tax environment the way London and New York can.  The moment Singapore’s tax regime becomes materially less attractive, the capital that arrived because of it evaluates the alternatives.  Dubai is already competing aggressively.  The UAE has built a parallel financial infrastructure in less than a decade.  Abu Dhabi has ADIA, Mubadala, and ADGM.  The assumption that wealth gravitates to Singapore regardless of the fiscal environment is not supported by how wealth moves.

The Correct Policy Direction

Two levers genuinely address fiscal sustainability without undermining the competitive architecture.

The first is consumption taxation on a progressive scale.  The GST is a blunt instrument — it taxes consumption uniformly, which means it consumes a higher proportion of lower-income household budgets.  The reform is not to abolish it but to make it more sophisticated.  A tiered consumption tax that scales with the category of expenditure — essentials taxed minimally or exempted, luxury goods and services taxed at materially higher rates — captures the consumption of the wealthy without structurally disadvantaging the poor.

Singapore already applies this logic imperfectly through the GST Voucher scheme — cash transfers to lower-income households to offset the regressive impact of the flat GST rate.  The cleaner solution is to build the progressivity directly into the rate structure rather than compensate for it through transfers.  Luxury goods, premium hospitality, high-end property transactions, and private aviation are taxed at rates that capture the spending pattern of the wealthy without touching the savings, investments, or capital structures that generate long-term economic activity.

The second lever — and the more important one — is expanding the tax base rather than increasing the rate on the existing base.  A shrinking tax base subjected to rising rates produces diminishing returns and accelerating capital flight simultaneously.  An expanding tax base at stable rates produces growing revenue without altering the competitive calculus that attracted the base in the first place.

Tax base expansion requires two things.  First, attracting more productive economic activity — more businesses establishing substantive operations, more professionals relocating, more investment flowing into sectors that generate employment and consumption.  The SFO framework, the PCC structure, the MAS fintech sandbox, and the carbon market infrastructure are all instruments of tax base expansion.  They attract capital that would otherwise be elsewhere.  Second, converting non-taxpaying economic participants into taxpaying ones — through schemes that bring the informal economy into the tax architecture and through CPF structures that capture contributions from the self-employed who currently opt out.

The Summary

A wealth tax is the policy equivalent of taxing the people who cannot afford the advice to avoid it, while the people who can afford the advice continue undisturbed.  It raises less revenue than projected, drives the mobile capital and talent it was designed to tax to friendlier jurisdictions, and leaves Singapore’s competitive architecture weakened without a compensating fiscal benefit.

The question is not how to extract more from the existing tax base.  It is how to grow the tax base, retain the capital and talent that generate it, and capture the consumption of the wealthy through instruments that cannot be architectured away.  Consumption taxes on a progressive scale.  Expansion of the economic base through competitive positioning.  These are harder to implement and easier to justify than a wealth tax that achieves the opposite of what it promises.  Singapore got here by being smarter than its competitors.  The fiscal policy debate deserves the same standard.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code

Q-Paulownia Cultivation

Quantum Age Holdings Corporation has developed a new type of paulownia tree, the Q-Paulownia, which grows faster, which puts nitrogen back into he soil, and has many other uses.  Red Sycamore’s electric vehicles use graphene from this tree to create superior batteries.   The wood from the tree can be turned into a form of carbon nanofibers for the vehicle bodies.  This makes our vehicles the most environmentally friendly, and sustainable.  It is not just about the batteries.  It is the entire process. 

The Q-Paulownia project is not an agricultural project.  It is a biotechnology project.  We are not merely planting and harvesting trees.  We are developing an independent ecosystem that can be spun off as a series of verticals, independently generating revenue. 

Investing for a Legacy

Family Officers have been increasingly focused on sustainability as a measure of risk management.  Companies that are serious to adhering to ESG guidelines tend to be less exposed to political risk, liabilities, and other risks such as litigation for pollution, for example. 

Additionally, people who have substantial funds are no longer investing merely for a return, but as part of legacy planning, they want to drive positive change in the world.  They are putting their money in projects they believe in, in companies with values they share, in places they have some sort of attachment to.

Net Zero or Bust: Beating the Abatement Cost Curve for Growth

In an age of activist consumerism and investment, and the apparent effects of climate change, moving towards net zero emissions is the stated goal of many businesses.  The questions is how do we evolve it from slogan to reality?  The following is taken from “Net Zero or Bust: Beating the Abatement Cost Curve for Growth”.  This article was written collaboratively by global leaders in the McKinsey Sustainability and Manufacturing & Supply Chain Practices, including Pauline Blum, Stefan Helmcke, Ruth Heuss, Thomas Hundertmark, Sebastien Marlier, Dickon Pinner, and Ken Somers.

Companies can both decarbonise and boost long-term growth, but it means pushing beyond abatement curves’ focus on cost and instead empowering people, while making a few big, strategic bets.

Before the COVID-19 pandemic, environmental, social, and governance (ESG) issues had become priority concerns for governments, businesses, investors, and consumers.  As the world looks forward to the post-pandemic next normal, these themes are likely to return to the top of executives’ agendas.  Among them, the need to eliminate emissions of greenhouse gases may be the most difficult to address.  Many companies have already committed themselves to deep, long-term reductions in greenhouse-gas emissions.  Others will be forced to act by customers, investors, and governments.  Almost 300 large companies have joined the highest tier of the Science Based Targets initiative, for example — that is, ramping up pressure on suppliers to cut their own emissions or risk losing business.  Business leaders are already telling us that some of their biggest customers are warning that future contracts will be contingent on significant emissions reductions.

A growing share of investment capital is also being channeled into the fight against climate change.  Between 2012 and 2018, investment in assets with explicit sustainability goals grew by 15% a year.  By 2018, such investments accounted for 11% of professionally managed assets globally.  More broadly, investors are increasingly concerned about the potential impact of climate-related risks across their portfolios.  In January 2021, BlackRock, the largest asset manager in the world, asked the CEOs of companies in which it holds shares to explain how they plan to achieve net-zero emissions by 2050.

And policy makers are piling on further pressure.  The European Union, for example, appears ready to proceed with plans for a cross-border carbon tax, using the proceeds to fund sustainability initiatives within the bloc.  Such policies mean companies are no longer shielded from environmental legislation by virtue of their location.  Any organisation participating in global supply chains will need to cut its emissions.

Together, these forces mean that decarbonisation is no longer an option.  Across most of the world, companies with ambitions to stay in business over the long term are already on a 30- or 40-year journey to net-zero emissions.

Like any change journey, the road to net zero involves several distinct steps.  Companies must understand their current carbon footprints, identify strategies to reduce and ultimately eliminate carbon emissions, and implement the necessary changes.

These steps would be straightforward, were it not for one catch.  Emission-reduction plans tend to be created using standard “abatement curves,” which take a top-down view and focus on large-scale technological shifts.  These curves often predict that transition risks, such as falling demand or asset devaluation or regulatory shifts, will lead to cost increases great enough to put many organisations out of business long before they reach their net-zero goals.

In our view, organisations should not let the scale of the challenge derail their sustainability ambitions.  Contrary to what cost curves suggest, big cuts in emissions can be achieved without large-scale value destruction.  What is more, the climate transition will create historic opportunities for environmentally sustainable businesses to build new markets, reinvent old categories, and become magnets for top talent.  Unilever, for example, says that in 2018, its Sustainable Living brands grew 69% faster than the rest of its portfolio.  And by 2030, the reuse and recycling of plastics could drive profit-pool growth of US$60 billion for the chemicals industry, according to McKinsey analysis.

For the journey to become value creating rather than value destroying, however, companies will need to rethink the conventional approach to carbon reduction.  Moving beyond the abatement curve involves a combination of top-down and bottom-up activities: empowering frontline personnel to drive emissions reductions while making significant long-term strategic bets on markets, technologies, and production footprint  (Exhibit 1).

Even the first step in the carbon-reduction journey — determining baseline emissions — presents significant complexities.  An organisation can use internal data sources, such as energy bills and procurement records, to calculate its emissions in the Greenhouse Gas Protocol’s Scope 1 (direct emissions from its own activities) and Scope 2 (indirect emissions attributable to the organisation’s energy use).  Scope 3 emissions are more difficult to ascertain.  The necessary data are not always available from suppliers and customers, forcing companies to rely on models or approximations to build an estimate of their full carbon footprint.

Even a less-than-perfect picture of emissions could still act as a useful catalyst for improvement.  Understanding the largest sources of greenhouse gas emissions across value chains can help companies identify quick wins and target energy efficiency improvement efforts.  Few organisations make that link, however.  Emissions analyses remain locked in the boardroom, while any improvements made by the front line are simply a byproduct of efforts to reduce waste and drive up productivity using well-established lean approaches.

To establish a potential pathway to net zero, companies must identify the changes that could eliminate emissions from their value chains, then rank them in ascending order of cost per ton of abated carbon.  Today, it is common to map these changes in the form of abatement curves, which provide the boardroom with a top-down view of the potential capital investments (often large) in known technologies that could trim organisation’s emissions.

For business leaders, these abatement curves can be frightening, especially for industrial companies with energy-intensive processes.  Exhibit 2 shows an illustrative carbon-abatement cost curve for the full value chain of a European automotive player.

The x-axis of the chart sets out, in ascending order of cost, the available options for reducing the organisation’s carbon emissions.  The y-axis shows today’s cost of each option per ton of carbon emissions reduced.  At current costs, less than 25% of the path to zero emissions is positive net present value (NPV).

For this company, the chart’s implications are stark.  Eliminating the company’s upstream emissions would reduce its profits by around €1 billion.  At many organisations, the implications of the carbon-abatement curve have been daunting enough to stall progress on the deep emissions reductions that will be necessary over the coming decades.  The imperative for today’s leaders is to find ways to break this deadlock.

Beating the cost curve and building a successful long-term decarbonisation strategy will depend on big moves in two areas (Exhibit 3).  The first operationalises emission-reduction efforts using known technologies and approaches, moving from theoretical discussion in the boardroom to pragmatic action in the control room, on the shopfloor, and throughout the organisation.  The second entails big bets on options that don’t currently appear on the abatement curve, exploring new technical, strategic, and market opportunities to capture value while reducing environmental impact.

Translating emissions-reduction goals into a practical reality involves working on three fronts at once: redefining the decarbonisation business case in finance, building an integrated sustainability production system into the organisation, and assembling an infrastructure to support tactical innovation in operations.

Increasingly, organisations looking to finance emissions-reduction initiatives can access the necessary capital at low cost.  Governments and private investors are showing a greater willingness to offer long-term loans at favorable terms to fund such projects.  Sustainability-linked bonds worth more than US$200 billion were issued in 2020, for example, pushing the total market for such securities above US$1 trillion for the first time.  Some programmes even offer borrowing costs linked to the carbon-reduction impact of investments.  In February 2021, drinks maker AB InBev agreed to a US$10.1 billion credit facility that links interest margins to several sustainability goals, including group-wide carbon-emissions reductions.  Using such structures, companies can often secure funds for investment at less than half of their existing cost of capital.  That is enough to shift the NPV of plenty of emissions-reduction projects from negative to positive.

In the context of the transition to net zero, companies can also revisit their project-investment criteria.  At many organisations, projects that improve efficiency or reduce emissions must today pass the same financial tests as any other capital investment.  That usually entails a maximum payback period of two years.  Extending the maximum payback period to five years, for example, allows organisations to take a longer-term perspective on investments that could make a meaningful difference in their climate-change impact.

 

Alternatively, companies can explore new funding and ownership models for low-emission assets.  Original-equipment manufacturers or third-party operating companies may be willing to retain ownership of equipment such as biomass boilers, for example, while the end user pays by unit of energy consumed.  In Romania, for example, specialty chemicals company Clariant is building a 50,000- ton capacity plant to produce ethanol from agricultural residues.  Steam and electricity for the facility will be provided by a dedicated biomass cogeneration plant installed and operated by German energy company GETEC.

Another option for companies is to introduce an internal form of carbon tax by including the cost of the carbon emissions explicitly as a line item on the profit and loss accounts of their plants and business units.  The funds collected through this mechanism can then be ring-fenced for use in emission reduction projects.  Dutch chemicals company Royal DSM, for example, introduced such as scheme in 2016, setting an internal carbon price of €50 per ton.

Many organisations have dozens of potential emission-reduction projects sitting on their shelves because their business cases failed to meet the requirements for investment, sometimes by narrow margins.  The combination of cheaper, more accessible capital and a full life-cycle perspective can unlock multiple opportunities to simultaneously reduce emissions and improve financial performance.

Designing, running, and improving a low-carbon manufacturing network and supply chain is an intricate task.  Organisations will need the skills, processes, and data to identify and implement efficiency improvements across their operations.  Today, all three are in short supply.

The development of an end-to-end sustainability production system will require a systematic approach to the acquisition and development of capabilities across the workforce.  Companies will also need appropriate supporting infrastructure across the wider organisation.  That might include investments in new analytical tools to help staff interpret sustainability-related data, and changes to KPIs, targets, and incentives to promote continuous improvements in energy and resource efficiency.

Several companies are already pursuing this approach.  A large-scale, ten-year operational energy-efficiency programme at one major chemicals player focused on capability building among frontline process engineers.  Hundreds of staff across the organisation developed the skills to understand the root causes of losses and process inefficiencies, aided by new analytical tools that helped them identify and evaluate the impact of detailed process changes.

The programme has reduced carbon emissions by 10% while generating savings of about €100 million  per year.  That impact was achieved not through big investments in new equipment but through dozens of smaller measures scattered across the business. One site alone implemented more than 30 separate projects.  Notably, the company made no special financial provisions for efficiency improvements; projects had to demonstrate a three-year payback like any other investment.

The road to net zero involves several distinct steps.  Companies must understand their current carbon footprints, identify strategies to reduce and ultimately eliminate carbon emissions, and implement the necessary changes.

The drive to reduce Scope 3 emissions generated in the upstream and downstream value chain, meanwhile, will require companies to extend their sustainability production systems to include functions such as procurement, product development, supplier development, sales, and logistics.  Measuring, monitoring, and improving Scope 3 emissions in the upstream supply chain will demand extensive changes to current approaches to supplier selection and management, for example, along with new analytical skills in the responsible teams.  Companies will want a comprehensive carbon accounting-and-control system that runs alongside its financial equivalent.  Such systems are in their infancy today, but development is accelerating.  In mid-2020, chemicals company BASF began to publish full details of the carbon footprints of the 45,000 products in its portfolio.

The transition will also require effective cross functional coordination.  Carmakers are already exploring opportunities to replace high-quality, high-footprint virgin aluminum with lower-grade, low-footprint recycled aluminum.  That calls for collaboration between product development, sourcing, and manufacturing teams.  The ability to demonstrate better environmental performance can boost sales too.  Some materials companies are already using their sustainability credentials and long-term improvement plans as an argument for their products over rivals’.

The third critical element required to operationalise a company’s carbon-reduction strategy is tactical innovation.  Many of the moves required to drive down overall emissions will involve the adoption of new technologies and approaches, the costs and benefits of which may be highly site-specific.  Half of the carbon emitted in ammonia production is pure CO2, for example — and therefore could be ideal for carbon capture and storage (CCS).  In Europe, ammonia plants located close to ports have opportunities to transport this gas in marine tankers for storage in depleted offshore oil and gas wells.  Our calculations suggest that this approach was cash-flow-positive even at the February 2021 carbon price of €40 per ton.

Similarly, advanced heat recovery, zero-carbon electricity, hydrogen, biomass, and geothermal and nuclear heat are all potential substitutes for the fossil fuels used to produce process steam.  The best choice for a given site will depend on the local price, societal acceptance and availability of each fuel type.

Companies will need the ability to pilot and scale up new and unproven technologies within their existing production networks.  That will involve partnerships with start-ups or research organisations to pursue breakthrough innovations — and it will also require adequately funded and supported in-house capabilities.  Government support for such initiatives is increasingly available.  The EU Innovation Fund, for example, plans to invest €10 billion on low-carbon innovation over the next decade, with funding earmarked for small-scale projects alongside flagship innovation efforts.  One candidate for such tactical innovation might be the development of high-temperature heat pumps to reduce energy consumption in the food industry’s sterilisation and cooking processes.

Capex-replacement cycles present another opportunity for site-level innovations and technology investments.  A steelmaker facing a €500 million investment to replace a coke oven battery, for example, might consider a switch to more efficient alternative technologies, such as a jet-process basic oxygen furnace.  It could also choose to invest in electric arc furnace technology, switching the feedstock to direct reduced iron produced using natural gas with CCS, or using hydrogen.

Once again, these are decisions that cannot be left to the boardroom alone.  The best answers for any site will depend on specific factors, including its location, the availability of low-cost capital or government support, and the strength of the organisation’s long-term commitment to the technology or market segment.

Proven and emerging technologies and operating approaches, if applied at scale, will be enough to take energy-intensive companies perhaps 40% of the way along the emissions-abatement curve.  The remainder of the journey will require big bets and big steps into the unknown.  As they consider those choices, businesses will need to decide the strategic posture they wish to adopt in the carbon transition.  Some organisations will seek to play a leading role, pioneering the adoption of sustainable technologies and business models.  Others will adopt a “last man standing” strategy, seeking to retain their existing approaches for as long as customers and regulators permit.  Between those extremes, companies may choose to pursue fast-follower or slow-follower strategies, holding off on major shifts until approaches have been proven elsewhere (Exhibit 4).

Based on their strategic postures, companies will want to reevaluate their existing portfolios, potentially disposing of assets or exiting certain businesses.  In other areas, they will likely need to place their big bets across one or more of three key dimensions: geographies, products, and processes.

— New geographies: Locating manufacturing facilities for less energy-intensive products closer to the point of end use can significantly reduce carbon emissions generated during transportation.  For energy-intensive products, proximity to new feedstock sources or sources of low-carbon energy can be even more advantageous.  Saudi Arabia, for example, has announced plans to build a new green hydrogen plant powered by 4 gigawatts of wind and solar energy.  Much of the plant’s annual hydrogen output will be converted to 1.2 million tons of ammonia and exported worldwide as a low carbon energy source and chemical feedstock.  Australia, which has abundant ore resources and significant renewable-energy potential, could become an advantageous location for the production of iron using green hydrogen, for example.  The move up the value chain, shifting from an exporter of ore and coking coal to a producer of iron, would generate new value for the region.  And, by halving the mass of exported materials, it would have a positive knock-on effect on transport emissions.

— New products: Organisations may choose to shift into lower-emissions product and market segments.  Manufacturers of cement-based building components might migrate into engineered timber alternatives.  Materials players could invest in novel chemical-based recycling technologies for plastics.  Meat and dairy producers could enter new food categories derived from plants, cultured meat, or insect-based sources of protein.  That shift is already underway, with major food companies making large investments in the sector.  In 2016, dairy products maker Danone made its largest acquisition in a decade with its US$12.5 billion purchase of WhiteWave, owner of the Alpro brand of plant-based foods.

— New processes: In many industries, the known technologies required to deliver net-zero operations are value destroying, if they exist at all.  To remain viable, therefore, companies will want to radically reinvent their processes.  Heavy industrial sectors face a multiyear effort.  Brazilian metals company Tecnored is developing a more energy-efficient process for production of pig iron that uses pellets of powdered ore combined with coal or biomass char as a reducing agent.  It has been operating a development plant since 2011 and, having proved that its process is cost-competitive with conventional methods, is now working on a commercial unit with a planned annual capacity of 500,000 tons.  In the production of ethylene, Dow and Shell have announced research into electrically powered steam-cracking technology.  Elsewhere, laboratory-scale demonstrations have shown that replacing the conventional high-temperature steam-cracking process with chemical looping–oxidative dehydrogenation could reduce carbon emissions by almost 90%, cut operating costs, and debottleneck existing assets.

To succeed in these moves, organisations will want to move more R&D expenditure into sustainability related topics.  They have room to do so.  In 2020, global R&D expenditure on technologies to fight climate change was estimated at around US$80 billion.  That is less than 5% of the world’s US$1.7 trillion R&D budget.

The transition to net-zero emissions will have a profound impact on almost every aspect of business.  Success will require a transformational approach.  For industries that have relied on the same fundamental technologies for a century or more, the degree of change required in the next three decades may seem formidable, but it is not without precedent.  Neither the internet nor the mobile phone had achieved large-scale adoption at the beginning of the 1990s.

Such a transformation must begin with a decarbonisation vision, determining the role the organisation seeks to take through the carbon transition and beyond, and laying out the scale and scope of the operational changes and strategic big bets required to reach it.

Achieving that change at the necessary pace to meet global climate goals will still require companies to juggle thousands of initiatives and develop entirely new technologies, all in an environment of significant uncertainty.  That will require careful planning, with development of new decarbonisation “playbooks” that help business prioritise and sequence their carbon-reduction actions.  Whatever their strategy, companies must also adapt targets, performance metrics, and decision-making processes across the organisation to ensure that staff at every level are motivated and supported to achieve emissions goals.

Finally, to successfully operationalise their emissions reduction efforts, companies will need to develop new capabilities at a transformational scale.  That capability-building effort needs to be broad, equipping the majority of staff with the skills they need to understand and act on sustainability related sustainability data.  It also needs to be deep; developing a task force of process optimisation and sustainability specialists that can help site teams to drive rapid improvement, for example.

For any company with ambitions to remain viable beyond the middle of this century, the race to net zero emissions is already under way.  Yet, the formidable technical and economic barriers they face has left many organisations stuck in the starting blocks, paralysed by the abatement curve.

Surmounting those barriers will require a transformation mindset with two primary elements.  Beyond the boardroom, companies will need to operationalise at scale, capturing short-term value creation opportunities by equipping their frontline staff with new skills, new tools, new processes, and new infrastructure.  Within the boardroom, meanwhile, leaders will need to rethink their strategic positioning, adapt their existing portfolios, identify the growth opportunities emerging from the disruption of decarbonisation, and place big bets on their long-term futures.