Page 181 - CW E-Magazine (12-11-2024)

Special Report

The green premium explained

s sectors like aviation, ship- bolstered by supportive policies and OMKAR KAJROLKAR
ping, steel, cement, aluminium, green subsidies. However, challenges Email: omkar.kajrolkar@edu.escp.eu
Aand oil & gas grapple with such as untested green premiums per-
their carbon footprints, the concept of sist. The ability of the industry to pass ing on the fuel’s source and the produc-
the ‘green premium’ – the additional along this premium or to monetise near- tion method. For consumers (B2C), this
cost of choosing environmentally zero-emission products as a differentia- translates to a 5-12% increase in the
friendly alternatives – has become a ting attribute depends on the target price of air tickets.
focal point. This article explores the consumer segment (B2B vs consumer)
impact of passing the additional cost or and geography. Shipping industry
‘green premium’ of sustainable produc-
tion to customers/businesses and the Here is the detailed sector-wise The urgency of decarbonised shipping
pivotal role of innovation, fi nancing, analysis of the green premiums by The shipping industry was responsi-
and public policy in reducing these current estimates: ble for emitting 0.86-Gt CO e in 2022,
2
premiums. accounting for approximately 2% of
Aviation industry global GHG emissions. A transition to
INTRODUCTION clean, hydrogen-based zero-emission
In 2021, Microsoft co-founder Bill The urgency of sustainable aviation fuels (ZEF) such as e-methanol and
Gates authored ‘How to Avoid a Cli- The aviation industry’s contribution e-ammonia presents a promising pathway
mate Disaster’, a comprehensive plan to global GHG emissions, at around to nearly eliminate emissions from this
for reducing global net CO emis- 2% in 2022, has spurred the search for sector. However, adopting these fuels
2
sions to prevent a climate catastrophe. sustainable alternatives. Sustainable faces signifi cant challenges, particularly
Among the key concepts he discusses aviation fuels (SAF), while promising, in costs and the necessary infrastruc-
is the ‘green premium’, which refers to faces challenges in adoption due to its ture.
the additional cost associated with pro- limited scale, high costs, and supply
ducing goods or services in a pollution- chain complexities. The green premium
free or environmentally-friendly way. Green shipping technologies such
This premium represents the price tag The green premium as biofuels and liquefi ed natural gas
for choosing a greener option. SAF, as noted, carry higher premi- (LNG) add a premium of around 25-
ums than traditional jet fuel. The B2B 50% compared to conventional fuel-
Early signals of market demand for green premium for SAF can be 3x times based shipping operations. Adopting
low-carbon technologies are emerging, the current fossil jet fuel price, depend- fully sustainable fuels like green am-
monia or hydrogen may increase these
costs even more. The consumer-facing
(B2C) premiumvaries depending on the
shipping company’s pricing strategies,
but it often ranges from 2-5% per pro-
duct on the goods transported.

Iron and steel industry
Fig. 1: B2B and B2C green premium in the aviation industry The urgency of decarbonised iron
and steel
In 2022, the steel industry was re-
sponsible for approximately 3.7-Gt-
CO e, accounting for 8% of global
2
GHG emissions. Clean hydrogen and
carbon capture, utilisation, and storage
(CCUS) can decarbonise primary steel.
Secondary steel production can achieve
Fig. 2: B2B and B2C green premium in the shipping industry decarbonisation through Electric Arc

Chemical Weekly November 5, 2024 181

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