Part 1 of 2

Commodities are hidden forces that rule our lives and our economy. They are designed to never be thought about, and frankly, only enter our consciousness when 1) we lack them or 2) when prices spike. A commodity is a raw material or basic good that is essentially the same regardless of who produces it. The bland, undifferentiated nature of a commodity is exactly why they are the hidden driver of economic prosperity. Gasoline, wheat, water, natural gas, electricity, eggs, corn, cotton, steel, copper, timber, cement, hydrogen, AA batteries, light bulbs and the list could go on for pages. Most of the building blocks of our diet, our livelihoods, our cities, our society are built on the back of undifferentiated commodities. Given companies struggle to compete on differentiation, the formula for commodities has been clear and perfected for 100s of years…drive costs down per unit produced and scale up just enough to meet demand without oversupplying the market and driving down prices. The world is exceptionally good at this formula.

The hidden dark side of this economic model is that our environmental impact is also equally built on the back of commodities. More than 90% of our annual greenhouse gas emissions (GHG) come from the production or consumption of commodities (Figure 1). Much of that coming from the energy we use to fuel our society. Said another way, more than 90% of our emissions come from things that we do not differentiate, and we have historically not cared about how they are produced. Steel is steel. Timber is timber. Beef is beef. The fact that we have turned all these building blocks of society into commodities, also by definition, means we have not recognized any cost to their negative externalities, i.e., their emissions and impact on the planet. If the world is exceptionally good at the economics of scaling commodities, it is conversely bad at accounting for their impact on the planet (and often our health in the case of pollution) in the economic formula.

Figure 1. % of Global Greenhouse Gas Emissions by Sector

If we are going to move toward a net zero society in any material way, we must decommoditize commodities. We must start to care about how the core building blocks of society are sourced and manufactured. We must care about their impact on the planet and our health. We must find a way to re-engineer the economic formula and account for the cost of these negative externalities.

In today’s green economy, the reality is that cement is not cement. Electricity is not electricity. There are ways of producing electricity that are incredibly emissions intensive (coal), much less intensive (natural gas), and nearly emissions free (solar, wind, nuclear, hydro, geothermal). The electrons are the same. The environmental cost, technology cost, human cost, scalability, regional accessibility, application applicability of each are not. Electrons are highly differentiated, not a bland commodity. The story is the same across nearly every commodity.

The process of decommoditizing commodities has actually been happening for years, all be it slowly. If I look back to my childhood in the 1980’s, the way we purchased food looks nothing like it does for my kids today. We just bought eggs, ground beef, tomatoes, and milk. There was little differentiation. My kids, however, now have a totally different relationship with food. We look for organic. We look for eggs that come from local farms, are cage free and free range. We prioritize local, in season food. We are fortunate to be able to shop this way and as a consumer we are happy to assign a value, in the form of a price, to what we view as important for our food and our planet.

The key enabler to turning food and other commodities into differentiated goods is transparency. Is it a perfect solution? Not by a long shot. Organic standards, managed by the USDA, give customers the confidence to know what they are buying and allows the market to assign value to the label (critically important), but at the same time is overly burdensome and costly for producers to comply with. Incredibly important issues like food waste in our supply chain are still almost completely opaque and therefore not adequately being addressed. The price of the highest quality, most nutritious ingredients are still too high. It’s a work in progress, but transparency is the key ingredient!

I can come up with a small handful of other examples beyond food and electricity, but overall, we still have essentially no transparency into the environmental footprint of most commodities and no way for consumers to choose cleaner, lower impact alternatives at any material scale. This is despite appreciable innovation in driving down costs and increasing output of commodities (we are exceptional at this and it is a real benefit to society).

Change is in the air. The wave of decommoditizing commodities is coming and the market is speaking more loudly each day. The largest investors in the world are voting with their money (i.e. BlackRock), influencing companies and their boards to get serious about environmental disclosures and taking actions. Natural Gas producers are investing heavily in leak sensing, drilling electrification, and equipment monitoring to certify their natural gas as lower emissions. Zara is partnering with Lanza Tech to produce clothing from recycled CO2 converted into raw material feedstocks. Alaska Air is working with Twelve to test Sustainable Aviation Fuel made from CO2. Pelican is working with Lyten on lighter weight, lower materials intensity polyethylene composites. The list is exploding. Walk into any industry conference for mining, oil and gas, utilities, batteries, manufacturing, travel, automotive or agriculture and one of the top topics, if not the only topic, will be on how to make that industry more sustainable.

We cannot get to net zero without decommoditizing our vast, global commodity industries. It is a necessary step and it’s a step that industry, regulators, and consumers are starting to embrace. It is shifting contentious conversations, likes ones on debating renewables vs natural gas, into collaborative conversations on transparency. As we improve and scale environmental transparency, the markets will have the information to value (i.e. price) commodities, taking into account their environmental footprint. Then we have the formula for markets and consumers to vote with their money and for companies to innovate and scale lower emission technologies.

At Lyten, we are one of a wave of emerging companies, developing a wide range of new technologies with the objective of lowering, and in some cases fully offsetting, the environmental impact of the commodities that make up more than 90% of the planet’s annual greenhouse gas emissions. Our piece of the puzzle is advanced materials. We convert methane into a decarbonizing material called Lyten 3D Graphene™ that will infuse commodities and products you use every day with properties like improved strength, reduced weight, and enhanced conductivity. We are currently using 3D Graphene to 1) develop higher energy density, lower cost and lower carbon footprint batteries; 2) to strengthen and lightweight composites and plastics, removing up to 50% of the required material in the process; and 3) to enable ultra-high sensitivity and selectivity chemical vapor sensors to identify and track emissions and air quality. And those applications are just the start as we work to decarbonize our commodity markets.

In part 1 we have hopefully built the case for and piqued your interest in why decommoditizing our commodity markets is so critical to achieving net zero. In Part 2 of this series, we will discuss what are the necessary ingredients to accelerate the process of building scalable markets for lower environmental impact commodities. We will hit on measurement, reporting, regulations, carbon offsets, and highlight some of our peer innovators, that like Lyten, are working as fast as they can on the necessary technologies to transform our commodity markets and do it a price point that can scale.


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