LowEmissionAsphalt-136pg-WhitePaper-May2023

P a g e | 28 ExxonMobil’s current capex budget is 60% allocated to low carbon ventures with little or no near-term revenue and EBIT opportunities owing, in large part, to environmental politics, regulation, and ESG influence. This is contributing to current runaway inflation (an issue for a separate discussion another time, perhaps). 49 Amazon has an active carbon neutral verification program for its vendors 50 and Microsoft charges its operating divisions a carbon fee. 51 De facto carbon offsets driven both by financial and regulatory incentive. Aggressive firms including Stripe 52 and Shopify 53 have begun to finance early-stage carbon capture technologies through forward agreements for future carbon reduction credit capacity. Under such structures, the “start - up” exchanges credit capacity from future operations to these buyers for initially non-dilutive, yet urgent capital. The risk to the buyer is non delivery, of course. The risk to the seller is that the heavily discounted present price for the expected credit may prove low in the future and hence hinder profitability (equity dilution by another means). It is, however, a well thought out form of risk capital we view as value-add towards the need to accelerate a more efficient carbon allowance market. Industries that are intractable net polluters are keen to fund environmentally focused projects as corporate boards and managers heed the demands of rapidly changing regulations and their own investor base. They increasingly need high value, local impact offsets. The basic types of carbon instruments: Verified Emissions Reductions (VER) – are exchanged within the unregulated voluntary market over an exchange, including decentralized, that facilitates trade between buyers and sellers of carbon credits from GHG emissions reduction, removal, and avoidance schemes. Certified Emissions Reductions (CER) – are carbon credits created within a regulated compliance market, but also can be acquired voluntarily. 49 ESG Funds Are Having a Lousy Year, Blame It on What They Don’t Own , Barron’s , March 2022. 50 Amazon.com: Amazon Aware . 51 Microsoft Global Carbon Fee | Global | UNFCCC 52 Stripe Climate . 53 Carbon Removal Application Process | Shopify's Sustainability Fund .