Carbon fibre is a material perfectly suited to electric vehicles. Manufactured from long strands of carbon blended with plastic resin (think fibreglass, with carbon replacing the glass), it’s far stronger than steel – up to 10 times as strong – and much lighter. Plus it doesn’t corrode. Owing to these advantages, carbon fibre has been coveted by car makers since it was first introduced in the early 1980s. Because of its steep price, though, it has until recently been used primarily in racing cars and next-generation prototypes. (Carbon fibre costs as much as US$7 per pound wholesale, compared to about 40 cents per pound for steel or 80 cents for aluminum.) The explosive growth in electric vehicle sales, however, creates a unique and potentially enormous market for carbon fibre – especially if the manufacturing costs of the stuff can be slashed somehow.

And this is where Alberta’s oil sands come in. Alberta produces nearly three million barrels of bitumen from the oil sands each day – heavy oil in need of expensive and energy-intensive processing to be turned into transportation fuel. The industry faces an uncertain and perilous future as the high cost and large carbon footprint of its product becomes harder and harder to sell as demand for oil begins to level off and eventually decline, in part due to the rise of emissions-free technologies such as electric cars. Might there be a place for bitumen instead in the carbon-fibre frames of those vehicles?

This was the question Alberta Innovates, the Alberta government’s research arm, aimed to answer with its Bitumen Beyond Combustion program, launched three years ago to begin exploring new commercial uses for bitumen. The program’s research identified a range of potential new markets, including asphalt for paving and the production of vanadium, a metal present in relatively abundant quantities in bitumen and in increasing demand as a component in new battery technology. But nothing else so far has shown the “major mid- to long-term potential” that carbon fibre has. What’s more, its greatest weakness as a transport fuel – its heaviness, owing to the very large carbon molecules that comprise it – becomes an asset.

“Bitumen is a bigger molecule, and you are competing with lighter oils as transportation fuel,” John Zhou, vice president of clean energy at Alberta Innovates, explains. “You are always at a disadvantage. But when you are making big molecules like carbon fibre, that high carbon in the bitumen compared with other oil becomes a competitive advantage.”

To transform bitumen into the lighter crude oils that are refined into gasoline and transportation fuels, oil sands operations either add a lighter petroleum product called diluent to their bitumen to make it flow down a pipeline to a distant heavy oil refinery or use costly, energy-intensive upgrading facilities that “crack” the bitumen into smaller molecules, turning it into synthetic crude. In recent years, oil sands companies have been developing “partial upgrading” technology, which cracks off a smaller piece of the bitumen molecule and allows it to be shipped without diluent. One of the heavy carbon molecules cracked off the raw bitumen is called asphaltene, and it shows enormous promise as a feedstock for producing the long carbon fibres that go into the lightweight, ultra-strong carbon-fibre panels used in cars like the Toyota Prius Prime.

Asphaltenes make up around 15 to 18% of a typical barrel of bitumen. Produce 100 barrels of bitumen and send them through a partial upgrader, in other words, and you have 15 to 18 barrels of asphaltene on your hands. The world’s current supply of carbon fibre is about 100,000 tonnes per year, a total that oil sands operators could easily exceed with the widespread use of partial upgrading.

“The supply is not the issue,” Zhou says. The big question is whether carbon fibre produced from bitumen could cut carbon fibre costs to the point where the material made sense not just for a flagship Prius but for Honda Civics and Ford Fusions. “If you can reduce the cost of carbon fibre by 50% or more, you will have a chance to get into medium-priced vehicles. So you will open up a much greater market.”

It’s an enticing possibility, especially for an oil sands industry battered by low prices, fleeing investment capital and a barrage of criticism over its expanding greenhouse gas emissions and other environmental impacts. “It’s early days in looking at the potential for carbon fibre production from bitumen; however, we think there’s value in looking at different ways of optimizing our barrels – value in the traditional sense and in potential environmental benefits,” says Carrie Fanai, who is leading Suncor’s participation in the carbon fibre project at Alberta Innovates. With partial upgrading technology perhaps only three years away from commercial-scale operation, oil sands companies will soon have stronger motivation to find uses for the by-products of bitumen processing.

“When you are making big molecules like carbon fibre, that high carbon in the bitumen becomes a competitive advantage.”

–John Zhou, Alberta Innovates

The carbon fibre market, though, remains a young and volatile one, and that means any plans regarding its future role come freighted with caveats. Cecilia Gee, an analyst with Lux Research who tracks the carbon fibre market, explains that carbon fibre is at present a niche product, and many factors beyond the price and availability of the raw material, in the automotive market and beyond, will determine future demand. At present, the use of carbon fibre in EVs, for example, is limited by a lack of standardized production and supply chain certainty, and as much as 70% of the cost associated with using carbon fibre comes from the high price of manufacturing and installing components made from carbon fibre – not from the cost of the raw material the oil sands might one day supply. Meanwhile, plummeting battery prices are taking some of the pressure off EV manufacturers to pay a premium to reduce the weight of their vehicles. BMW, for example, recently announced it will no longer be using carbon fibre in some of its electric cars as it expands production.

“Is there an opportunity for the oil sands? Yes,” Gee says. “Are there a lot of unknowns about that future? Also yes. But if they have the opportunity to make things more circular, more green, why not?”

In any case, Alberta’s carbon fibre industry is a long way from supplying frames for hundreds of thousands of Civics; at present, it’s not even an industry. In the wake of the Bitumen Beyond Combustion program’s final report in January 2018, Alberta Innovates freed up $2 million in seed money for a handful of initiatives, one of which is a laboratory at the University of Alberta now working on developing an industrial process for converting bitumen-derived asphaltenes into carbon fibre. The early results have been so promising that Alberta Innovates has already connected the lab with industry heavyweights like BASF and Mitsubishi Chemical. A representative from SGL, a market leader in carbon fibre manufacturing, has paid multiple visits to the lab and has made plans to connect the researchers with similar projects at the Oak Ridge National Laboratory, the U.S. Department of Energy’s top energy research lab.

These are, to be sure, very early days. There remain many hurdles yet to clear. But presuming that partial upgrading expands at the rate Zhou and his colleagues in the oil sands hope it does and that the lab research on bitumen-derived carbon fibre continues apace, there could be viable commercial-scale carbon fibre production in Alberta by around 2030 – which just so happens to be around the time experts predict electric vehicle sales will roar into overdrive worldwide.

Zhou concedes that from an investor’s point of view, the project is very much in the high-risk, high-reward category. At a recent funding meeting with federal officials in Ottawa, he compared it to the $50 million the government recently invested in General Fusion, a Vancouver start-up working on nuclear fusion reactors. Still, the long timeline and uncertain payoff don’t worry Zhou much. “If in 10 to 15 years we can create a multi-billion-dollar business in Alberta, I will be very happy,” he says. Significantly less time, come to think of it, than it took bitumen production to go from Karl Clark’s lab at the University of Alberta to the first mine site north of Fort McMurray.

Chris Turner’s most recent book is The Patch: The People, Pipelines, and Politics of the Oil Sands.

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Volkswagen is Germany’s largest automaker and runs neck-and-neck with Toyota to be the world’s largest automobile company. In addition to its lower priced VW models, the company also owns brands like Audi, Bugatti, and Porsche. (Yes, this article is a great excuse to spend time ogling the new electric Porsche Taycan.)

The company took a major hit when it was caught cheating by the U.S. Environmental Protection Agency. The scandal cost VW €26 billion, and there may be more penalties to come. Volkswagen is still under investigation by the U.S. Securities and Exchange Commission, and former CEO  Martin Winterkorn was charged with fraud in Germany. Investors should be cautious—more bad news is almost surely on the way.

It’s understandable that Volkswagen wants to turn the page on this story, and it seems like its strategy is to leap frog over internal combustion engines by investing €30 billion over the next four years to launch fifty different electric cars. As CEO Dr. Herbert Diess said in the company’s 2018 sustainability report, “On the road to emission-free mobility, we are putting all our weight behind the electric car.”

VW is betting that the future of mobility is electric, and hoping that people will forget about their dirty diesel history. We got a taste of the new branding with this week’s unveiling of an updated logo and the new ID.3 electric model. I’m not a car expert, but it looks pretty good in this early review. European deliveries will start in the middle of next year in with a base model priced at under €30,000. By comparison, the Tesla 3 starts at €57,000.

If you put the scandal aside, Volkswagen’s underlying financial situation looks fairly good. They’ve had growth in the top line (revenues) and the bottom line (profit) each year since 2015. The stock hasn’t been doing well, so investors looking to bet on electric vehicles might do better to invest in Volkswagen rather than pricey Tesla stock. But some people just won’t forgive Volkswagen for its past sins, so let’s take a look at Toyota, Volkswagen’s main rival.

Toyota launched the first Prius hybrid in 1997, and it has dominated the market for hybrid cars ever since. But it’s no surprise that you’ve never heard of a fully electric Toyota because it doesn’t exist. Toyota has made a strategic decision to sell hybrid vehicles for now and to develop zero emission hydrogen fuel cell vehicles in the future.

My concern with hydrogen fuel cells is that they require the construction of a whole new distribution network. Gas stations need to be replaced by hydrogen stations, whereas electric vehicles can be plugged in to the existing grid. This makes perfect sense for centralized vehicles, like buses and forklifts, but it’s hard to imagine that it’ll become mass market anytime soon. Really, it comes down to how rapidly consumers start adopting fully electric vehicles. Toyota will be behind the curve if we see exponential growth, but would likely win the long game if the internal combustion engine ends up experiencing a long, slow death or hydrogen fuel cells emerge as the most popular zero emission option.

While Toyota was a pioneer of hybrid electrics, and Volkswagen is betting big on the future of all-electric, both companies are trying to make sure a switch away from internal combustion vehicles doesn’t happen too quickly. They’d like to squeeze out as much profit as possible from the billions they have poured into their internal combustion production lines before they become obsolete.

According to InfluenceMap, a U.K.-based non-profit that maps the extent to which corporations influence climate policy, Toyota is the bigger obstacle to progressive policies. The company scored a D–, which is at the bottom end of the range of major automakers. InfluenceMap cited Toyota’s apparent support of the U.S. Administration roll back of fuel efficiency and greenhouse gas standards, its opposition to phasing out conventional vehicles in India and the U.K., and its lack of support for zero-emission vehicle mandates in China and the EU.

Volkswagen is not much better. The company scored a D+, which is the top end of the range of automakers. According to InfluenceMap, the company didn’t appear ready to support more ambitious CO2 targets in Europe despite a 2017 leaked internal document suggesting that it was. Conversely, in 2018, Diess strongly criticized EU proposals to tighten vehicle CO2 targets for 2030, arguing that they would negatively impact the sector’s international competitiveness. In 2018, Diess also warned against an ambitious transition towards electric vehicles in the transport sector and opposed bans on specific vehicle types, namely diesel.

Toyota’s financial statements are, understandably, in a better place than Volkswagen’s right now. Investors have seen more growth and less volatility with no major scandals beyond the odd product recall. With a higher clean revenue score, Toyota wins the Sustainable Stock Showdown for now, but Volkswagen is picking up speed in the race to all-electric vehicles. I’ll be keeping a close watch on these companies. If the market shifts quickly towards electric vehicles, Toyota could start eating Volkswagen’s zero-emissions dust.

Beta is a measure of a stock’s volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. Lower beta means less risk.

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Tim Nash blogs as The Sustainable Economist and is the founder of Good Investing.

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