Two Mergers and Future Alerts for Carbon Capture, Use Technologies and Gaming

TK Arun

Over the last week, there have been two big corporate mergers whose significance we would do well to appreciate.

›ExxonMobil’s acquisition of Pioneer Natural Resources, a shale oil biggie in the Permian Basin, for $59.5 billion.

›Microsoft’s acquisition of gaming giant Activision Blizzard for $68.7 billion, giving the tech giant access to an additional raft of popular games for its Xbox player.

The merger in the oil and gas space makes it clear that some energy majors do not expect oil and gas to go quietly into the night soon. They expect these fuels to remain viable and active long enough for the acquirer to make good on its giant investment. Other oil majors are scouting around for shale partners to acquire.

This does not mean that ExxonMobil is indifferent to its impact on climate change and stubbornly resists all efforts to go green. It claims to be the world’s largest capturer and storer of CO2. With the Inflation Reduction Act’s hundreds of billions of dollars of subsidy on offer for carbon-capture technologies and processes, we should expect to see the large oil companies turning into investors in innovative companies that try to capture carbon and use it as a resource for manufacturing materials for everyday use.

BP’s venture capital arm, BP Ventures, is one of the investors in CarbonFree, which uses captured carbon to make fine chemicals. LanzaTech, a Nasdaq-listed company that uses biotechnology to convert captured CO2 into the starting blocks for making synthetic fibre, is another example of new research that hopes to mine the air for the carbon that goes into a vast array of organic chemicals, including synthetic fuels.

The short point is that there is more than one way to combat climate change.

›Force developing countries like India to forgo a slice of potential growth to reduce emissions for the collective good.

›Make giant strides in sucking CO2 out of the air, more than is injected into it, to make a bigger impact on the climate than the reduction of fresh emissions can hope to achieve on its own.

Shale oil companies have an ace up their sleeve that is often ignored. They are masters of horizontal drilling, and pumping water into the holes drilled. This is necessary to extract oil from the porous rock called shale. But it is also useful for a technique of tapping geothermal energy: you drill vertically down to reach a layer of hot rocks, and then drill horizontally around to enlarge the area of heat transfer, push water in and get steam out, to turn a turbine and produce power.

After the Joe Biden administration successfully pushed his Inflation Reduction Act through, with some $300 billion worth of green subsidies on offer, US oil companies, hitherto the most vigorous opponents of climate action, have become votaries of a reasonable price for the carbon they mitigate. This is a wholesome development.

India’s policy has shifted to demanding net negative emissions from the rich world by 2035 instead of net zero at a later date. Negative emissions call for carbon capture, ideally for use rather than storage. Where policy is still lacking is in incentivizing carbon capture and use technologies in India. India’s RE powerhouses should invest in carbon capture and use technologies, to become global leaders.

Microsoft’s acquisition of Activision Blizzard for $70 billion calls for a course correction in GoI’s attitude towards gaming companies. GoI is currently throttling India’s burgeoning gaming sector with extortionate tax demands. True, the gaming industry gasping for breath is real money gaming a tiny slice of the $200 billion-plus global gaming business. But some of these gaming companies were in a position to invest in other segments of gaming, using the financial security they derive from real-money gaming to expand into other games, where the money comes in from in-game purchases, product placement and merchandising, even when the game is free to acquire.

The GST Council decided to conflate games of skill with games of chance to label all real-money games, such as rummy or poker, as gambling or lottery, and levy GST on the entirety of the outlay a player makes, instead of only on the platform fee charged by the gaming company. This violates the distinction that the Supreme Court has repeatedly recognized and endorsed between games in which skill, rather than chance, dominates and pure games of chance.

In its submission to the Karnataka High Court, revenue claimed that any activity that entails an outlay of money, reward and uncertainty is gambling. In its broad sweep, this definition would damn any entrepreneurial activity as gambling. Dismissing this contention, the high court pointed out the difference between a player staking himself, relying on his skill, and an outside observer betting on or against him.

The GST Council ignored the luminous judgment of high court and treated all games as pure games of chance, taxing gaming companies on both the stake and the platform fee. Revenue has raised back tax demands worth multiples of the gaming industry turnover.
India’s gaming industry stares at the tax demand, much as the dinosaurs stared at the giant asteroid hurtling towards them one fateful day 65 million years ago, albeit with greater sentience.

Of course, there is a silver lining: no giant US megacorp would try to gulp down an Indian gaming star. The policy has banished Indian gaming stars.

The article was first published in The Economic Times as India must invest in carbon capture and use technologies and gaming

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organization.

Read more by the author: Sugar-Coated Illusions: The Flaws of Ethanol Fuel

Posted by Chaitanya Deshpande, Research Intern at IMPRI.



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  • TK Arun

    TK Arun is a Senior Journalist and Columnist based in Delhi.

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  • Chaitanya Vivek Deshpande