Matthew Pech, Finance and Control Director of AW-Energy Oy, explains how the EU’s proposed sustainability legislation poses hydrogen manufacturers a problem – if grid electricity is used in production, it will not be considered green. So, what’s the solution? Matthew explains why industry needs to consider wave power as an off grid alternative
The climate crisis is all around us. There is more carbon dioxide in our atmosphere right now than at any previous point in human history. Global temperatures are warming as a result, the effects of which are both alarming and widespread.
Oceans globally have been rising at the fastest rate in 3,000 years as polar ice caps continue to melt, resulting in impacts such as the city of Jakarta sinking roughly 25 centimetres every year. At the same time, average wildlife populations around the world have dropped 60 percent in little over 40 years, owing to deforestation and fundamental habitat changes to ecosystems such as unpredictable weather patterns. The 2010s were the hottest decade on record, evidenced by 2019 which saw 99 tropical storms and 6.7 million people being displaced from their homes because of the rise in the number of natural disasters.
Statistics like these speak for themselves – climate change is no longer a problem that can be ignored and, without serious action, the world as we know it will be fundamentally altered for the worse.
A sustainable finance taxonomy
Since the adoption of the landmark Paris Agreement in 2015, momentum in the fight against global warming has been building. The tide is clearly turning, and the European Union’s plans to introduce a sustainable finance taxonomy is the latest in a long line of strides towards a cleaner future.
Proposed by the EU Technical Expert Group on Finance (EU TEG), the goal of the sustainable finance taxonomy is to make the EU’s climate targets more practical and attainable.
There will, of course, be significant implications should it be instated – a significant reason as to why the proposal has been shrouded by some degree of controversy.
The hydrogen production conundrum
In a recent letter sent to EU climate chief Frans Timmermans, a coalition of electricity firms and industrialists expressed their concerns about the specific level at which the emission threshold may be set.
Why? The draft threshold would deem hydrogen produced from current grid electricity not green, even in countries which have a relatively low carbon-intensive electricity mix such as France and Nordic countries – examples cited by the coalition.
The global growth of sustainable investing and of funds with an environmental, social and governance (ESG) mandate means there is an ever-increasing pool of finances available for investment targets that meet sustainability criteria. In early 2020, the International Institute for Sustainable Development (IISD) predicted that by 2025 there would be over $80 trillion of global assets with an ESG mandate, up from $30 trillion in 2018.
Technologies and projects which can clearly show they meet the criteria of the taxonomy will more easily be able to attract such financing – both public and private. Meanwhile, some projects which are currently labelled as sustainable will be shown to not meet the criteria, and funds may shift across to other projects which do fit under the threshold.
With sustainability legislation continuing to tighten it will only be a matter of time before the next hike in requirements is introduced as climate change countermeasures ramp up. And, in the case of those companies using electricity from the power grid in the production of hydrogen, the disadvantages are clear. So what are the alternative solutions?
Discover why early adoption of current off-grid energy is worth serious consideration by reading my full article.