To achieve a complete transformation of the global energy system and deliver on global climate goals by 2050, it is critical that the world moves away from unabated fossil energy sources to zero-carbon alternatives across all sectors.
As we carve a path forward towards global decarbonization, we need a portfolio of options to deliver on climate goals. This means all technologies must be on the table so that we can effectively and efficiently decarbonize each component of the energy system and reduce the energy transition risks. Clean, dispatchable, and affordable electricity, zero-carbon fuels, and other innovations and technologies must be in the toolkit and brought into the policy conversation, so that clear goals and activities can be implemented to progress all of the needed climate technologies.
In terms of global energy supply today, the world is not on track to achieve stated climate goals and emissions continue to increase. Fossil energy sources still provide 78.5% of the global economy’s primary energy demand. Policymakers have largely been focused on decarbonizing the electric grid, and reducing emissions from transport through electrification and energy efficiency. However, this will not be enough. Full decarbonization of transport and heavy industry must also be addressed.
Today, fuels are an important part of the global energy system, and this will likely remain the case for several decades, as they are needed for the parts of the system that are the most challenging to change: heavy industry and heavy transport. This means switching from fossil fuels to decarbonized alternatives, such as hydrogen and ammonia produced through climate-beneficial pathways. CATF focuses on these since they contain no carbon molecules, making them ‘zero-carbon’ at the point of use and – when compared to batteries – these fuels are very energy dense.
The importance of fuels
The need for advanced low-carbon energy beyond electricity is widely understood. The energy transition literature shows that the energy transition will involve the rapid scaling of an array of climate technologies. For example, the International Energy Agency (IEA) includes all fuels and technologies to achieve global net zero emissions by 2050.
In this scenario the share of (decarbonized) electricity in the global final energy use jumps from 20% in 2020 to 50% in 2050. The total contribution of fuels drops over time but decarbonized fuels still play a very significant role in 2050, and hydrogen-based fuels form a critical component of the mix.
In fact, future energy scenarios project an almost fivefold increase in global hydrogen demand from today’s levels. The NZE IEA scenario expects to see growth from 90 Mt/y to 530 Mt/y by 2050, including hydrogen from electricity and from natural gas with carbon capture and storage (with a split of 62/38% respectively in 2050), as both will be needed to meet the scale of decarbonized energy supply.
Global fuel consumption is largely driven by the transportation sector, industrial plants, and power plants. Decarbonizing these sectors requires a combination of technologies and methods. Different countries and sectors are likely to choose different ‘best fit’ solutions for their own circumstances.
Switching to zero-carbon fuels, like hydrogen and ammonia, is considered a critical component of decarbonization pathways, and in 2050, it will contribute to more than 20% of annual global emissions reduction. The consumption of hydrogen and ammonia should see significant growth in several sectors, as these zero-carbon fuels are crucial in difficult-to-electrify sectors, such as heavy industry and heavy transport.
Optionality will speed up the transition to zero-carbon fuels
The European Union (EU) has set itself a 55% emissions reduction target by 2030. In 2019 it had achieved 24% reduction since 1990. While industrial emissions have already plateaued for over a decade, the emissions of key sectors which rely heavily on fuels, like the transport sector, have actually increased.
Within the EU, hydrogen produced by electrolysers powered with renewable electricity (aka ‘green’ hydrogen) remains the primary focus. While this is a laudable strategy that should be supported, it will not replace fossil fuels fast enough to avert the worst effects of climate change. Europe is in a race to build renewables fast enough to decarbonize the electricity grid, so it may not have the additional renewable electricity needed to produce meaningful volumes of ‘green hydrogen’ in the near term.
There are many challenges associated with the alternative option: producing hydrogen from natural gas with carbon capture and storage, often referred to as ‘blue’ or, in the nomenclature of the European Commission, ‘low-carbon’ hydrogen.
First and foremost, there is the potential for a significant amount of upstream emissions in the form of methane. Scientists estimate that methane can dominate the emissions associated with blue hydrogen, even at high carbon capture rates, as you can see from the chart below.
Methane is 80x more potent as a greenhouse gas than CO2 on a 20-year GWP timescale and is leaked and vented throughout the natural fossil gas supply chain. Eliminating methane emissions is perhaps the single most pressing climate action of this decade because of its massive short-term impact on warming. Happily, leading research shows that significant reductions are attainable with technologies that are already available, at low or negative costs. These changes must be implemented at a global level, whether or not natural gas is being used to produce blue hydrogen.
Second, there are inevitable CO2 emissions involved when extracting hydrogen from natural gas which must be accounted for. To address this, low-carbon hydrogen plants need to adopt carbon capture and storage technology, preventing carbon dioxide from entering the atmosphere by storing it permanently in deep underground geologic formations. Carbon capture and storage has been operating safely and effectively for many years now, and hydrogen production facilities achieving 90% overall carbon capture or more can be built today using commercial technology.
With much lower methane leak rates and the deployment of carbon capture units with high capture rates, it is possible to produce hydrogen with a 70% or more reduction in greenhouse gas emissions compared to unabated production of hydrogen from natural gas reforming, which accounts for the majority of hydrogen produced today. However, such capture rates have yet to be proven on a large scale. As with any other new climate technology, there are risks that the promised emissions reductions will not materialize, and several groups have resisted attempts to bring carbon capture and storage into the technology mix because of said risks. CATF is pushing policymakers to adopt strict standards for what qualifies as ‘low-carbon hydrogen’ to drive emissions down as soon as possible.
Hydrogen could allow high-emitting economies to become decarbonized economies
A major reason for having yet to see such capture rates demonstrated is that industry has not really deployed it at significant scale. While there is growth in carbon capture and storage activity, with more than 40 million tons of annual capture capacity now operational across the world, most fossil energy remains unabated.
Just 0.6% of the fossil based hydrogen produced today uses carbon capture and storage technology and even less is made using renewable electricity. Without the pressure from policies to increase the production of low-carbon hydrogen, producers have no reason to cut the emissions from the ‘grey’ hydrogen produced from fossil fuels, which we overwhelmingly use today.
Earlier this year, in a speech aimed at potential low-carbon fuel producers in neighboring countries, the Vice President of the European Commission, Frans Timmermans, stated that, “Europe is never going to be capable of producing its own hydrogen in sufficient quantities.” This typifies a growing understanding of the need for cross-border cooperation to speed up the transition to low-carbon hydrogen. Europe and Asia are likely to remain net importers, at least until 2050, and both regions must collaborate with potential exporters to reach the volumes their businesses and citizens will require.
Gulf countries, for example, currently export around 80% of their crude oil to Asia (13 million BPD), and crude oil flows to Asia are expected to increase further. Population growth and market demand must also be considered as we carve a path forward towards global decarbonization. 883 million Indian citizens are expected to join the ranks of the middle class in 2020 – 2030, the highest growth and highest contribution to Asian middle class growth. This offers a huge opportunity for collaboration around the zero-carbon fuels conversation.
Major producers of fossil fuels, such as those in the Middle East and North Africa (MENA) have significant advantages that could allow them to become clean energy providers and meet the diverse needs of many sectors and countries. CATF documented this opportunity in a landmark 2022 report, Poised to Lead: How the Middle East and North Africa Can Accelerate the Global Energy Transition.
In this new world, the Middle East could become a new hub for decarbonized fuels, cutting emissions from the production of fossil fuels while providing clean energy for industries that have seen the least movement towards climate goals over the past twenty years. This is the kind of win-win scenario that will help drive action at the global scale and CATF is committed to working across borders to make it happen.