7 minute read 11 Nov 2021
Image of water drop on green leaf

Hydrogen’s back on the agenda – and this time it’s green

By Carmen Maria Sprus

Project Lead EYCarbon and Smart City | Switzerland

Develops sustainability strategies. Accompanies transformations. Connects decision-makers. Moderates conferences. Loves salsa & mountains.

7 minute read 11 Nov 2021

Global and local strategies are exploring the role of H2 in the decarbonization mission.

In brief
  • As global leaders commit to decarbonization, Switzerland remains on board despite the rejection of amendments to the CO2 Act
  • Although electrification has taken off in recent years, alternative green technology is still needed 
  • With the right approach, green hydrogen – as part of a circular economy – could fit the bill

The sense of urgency around climate change continues to accelerate as people and nature experience the effects of extreme weather, rising sea levels and pollution.

It’s a global crisis that has not gone unnoticed in Switzerland, despite some indications to the contrary. In June 2021, the Swiss public narrowly voted to reject the addition of ambitious climate protection targets in the Federal Act on the Reduction of Greenhouse Gas Emissions (CO2 Act). The initiative’s failure at the urns may be a blow to those hoping for more commitment at the political level.

At the same time, Switzerland participates actively in the global economy and the many multinationals based in the country will be heavily influenced by legislation and initiatives at the EU and international level. Legal requirements remain a powerful instrument to influence behavior. A second tool is “green taxes” – the umbrella term for incentives and penalties around environmental corporate behaviour. Governments can use these tools to shape companies’ sustainability strategies and encourage decarbonization efforts.

Regardless of the legal situation, most organizations recognize the significance of stakeholder expectations around decarbonization and sustainability. A particularly disruptive winter, unseasonable flooding and summer storm damage are likely to have strengthened many people’s resolve to demand more sustainable approaches.

Label* European Union Emissions Trading System (EU UTS)

8.9

The price increase in EUR per tonne of CO2 and the percentage decrease in overall emissions. (Source: Effective Carbon Rates 2021, OECD.)

For multinational corporations with significant emissions, carbon trading has become a valuable tool in balancing business needs and environmental responsibility.  As prices increase, so too does pressure to cut emissions. Permit prices under the EU UTS, which is linked to Switzerland’s own Emissions Trading System (ETS), increased by EUR 8.90 per tonne of CO2 between 2018 and 2019. At the same time, total emissions fell by 8.9%. CO2 price development is an important push factor in encouraging corporates to reduce their carbon footprint. The question is: how else can we make decarbonization more attractive on a wider scale?

One issue is that the negative environmental impact of fossil fuels is not yet reflected in the price. Green taxes could help steer both corporate and private consumers toward renewable energy as a key driver of decarbonization. As decarbonization efforts accelerate, though, it’s becoming clear that a multi-pronged approach will be needed to decarbonize all sectors. While electrification has gone mainstream in recent years, with electric vehicles perhaps the most visible example of transformation, it’s not feasible for all industries. That’s why many are pinning their hopes on hydrogen.

If produced appropriately, H2 is a clean and versatile energy carrier, which has a significant potential to reduce greenhouse gas emissions in hard-to-decarbonize sectors of the global energy system. It can be used directly in various applications, but also offers exciting potential to improve the stability of the overall power supply alongside renewable energies thanks to its high storage capacity and transportability. 

Even though applications using hydrogen technology produce zero end-point emissions, how “green” hydrogen is depends on how it’s made. Generally, we distinguish between three “shades” of H2. In an article , EY-Parthenon Partner Giacomo Chiavari explored the role of green hydrogen in global decarbonization, and explained the shades as follows:

  • Gray

    Hydrogen is classified as “gray” if it uses a fossil fuel as a source. 

  • Blue

    Hydrogen is labeled “blue” if carbon capture and storage (CCS) solutions are in place when using fossil fuels, to contain carbon emissions emitted from the production process.

    Some welcome blue hydrogen as an intermittent step where green hydrogen is not yet possible.

  • Green

    Hydrogen is defined as green if it is generated from water and renewable energy to power the electrolyzers, making the process completely green and sustainable. 

As a result, the decarbonizing power of hydrogen rests on its production method and on the natural resources that go into that process. Simonetta Sommaruga underlined the potential of hydrogen for Switzerland during the parliamentary debate of 17 June 2021 (on motion 20.4406).

Various circles see hydrogen as a key element in developing the decarbonization of our economy in the coming years. Switzerland has a lot to offer in this area. But we need a strategy.
Simonetta Sommaruga
Member of the Swiss Federal Council

The question is, how do we – as a country and international community – incorporate H2 intelligently into existing ecosystems? Industry investment, facilitated by supportive government policies, will enable the deployment of H2 technology at the scale required to realize its potential. In Switzerland, the Federal Council is on board – but it’s early days. In June 2021, Parliament voted to adopt the motion on creating a Green Hydrogen Strategy, which sets out the role and development of H2 in the Swiss energy landscape until 2035, 2050 and beyond.

We need a more pragmatic approach – one that prioritizes application of hydrogen where it makes most sense. Green H2 can serve as a fuel for transport and power, as heat for industrial use and buildings, as well as a feedstock for chemicals and products. But it shouldn’t be competing in applications where electrification is already doing the job well. At the same time, shifting toward a circular economy (CE) will be key in making decarbonization a success – and use of green H2 widespread.

Circular economy practices will not only be highly relevant in transitioning to a more sustainable future but may also offer attractive and additional revenue streams for many companies.
Carmen Sprus
Member of the EYCarbon Team

The ultimate goal of a circular economy is to decouple economic growth from the degradation of natural capital. This can be done in two ways, and ideally through a combination of the following:

  • Reducing utilization of finite resources
  • Reducing the negative impact of products and processes by decreasing emissions, waste and other negative environmental impacts (Palmié et. al, 2021).

CE practices are particularly relevant in the H2 debate as they can be used to identify additional production possibilities for green hydrogen. At the same time, they will be highly relevant in transitioning to a more sustainable future in Switzerland and around the world, while also offering an attractive (new) revenue stream for many companies. 

Summary

The future of the global economy is climate neutral. As carbon reduction targets are adopted worldwide, the drive to decarbonize the economy has triggered debate on different approaches and technologies. Green H2 – as a clean and versatile energy carrier – offers numerous applications to reduce carbon in hard-to-decarbonize sectors – particularly when combined with the principles of a circular economy.

About this article

By Carmen Maria Sprus

Project Lead EYCarbon and Smart City | Switzerland

Develops sustainability strategies. Accompanies transformations. Connects decision-makers. Moderates conferences. Loves salsa & mountains.