Europe

Ignore Gas, Jump to Green Hydrogen, EU Told

New report outlines policy recommendations to facilitate investment in renewable energy transition. 

The EU must “leapfrog” from fossil fuels to renewable energy to stay on track with a 1.5°C temperature pathway, according to a new report by the NGO Climate Bonds Initiative.  

The report outlines the risks to the EU’s climate transition if new fossil gas infrastructure and assets continue to be developed and invested in, highlighting low-carbon or ‘green’ hydrogen expansion as a more sustainable alternative.  

“The energy transition will be met not with incremental change but with the rapid expansion of renewable energy, energy efficiency gains and low-carbon hydrogen,” Climate Bonds said. 

Fossil gas is mostly made from methane, which has an increased negative impact on the environment in the shorter term. It is the second most abundant anthropogenic hydrocarbon in the world and accounts for 25% of global emissions.  

In the EU, fossil gas accounts for 22% of energy, the report noted. Ninety percent of this is imported, with 50% coming from Russia. A number of European countries have announced new investments in gas infrastructure as part of efforts to eliminate reliance on Russian gas, as a short-term response to the the country’s invasion of Ukraine.  

Further, the EU has identified gas as a necessary transition fuel in its environmental taxonomy, including it alongside nuclear energy in a complementary delegated act following aggressive lobbying efforts from European oil and gas majors.  

“Gas will never be a transition fuel: gas-fired power needs to be removed from the list of transition activities,” Climate Bonds said. 

Policymakers need to instead better define the benefits of credible technologies like hydrogen in place of fossil gas through taxonomies and standards, issuing guidance on interim steps to take between now and 2050, the report noted.  

“Even conservative estimates expect hydrogen to grow from 2% to 13-14% of the EU energy mix. This will need rapid scaling of low-carbon hydrogen. Global hydrogen investment [from] 2020-50 could total US$15 trillion,” Climate Bonds said. 

The report further warns against blending hydrogen with gas by retrofitting existing infrastructure, arguing that it will realise limited emissions reductions, while increasing the risk of stranded assets. Further, hydrogen should be deployed in sectors where it will have the biggest near-term impact, such as steel production, where it is estimated to be able to reduce CO2 emissions by 98%.

Hydrogen-focused policy 

As part of the EU’s REPowerEU initiative, which aims to decrease dependence on Russian gas by accelerating the transition to renewable energy and bolstering energy efficiency, the European Commission has pledged to fulfil the implementation of the EU Hydrogen Strategy while “further increasing the European ambitions for renewable hydrogen”. 

Published in 2020, the original EU Hydrogen Strategy committed to installing at least six gigawatts (GW) of renewable hydrogen electrolysers and the production of up to one million tonnes of renewable hydrogen between 2020 and 2024.  

The Climate Bonds report said large-scale installation of grid-connected electrolysers will need to be linked to new renewable energy generation. “Otherwise, they will increase fossil-powered electricity demand, hindering grid decarbonisation,” it added.  

In a staff working document accompanying the REPowerEU plan, the Commission outlined a ‘hydrogen accelerator’ strategy, which aims to more rapidly scale up the deployment of renewable hydrogen, producing ten million tonnes of renewable hydrogen in the EU by 2030 and importing an additional ten million tonnes from other countries.  

This will require an additional 90-150 GW of electrolysis on top of the 30-50 GW required under existing ‘Fit for 55’ proposals.  

“Roadmaps and strategies provide a market signal, increasing investor confidence while also shaping the growth trajectory of an industry, ensuring policy and infrastructure frameworks are in place to support the new industry,” the Climate Bonds report said.

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