Thibaud Clisson is a senior ESG analyst at BNP Paribas Asset Management
How the pace of action to halt climate change must step up dramatically and the challenges and investment opportunities that may result. There is no silver bullet to tackling climate change. The likely answer to get to net-zero emissions by mid-century is to deploy everything we have, but faster.
First step: more electrification
Reducing consumption and increasing energy efficiency will play a large role. However, additional efforts are required: electricity grids need to be decarbonised and this low-carbon power needs to electrify as many sectors as possible.
For those areas that cannot be electrified, other technology will be needed. This means looking to alternative fuels or cap- turing carbon emissions, either directly from these activities or by removing CO2 from the atmosphere.
Great technological strides have been made in the electricity sector in recent decades. Targeted government support and public and private investment have made the price of wind and solar power more competitive than conventional gas-fired power in many locations1.
Carbon capture – targeted deployment
In hard-to-abate sectors, where electrification is not an option due to high heat requirements, carbon capture may be the solution. As the Energy Transition Commission outlines2, carbon capture and storage (CCS) and carbon capture and usage (CCU) should be used in industries that cannot decarbonise through electrification. CCU involves chemical techniques taking CO2 out of the flue gas of an industrial process for it to be transported underground.
For CCU to be a success, certain factors need to be addressed. The first is allocating enough resources to its development into a mature technology. Now, it is some way from being commercial.
While some power-sector pilot projects in North America are reportedly running effectively, concerns have been raised over the performance of others and, as a result, their returns are uncertain for investors.
The second is offering an effective means of valuing captured CO2. A worthwhile carbon price is one way to do this. Currently, many projects are deemed eco- nomically viable by using the captured CO2 to push greater amounts of oil out of the ground via a process that appears to be at odds with climate change targets. CCU has other uses: it can help develop low-carbon synthetic aviation fuel.
Blue and green hydrogen
Many Covid-19 green recovery plans target the hydrogen sector. While traditional means of producing hydrogen via steam methane reformation emit CO2, carbon capture can play a role. Integrating it into the process to capture the emissions creates blue hydrogen.
However, the overall efficiency of blue hydrogen in addition to the environmental concerns around CCS raised are problematic and do not make this solution the most promising one. Green hydrogen is a different beast. It enables the gas to act as somewhat of a vector for renewable electricity to be used in heating, transport or steel production.
Technological development needs to be faster
Despite forming a significant part of green recovery and climate change plans, a major acceleration is needed to bring green hydrogen and carbon capture tech- nologies up to speed.
There is a large opportunity: the Energy Transitions Commission estimates that to develop these technologies and others, such as bio-energy, to decarbonise aviation, heavy goods transport, buildings and agriculture, will require between $1trn and $2trn (£1.4trn) a year in investment. Targeting this effectively could see net zero being realised. We have the means to get there, but a lot of work is needed.
1) https://www.irena.org/publications/2020/Jun/Renewable- Power-Costs-in-2019
2) https://www.energy-transitions.org/wp-content/up- loads/2020/09/Making-Mission-Possible-Full-Report.pdf
To get to net zero, low-carbon generation needs to scale up significantly and electrifica- tion will be key, with hydrogen and CUS tack- ling the areas that can’t be electrified
