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You are here: Home / Archives for Decarbonisation

18 November 2020 By David McEwen

Climate Litigation – An Expanding Risk for Business

With compelling evidence that even 1.5 degrees of global warming will mean suffering for millions, climate activism is heading to the courtroom.

Photo by Bill Oxford on Unsplash

Climate activists are on the prowl. Armed with not for profit law firms they are becoming increasingly creative in their attacks on governments and business. During 2020 in Australia alone, there have been dozens of cases lodged, often aimed at halting or challenging government approvals of private sector projects. Indeed, Australia has one of the highest rates of climate litigation outside of the United States. [1]

As legislative compliance avenues have been exhausted, activists have increasingly moved to human rights and common law challenges. A good example of the latter is Sharma et al v. the Minister for the Environment, which invokes the Minister’s duty of care for young people to attempt to prevent approval of a thermal coal mine extension. Another is O’Donnell v. Commonwealth, which alleges that the Australian government has “…breached its duty of disclosure and misled and deceived investors in failing to disclose” climate risks related to its issuance of government bond. And one of the most famous is the Urgenda case in the Netherlands, which has forced the government to significantly up the ante on its emission reduction targets. 

Of course, a growing number of fossil fuel firms have been directly sued for their projects’ environmental harm. Not for profit law firms such as the Environmental Defenders Office, Environmental Justice Australia and Equity Generation Lawyers have been busy progressing such cases. This includes a landmark case applying new Queensland Human Rights legislation, challenging the state’s Land Court to reject Clive Palmer’s proposed Waratah coal mine near the Adani Carmichael project in the Galilee Basin.

It’s not just governments facing the brunt of the law. Superannuation funds and banks have found themselves under attack for failing to consider climate risks in their investing and lending activities. Similar to the O’Donnell case, McVeigh v. Retail Employees Superannuation Trust (REST, lodged in 2018) involved a member of the fund challenging the manager on its failure to disclose or address climate risks. In early November it was settled just before court proceedings were due to commence, with REST agreeing to improve its climate risk assessment and disclosure, along with measurement of the emissions intensity of its portfolio and a realignment to achieve carbon neutrality for the fund by 2050. While not creating a legal precedent, the settlement nevertheless sends a clear signal to the influential sector, which controls substantial holdings in all listed companies and can exert its influence to pressure carbon polluting companies to clean up their acts and transition to clean energy alternatives.

And a number of progressive governments have themselves got in on the act, with jurisdictions such as the state of New York suing fossil fuel firms (in this case Exxon Mobil Corporation) for their complicity in misleading their investors with regard to the deleterious impacts of their products on the global climate. Thus far such cases have failed to stick in court.
Conversely, local governments have come under attack from residents when they have attempted to amend development plans to limit coastal developments subject to erosion due to sea level rise. While it’s a natural response from a well heeled owner of waterfront property wanting to avoid value loss or have their , a number of back downs have eroded local governments’ authority to assert prudent controls. In turn this raises risk for purchasers of vulnerable property, while insurance affordability is progressively reduced. As long ago as 2011 the Australian Local Government Association commissioned a report to help councils prepare for this risk.

What has been less common in Australia — thus far — is the practice of companies suing governments (or other companies) on climate grounds. 2014 marked one of the first such examples: filed as a show case and later withdrawn, perhaps as a warning shot above the bows. In it, the Illinois Farmers Insurance Company challenged Cook County (covering greater Chicago) over its failure to implement effective stormwater management capacity in light of increasing extreme inundation events as a result of climate change, which was leading to increased payouts by the insurance company.

The insurance industry has a great deal to lose from climate change as acute physical climate risks in the form of extreme weather events become more intense and/or frequent over time. It is perhaps surprising that insurers have not been more active in pursuing stronger government action on emissions reduction. And the impacts cascade: as insurers retreat from coverage in vulnerable areas (initially by raising premiums), the proportion of under- and un-insured assets increases. Vulnerable property values decrease, resulting in losses for owners when selling. Banks face default risk in the case of asset damage to uninsured properties. Some of the burden passes to government social services, as mortgage holders are forced from their homes.

As the extent of business and individual losses due to climate inaction becomes more apparent, there is likely to be a boom in climate litigation. To the extent that your business is not seen to be taking genuine action to reduce emissions in line with science based plans aligned with the IPCC’s 1.5 degree target, it could be vulnerable. While governments and major emitters associated with the fossil fuel industry will remain the major targets (and are fertile territory given evidence of their long term knowledge and suppression of information about the risks of climate change), other sectors are not immune. Airlines, shipping, steel, cement, petrochemical derivatives and meat based agriculture are amongst industries that could have actions brought against them, particularly as science-aligned emissions reduction targets are legislated by states and countries.

Is your business next? Talk to Adaptive Capability today to understand the risks and opportunities of climate change to your business.

[1] Columbia University’s climate litigation database http://climatecasechart.com/ tracks cases globally.
[2] 
https://equitygenerationlawyers.com/wp/wp-content/uploads/2020/11/Statement-from-Rest-2-November-2020.pdf
[3] 
https://www.environment.gov.au/system/files/resources/d9b2f9cf-d7ab-4fa0-ab0e-483036079dc7/files/alga-report.pdf

Filed Under: Climate Change Adaptation, Legal Services, Risk management Tagged With: Climate change, Climate Litigation, Climate Risk, Decarbonisation, Human Rights

15 October 2020 By David McEwen

Is hydrogen in buildings the right approach?

83 years after the Hindenburg disaster highlighted the dangers of this highly flammable and explosive gas, hydrogen is now being touted as an energy saviour that will help humanity reduce its greenhouse emissions to avert catastrophic climate change. There’s a lot of talk and a growing investment pot, but not all of it is realistic or beneficial in helping countries achieve net zero decarbonisation targets.

Hydrogen is the lightest gas; colourless, odourless, and an excellent energy carrier: around three times more so than natural gas (methane, a fossil fuel) on a weight for weight basis. When burnt, its only emission is water, with no greenhouse gases or other toxins released.

On the other hand, in terms of energy density (per litre) it is considerably less efficient than natural gas and oil, and it involves a number of technical challenges to handle, store and transport safely and efficiently for different applications. Nevertheless it’s already used at reasonable scale in industry, mainly for applications like fertiliser production and refining petroleum products. Perhaps surprisingly, on many measures hydrogen is considered safer than methane or petrol. [1]

Where Does Hydrogen Come From?

Due to its tendency to bond with other elements, pure hydrogen (H2) is typically not found in abundant quantities either in the atmosphere or underground – it has to be made, using chemical processes that consume energy and, depending on the method, may involve significant greenhouse emissions themselves. And, it’s currently relatively expensive.

Those seeking action on climate change have their hopes pinned on hydrogen produced by splitting water molecules into their component H2 and O parts using electrolysis. Kids can do this at home using two conductors placed in a cup of water and connected to a battery. Bubbles of hydrogen form at the negatively charged cathode, while oxygen collects at the positive anode. Commercial electrolysers are improving rapidly in cost and performance.

If the electricity for the electrolyser is sourced exclusively from a renewable source (such as a wind or solar farm) then the hydrogen is known as “green”: it involves no operational emissions in its production or use. Electrolysers at large scale could provide a valuable demand response solution for the grid, by skimming excess renewable generation, or bespoke wind/solar farms could be established near production sites (see https://asianrehub.com/ for one such example).

(Of course, if processes involved in its transportation and storage create emissions, then it may not be a truly emissions free source. It also consumes a lot of fresh water, but so does the extraction and processing of fossil fuels and their use in electricity production.)

On the other hand, most of the hydrogen produced today comes from a process called steam methane reformation (SMR) using fossil gas; another method involves coal gasification. Both of these approaches produce significant greenhouse emissions.

Some (including the Australian Government in its recently released Technology Roadmap [2]) argue that SMR with carbon capture and storage (CCS) – i.e. trapping and burying the greenhouse emissions deep underground) can produce low emissions hydrogen, referred to as “blue”.

However:

  1. CCS technologies are relatively unproven and in any case do not trap 100% of emissions;
  2. CCS consumes additional energy, which would itself need to be renewably produced; and
  3. the extraction and transportation of the fossil methane to the hydrogen production facility involves significant “fugitive” emissions of methane, a greenhouse gas 86 times more potent than carbon dioxide.

Perhaps they call it “blue” because its emissions reduction outcomes are pretty sad compared to green hydrogen.

What should hydrogen be used for?

Currently, fossil methane (marketed as natural gas) has a wide range of applications including electricity production; vehicle fuels; many industrial processes, including where high heat is required; plus cooking, space and water heating in homes and commercial buildings. Theoretically, green hydrogen could be used for most of these (apart from industrial processes that rely on the specific chemical composition of methane or other hydrocarbons).

Hydrogen in Electricity Production
Does hydrogen have a place in electricity production? Renewable electricity generation supported by batteries and other storage systems can replace most use of gas (and coal) in the grid (much more cost effectively than hydrogen). There is likely to still be a need for dispatchable generation for odd times when wind and solar under-produce for multi-day periods depleting battery and pumped hydro storage capacity. A well designed renewable grid will limit but probably not eliminate those occurrences, and as we’ll see the grid is expected to grow significantly over the next few decades due to electrification. For a fully decarbonised grid, we will likely need green hydrogen turbines (as production costs become competitive) to fully phase out coal and fossil gas generation. For the foreseeable future however, hydrogen is likely to be relatively uncompetitive against fossil methane for such peaking requirements.

Hydrogen in Transport
Transport falls into two camps. The vast majority of personal transport needs will soon be able to be cost effectively met by battery electric vehicles, with hydrogen fuel cells remaining uncompetitive. Given the enormous advances in technology and manufacturing scale, BEVs are expected to be available before mid-decade for the same or lower cost of an equivalently featured internal combustion engine (ICE, i.e. petrol or diesel) car. They will have battery ranges more than equivalent to similarly sized ICE vehicles.

At that point (and assuming fast charging infrastructure matches uptake), only enthusiasts and those in remote parts of the country would buy an ICE vehicle given the much lower running costs of BEVs (charging costs a fraction of filling a tank, and with far fewer moving parts the outlook is bleak for motor mechanics). Charging a national fleet of BEVs is expected to increase grid demand in the order of 20%. [3]

Hydrogen fuel cell personal vehicles could gain a small foothold in remote communities given their ability to carry additional fuel, particularly if sales of ICE vehicles are banned and hydrogen refuelling infrastructure is established.

Conversely, for heavy transport, including buses, trucks, un-electrified trains, and shipping (but perhaps not aircraft), green hydrogen is emerging as a sensible way to go, cost effective given the emergence of a  network of refuelling depots and once its cost drops a little more, as it already has with growing scale and experience. The Australian government has set a target of A$2 per kilogram, at which point it is expected to become competitive with liquid transport fuels. According to UNSW research it’s currently in the $4-8 range [4]). 

In the case of shipping, green hydrogen converted to ammonia (another fuel that is emissions free when burnt) may be a good substitute for the heavy (and highly polluting) fuel oil that is currently used. Ammonia produced in this way is more energy efficient than current processes and can also be used in other applications such as fertiliser production (currently a major source of emissions associated with agriculture). [5] 
Suitable replacements for aviation fuel are more problematic. Battery powered planes may work for short haul commuter flights in the future, but hydrogen’s density issue may prevent it from replacing avgas. Synthetic carbon neutral  fuels — which green hydrogen might play a part in manufacture of — may be the solution here. 

Hydrogen in Industry
In industry, replacing natural gas and coking coal with hydrogen for a range of high heat applications including major emitters steel and cement offers great potential if the cost of hydrogen falls or carbon pricing is applied to traditional processes.

Why Hydrogen Doesn’t Make Sense In Buildings

For both residential and commercial buildings, replacing fossil methane with renewable hydrogen does not make sense for three key reasons:

1. To be competitive with gas for in-building applications, hydrogen would need to be significantly cheaper than is predicted for the foreseeable future. And that’s with domestic gas prices having climbed in Australia since the emergence of the LNG export market. Even if hydrogen prices reach US$1 per kg, it remains relatively uncompetitive with fossil gas, particularly in the absence of a carbon price. [6] 

2. Electric substitutes, generally with superior energy efficiency, can replace gas appliances in both homes and larger buildings. There is no economic case for expensive hydrogen to be used in buildings when electricity is available. As the emissions intensity of electricity generation continues to decrease with greater renewables penetration, neither fossil methane nor hydrogen can compete. 

3. Above about 10% concentration, hydrogen in the existing fossil methane transmission network (made of high tensile steel) will make the pipes brittle. While the local distribution network has mostly been replaced with HDPE pipes, which are acceptable for hydrogen use, many appliances in buildings will need to be adapted or replaced to cope with for high concentrations of hydrogen. 

The ACT government has already introduced mandates for new subdivisions, resulting in the first intentionally gas-network free suburbs. A number of recent commercial building projects have announced net zero targets, requiring all energy consumed to be fossil free. In such cases, fossil gas has been designed out in favour of all electric building systems and power contracted from renewable generators. This trend is expected to grow rapidly as more companies announce plans to achieve carbon neutrality.

What Future for the Gas Network?

If hydrogen in buildings doesn’t make sense, what is the future for the fossil gas network?

Proponents argue that there is merit in starting to inject “clean” hydrogen into the existing gas network. The NSW Government has set a target of 10% green hydrogen in the network by 2030. Australia’s Chief Scientist, Professor Alan Finkel, believes this early use of hydrogen will allow production to scale up over the decade before “pure” hydrogen applications can be rolled out at scale, providing much needed learning opportunities.[7]

We note, that unless there is a clear signal regarding the future of the gas network (i.e. its path to net zero emissions), blending hydrogen with fossil gas will slow down the uptake of electrification in buildings and lead to investment in gas-based plant that could become stranded assets as policies shift to achieve decarbonisation targets. Since going much beyond 10% concentration of hydrogen will require costly upgrades to transmission and building plant (as well as a material impact on energy prices), it is essential that government policy is resolved to provide investment certainty. 

Hydrogen is clearly in our future as a vital part of measures to achieve net zero emissions. A pure hydrogen gas network will be required, but it can be much smaller and more distributed than the current fossil gas grid. Rather than serving millions of buildings, it will only need to connect local hydrogen supply points (of which there will be many given the distribution of renewable energy generation), with connections to industrial and generation users, heavy transport vehicle fuelling stations and export terminals, collectively numbering in the hundreds or thousands. 

[1] For example, https://blog.ballard.com/hydrogen-safety-myths
[2]https://www.industry.gov.au/sites/default/files/September%202020/document/first-low-emissions-technology-statement-2020.pdf
[3] https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Electric_Vehicles/ElectricVehicles/Report/c03
[4] https://newsroom.unsw.edu.au/news/science-tech/how-green-hydrogen-can-become-cheap-enough-compete-fossil-fuels
[5] https://arena.gov.au/projects/hydrogen-to-ammonia/
[6] https://reneweconomy.com.au/renewable-hydrogen-to-undercut-gas-on-price-but-not-the-answer-for-transport-99853/
[7] Alan Finkel answering the author’s question at the Australian National University’s Energy Change Institute webinar “Digging deeper into the Technology Investment Roadmap”, 8 October 2020

Filed Under: Clean Energy, Uncategorized Tagged With: Climate change, Decarbonisation, Emissions Reduction, Energy, Hydrogen

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