The aggressive Covid-19 pandemic has sounded a last minute wake-up alert to a global population snoozing through a period of environmental degradation that threatens its very existence.
Despite the terrible loss of life and an unfolding economic catastrophe, the coronavirus story could ultimately offer humanity hope and the opportunity to escape the mother of all bearish endings: out-of-control climate change.
The coronavirus outbreak has already triggered fundamental adaptations in consumer and social behaviour, some of which may be permanent. But governments and businesses also must innovate at a faster pace if we are to transform the crisis into opportunity.
Energy markets
The Covid-19 crisis coincided with, and reinforced, a huge shock to energy markets. Already low oil prices, for example, sank briefly into negative territory soon after the virus-led lockdowns vaporised demand.
And if research suggesting that nine out of 10 existing trends would accelerate further post-crisis is accurate, then the decline of fossil fuels and rise in sustainable energy solutions should continue apace.
At the same time, falling renewable energy costs should help the transition away from high-carbon fuels and enable alternative power systems to scale-up.
Clearly, such a dramatic shift in a key sector will have a major impact on employment, requiring retraining for many thousands of workers in that industry alone.
The coronavirus crisis has already shown that the burden of change falls unequally across societies, revealing pre-existing fractures and structural unfairness.
But the current disruption can indicate how to build better social safety nets as well as identify, and reward, a wider range of essential workers.
In some ways, too, education – especially targeted to historically neglected cohorts such as girls and women in many developing countries – could be as an effective a weapon against climate change as any new-fangled technology.
Educating a broader section of society about the climate change risks should spur more individuals to make necessary lifestyle adaptations and develop innovative solutions.
Hydrogen solutions
Ground-breaking technology, however, remains a necessary part of the green equation.
Europe, for instance, is pinning much of its sustainable hopes on hydrogen energy projects that will see hundreds of billions of euros flow into clean technology investment as part of the climate-friendly coronavirus economic recovery programme.
The hydrogen investment prospect is in its relative infancy.
Currently, most hydrogen is produced from reasonably high-carbon energy sources such as natural gas – so-called ‘grey’ hydrogen. ‘Blue’ hydrogen production techniques step-up the climate case for the fuel source by using ‘carbon capture’ methods.
An overview of hydrogen production routes
Type of hydrogen | Grey | Blue | Green |
Production route | Natural gas reforming/coal gasification | Natural gas reforming/coal gasification + carbon capture | Electrolysis of hydrogen compounds |
Cost (USD/kg) | 1.0-1.5 | 1.5-2.5 | 4.0-6.0 |
Pro | Relatively cheap, commercially widespread | Carbon neutral | Zero carbon (where power source is renewable) |
Con | High carbon emissions | High CCS investment costs | High capex and water intensive |
Source: HSBC.
But the falling cost of renewable energy and more efficient water electrolysis processes signal the dawn of a new ‘green’ hydrogen era where the clean-burning fuel is extracted with a zero carbon footprint to boot.
Hydrogen appears to have reached a tipping point for growing adoption as falling costs converge with rising demand post-Covid from nations seeking to reduce their dependence on fossil fuel supply chains.
In particular, hydrogen holds much promise in the long-haul heavy goods vehicle segment where it has two key advantages over battery-powered electric trucks, namely lower weight leading to longer range and rapid refuelling time.
As long-haul transport typically moves along the main road arteries, hydrogen requires far fewer refuelling stations compared to more localised transport, such as cars.
The choices that we make now and in the next few years will shape the global economy for decades to come. Rather than seeing the Covid-19 crisis as a distraction from the climate change challenge, we should use it to move from acknowledgment to action.
Eoin Murray is head of investment at the international business of Federated Hermes
