11 minute read
Climate Action
ANALYSIS
Can hydrogen make climate change worse?
There is great potential in using hydrogen to save a lot of carbon dioxide emissions, but it’s really important to keep the hydrogen leakage rates down
Aworld desperate for a climatefriendly fuel is pinning its hopes on hydrogen, seeing it as a way to power factories, buildings, ships and planes without pumping carbon dioxide into the sky.
But now scientists are warning that hydrogen leaked into the atmosphere can contribute to climate change much like carbon. Depending on how it’s made, distributed and used, it could even make warming worse over the next few decades, even if carbon poses the bigger long-term threat. Any future hydrogen-based economy, they say, must be designed from the start to keep leaks of the gas to a minimum, or it risks adding to the very problem it’s supposed to solve. Some ideas now being tested, like shipping hydrogen in pipelines built to hold natural gas or burning it in individual homes, could cause an unacceptable level of leaks.
“The potency is a lot stronger than people realise,” says Ilissa Ocko, a climate scientist with the Environmental Defense Fund (EDF), a non-profit group. “We’re putting this on everyone’s radar now not to say ‘no’ to hydrogen but to think about how we deploy it.”
Hydrogen doesn’t trap heat directly, the way CO₂ does. Instead, when leaked it sets off a series of chemical reactions that warm the air, acting as an indirect greenhouse gas. And though it cycles out of the atmosphere far faster than carbon dioxide, which lingers for centuries, it can do more damage than CO₂ in the short term. Over 20 years, it has 33 times the global warming potential of an equal amount of carbon dioxide, according to a recent UK government report. Over hundreds of years, carbon is more dangerous, due to its longevity.
Hydrogen’s warming potential was never a problem before, as its use was largely limited to oil refineries and chemical or fertiliser plants. But now governments worldwide are investing billions to build a hydrogen economy, seeing the gas as one of the only options for decarbonising many industries that can’t easily run on electricity. President Joe Biden has set aside $8 billion to build at least four “hydrogen hubs” where the fuel will be produced and used, and states are gearing up to compete. US utility companies that now deliver natural gas see it as a savior, announcing more than two dozen hydrogen pilot projects in the last two years.
“Now is when decisions are being made, and money’s being spent,” Ocko says. “We can get ahead of this issue now, so it doesn’t become a problem.”
She and others sounding this alarm insist it’s no reason to give up on hydrogen. Rather, hydrogen’s heat-trapping power means any future system for producing, distributing and using the gas must be built to minimise leaks.
“There is great potential using hydrogen to save a lot of emissions of carbon dioxide, but it’s really important to keep the hydrogen leakage rates down,” says Nicola Warwick, lead author of the UK study and a National Centre for Atmospheric Science research scientist at the University of Cambridge.
The hydrogen industry acknowledges the problem, even if companies disagree on the potential scope. Dave Edwards, with industrial gas company Air Liquide, said the effects of hydrogen leaks on the atmosphere should be far less than the traditional fuels they displace. Running cars and trucks on hydrogen fuel cells would have less atmospheric impact than running them on gasoline and diesel, even if the system for making and delivering that hydrogen leaks.
“It doesn’t mean it’s not still important, it doesn’t mean we don’t need to understand more about it, but our first impression is it’s much, much smaller,” says Edwards, a director with the company and its chief hydrogen advocate in the US. Hydrogen leaks, he says, “are manageable problems to address.”
Hydrogen has big advantages as a clean fuel. Burn hydrogen in a turbine, and it will generate power without carbon dioxide. Run it through a fuel cell, and it will produce electricity with water vapour as the only exhaust. Unlike solar and wind power, it can be stored in large amounts for when it’s needed. While the vast majority of the hydrogen produced today is stripped from natural gas, in a process that releases
OVER 20 YEARS, HYDROGEN HAS 33 TIMES
carbon dioxide, it can also be separated from water using renewable power, with no emissions but oxygen.
But for all its benefits, hydrogen can also slip easily through equipment designed to contain larger molecules like the methane in natural gas.
Once it escapes, much of the leaked hydrogen will be absorbed by microbes in the soil. Some of what’s left in the air will react with a substance that helps remove methane from the atmosphere. That’s a problem, because methane is itself a powerful greenhouse gas, with more than 80 times the global warming potential of carbon dioxide over 20 years. The reaction between hydrogen and that substance — known as the hydroxyl radical, or OH — leaves less of the OH available to react with methane. So methane entering the atmosphere will stick around longer and do more damage than it would have if the hydrogen hadn’t been there.
Leaked hydrogen has other warming effects as well. In the troposphere, the atmospheric layer closest to the ground, it triggers a chain of chemical reactions that produce more ozone, another greenhouse gas and a key component of smog. Much higher up, in the stratosphere, the hydrogen leads to an increase in water vapour, which has the overall effect of trapping more thermal energy in the atmosphere.
These reactions happen over a short time span – a handful of years. Excess carbon dioxide, in contrast, builds up atmospheric heat over centuries. But with temperatures quickly rising worldwide, scientists say short-term drivers of climate change can’t be ignored.
“These decades matter,” says Steven Hamburg, EDF’s chief scientist. His group has been trying to raise the issue of hydrogen’s warming potential with anyone who’ll listen, briefing academics, businesses and the US Department of Energy. His colleague, Ocko, estimates they’ve met with some 200 people to date. For EDF, it’s a logical extension of the group’s work trying to direct public attention to short-term climate pollutants like methane and black carbon, which often get overlooked in the focus on carbon dioxide.
Many utility companies are experimenting with blending hydrogen into their existing natural gas pipelines, sprawling networks that feed everything from power plants to household stoves. To Hamburg,
US President Joe Biden has set aside
$8bn
to build at least four “hydrogen hubs” where the fuel will be produced and used
that’s a recipe for leaks. He also warns that mass-producing hydrogen from fossil fuels could even lead to a short-term increase in warming, if the systems for making and transporting the hydrogen leak enough hydrogen and methane. There would still be a long-term benefit from cutting carbon dioxide emissions, but over the span of a decade or two, a leaky hydrogen system based on fossil fuels could cause more warming than business as usual.
“Over several decades, you could be worse off – it’s very plausible,” Hamburg says.
The issue hasn’t stopped gas utilities from exploring hydrogen blending projects. But it may become one of the things those projects study. California utility PG&E Corporation, in May, announced plans to try different blends of hydrogen and natural gas in a dedicated pipeline system separate from the company’s usual gas transmission network, with the blends burned in a power plant south of Sacramento. The company’s spokeswoman Melissa Subbotin says the company’s “Hydrogen to Infinity” project will examine the potential for leaks.
“Extensive research needs to be done to understand the feasibility of hydrogen injection within a natural gas pipeline system,” she wrote in an email.
A hydrogen economy riddled with leaks would just undercut its own effectiveness, Hamburg says, delivering less of a blow against climate change than it could. Clean-energy advocates point to how methane leaking from natural gas wells and pipelines – leaking that turned out to be far more widespread than once believed –undermined some of the benefits of shifting power plants from coal to gas. They don’t want that to happen with hydrogen.
“We’re at risk of proceeding with the build-out of new infrastructure that’s essentially going to repeat all those past harms,” says Julie McNamara, deputy policy director for climate and energy with the Union of Concerned Scientists. “We don’t have the time or luxury to get it wrong.”
Steady course
The local and regional banking ecosystems have remained resilient, fi nds Zainab Mansoor
The traditional banking landscape has experienced a notable change, driven by escalating consumer expectations, innovation-led competition and greater regulation. Closer to home, banks in the GCC have also witnessed a shi t led by dynamic market conditions.
However, despite the economic challenges, the local and regional banking ecosystems have remained resilient. The aggregate net profi t of top UAE banks for Q1 2022 increased by 24.3 per cent quarter-on-quarter, a report by Alvarez & Marsal (A&M), which examined the data of the country’s 10 largest listed banks, comparing Q1 2022 results against Q4 2021, revealed.
However, excluding the Dhs2.8bn gain that came through from First Abu Dhabi Bank’s stake sale in its payments business Magnati, the aggregate net profi t dipped by 2.6 per cent quarter-on-quarter. Meanwhile, aggregate loans and advances (L&A) increased 2.8 per cent quarter-on-quarter in Q1 2022, signalling credit growth revival, the report added.
In the neighbouring country of Saudi Arabia, aggregate profi tability of the country’s top banks surged by 17.6 per cent quarter-on-quarter in Q1 2022, largely driven by growth in operational income, which itself equalled 5.6 per cent quarter-on-quarter,
BOTH THE UAE AND SAUDI MARKETS ARE GOING THROUGH A PERIOD OF POSITIVE CHANGE another A&M report – which compared Q1 2022 results of the kingdom’s 10 largest listed banks against Q4 2021 data – revealed.
Lenders across the GCC also posted promising results – QNB (Qatar National Bank) Group – Qatar’s largest bank – announced a net profi t of $1bn for the three months ended March 31, 2022, marking an increase of 9 per cent compared to the same period last year. National Bank of Kuwait also reported $383.6m in net profi t for Q1 2022, marking a 38.3 per cent year-on-year rise. Meanwhile, Bank Muscat’s preliminary unaudited net profi t for Q1 2022 equalled $125m, rising 2.4 per cent from $122.4m reported during the same period in 2021. National Bank of Bahrain also posted a 24 per cent increase in its net profi t attributable to equity shareholders to $51.5m for the fi rst quarter ended March 31.
BROADER ECOSYSTEM The broader economic landscape has had its own set of challenges. Infl ation across the US accelerated in May, following which the US Federal Reserve raised the interest rate in June – its biggest hike since 1994.
$1bn $1bn
QNB GROUP’S QNB GROUP’S NET PROFIT NET PROFIT for the three months for the three months ended March 31, 2022 ended March 31, 2022
2 .8% 2.8%
QUARTER-ON-QUARTER QUARTER-ON-QUARTER increase in loans and increase in loans and advances (L&A) for the advances (L&A) for the top ten banks in the UAE top ten banks in the UAE
This was succeeded by the Central Bank of the UAE (CBUAE) increasing the base rate by 75 basis points. Central banks across the GCC – namely Saudi Arabia, Qatar, Kuwait and Bahrain – also raised their interest rates last month. “Interest rate increases are intended to reduce the inflationary pace in an economy. However, in the GCC given the strong surpluses that are being recorded, this should temper the effect of the increased rates,” says Asad Ahmed, managing director and head of Middle East financial services at A&M.
Oil prices have been on an upward momentum since the beginning of the year, favouring oil-producing economies. Saudi Arabia reported a SAR57.5bn ($15.3bn) budget surplus in Q1 2022, while Oman posted a budget surplus of OMR357m ($929m) during the first three months of the year. MOVING AHEAD Going forward, several factors such as rising digitalisation and the need to optimise costs may help redefine the banking landscape. Firmer regulations may also play a key role. Locally, the CBUAE has stipulated that banks incorporated in the UAE must maintain a fully paid-up capital of at least Dhs2bn no later than December 31, 2023.
With growing need for resilience and amid rising competition, a key question remains: Is there room for further consolidation, especially across the UAE and Saudi banking ecosystems? “Both the UAE and Saudi markets are going through a period of positive change. While additional consolidation remains an option, there are a couple of related things to consider. Firstly, there are large digital banks in both countries that are imminent, and this will change the overall equation. Secondly, as in most economies, large universal banks have not been steady providers of SME credit, so consolidation may need to be balanced with specialised institutions that cater to SMEs,” states Ahmed.
“In the context of the global environment, banks in the GCC are well capitalised and in a market that is revising its GDP growth numbers upward and showing strong surpluses. Against this backdrop, they are well positioned to tackle issues related to digitalisation, greater efficiency and heightened compliance – all of which are on board and management agendas today,” concludes Ahmed.
“INTEREST RATE INCREASES ARE INTENDED TO REDUCE THE INFLATIONARY PACE IN AN ECONOMY. HOWEVER, IN THE GCC GIVEN THE STRONG SURPLUSES THAT ARE BEING RECORDED, THIS SHOULD TEMPER THE EFFECT OF THE INCREASED RATE” ANALYSIS
