In recent years, artificial intelligence (AI) has become a prominent topic of conversation. Advances in other frontier technologies, such as cloud computing, big data, the Internet of Things (IoT), and virtual reality, have led to some major breakthroughs in artificial intelligence. Aside from the financial and societal benefits of AI applications, the technology is also set to revolutionize environmental sustainability. Scientists argue that one of the main challenges to environmental sustainability is understanding how the ecosystem works, given the number and complexity of interactions within it. The amount of information available is simply too large to be analyzed by the human brain or traditional statistical tools. Using advanced tools and technologies can help us understand the impact of the ecosystem on us and vice versa. Sensors enable the collection of large amounts of data, while AI can help analyze this data and build models to help navigate these complexities and make agile decisions in uncertain and volatile conditions. Impact of AI on the ecosystem and environmental management: Technologies such as AI and IoT are expected to drive progress in most areas of ecology and biodiversity research, as well as environmental and ecosystem management. Motion-sensing cameras can collect very large amounts of biodiversity data Motion-detector cameras enable the low-cost and widespread collection of massive amounts of biodiversity data. Analyzing biodiversity images used to be time-consuming, but a recent article in the journal Proceedings of the National Academy of Sciences showed that AI was successful in automating animal identification for 99.3% of the 3.2 million animals, with the same level of accuracy (96.6%) as the crowdsourced groups of human volunteers. The authors of the article state that "the automatic, accurate, and economical collection of data could catalyze the transformation of many disciplines, from ecology, wildlife biology, zoology, conservation, and ethology, into “big data” sciences. Drones equipped with AI technologies can fight deforestation and poaching The use of drones equipped with AI technology can help reduce deforestation and poaching. For instance, the World Wide Fund for Nature (WWF) in Kenya received a US$5 million subsidy from Google to use an AI device equipped with drones to track poachers in the Masai. Impact of AI on Water Management Although AI applications are limited to select cases in the operational water sector, machine learning algorithms are increasingly being used in water science. For instance, the Centre for Water for Sustainable Development and Adaptation to Climate Change, a UNESCO-affiliated organization, has been utilizing AI and statistical modeling to enhance the quality of time-series data in structural and environmental monitoring in Serbia for years. Deep learning, a subset of machine learning, is one of the most crucial methods. Deep learning can be used as a predictive tool to detect patterns, classify and correct remote sensing products, or mitigate risk. An example of a deep learning application for water management is using Echo State Networks (ESN) to provide discharge forecasts and water-level simulations on the Rhine and Danube Rivers in Germany, which provided better results than the existing traditional hydrological model. Internet of Things, machine learning, and blockchain can be combined to support urban water management The Internet of Things, machine learning, and blockchain technology can all be used to improve urban water management. Using these three technologies can improve service provision and quality while protecting the sustainability of water resources. Smart water systems, which use an Internet of Things-based approach, are gaining traction in urban water resource management. These smart systems are composed of a network of physical devices (such as the flow meter), a sensor that records data (such as water amount and quality, pictures, etc.), and a communication device that transmits this data in real time to a cloud-based server. Smart water systems improve efficiency and reliability while reducing costs. Impact of AI on Disaster Risk Reduction AI to prevent disasters Many concepts and prototypes for catastrophe risk mitigation have previously been tested. Thus far, they have mainly focused on the response and rescue phases. Sendai, Japan, for example, has tested a prototype with private companies for a tsunami alert using AI and Blockchain technology, in which the AI system launched a drone, sent an alert via mobile phones and radios, and used facial recognition software to identify survivors, such as individuals drifted in a vehicle by a tsunami wave. AI to manage hydrological hazards A variety of innovative modeling systems are being evaluated for their capacity to accurately forecast drought events. Such models are: Artificial Neural Networks (ANN), Adaptive Neural-based Fuzzy Inference Systems (ANFIS), Genetic Programming (GP) and Support Vector Machines. Currently, the downside to using AI for drought management is the lack of “big data” needed to design models that can make reliable predictions. AI to improve climate change assessment Studying the climate and identifying high-risk areas require large amounts of data, ranging from images to sensor data. Machine learning algorithms can help mitigate and manage climate change effects by improving the accuracy of global climate models and predictions. For instance, extreme weather events such as wildfires and hurricanes can be predicted by analyzing data from satellite images and weather station data in real-time. New research indicates that artificial intelligence and neural networks can also address more complex, smaller-scale meteorological phenomena, such as convective cloud production. As a result, they may be able to mitigate the uncertainties inherent in existing climate models. By enhancing the accuracy of global climate predictions, AI and machine learning algorithms can help mitigate and manage the risk of catastrophic weather events such as tornadoes, hurricanes, and storms, which are anticipated to become more frequent and severe in the future. Impact of AI on Agriculture AI-based solutions can enhance efficiency in the agricultural sector in practices such as crop yield, irrigation, soil content sensing, crop monitoring, weeding, and crop establishment. AI-based technological solutions can enhance the sector’s resource efficiency by reducing the use of land, water, fertilizers, and pesticides while also enhancing output quality and ensuring a faster time to market for produced commodities. Smart Farming Using drones, cameras, and sensors along with AI to scan plantations and detect pests, identify areas that are either excessively or poorly irrigated, and intervene more quickly eliminating the need for expensive and fuel-polluting helicopters to monitor the fields. Robots or drones can help with field inspection and early detection of crop diseases, making the process more effective and ensuring future food security. Weed control can also be significantly enhanced using solar-powered robots that can detect weeds and pull them out mechanically (without chemicals). All these developments are providing farmers with the tools to observe, measure, and analyze the needs of their farms, allowing for improved resource management while reducing environmental impact and waste. The use of artificial intelligence (AI) in environmental sustainability has the potential to significantly improve our understanding of and ability to manage the ecosystem. AI-enabled technologies such as motion-sensing cameras and drones can be used to collect and analyze large amounts of biodiversity data, while machine learning algorithms can be used in water science to improve quality and forecast discharge and water levels. In addition, the combination of the Internet of Things, machine learning, and blockchain technology can improve urban water management. AI can also be used in disaster risk reduction by predicting and mitigating the impact of natural disasters such as earthquakes, hurricanes, and floods. AI can also help enhance the agricultural sector’s resource efficiency and reduce its impact on the environment. With all these advancements in AI applications, it is important to carefully consider the ethical implications of using AI for environmental sustainability and ensure that the technology is used in a responsible and transparent manner. Author: Ismail El bouni Sources: AI - A game changer for Climate Change and the Environment Artificial intelligence for sustainable development: challenges and opportunities for UNESCO’s science and engineering programmes Automatically identifying, counting, and describing wild animals in camera-trap images with deep learning Quel sera l’impact de l’intelligence artificielle sur l’agriculture ? Smart Farming Using Artificial Intelligence, the Internet of Things, and Robotics: A Comprehensive Review Implementation of artificial intelligence in agriculture for optimization of irrigation and application of pesticides and herbicides BI Survey Autonomous Battery Optimization with Machine Learning, Robotics Robots and AI Could Optimize Lithium-Ion Batteries MIT: On the road to cleaner, greener, and faster driving
After years of being hyped as a possible game-changer and touted as the fuel of the future, green hydrogen is now recognized as a crucial component of any realistic net-zero economy in the long term by both governments and investors. While energy transition plans were slowly taking shape, particularly in Europe, recent events have created a golden opportunity for a more rapid rollout of green hydrogen. The ongoing Ukraine-Russia conflict and its implications for energy dependence have forced European nations to rethink their priorities and sparked a frenetic race to secure new energy alternatives other than Russian-controlled gas supplies. In fact, it didn’t take long for these opportunities to materialize. As part of the RepowerEU strategy, the EU set a target of 10 million mt/year of green hydrogen imports by 2030, in addition to its domestic hydrogen production target of 10 million mt/year. With this massive import opportunity, Africa seems poised to realize its green hydrogen potential. Green hydrogen, fueled by renewable energy, now accounts for 4% of total world hydrogen production. It can be used in several sectors and industries, including refineries, to produce ammonia. Automobile manufacturers have also set their sights on this kind of energy. The market for hydrogen fuel cell electric vehicles is booming, with stiff competition to get enough range for the end user. An overview of Africa Africa stands out as the region with the greatest potential for green hydrogen. Not only is the continent in desperate need of energy infrastructure investment, of which renewables and green hydrogen could represent the lion’s share, but many African countries present unique competitive advantages and environmental characteristics for cheap and reliable energy production. According to H2 Atlas-Africa, wind and solar energy in West Africa could generate up to 165,000 TWh of green hydrogen per year, of which 120,000 can already be produced for less than €2.50. To put this figure into perspective, green hydrogen in Germany currently costs around €7 to €10 per kilogram. Therefore, Africa has been presented with a tremendous opportunity to fulfil its energy needs and requirements, reduce its emissions in line with the current international standards, become a net exporter of energy, and decarbonize its industry, which allows an easier entry into the EU market. Realizing the potential, a few African countries have already started positioning themselves and have taken the lead in establishing a green hydrogen industry powered by their renewable energy capabilities. Egypt, Morocco, and South Africa stand out as great examples of countries taking the opportunity seriously and advancing their plans to transform fiction into reality: Focus on the projects Egypt Egyptian policymakers have taken green hydrogen more seriously in the last year, holding talks with a number of multinational corporations about developing a local sector that has the potential to become an important component of the country's energy mix. Egypt's first green hydrogen generating plant, with a capacity of 100MW, will be operational in November 2022, making it the world’s largest by a factor of five[1]. The output will be used as a supplemental feedstock by the Egyptian Basic Industries Corporation to generate 90,000 tonnes of green ammonia per year. TAQA Power has also signed a Memorandum of Understanding (MoU) with MAN Energy Solutions, a German business, for a pilot project to produce green hydrogen locally in Egypt to power tourist buses with clean fuel. Siemens Energy and the Egyptian Electricity Holding Company have signed a MoU to collaboratively create a hydrogen-based industry in Egypt with export capabilities. They will co-develop a pilot project with a 100 to 200 MW electrolyzer capacity as a first step, which will help drive early technology deployment, start a partner landscape, establish and test regulatory environment and certification, setup off-take relations, and define logistic concepts. Eni, GE, and ThyssenKrupp have all submitted bids to build hydrogen facilities in Egypt. The proposals, which total $2 billion, are for facilities that would create both green and blue hydrogen. Several proposals from European institutions such as the German development bank KfW, the European Investment Bank, and the International Finance Corporation (IFC) were accompanied by financing offers. South Africa Further South on the continent, South Africa has already had a go at green with The National Hydrogen Fuel Cell Technology (HFCT) Research, Development, and Innovation strategy-also known as the Hydrogen South Africa strategy (HySA). The mining sector has also been leading the way in hydrogen technology within the country. Anglo Platinum, for instance, is setting up a 75 MW solar PV-powered plant with plans to further increase the capacity to 320 MW, with the surplus of electricity generation being directed to produce green hydrogen. In May 2021, the German development bank KfW announced a €200 million scheme to help South Africa establish green hydrogen projects. A feasibility assessment issued by the government and private-sector partners in October 2021 found three green hydrogen hubs in the eastern region that had the potential to develop a hydrogen valley. Sasol and the Industrial Development Corporation (IDC) have agreed to work together to advocate for enabling policy frameworks, develop pilot and commercial-scale hydrogen projects, access local and international financing options, and go after strategic projects that will help the country attain its energy transition and economic development goals. Sasol revealed a few months later that it planned to begin manufacturing green hydrogen as early as 2023. Morocco Considered a leader along with South Africa, Morocco is also working to create its own green hydrogen industry. In 2020, the Moroccan government engaged in a partnership with Germany to build the first standalone green hydrogen plant on the continent. The following year, the government signed an agreement on green hydrogen development with Portugal, laying the groundwork for clean energy collaboration between the different economic actors in both countries. Morocco has also inked a strategic collaboration with Irena in June 2021, with the goal of becoming a major green hydrogen producer and exporter. The two parties will work together to conduct green hydrogen studies and examine policy options for incorporating businesses into the green hydrogen economy on a national scale. A joint venture between Greece's Consolidated Contractors Company (CCC) and Ireland's Fusion Fuel aims to build a green hydrogen-powered ammonia facility in Morocco as of 2022, which will be the country's largest green hydrogen project to date. The plant will have the capacity to produce 31,000 tonnes of renewable hydrogen per year and generate 183,000 tonnes of green ammonia by 2026. Finally, in early December 2021, the country saw the establishment of "Green H2A", a technology platform dedicated to research and innovation in green hydrogen. The first of its kind in Africa, it aspires to play a key role in Morocco's industrial deployment of green hydrogen and its uses. One of Green H2A's first initiatives is a pre-industrial pilot project to produce 4 tonnes of green ammonia per day with a 4MW electrolysis capacity. Given both the advancements on the ground and in legislation, and the intense interest by Germany, one of the leaders in green H2 technology, Morocco, Egypt, and South Africa are poised to become the leaders in the field for the coming decades, developing a "decarbonized fuel" made from renewable energy for export to Europe. In this sense, The Africa Green Hydrogen Alliance was officially launched at the first-ever Green Hydrogen Global Assembly in Spain on May 2022, with the goal of developing a strong green hydrogen ecosystem. Egypt, Kenya, Mauritania, Morocco, Namibia, and South Africa are among the founding partners. The energy ministers of 14 Arab nations, including Morocco, have proposed an ambitious plan to create an Arab Common Market for power, with green hydrogen being an important link in the chain. On July 27, 2020, the final versions of two international treaties connected to this project were completed. It is undeniable that green hydrogen shows strong potential on the continent, with several countries taking the lead due to the foresight and available opportunities. In the coming years, we are likely to witness a marked acceleration in the rollout of hydrogen projects and the concretization of decarbonisation plans. However, despite the winds setting the sails on a clear course in the coming years, many African nations have yet to live up to their potential and geographic resources. Sources: African Business - Green hydrogen – implications and prospects for Africa - June 2022 African Business - South Africa eyes future as green hydrogen hub– October 2021 Atlas of green hydrogen generation potentials in Africa - H2 Atlas Tool Federal Ministry of Education and Research - West Africa can become the climate-friendly energy powerhouse of the world - May 2021 Arab News - Egypt to open its first green hydrogen plant in November 2022 – December 2021 Recharge - World's largest green hydrogen project – with 100MW electrolyser – set to be built in Egypt – November 2021 Siemens Energy - Siemens Energy supports Egypt to develop Green Hydrogen Industry – August 2021 Enterprise - Big global players eye hydrogen investment in Egypt – November 2021 Cliffe Dekker Hofmeyr - Moving towards a green hydrogen energy future – April 2021 Baker McKenzie - South Africa: Green hydrogen policy - a rapidly growing timeline of important developments – November 2021 South Africa’s Department of Science and Innovation – South Africa hydrogen valley final report – October 2021 African Business - Green light for a green hydrogen economy in Africa – November 2021 Le360 – Hydrogène vert: le Maroc et le Portugal main dans la main pour booster la filière – December 2021 Al Jazeera - Green Hydrogen: The new scramble for North Africa – November 2021 Energy & Utilities - Fusion Fuel and CCC to develop $850m Morocco green hydrogen project – July 2021 Le360 – Hydrogène vert: une plateforme technologique pour développer la filière, une première en Afrique – December 2021 [1] The second one, Air Liquid’s 20MW plant, is in Canada.
Corporate sustainability has evolved from a mere buzzword to a critical business imperative. This article traces the journey of corporate sustainability, highlighting pivotal moments and key initiatives that have shaped its current significance in the global business landscape. A few key dates The United Nations Global Compact, launched in 2000, is a multi-stakeholder leadership initiative that aims to align business strategies and operations with ten universally accepted principles in multiple areas, including human rights, labor, environment, and anti-corruption, and to drive efforts in support of broader UN goals. In early 2005, Kofi Annan, the former United Nations Secretary-General, invited a 20-person group of the world’s largest institutional investors from 12 countries to participate in the development of the Principles for Responsible Investment (PRI), with the support of a 70-person group of experts in the investment industry, intergovernmental organizations, and civil society. The PRI helped provide a definition of sustainable investment and the actions that ensure that money is invested in a proper and wise way. However, it would take another ten years for these investment criteria to spread further. 2015 was a turning point for business sustainability. The Paris Agreement, a legally binding international treaty on climate change, was adopted by 196 parties at COP 21 in Paris on December 12th, 2015, and entered into force on November 4th, 2016. It is aiming at “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels”. The Paris Agreement is a landmark in the climate change process since it is the first binding agreement that brought all nations together for a common cause: combatting climate change and adapting to its effects. The year also marked the foundation of the Science Based Targets initiative (SBTi), a partnership between CDP, the United Nations Global Compact, the World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). Science-based targets show how much and how quickly businesses need to reduce their GHG emissions to prevent the worst impacts of climate change, creating a path towards decarbonization. In 2018, the Intergovernmental Panel on Climate Change (IPCC) warned that global warming must not exceed 1.5°C above pre-industrial temperatures to avoid the catastrophic impacts of climate change. In order to achieve this target, greenhouse gas (GHG) emissions must decrease by about 45% by 2030 (2010 baseline) and reach net zero by 2050. Sustainability criteria and their impact Sustainability is evaluated using environmental, social, and governance (ESG) factors: The Environmental category focuses on the impact a company has on the environment, e.g., Scopes 1-3 GHG emissions, resource and waste management, water use and conservation, the share of renewables in the energy mix, etc. The Social category considers the social impact a company has within society, as well as whether and how it advocates for social good and change. Indicators relate to stances and efforts on social issues including racial and gender diversity and inclusion, employee development, human rights, operational health and safety, stakeholder, and community engagement, etc. The Governance category refers to the ways a company is managed, or “governed”, to address issues and drive positive change. Indicators in this category include quality and diversity of management and the board, executive compensation, corporate ethics, transparency and disclosure, corporate political contributions, etc. These three categories allow companies to create a holistic approach for business strategies, risk mitigation, and reporting. Investors are also increasingly turning to ESG investing, which incorporates these factors into investment decisions, spurred by growing evidence that ESG integration in business decisions has a positive impact: 57 percent of executives and investment professionals in McKinsey’s Global Survey agree that ESG programs create shareholder value, and 83 percent believe that these programs will create even more value by 2025. Respondents also indicated they would be willing to pay a premium to acquire companies with a positive ESG record. In Accenture’s 2020 report titled “Seeking Responsible Leadership”, 2,540 publicly listed companies were examined between 2015 and 2018. Results show that companies that combine high levels of innovation with sustainability and trust outperform their industry peers, with 3.1% higher operating profits and greater returns to shareholders. S&P Global Market Intelligence analyzed 26 ESG exchange-traded funds and mutual funds, with more than $250 million in assets under management, between March 2020 and March 2021. 19 of those funds performed better than the S&P 500. Outperformers rose between 27.3% and 55% over that period, while the S&P increased 27.1%. On the other hand, companies that are seen as not making enough efforts on ESG issues are facing mounting pressure from stakeholders, and operational consequences: Two shareholders in the Commonwealth Bank of Australia (CBA) filed an application in the Federal Court of Australia in August 2021 seeking access to all documents created by the CBA in relation to the bank’s reported involvement in seven specified gas and fossil fuel projects. It is anticipated that the plaintiffs may bring a substantive claim against CBA if the documents produced demonstrate that the projects did not satisfy CBA’s Environmental & Social Policy. In May 2022, both ExxonMobil and Chevron, the two largest US oil companies, suffered shareholder rebellions led by climate activities and disgruntled institutional investors over their failure to set a strategy for a low-carbon future. This comes one year after a court in The Hague ordered Royal Dutch Shell to cut its global carbon emissions by 45% by the end of 2030 (2019 baseline), in a landmark case brought by the environmental organization Friends of the Earth and over 17,000 co-plaintiffs. Also in May 2022, nearly half of Berkshire Hathaway’s independent investors rejected the advice of the board led by chairman and CEO Warren Buffet, instead supporting proposals requesting climate-change-related reports and reporting on Berkshire’s diversity, equity, and inclusion efforts. Collaboration is essential Some companies have gone beyond their own operations and are trying to catalyze ESG efforts not only along the value chain, but also for whole industries. For example, in 2015, Apple launched the Supplier Clean Energy Program, which allows the company to not only share resources and training material on renewables but also to participate in clean energy investments by suppliers. In November 2021, Schneider Electric announced a collaboration in the same field with 10 global pharmaceutical companies, namely AstraZeneca, Biogen, GlaxoSmithKline, Johnson & Johnson, MSD, Novartis, Novo Nordisk, Pfizer, Sanofi, and Takeda. The new program, called Energize, will give suppliers of these companies the opportunity to participate in the market for power purchase agreements. Other companies have partnered with banks to link supply chain financing to ESG assessments. Henkel and Deutsche Bank announced such a partnership in May 2022, creating incentives for suppliers who can lower their costs by improving their ESG rating. Finally, various initiatives, whether sector-specific or not, have been able to gather pledges and commitments towards different targets. RE100, for example, brings together some of the largest companies in the world that are committed to 100% renewable electricity. Race to Zero is the UN-backed global campaign rallying non-state actors to take rigorous and immediate action. As part of the Race to Zero Breakthroughs: Retail Campaign, companies such as Best Buy, H&M Group, Ingka Group (IKEA), Kingfisher Plc, and Walmart have pledged their support to accelerate a movement in the retail industry to drive climate action and encourage other retailers to set out their plans to achieve 1.5 degree aligned carbon reduction targets. By raising awareness and engaging several stakeholders, these efforts—whether through incentives, resource and knowledge sharing, or other means—are important steps on the path to sustainability. In 2021, the first publication from the IPCC’s sixth assessment showed that the world will probably reach or exceed 1.5 °C of warming within just the next two decades. If emissions aren't slashed in the next few years, this will happen even earlier. Whether we limit warming to this level and prevent the most severe climate impacts depends on actions taken now. Sources: https://www.un.org/en/academic-impact/sustainability https://www.unpri.org/about-us/about-the-pri https://www.weforum.org/agenda/2022/02/sustainable-investing-esg-finance-future-norm/ https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement https://www.un.org/en/climatechange/paris-agreement https://www.ipcc.ch/site/assets/uploads/sites/2/2018/12/SR15_FAQ_Low_Res.pdf https://sciencebasedtargets.org/about-us https://www.wri.org/insights/ipcc-climate-report https://www.ipcc.ch/site/assets/uploads/sites/2/2022/06/SPM_version_report_LR.pdf https://online.hbs.edu/blog/post/sustainable-investing https://www.mckinsey.com/business-functions/sustainability/our-insights/the-esg-premium-new-perspectives-on-value-and-performance https://www.accenture.com/us-en/insights/consulting/responsible-leadership https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/esg-funds-beat-out-s-p-500-in-1st-year-of-covid-19-how-1-fund-shot-to-the-top-63224550 https://www.theguardian.com/business/2021/may/26/exxonmobil-and-chevron-braced-for-showdown-over-climate https://www.theguardian.com/business/2021/may/26/court-orders-royal-dutch-shell-to-cut-carbon-emissions-by-45-by-2030 https://www.morningstar.com/articles/1092856/nearly-half-of-berkshire-hathaways-independent-shareholders-support-climate-diversity-reporting https://www.nortonrosefulbright.com/en-nl/knowledge/publications/901a1a41/climate-change-litigation-update https://www.europeanpharmaceuticalreview.com/news/165113/energize-initiative-to-boost-renewable-energy-access-for-pharma-suppliers/ https://www.apple.com/ma/newsroom/2022/04/apple-helps-suppliers-rapidly-accelerate-renewable-energy-use-around-the-world/ https://www.db.com/news/detail/20220517-deutsche-bank-links-henkel-supply-chain-financing-to-esg-ratings?language_id=1 https://www.there100.org/about-us https://racetozero.unfccc.int/join-the-race/ https://racetozero.unfccc.int/system/race-to-zero-breakthroughs-retail-campaign/ https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf
Energy use and CO2 emissions from transportation The transportation sector accounts for around 30% of global final energy consumption. Given that most of our energy is still derived from fossil fuels, despite the growing share of renewable energy generation and the announced carbon neutrality ambitions by 2050, transportation is already at the top of a list of sectors to decarbonize. What’s more, transport has the highest level of reliance on fossil fuels of any other sector. According to the International Energy Agency, road transportation alone accounts for approximately 15% of global energy-related GHG emissions. During the last few years, the public debate on reducing road transport emissions has been dominated by battery electric vehicles (BEVs), which represent a promising path towards decarbonizing the sector. However, despite significant advances in cost and economic competitiveness—EVs are already competitive with internal combustion engine (ICE) vehicles on a total cost of ownership (TCO)1 basis—a few challenges have hampered market development, most notably in terms of practicality, limited autonomy2, and long refueling times of BEVs. The Hydrogen Fuel Case The use of hydrogen as a fuel, particularly green (hydrogen produced from water electrolysis3) or blue hydrogen (produced from natural gas and supported by CCS4), could be the key to decarbonizing road transportation. This is because not only can fuel cell electric vehicles (FCEVs) already, similar to conventional ICE vehicles, refuel in less than 4 minutes and have a driving range of over 450km5 but also, just like BEVs, they produce no harmful tailpipe emissions. From a cost perspective, because the level and type of performance required vary from one vehicle segment to another, it’s important to make a distinction between light and heavy-duty vehicles. For the sake of illustration, we consider the 3 main vehicle segments: passenger cars, HDT, and off-road, and compare the FCEV options to the BEV and ICE versions by the total cost of ownership (TCO). Passenger Cars: Based on a TCO analysis by energy consultancy Element Energy, FCEVs are quite a long way from being cost competitive with electric and conventional passenger cars, especially for first-time owners. And although the TCO of FCEVs in the segment is expected to drop significantly over the next decade due to falling fuel cell costs, BEVs are expected to remain a much more attractive option in comparison, except for larger passenger cars, SUVs, and vans with longer-range requirements and heavier use cycles (e.g., for taxis and ride-sharing) where FCEVs become a reasonable alternative. Heavy-Duty Vehicles/Trucking (HDT): According to a report by the Hydrogen Council and McKinsey, on-demand HDT FCEV is expected to become the cheapest option in terms of TCO by 2030, assuming a hydrogen price at the dispenser of about $4/kg in 2030. The analysis suggests that HDT FCEV should achieve break-even with BEVs by around 2025 and with ICE HDTs by 2028, driven primarily by a drop in hydrogen fuel costs and equipment costs. It’s worth noting that, in a context where targeted subsidies such as Switzerland’s toll exemption policy or other support mechanisms exist, the described timeline could be even shorter. Off-Road Equipment/Vehicles: Due to the specific performance requirements of off-road equipment, fuel cell powertrains are potentially the only alternative to GHG-emitting equipment. In the context of achieving net zero targets, decarbonizing the off-road vehicle segment is of particular importance. That’s because mining rare earth metals is critical for green technology manufacturing (including fuel cells), and off-road equipment (such as excavators and wheel loaders) is heavily used in mining operations. Regarding the cost, the latest estimates from the US DoE and the Journal of Hydrogen suggest that fuel cells are already the lower-cost option for compact tractors/wheel loaders and standard/full excavators. Developing the hydrogen sector Hydrogen-fueled cars have been commercially available for almost a decade. Despite that, due to the lack of infrastructure, their sales remain dwarfed by those of BEVs. Mindful of the sector’s potential, governments have started over the past few years drafting strategies and creating policies in support of hydrogen, including investment incentives for the construction of hydrogen production and refueling facilities to enable the deployment of FCEVs. Below are some examples: Japan: In 2017, the Japanese government issued the Basic Hydrogen Strategy and became the first to adopt a national hydrogen framework. Through a series of legislation and plans, it aims to expand its hydrogen economy and production to 20 million tonnes by 2050. United States: At the federal level: the Emergency Economic Stabilization Act of 2008 introduced incentives in the form of tax credits to help minimize the cost of hydrogen and fuel cell projects. Since then, the tax credit policy has been extended and its scope enlarged to include refueling equipment and energy storage system facilities. A wealth of other incentives has been introduced, most notably through the Biden Administration’s Build Back Better Act. At the state level: energy authorities have taken similar steps. In 2020, the California Energy Commission (CEC) committed to investing up to $115 million to significantly increase the number of Hydrogen Refueling Stations (HRSs) in the state. California is on track to achieve its target of deploying 200 HRSs by 2025. Germany: In June 2020, Germany presented its National Hydrogen Strategy. The strategy document identified several goals that need to be achieved for green hydrogen to become an effective tool in reaching emissions neutrality by 2050, including the scale-up of H2 production and transport capacity, as well as the introduction of support schemes and public funding. Germany committed to providing public funding amounting to €7 billion for the market ramp-up of hydrogen technology in the country. Chile: In addition to their National Electromobility Strategy published in 2017, which includes goals on green hydrogen and fuel cells applications, Chile announced its National Green Hydrogen Strategy in 2020, and the goal to be carbon neutral by 2050. Figure 1: HRS by region, 2021 [caption id="attachment_8368" align="aligncenter" width="486"] source: IEA, 2022[/caption] On the private sector front, energy companies are already competing for market shares of Hydrogen Refueling Stations (HRSs). Today, the fast-growing HRS market is dominated by a few Oil & Gas and hydrogen companies, namely Air Products, Linde, Air Liquid, and Nel. To enter the market, some companies chose to combine their investment efforts through JVs, such as the German H2 Mobility JV, which operates a global network of 200+ HRS. Concerning car manufacturing, major OEMs are offering a limited but growing number of FCEVs to the public in certain markets, in line with what the developing infrastructure can support. It is estimated that around 52 thousand FCEVs are currently in circulation, with the majority of them concentrated in the United States (38%) and Korea (24%). Figure 2: FCEVs by region, 2021 [caption id="attachment_8369" align="aligncenter" width="458"] source: IEA, 2022[/caption] The net zero emissions by 2050 scenario requires transport sector emissions to fall by 20% by 2030. To achieve this goal, new sales of PHEVs, BEVs, and FCEVs need to represent 64% and 30% of total passenger car sales and HDT sales, respectively, by 2030. The TCO data summarized in this article shows that, rather than competing against BEVs, hydrogen-fueled vehicles can help achieve this objective by taking up the baton where BEV technology fails to deliver, in particular in the HDT segment. Notes: 1: The total cost of ownership includes both purchase cost and running cost, i.e., fuel and maintenance costs, over the lifetime of the vehicle. 2: Based on EPA data, the median range for 2021 model EVs was 234 miles (source) 3: Water electrolysis uses an electrical current to separate the hydrogen from the oxygen in water. If this electricity is obtained from renewable sources, hydrogen will therefore be produced without emitting carbon dioxide into the atmosphere. 4: CCS stands for Carbon Capture and Storage. In the case of blue hydrogen production, the CO2 generated during the manufacturing process is captured and stored permanently underground. The result is low-carbon hydrogen that produces no CO2 5: 300 miles based on US DoE estimates –converted to km and rounded for the sake of convenience (Source) Oussama El Baz Sources: IEA, Key World Energy Statistics 2021 IEA, World Energy Outlook, 2021 IRENA, Green hydrogen cost reduction, 2020 IEA, Global EV Outlook 2022 US DoE Alternative Fuels Data Center European Parliament – What if hydrogen could help decarbonize transport? European Commission, Biofuels in the European Union, A vision for 2030 and beyond Element Limited, Electric Cars: Calculating the Total Cost of Ownership for Consumers, 2021 US Department of Energy, Hydrogen and Fuel Cell Technologies Office, 2022 Hydrogen Council, A perspective on hydrogen investment, market development and cost competitiveness, 2021 Cleantech Group, Decarbonizing off-road vehicles, 2022 US DoE, Hydrogen Fuel Cell Technologies Office, 2022 Journal of Hydrogen, Performance, and cost of fuel cells for off-road heavy-duty vehicles, 2022 International Partnership for Hydrogen and Fuel Cells in the Economy Marca Chile, Electromobility: Chile is leading the way in Latin America with ambitious goals, 2021 Watson Farley & Williams, The German Hydrogen Strategy, 2021 Baker McKenzie, How Proposed New US Hydrogen Tax Incentives Should Spur Investment, 2021 US DOE, Financial Incentives for Hydrogen and Fuel Cell Projects JD Supra, Clean Energy Tax Proposals in Biden’s New “Build Back Better” Framework, 2021 California Energy Commission, 2020 Exxon Mobil – What is blue Hydrogen Iberdrola – Green hydrogen: an alternative that reduces emissions and cares for our planet
In recent times, inflation has been a topic of discussion for economists, politicians, and citizens alike. The pandemic has brought an end to a period that was marked with low-to-moderate inflation rates with even deflation plaguing countries such Thailand, Qatar, and Malaysia before the COVID outbreak. There has been a noticeable spike in the number of advanced economies with an inflation rate of above 5%. The number of emerging markets seeing higher inflation has also increased with 78 out of 109 Emerging market & Developing countries having an inflation rate of 5% or more. This leap is the first of its kind in a 20-year period. [caption id="attachment_8040" align="aligncenter" width="541"] Source: Project-Syndicate[/caption] Pandemic-related factors brought the annual inflation rate in the US to 7% in the last month of 2021, a fresh high since June of 1982. The U.K. and Canada had a whopping 30-year high inflation rate reaching 5.4% and 4.8% respectively. [caption id="attachment_8042" align="aligncenter" width="459"] Source: oecd.org[/caption] One of the major problems with inflation is that the lower social classes are the ones hit the hardest. According to the IMF, inflation has particularly negative consequences for households in low-income countries, where about 40% of consumer spending is on food. The reason inflation does not affect higher-income individuals and households is because they can afford to spend more money on basic goods contrary to their lower-income counterparts. A study conducted by Ipsos of 20,000 people from 30 different countries found that over 50% of participants reported an increase in the prices of clothing and shoes, housing, healthcare, and entertainment. Over 40% expect these costs to keep rising for several months to come. The UN noted that the FAO, Food Price Index, a measure of the monthly change in international prices of a basket of food commodities, reached a 10-year high in 2021, despite a small December decline. [caption id="attachment_8043" align="aligncenter" width="457"] Source: FAO.org[/caption] Reasons for the increase Many reasons contributed to prices rising at a substantial rate. Most of these reasons relate to the COVID-19 pandemic including supply constraints, economies reopening, fiscal stimulation, increased liquidity, higher energy prices, lower inflation in past years, higher unemployment, conflict between countries, and labor shortage. Supply constraints The fast spread of the virus in 2020 caused the shutdown of many industries around the world and with that, consumer demand also dampened, which in turn reduced industrial activity. After vaccines became widely available and many countries deemed their vaccination campaigns successful, economies reopened and suddenly, supply chains were faced with tremendous pressure. The supply of goods, once systematic and free-flowing pre-pandemic, was forced to a halt post-pandemic which damaged all the systems that were in place originally. Supply chain systems are not easy to implement as it requires coordination between a multitude of different parties. The surge in demand necessitated these systems to switch on and be fully functional in a short period, which is not feasible. [caption id="attachment_8044" align="aligncenter" width="454"] Source: BEA, BLS[/caption] A major culprit in price increases coming from the supply constraints is the semiconductor industry. Chips are increasingly present in most of the products we use, ranging from cars to remote controls to smart lights and a variety of different items that are used today. High Energy Prices [caption id="attachment_8045" align="aligncenter" width="443"] Source: U.S. Bureau of Labor Statistics[/caption] Oil prices have reached their highest level since 2008. Brent Crude, which represents the global oil benchmark, has increased to $130 per barrel. The spike has been driven primarily by fears of supply-side disruptions. The attack by Yemen’s Houthis on fuel trucks in Abu Dhabi, in which three people were killed played a part but the main reason has to do with the tensions between Russia, the world’s second-largest oil producer, and Ukraine. Energy prices in households are rising dramatically and their effects are directly being felt by consumers. Further, the key oil-producing countries have kept supply on a gradually increasing schedule despite the sharp increase in global crude prices. The OPEC countries decided to increase overall daily production by only 400,000 barrels in February, even though its own prediction is for demand to rise by 4.15 million barrels per day in 2022. 2022 Outlook According to the World Bank, Global inflation is expected to remain elevated throughout 2022. Supply bottlenecks and labor shortages are assumed to gradually dissipate through 2022, while inflation and commodity prices are assumed to gradually decline in the second half of the year. In the U.S. the central bank is under pressure to raise interest and tighten the economy further to combat inflation. However, the country is at a crossroads where raising rates might trigger a fresh global debt crisis, as its emerged poor-country repayments to creditors are already running at their highest level in two decades. The IMF warned that a quantitative tightening from the U.S. Federal Reserve could have a ripple effect on emerging markets by leading to capital outflows and currency depreciation. Emerging markets that borrowed most from the U.S. dollars are going to be hit the hardest by an increase in Interest Rates leading to potential country defaults. In the MENA region, the Economist Intelligence Unit has pointed out that the CPI is expected to remain high in 2021-2022 at an annual average of 14% due to the rise in international food and energy prices. Inflation will continue to be aggravated with Supply Chain bottlenecks and the post-pandemic increased demand in Middle Eastern countries. [caption id="attachment_8046" align="aligncenter" width="471"] Source: The Economist Intelligence Unit[/caption] There are also expectations that inflation will greatly impact low-income non-oil exporting countries within the MENA region such as North African countries. The effects of higher inflation will be less impactful in wealthier GCC and Asia-Pacific Economies. Regarding food, shortages might arise in low-income non-oil exporting countries due to dry spells and lower crop yields. Sharply depreciating currencies in countries such as Lebanon will further aggravate inflation in 2021/22, driving up the cost of imported goods. In a more distant future, inflation is expected to slow down toward the end of 2022 and the beginning of 2023, as Supply chain disruptions start to dissipate and the labor markets around the world are back to their healthy state. Conclusion Inflation seems to be quite a persistent rather than a transitory threat. The escalation of the conflict between Russia and Ukraine will most definitely not help ease inflation but rather further aggravate the matter since Russia is one of the biggest producers of raw materials such as oil, wheat, and a variety of different metals. Gasoline prices will further increase with the cost for food and goods such as smartphones most likely to follow suit. However, with supply chains recovering to their original efficiency, inflation will eventually slow down to settle at a fair rate. Author: Othmane Zidane Sources https://www.project-syndicate.org/commentary/return-of-global-inflation-by-carmen-reinhart-and-clemens-graf-von-luckner-2022-02?a_la=english&a_d=62067728a72fe630c0cb5cc7&a_m=&a_a=click&a_s=&a_p=homepage&a_li=return-of-global-inflation-by-carmen-reinhart-and-clemens-graf-von-luckner-2022-02&a_pa=curated&a_ps=&a_ms=&a_r= https://data.oecd.org/price/inflation-cpi.htm https://www.weforum.org/agenda/2021/12/rising-prices-inflation-ipsos-survey/ https://www.eiu.com/n/threat-from-inflation-in-the-mena/ https://www.theguardian.com/business/2022/jan/23/fears-grow-that-us-action-on-inflation-will-trigger-debt-crisis https://globalnews.ca/news/8523037/inflation-canada-jan-2022-record/ https://www.naturalgasintel.com/oil-natural-gas-prices-drive-sustained-surge-in-inflation/ https://research.stlouisfed.org/publications/economic-synopses/2021/12/16/supply-chain-bottlenecks-and-inflation-the-role-of-semiconductors#:~:text=Along%20with%20unprecedented%20labor%20market,to%20shortages%20of%20key%20inputs. https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/high_inflation.en.html https://www.imf.org/external/pubs/ft/fandd/basics/30-inflation.htm https://www.fao.org/worldfoodsituation/foodpricesindex/en/ https://blogs.worldbank.org/voices/global-economic-outlook-five-charts-1 https://www.morganstanley.com/ideas/global-macro-economy-outlook-2022#:~:text=The%20surge%20in%20global%20inflation,global%20GDP%20growth%20in%202022.
