Tackling Industrial Emissions
The Promise of Hydrogen
Emissions from heavy industry are the brave new world of climate action. Including emissions from electricity use, the industrial sector is responsible for 40 percent of the world’s GHG emissions, and its share of emissions is growing. Creating industry-wide transformation will take a combination of market, financial, and policy solutions. Last month, I was fortunate to have the opportunity to share RMI’s perspective on decarbonizing industry with the US House of Representatives. I was invited to testify before the Select Committee on the Climate Crisis on hydrogen’s role in the industrial energy transition. Here’s what I had to say:
When we talk about industrial emissions, it is important to take into account the whole value chain, from start to finish, considering how raw materials are sourced and processed, how products are manufactured, and finally, all the transportation pathways—the ships, trains, planes and trucks—that enable that package to arrive on your doorstep after you click the two-day shipping button.
Few of the activities in this value chain are consumer facing, but they are essential to creating and delivering the things we use every day, from our phones to our cars to our houses. These activities also contribute a huge share of greenhouse gas emissions: more than 40 percent worldwide. And these emissions are continuing to grow, not only driving climate change, but also putting our health and our economy at risk.
Hydrogen can play a key role in reducing industrial emissions by displacing the fossil fuels that currently power much of this sector. The good news is that hydrogen fuel is being produced in nearly every state. Collectively, the US makes about 10 million metric tons of hydrogen per year, which is about 15 percent of the global total. The challenge is that we need to produce a lot more of it: about ten times as much. And we need more industrial sectors to use it. You, as legislators, can play a key role in making this happen.
About 95 percent of the hydrogen made in the US today is manufactured through a process called steam methane reforming, or SMR. This process uses natural gas and steam as inputs but results in significant carbon dioxide emissions. A commercially available alternative to SMR is electrolysis. In this process, electricity is used to split water molecules into hydrogen and oxygen. In itself, electrolysis produces no greenhouse gases, so the carbon intensity of the process depends on the carbon intensity of the electricity source used.
We will need each of these processes, and others under development, to manufacture the 600 million metric tons of hydrogen per year that we need to decarbonize industry. And to reach this level, production needs to steeply increase in the next decade and then continue to grow at a steady rate.
To date, ramping up hydrogen supply and uptake by industrial users has presented a sort of chicken and egg problem. Industry doesn’t use a lot of hydrogen fuel for power because there is not enough of it on the market for it to be cost-competitive. And hydrogen producers don’t want to take on the financial risk of ramping up production if they don’t have a sure market to allow them to recover costs.
Targeted policy is key to resolving both sides of the problem so that we can meet our decarbonization goal. On the supply side, the focus should be on leveraging our existing hydrogen production resources to build supply and bring down prices, while also accelerating production based on low-carbon energy sources. This will require a mix of regulations and financial incentives, including renewable energy mandates, tax credits, loan guarantees, and feed-in-tariffs. On the demand side, clear regulations on hydrogen transportation and distribution infrastructure, coupled with direct investment and loan guarantees for building this infrastructure, can make hydrogen easier for industry to access. Financial incentives can be used to stimulate hydrogen uptake by large industrial users, and investment support programs can help reduce the costs associated with fuel-switching at industrial facilities.
These are just some of the tools that federal policymakers have in the toolbox to reduce investment risk in hydrogen production and grow the market to the scale necessary to decarbonize industry. And the good news is that many of these tools have been applied with impressive impacts in similar markets. For example, the solar investment tax credit has enabled the solar industry to expand at an annual growth rate of 50 percent since 2006, which has brought the price of solar power down dramatically and facilitated deployment of thousands of megawatts of clean electricity onto our nation’s power grid. Today, we have the same opportunity with hydrogen. If we are truly serious about decarbonizing industry, hydrogen will be a critical part of the solution.
To mitigate the risk of climate change, it’s critical to limit global temperature rise to 1.5°C above preindustrial levels. To help meet a 1.5°C pathway, RMI’s industry program is on a mission to decarbonize the world’s goods and services, including how they are designed, produced, sourced, and delivered. As we said in our recent blog, “The Truth About Hydrogen,” industrial sectors need a comprehensive approach to decarbonization, and they need it now. And, without a doubt, that approach will include hydrogen.