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Green hydrogen - Investing in the ‘Swiss Army knife of decarbonisation’

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    Hydrogen can be seen as the answer to the challenge of reaching net-zero emissions as long as it can be produced without emitting CO2 – in other words, as long as it is green. Its characteristics have earned it the moniker ‘the Swiss Army knife of decarbonisation’ [1] – a reference to its uses as a fuel to power a heavy-duty truck or a cargo ship, or to generate electricity, or even its use to store energy.  

    Unsurprisingly, it figures in government net-zero plans, not least because of its potential to enable the decarbonisation of ’hard-to-decarbonise’ and energy intensive sectors such as steel or shipping.

    The EU has assigned hydrogen a key role in its Green Deal aimed at achieving carbon neutrality in the EU by 2050. [2] Experts have forecast that hydrogen will be at the heart of the energy transition.

    Citing a need for clean electricity and clean fuels, the US government sees hydrogen as offering a path to sustainable long-term economic growth. Under its Hydrogen Program Plan, it has committed to developing the technologies that can enable a hydrogen transition in the US. It wants to double or quadruple production and cut the costs of green hydrogen by two to three times.

    China has included hydrogen as one of its ‘six industries of the future’ in its latest five-year plan, signalling that the country will invest significantly in hydrogen innovation and development. As the world’s largest greenhouse-gas emitter [3], China has set an objective for peak CO2 emissions before 2030 and to achieve carbon neutrality by 2060. 

    One challenge is to decarbonise hydrogen production. That involves moving away from hydrogen sourced from natural gas (grey hydrogen) towards low carbon hydrogen (blue hydrogen; CO2  emitted during production is captured and stored) and ultimately to clean green hydrogen. This uses renewable energy sources such as wind and solar power for production (see infographic below).

    Another challenge is how to scale up cost-efficient production, transport and consumption. The issues are around adequate renewable power generation, long-term and large-scale storage of renewables, and ensuring distribution infrastructure is in place, e.g., installing hydrogen refuelling stations along motorways.

    Check out our infographic and find out why green hydrogen matters and why investors should care

    [1] Source: Julio Friedmann, senior research scholar at Columbia University’s Center on Global Energy Policy, in Biden administration and industry alike see hydrogen as ‘Swiss Army knife’ for eliminating emissions  

    [2] Also see In focus: Hydrogen – driving the green revolution on  

    [3] Also see China’s hydrogen roadmap: 4 things to know on 

    Also read:

    Spotting the mega trends and the potential winners What technologies do we need to get to net zero?

    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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