How to align hydrogen investments with a 1.5°C pathway

Geneva, February 9, 2023 – Today, the World Business Council for Sustainable Development (WBCSD) is releasing new guidance that calls on companies investing in hydrogen and their business partners to add a “1.5°C alignment” to their investment decision-making processes. This guide is the result of a collaboration between 18 WBCSD member companies.

The publication aims to help shape the infrastructure, including the necessary technologies, policies, incentives and business plans that will propel the hydrogen economy to achieve net-zero emissions by 2050 and transition energy systems towards increasingly less reliance on support fossil fuels.

The new guidance outlines three criteria companies can use in their investment decisions to ensure hydrogen projects are aligned with the Paris Agreement’s 1.5 degree climate target:

  1. A rate of decarbonization (of hydrogen-related life-cycle emissions) in line with the International Energy Agency’s (IEA) net-zero emissions scenario curve, achieving net-zero life-cycle carbon emissions in 2050;
  2. Using hydrogen to decarbonize sectors where no alternatives are available, unsuitable for use or less efficient;
  3. Compliance with two limits for natural (fossil) gas-based hydrogen – not dependent on new fossil fuel exploration (ie greenfield) or fossil fuel subsidies.

In order to put these criteria into practice, WBCSD recommends companies to take the following actions:

  • Map out how they can reduce the full lifecycle carbon intensity (CI) of their hydrogen investments over time to achieve net-zero carbon emissions in 2050 and plan to build into that CI throughout the lifecycle of their projects -invest reduction measures;
  • decarbonization of existing gray hydrogen units in line with the global decarbonization required to meet a 1.5°C scenario;
  • Use new hydrogen production with the lowest possible carbon intensity as a starting point;
  • Respect the IEA and WBCSD redlines for blue hydrogen;
  • Invest in measures to reduce greenhouse gas (GHG) emissions to ensure these investments have net-zero carbon emissions by 2050.
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All companies, investors and policy makers active in the hydrogen sector can refer to the examples of carbon intensity reduction pathways presented in the guide to decide how best to gear their investments towards a 1.5°C scenario relay a message.

This is just a first step to define what it means for the hydrogen sector to be net zero and compliant with the 1.5 degree scenario. The WBCSD welcomes further collaboration to deepen this issue.

Harry Brekelmans, Project and Technology Director, Member of the Executive Committee at Shell: “The WBCSD’s report on aligning hydrogen investments along a 1.5 path shows us all an ambitious and pragmatic way to net out hydrogen production emissions over the entire life cycle – reduce to zero. This is of paramount importance for hydrogen to fulfill its crucial role in the future energy system. At Shell, we are committed to being a net-zero company by 2050 and are actively investing in hydrogen, for example in our Rhineland refinery or in Holland Hydrogen I. We are considering how to implement the proposed 1.5 compliant criteria in include in our decision-making process for investments in hydrogen. We also recognize that the energy transition will require different solutions by 2050 and in different regions. We thank the WBCSD and all the member companies that have drafted this report for such a clear and practical work.”

Peter Osterveer, CEO of Arcadis: “Arcadis has been heavily involved and a strong sponsor in the WBCSD hydrogen working groups and supported the workflows of ‘1.5 aligned hydrogen investments’ to support the adoption of hydrogen with the lowest possible carbon intensity across the industry. With challenges to Europe’s energy security and rising fossil fuel costs contributing to the cost of living crisis, supporting the rapidly accelerating hydrogen sector is essential to decarbonise our industries and shift our dependency on fossil fuels.”

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Members of the WBCSD Hydrogen Workstream: Arcadis, Baker McKenzie, bp, CLP, DNV, Dow, EDP, Enel, Engie, ERM and Element Energy, Galp, Iberdrola, Michelin, SwissRe, TotalEnergies, Shell, Yara, Yokogawa and KBC.

Download the full report and executive summary here.

Learn more about WBCSD’s work on new energy solutions here.

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