12 February, 2020
The world is starting to fully face the climate emergency
After signing the Paris Agreement in 2016, proclaiming their intention to limit global warming to well below 2 degrees C above pre-industrial levels, the 195 signatory countries now have to act on their commitments. In parallel, more and more businesses are committing to play their role, and citizens and shareholders increasingly demand that companies assume responsibility for their impact on climate change.
Within just a few decades, all our energy needs, electricity, industry, transport, buildings and agriculture, will have to come from carbon-free sources.
This will require huge changes in little more than a single generation, and will need innovative solutions, technologies and policies. Hydrogen will play a crucial role in making this fundamental change to our energy systems. It can – and will – constitute a key part of the solution to climate change.
Our latest report, Shaping Tomorrow's Global Hydrogen Market, shows that despite regulatory challenges, legal complexity and the current lack of incentives to invest in decarbonized hydrogen without government support, important opportunities exist for businesses seeking to reap first-mover advantages.
Key Findings
- To combat climate change, hydrogen is essential. There is a growing consensus among academia, industry and political leaders that a decarbonization path based (quasi-)exclusively on electricity networks (an "electricity only" model) is unrealistic and would be too expensive. Deep decarbonization will require hydrogen to satisfy current industrial demand; "no molecules, no deep decarbonization."
- Governments are supporting decarbonized hydrogen as they did with renewables to drive down cost. This support has already begun and is working.
- The current hydrogen market is already big and growing, with a total demand of around 115 million metric tons in 2018, representing USD 135.5 billion. Hydrogen also holds long-term promise, and is expected to reach USD 25 billion by 2030. Future applications include road transport, maritime and air transports, buildings and energy-intensive industries.
- Smart movers should use government support to de-risk investment with respect to the cost of low-carbon and decarbonized hydrogen. To do so, it is important to act in the right areas and on the right markets, where government support is likely to be abundant. Companies should understand which countries provide the most and best focused funding or investment support and what time of project governments are likely to support.
For further information, please contact:
Richard Allen, Baker & McKenzie
richard.allen@bakermckenzie.com
