Assessing the Investment Potential and Benefits of Green Hydrogen

The Earth’s population is constantly growing and so have carbon emissions. This has led to the rise of ideas surrounding renewable or sustainable energy. One form of sustainable energy is green hydrogen, which involves using renewable energy like wind or solar to electrolyze water and separate the hydrogen and oxygen atoms from each other. In a 2020 CNBC article called The investment opportunities in ‘green hydrogen’ might not be where you think by Anmar Frangoul, the author discusses the opportunities of investing in green hydrogen as well as the benefits of utilizing this new form of renewable energy in sectors like industry and transportation. However, the environmental implications are minimally discussed and the economic implications are few in this article.

First, on an environmental level, the use of green hydrogen having positive implications are minimal at best. For example, the author alludes to a statement made by the International Energy Agency (IEA) that “hydrogen production [being] responsible for roughly 830 million metric tons of carbon dioxide each year.” The emission of carbon dioxide is a well-known factor of climate change. Yet Frangoul also references from Wood Mackenzie - a global energy, chemicals, renewables, metals and mining research company - that despite how attractive green hydrogen seems at combating carbon dioxide emissions, green hydrogen’s “role in the overall energy mix is small, accounting for just 0.1% of worldwide hydrogen production in 2020.” Taking both examples into account, the fact that green hydrogen would barely have any effect on the annual amount of roughly 830 million metric tons of carbon dioxide causes one to wonder if it is even worth using, let alone investing in.

But from an economic perspective, the article is lacking. For instance, there is no mention whatsoever of such ideas as the “optimal” level of pollution regarding carbon emissions. The “optimal” level of pollution refers to the marginal costs of reducing pollution is greater than the marginal benefits. However, the article talks about the EU’s initiative of creating zero carbon emissions by 2030 with the help of green hydrogen without addressing this idea of optimal pollution levels. How much are people willing to pay to reduce carbon emissions by using green hydrogen? Do the marginal benefits of using green hydrogen outweigh the marginal costs? Since research into its use is still ongoing, the answers to these questions and seeing whether or not green hydrogen is an efficient renewable energy tool remains unknown.

Likewise, there is a brief discussion of investment opportunities for green hydrogen having the potential to increase renewable energy growth. Frangoul quotes Mark Lewis, a chief sustainability strategist at BNP Paribas Asset Management who says, “About 400 billion is what we think will be required, and fully half of that is for dedicated new renewable energy capacity. So … this is only going to increase the growth opportunity that was already there around renewables.” Considering this statement, there is the question of demand. Namely, the number of consumers in the public or in the sectors that could use green hydrogen who will demand this good. Moreover, with the author’s assertion of green hydrogen production being expensive, this ties in with how demand for this good holds up against demand for pre-existing renewable energy alternatives like solar, wind, ethanol, etc. Altogether, boasting that green hydrogen will increase the opportunity for renewable energy growth seems rather presumptive.

Therefore, on the surface, this article presents the investment potential for utilizing green hydrogen in an attempt to reduce carbon emissions and being a positive tool of renewable energy. But at this stage, the full scope of these potential benefits are a mystery that will hopefully be uncovered in the next couple of years.

Source

Frangoul, Anmar. “The investment opportunities in ‘green hydrogen’ might not be where you

think.” CNBC, 13 Oct. 2020, www.cnbc.com/2020/10/13/investment-opportunity-in-

green-hydrogen-may-not-be-where-you-think.html.