Efforts to keep the steel and shipping sectors on track for the Paris Agreement's 1.5°C target and for net-zero emissions by 2050 are being hampered by the clean hydrogen sector's slow progress, industry participants said on a panel hosted by Paris-based intergovernmental group OECD ahead of the UN climate summit Cop 29.
Clean hydrogen will be crucial to decarbonise the steel and shipping sectors because initiatives such as direct electrification and increased energy efficiency will be insufficient to reach net-zero emissions, panellists said. But ensuring supply of clean hydrogen and derivatives at scale and within the timeline required to meet climate goals has proved a challenge.
The two sectors together represent 10pc of global CO2 emissions and they would require 10mn-15mn t/yr of low-emissions hydrogen by 2030 in order to be on track for net zero by 2050, OECD environment directorate policy analyst Joseph Cordonnie said. Adapting to the deployment of hydrogen or derivatives in both sectors will take time, considering vessels and plants have a long life, so change needs to accelerate to avoid "emissions lock-in", Cordonnie said.
The global steel sector would require around 70 commercial-scale green steel plants by early 2030s to "stay as close as possible" to the 1.5°C target, according to Faustine Delasalle, chief executive at Mission Possible Partnership, a private sector initiative aimed at promoting the decarbonisation of hard-to-abate industries.
Around 60 green steel projects have been announced, but fewer than 10 have reached final investment decision (FID), Delasalle said. Fewer than 10 projects targeting production of hydrogen-based fuels such as ammonia or e-methanol specifically for bunkering have reached FID, she said.
Technology to decarbonise these heavy industries has progressed significantly over the last years, but "there is a lag" between technological advancements and industrial-scale investment and developers are struggling with project economics, Delasalle said. Many projects for production of hydrogen or derivatives have recently been delayed or cancelled.
Demand for products throughout the value chain has not moved at the necessary scale, Delasalle said. While there is voluntary demand for 'green' industrial products, overall demand has not reached a level that can unlock greater investment for projects to scale up, she said.
Waiting for the market to balance itself will not deliver decarbonisation, according to Delasalle. Even generous policy support for production such as the US' IRA scheme has not been enough for projects to build a strong business case. This shows the need for measures that "enable the green product to be more competitive versus the grey", like carbon pricing, "the removal of fossil fuel subsidies" and instruments that "drive demand for green commodities regardless of the price", such as mandates and carbon intensity thresholds, she said.
Subsidies represented less than 5pc of funding for Swedish green steel producer Stegra's project in Sweden, the firm's public affairs director Ola Hansen said. Stegra has seen demand from offtakers who are voluntarily cutting lifecycle emissions, but "what we really need is carbon pricing and to take away the fossil fuel subsidies," Hansen said.
"It's hard to compete with unpriced fossil fuel emissions," he said.
