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Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Australia Pivots To Hydrogen In Carbon Neutral Push

Like it or not, on a global level we are irrefutably in the beginning stages of a sweeping energy transition that favors clean energy alternatives over emissions-heavy fossil fuels. The COVID-19 pandemic, for all its economic destruction, has in some ways strengthened the renewable energy sector and definitively catalyzed the global green energy transition.  Even before the oil price crash of unimagined proportions that occurred in April, oil has been on a long, slow, and mostly steady decline. And now, we’ve arrived at a breaking point: Big Oil’s most profitable business is no longer oil. “Over the past decade, the ‘oil’ companies, whose profits were mostly derived from pumping crude out of the oil fields they discovered, transformed themselves into ‘oil and gas’ companies,” oil strategist Julian Lee wrote for Bloomberg Opinion in an August column. “Now they are evolving once again to become ‘energy’ companies. Shell’s latest report shows that almost half of its production was natural gas, compared with less than 40 percent in 2005.”

So far, the transition of supermajors from Big Oil to Big Energy has been mostly limited to Europe. Whereas European oil giants like Shell and BP have invested in major renewable projects and have taken the initiative to diversify their portfolios at a time that Peak Oil seems to be drawing closer and closer, in the U.S. it’s a different story. “While BP and other European companies invest billions in renewable energy, Exxon and Chevron are committed to fossil fuels and betting on moonshots,” the New York Times reported this month in an article titled “U.S. and European Oil Giants Go Different Ways on Climate Change.”

“As oil prices plunge and concerns about climate change grow, BP, Royal Dutch Shell and other European energy companies are selling off oil fields, planning a sharp reduction in emissions and investing billions in renewable energy,” NYT reports. “The American oil giants Chevron and Exxon Mobil are going in a far different direction. They are doubling down on oil and natural gas and investing what amounts to pocket change in innovative climate-oriented efforts like small nuclear power plants and devices that suck carbon out of the air.”

Related: Oil Bulls Return As OPEC+ Reassures Markets

Now, Australia seems to be starting to follow in Europe’s footsteps. “Oil and gas companies are pushing hydrogen as a key to Australia's pathway to net-zero emissions, with new modelling suggesting that using the fuel source to replace natural gas in stoves, heating and industrial processes will be cheaper than going fully electric,” read a report published in the Sydney Morning Herald last week. “As decarbonisation goals threaten long-term demand for emission-intensive fossil fuels, industry groups for gas producers, pipeliners and electricity-grid operators have launched a report into the costs of hitting carbon neutrality by 2050 under a range of different scenarios.”

While hydrogen is a clean energy buzzword that evokes utopian images of the perfect, clean-burning fuel that leaves behind nothing but water vapor, the reality is a bit more complicated. Some hydrogen is indeed very green. Quite aptly, this kind of hydrogen, produced using renewable resources and clean forms of energy production, is called green hydrogen. Most hydrogen currently produced for industrial applications, however, is more greenwashed than green. This hydrogen is produced with fossil fuels that do have considerable carbon emissions. This is known as gray hydrogen. 

Indeed, while Australia’s rhetoric leans heavily on carbon neutrality, the nation is angling for an energy future that still features the nation’s plentiful natural gas resources heavily. "There is a role for electricity and a role for gas in a low-carbon future; this report demonstrates it's not one or the other," Tamantha Smith of Energy Networks Australia was quoted by the Sydney Morning Herald. "Policy settings aimed at reducing emissions should recognise that continuing to use gas infrastructure is the lowest-cost option to reach net-zero emissions from the energy sector by 2050."

While the plan is not quite as green as the headlines may seem, if implemented it will still be a considerable step forward in the global call to action against climate change, especially for a country as historically faithful to its fossil fuel industries as Australia.

By Haley Zaremba for Oilprice.com

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