Another in a series of views from our CEO. EPFI colleagues, it would great to hear your responses. Equator Principles
EP Reflections #2 In my previous post in June I reflected on the huge opportunities and challenges for the necessary transition to a low carbon future for all. Reducing man-made global heating sufficiently to avoid the worst impacts to people and planet will require us to electrify the majority of our heat, transport and electricity use, globally and rapidly. I referred to an estimated capital cost of approximately $100-300 trillion before 2050. A big number. But very much less than the cost to the economy, humans and nature of not acting now. As well as rapid expansion and near-total decarbonising of the global electricity infrastructure there are core aspects of our way of living that this massive step won’t easily change. These are ‘hard to abate’ activities, like steel and cement production, international shipping and aviation. It’s expected that ‘renewably produced electrons’ are not going to be enough. Aspects of the way we live simply need molecules (produced by very low carbon sources) and energy sources with an energy density well above that likely to be achieved by batteries. So, as well as hugely increasing renewable electricity production, a sizeable proportion of this near-zero-carbon electricity is needed to produce the molecules to bring these ‘hard to abate’ processes in line with a future that we are all able to live in. To meet the urgent need it seems likely that production of very low carbon hydrogen (‘green hydrogen’), and derivatives from this, will have to massively increase, and super quickly. But for the thriving of people and the planet green hydrogen, ammonia, methanol and other molecules simply cannot be developed by creating other unacceptable impacts. Examples are further damage to critical ecosystems, biodiversity, indigenous rights, cultural heritage, and social capacity. We must seek to do no significant harm to other systems and values whilst also acting with speed and scale. Wouldn’t it be good if green hydrogen projects were financed with robust and sustainable evaluation of all relevant risks and opportunities; environmental, social, climate and biodiversity included? Fortunately, there is already a Green Hydrogen Standard which incorporates strong environmental, social and sustainability safeguards across a wide range of relevant factors. It’s readily aligned with the Equator Principles and both are underpinned by the current IFC Performance Standards on Environmental and Social Sustainability, allowing coherence for project borrowers to address both standards for relevant transactions. I really hope to see new green hydrogen projects financed under these or similar necessary standards. They are likely to be better projects for it – financially, environmentally and socially. And it seems that meeting the increasingly urgent needs of people and the planet now requires this. www.equator-principles.com greenhydrogenstandard.org Joe Williams Steve Waygood Amit Puri Andrew Scott EP Secretariat