The Good-The Bad-The InBetween: The Many Colours of Hydrogen, the US now has a 'climate' military, & more
Edition #19
Hi there!
I am not one to say I told you so … but here’s the new format like I told you (so) last week.
Here’s why I decided to do a revamp.
The last few months of running this newsletter has been one of immense learning and growth. I am proud of some of the editions I have managed to write. I didn’t think I’d be able to. But the newsletter has barely had any churn. That’s something I guess. Plus, you are still here =)
I thoroughly enjoyed going down rabbit holes, right from battery technologies and African geopolitics, to things that pissed me off about voluntary carbon markets.
I want to do more of that.
Also thanks to the last few months, I have become intimately familiar with the level of effort it takes to do more of that.
In order to build a quality throughput (so that it is worth your time, because hey, churn), I have decided to write these types of pieces at a more durable cadence, i.e., once or twice a month.
You will still receive weekly editions. Like this one.
True to the description of Living In A Greenhouse, I will curate the good, the bad, and now additionally, the in-between, of global climate developments.
I hope you like it and do write back and tell me what you think.
Feb. 18: Weekly Meter
The Good
1. Saudi Arabia and the many colours of Hydrogen: Hydrogen has long been touted as the revolutionary alternative to fossil fuels. Much like everything groundbreaking, higher costs and technology complexities have stifled its progress.
However, you know winds of change beckon when the largest oil producer in the world announces its hydrogen ambition.
Plans are currently underway to construct the largest ‘green’ hydrogen plant, with production slated to begin in 2026. Saudi Arabia wants to decrease its reliance on oil and diversify its economy, as the world shifts away from fossil fuels.
The thing about hydrogen though is that, unlike oil, it can be produced anywhere. Russia, UAE, and many other countries have spelt out their strong hydrogen ambitions. The EU and 15 other countries have, in fact, published national plans to develop and integrate hydrogen into its electricity mix in the coming decades.
That only bodes well for a high-cost, technologically complex climate solution.
Additional read: The largest oil and gas producer in India (owned by Asia’s richest man) has significant ambitions to be the global leader ‘blue’ hydrogen. It just announced the repurposing of a $4 billion petroleum-coke plant to produce ‘blue’ hydrogen.
The Hydrogen ‘Rainbow’
2. MorningStar cuts 1,200 funds from its sustainability universe. Tee-hee.
After I let my alter-ego loose (the one that resembles the ‘Old Man Yelling At Clouds’ from the Simpsons) at the shortcomings of ESG funds a couple of editions ago, this almost feels like a personal victory.
Nearly a $1 trillion in funds under management by these alleged ESG funds have been stripped of their sustainability tag by MorningStar, the independent investment research and management company with a presence in 29 countries.
Hortense Bioy, global head of sustainability research at Morningstar, told Bloomberg that sustainability tags were taken off “funds that say they consider ESG factors in the investment process, but that don’t integrate them in a determinative way for their investment selection.”
1,200 funds or 1 in 5 from MorningStar’s ESG Universe have been reclassified due to apparent ‘light or ambiguous ESG language’ used in disclosure documents, among other reasons.
This comes at the back of the EU financial watchdog issuing revised guidelines last year, called the Sustainable Finance Disclosure Regulation, to prevent greenwashing in capital markets. This regulation, right after it was introduced, led to a reduction in ~ $2 trillion from the ESG universe.
The disclosure regulation requires firms to classify their investment products under one of three categories: Article 6, which address ESG risks; Article 8, which promotes ESG characteristics; and Article 9, which sets measurable ESG objectives that have to be met.
Articles 8 and 9 alone account for over $4 trillion in the MorningStar universe, but without a standard definition or policy guidance, it is easy for any fund to self-classify. The European regulator announced that it is considering the introduction of minimum standards for articles 8 and 9, or to introduce rules around marketing of such funds. The SFDR is due for a review later this year and a decision is likely to be taken then.
Good signs all around, I’d say =)
Additional Read: This HBR article from earlier this week gives a good sense of the developments in ESG standardisation, besides making a strong case for it.
3. US Army is battling Climate Change: Yup, you read that right. This isn’t the Onion. We don’t joke around here. We run a very serious setup.
The US Army, earlier this week, announced its comprehensive plan to address climate change. In typical army bravado, they have asked … nay … instructed everybody to cite this strategy as:
Department of the Army, Office of the Assistant Secretary of the Army for Installations, Energy and Environment. February 2022. United States Army Climate Strategy. Washington, DC
Okay, in all seriousness, I personally find it impressive on a few counts.
Firstly, it signals that the defence forces of countries cannot be disconnected from a very real and prevalent global crisis.
Further, it allows for the considerable innovation and technological wherewithal within the US military to be potentially directed towards climate technology. (Here’s a fun read about all the things invented by the US military that went mainstream: it includes duct tape and super glue).
There’s much more to where that came from. Read the media coverage here and the actual announcement briefing here.
Of course, there are many who think the very idea of a ‘climate-friendly military’ as ludicrous, and that everybody is better off with reduced defence spending and a smaller. That’s a bit too optimistic, I’d say.
I will take this win and press on.
The Bad
1. Remember that Net Zero pledge by top banks at the COP? Wait, remember the COP? The COP26 was a fantastic spectacle of political showmanship, led by arguably a very unconventional sort of showman in Boris Johnson.
In the buildup to this spectacle, our man Boris designated Mark Carney to shepherd financial institutions into committing to a coordinated climate action. And commit they did, to achieve net-zero in the not-so-near-future by forming the Net-Zero Banking Alliance (NZBA), under a master-alliance called the Global Financial Alliance for Net-Zero (GFANZ). Yeah, my head spins too.
Here’s a short excerpt, about net-zero in all possible detail, from a previous edition:
Is Net-Zero Not All That?
If you ask me, there are only two types of climate pledges - ambitious pledges that are sparse on details, or inadequate pledges that are sparse on details. And it is hard to tell one from the other.
To no one’s surprise, it turns out that the biggest banks in Europe weren’t serious about their net-zero pledges. 25 of the banks that signed up to reduce emissions have extended loans and other forms of financing worth $33 billion to oil and gas firms since.
In all fairness,(I am nothing, if not fair) you cannot suddenly turn your loan portfolio ‘green’ with the snap of a finger. Most of the signees of the Alliance are working towards announcing their 2030 targets later this year. They also assure us that it is based on science.
What I have a problem with is touting it as a climate breakthrough when all you have is a pledge. It’s like celebrating the day you bought yourself a lottery ticket. (For the sake of sounding dramatic, I am going to assume the odds of the two are comparable).
What is required is transparency in reporting current emissions (across all scopes while we are at it), a means to monitor progress, and enforcing accountability while executing the commitments
That’s not too much to ask for. Pledges must at least be worth following through.
The In-Between
1. Australia is closing its largest coal-fired power plant in 2025, 7 years ahead of planned closure. The Eraring plant, owned by Origin Energy, supplies 20% of the electricity demand of the nation’s most populous state, New South Wales.
The reason seem to be untenable coal-plant economics amid the widespread adoption of cleaner and lower cost technologies such as wind, solar, and battery technology across Australia.
Furthermore, Origin announced that it will be replaced by a 700 MW super-battery, allegedly the largest in the Southern Hemisphere.
Australia’s notoriety for not exhibiting urgency in climate action notwithstanding, this news apparently caught the national government by surprise. So much so, the National Energy Minister went on to say that he was ‘bitterly disappointed’ by Origin’s decision.
My $0.02
What can be bad about shutting down a coal-fired power plant, right? Not really.
It makes perfect sense for the power company to shut down the plant. The costs of running a coal-fired plant that is near the end of its useful life is extremely expensive. The plant has been live for 35 years and contributed single-handedly to nearly 2% of Australia’s overall emissions.
It also makes sense to build a battery on the site of a coal plant because of existing transmission and distribution infrastructure.
Two for two there when it comes to the coal company’s incentives.
What makes me uncomfortable is, while closures like these continue to become commonplace, there isn’t a clear exit plan for coal.
Australia’s notoriety for not exhibiting urgency in climate action notwithstanding (x2), the success or failure of this transition could potentially arm fossil fuel supporters with a convenient excuse to maintain status-quo in electricity mix.
Bonus
How much farther?
That “legendary” gap between Intention and Action
The gap between individual intention and action is extremely relevant to the climate narrative. I have written enough about how tradeoffs for individuals in making climate-responsible choices are far less consequential, than it is for system-level actors.
Even the mild inconvenience that I write about, round about €2 here, appears to be aspirational going by this Politico article. .
Banter
Three Super-Reliable Ways to Solve the Traffic Problem
(It’s a riot. Please watch it. You will thank me later)