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Wednesday, December 1, 2021

The severe end of Europe’s natural gas dependence


At the COP26 climate conference last week, activists awarded Norway their “Fossil Today” award. This is an honor, and the new government of Oslo could have done it if it hadn’t had a first global trip. But this highlights the dilemma that Norway faces as a large fossil fuel producer, especially the European Union, whose economy is heavily dependent on natural gas.

The new Norwegian Prime Minister Jonas Gal Stowe told the Financial Times in the first strong interview that the green transition in Europe requires his country to continue drilling. He said that the rapid end of the supply of hydrocarbons in Norway “will prevent” the industrial transformation required for decarbonization.

Of course, this is a selfish argument. It goes against the International Energy Agency’s roadmap to net zero emissions, which requires no more investment in new oil and gas development.This also goes against the EU’s Unrealistic demand End hydrocarbon mining in the Arctic.

In other words, this argument may be correct. Technically speaking, replacing coal and oil with natural gas is a necessary step to reduce emissions. It captures important truths about the political economy of oil and gas exporting countries. Even for a climate-conscious population like Norway, there is far from the majority of people who support the phasing out of fossil mining. It reflects the geopolitical reality: reducing Norwegian gas will make Europe more dependent on the waywardness of Russian President Vladimir Putin.

Most importantly, it exposes the political challenges of the EU’s green ambitions. The intention of decarbonization is real. But the African continent is still highly dependent on natural gas, and will become more dependent on natural gas because it no longer depends on coal.

However, short-term logic is accompanied by long-term contradictions. If the EU encourages natural gas investment to meet short-term demand, it may rely on natural gas for a long time. The argument that natural gas is a transitional energy source runs counter to the fact that no one develops a gas field and plans to close it in five to ten years. Therefore, the EU and Norway are in a hypocritical embrace, and North Sea natural gas will provide power for European households and businesses for a long time.

There is a way out, and all parties recognize it. Natural gas does not need to be burned because of its energy content. It can be used as a raw material for hydrogen. If carbon is captured and stored (CCS) in this process, the “blue” hydrogen produced is a source of carbon-free energy.

Existing technology can be used to power heavy vehicles that are not suitable for high-temperature industrial processes such as batteries, ships, and steel.In fact, some activities are difficult to decarbonize in any other way, and CCS is a kind of Necessary condition If net negative emissions become possible.

What is missing is the infrastructure and the market. To convert gas from combustible energy to hydrogen feedstock requires transportation and storage of hydrogen and carbon dioxide, as well as carbon sequestration facilities. Unless sufficient demand is expected, it is difficult to justify such investments.

This is a question of whether the chicken comes first or the egg comes first. In order to have sufficient demand, it is necessary to adopt hydrogen power technology on a large scale in relevant departments. Conversely, this is only economically feasible when the user is convinced that the supply of hydrogen is imminent.

The EU has the ability to create markets. Ensuring large-scale hydrogen supply is a gift from gas producing countries. But for either situation to happen, both must jump together.

The EU bears the greatest responsibility for achieving this goal.It has a Hydrogen strategyBut talking to Norwegian public and private decision makers, as well as superficial doubts about the EU’s implied commercial approach. They question whether Europe is capable of accepting the difficult choices required by net zero, such as biting carbon prices. Does Europe fully support blue hydrogen and CCS, or is it combined with the less efficient “green” hydrogen made from electrolyzed water? This choice would be as self-defeating as Germany’s abandonment of nuclear energy, because it makes it use more coal.

If the EU promises to use blue hydrogen and puts the money on its lips, it may ask Norway to make corresponding supply promises. Rather than prohibit exploration in the Arctic, it is better to require a policy that only allows the further exploitation of natural gas through infrastructure that can quickly be converted into blue hydrogen production with carbon storage functions.

Politically and even legally binding instruments can be found to assure everyone that demand and supply will come. For Oslo, such a policy provides a compromise for those who demand the complete elimination of fossil fuels. It may even be allowed to return its Glasgow award.

martin.sandbu@ft.com



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