Carbon offsets a short-term fix: Fortescue Future Industries boss
The boss of green hydrogen powerhouse Fortescue Future Industries (FFI) has backed the Labor government’s safeguard mechanism as a good start in reducing harmful carbon emissions from heavy industry, but says the policy’s use of carbon offsets is not a viable long-term solution.
Storage tanks at a green hydrogen plant in Spain. Fortescue Future Industries is aiming to make 15 million tonnes of green hydrogen a year by 2030.Credit:Bloomberg
The Albanese government this week struck a deal with the Greens that enabled it to pass new laws on Thursday that will force the nation’s 215 biggest greenhouse-gas polluters – including major mining sites, gas processing plants, manufacturing firms and steel mills, to cut emissions and set tougher controls on new fossil fuel projects from July 1.
“It [the safeguard mechanism] is a great first step,” Fortescue Future Industries (FFI) chief executive Mark Hutchinson said, adding that the use of offsets is “debatable” longer term. “It’s necessary now, but eliminating fossil fuels that’s really the goal, not trying to find a way level them.”
To achieve the policy’s targets of reducing emissions by at least 4.9 per cent a year, or 30 per cent by 2030, companies will be forced to either buy carbon credits generated by carbon offset projects such as tree planting, or they can switch old fossil fuel-based technologies to cleaner systems, such as hydrogen.
FFI is in pole position to take advantage of a global push by heavy industries – accelerated by policy shifts like Australia’s safeguard mechanism and America’s Inflation Reduction Act – to switch to alternative energy sources, such as green hydrogen.
Hydrogen, which burns cleanly and emits only water, is considered a growth industry that could eventually substitute coal in steelmaking furnaces or natural gas in electricity and heating systems. Most of today’s hydrogen is limited to “grey hydrogen”, made from gas via a process that emits carbon dioxide into the atmosphere.
Green hydrogen, on the other hand, is produced when a renewable energy-powered electrolyser is used to split water into hydrogen and oxygen.
Hutchinson is the chief executive of a company set up by Australian billionaire Andrew ‘Twiggy’ Forrest to spearhead a multibillion-dollar effort to diversify Forrest’s iron ore mining company Fortescue, which currently generates 2 million tonnes of greenhouses gases a year, into a clean-energy group spanning renewable energy and zero-emissions hydrogen.
Hutchison said FFI this week signed a power purchase agreement with Norwegian hydropower and renewable energy generator Statkraft to supply hydrogen from a prospective plant in Holmaneset for export to Germany.
“We have committed to do five projects to FID [Final investment decision] this calendar year.” They are in Australia, the United States, Brazil, Norway and Kenya, he said. “The demand is absolutely there. The world is waiting to do it at scale, which is what we’re trying to do.”
FFI is aiming to make 15 million tonnes of green hydrogen a year by 2030 – an ambitious goal for an energy source whose current global production is a tiny fraction of that target.
While green hydrogen has gained global attention for its potential future applications as a zero-emissions energy source, other companies building demonstration plants for the fuel are less bullish about its near-term outlook, arguing that it remains a new technology with significant obstacles surrounding its ability to be cost-competitive at scale.
However, Hutchinson said two events have “supersized” green hydrogen’s potential.
The US Inflation Reduction Act will subsidise green hydrogen by nearly $US3 a kilo, making it immediately cost-effective for manufacturers and the war in Ukraine has made Europeans sit up and accelerate their plans, he said.
“Those two things globally, have been a major, major impetus to what we’re doing.”
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