By Vish Gain

(Vish Gain is a journalist based in Dublin. He is a correspondent for AML Intelligence covering the financial crimes sector in Europe and beyond.)

DUBLIN (Callaway Climate Insights) — As the EU’s 2030 climate goals inch closer to approval, the blue and green hydrogen debate and how a carbon wealth gap stands in the way of a just transition is worth a full analysis.

The European Union is now closer than ever to sealing a deal on its 2030 climate goals, including an ambitious 55% reduction in carbon emissions. Draft conclusions from an EU summit in Brussels held Wednesday indicate a possible end to a political quagmire spurred by Poland and Hungary’s refusal to approve necessary funding.

The problem? Both Warsaw and Budapest blocked the €1.8 trillion ($2.1 trillion) proposal for a seven-year budget and recovery fund last month, citing rule of law provisions they claimed were illegal. This comes at a time when both governments are under pressure from the EU for restricting the freedom of press and judiciary, with the potential to lose out on billions in green funding.

This conflict of interest seems to have been mitigated by an understanding between the two countries and the EU after the draft conclusions tactfully stressed “fairness and solidarity” in its approach to delivering the goals “in the most cost-effective manner possible.”

The draft statement went on: “The new 2030 target needs to be achieved in a way that preserves the EU’s competitiveness and takes account of member states’ different starting points and specific national circumstances,” acknowledging “the right of the member states to decide on their energy mix and to choose the most appropriate technologies.”

This is in response to Poland’s earlier concerns around the transition costs of a net-zero emissions economy. The coal-dominated country said it wanted “further analysis” to ascertain the economic impact of the proposals on all member states before it could agree to any deal.

The hydrogen divide

With the deal potentially in grasp, some other practical challenges remain. To replace emissions-based energy sources, Europe will need to find and swiftly transition to more renewable sources of energy.

One element has caught its attention as a solution to all its energy problems: hydrogen.

Hydrogen is considered a green fuel which emits no carbon dioxide when used in industrial processes. As a result of the EU’s investment in the new source, a group of 11 European gas infrastructure companies announced earlier this year their plans to create a dedicated hydrogen pipeline network of almost 23,000 km by 2040.

Known as the “hydrogen backbone,” this network aims to connect future hydrogen supply and demand centers across Europe, including the highly industrialized northern EU countries and offshore wind farms in the North Sea that can produce green hydrogen from excess renewable electricity.

However, the plan has analysts divided. While some environmentalists think the move is detrimental to the green deal’s objectives because it invests taxpayer money in the gas infrastructure industry, others seem to think it is necessary for the short term.

In its hydrogen strategy, the Commission has taken a clear stance in favor of green hydrogen produced from renewables. But the strategy also acknowledges the role hydrogen produced from natural gas, known as blue hydrogen, can play in the transition.

Lisa Fischer from E3G, a climate think tank, said, “EU instruments should support the cutting-edge and not just the transition technologies. We might need some infrastructure to match renewable sources of hydrogen with demand in industry,” adding that the infrastructural needs will be “localized and limited” to targeted areas only.

These targeted areas, according to Simone Mori, of Italian energy company Enel, are mostly heavy industries. For him, the expensive undertaking of hydrogen as a source of energy can be justified when it is used in areas where it can make the biggest difference.

Referring to the Commission’s aim to use 100% green hydrogen (hydrogen that is not sourced from fossil fuels), Mori said the Enel group is “entirely in line with this approach,” adding that Europe needs to focus its attention on electrolyzers needed to mass produce green hydrogen by 2040.

As of 2018, around 95% of global hydrogen was produced from fossil fuels by steam reforming or partial oxidation of methane and coal gasification. Only a small quantity was derived from alternative routes such as biomass gasification, electrolysis of water, or solar thermochemistry — a solar fuel with no carbon emissions.

Another source of hydrogen, nuclear power, has drawn a stark opinion divide in Europe. According to a Euractiv report, Austria and Germany are adamant in their refusal of anything nuclear, while France, Finland and some Eastern states approve of the technology.

Carbon and Europe’s wealth gap

Europe’s stark divisions are not just restricted to the realms of opinion. A significant wealth divide between member states has seen implications for its fight against climate change, with poorer citizens bearing the brunt.

An Oxfam report published Tuesday has found that EU emission cuts since 1990 have only been achieved by lower and middle-income citizens while total emissions for the richest 10% have grown, revealing a huge carbon inequality problem in Europe.

It shows that the richest 10% of Europeans are responsible for over a quarter of emissions — the same as the poorest half combined. Middle-income Europeans, who earn between €20,000 and €40,999 annually, were responsible for just under half of emissions, making cuts of 13%.

This news comes at a time when research suggests climate change hits the poor much more than the rich. The global pandemic, which devastated much of EU’s economy, has exacerbated the wealth divide and the report calls on the EU to establish “a green deal that tackles both inequality and emissions can help build fairer, healthier and more resilient European societies in the wake of the Covid-19 crisis.”

The report also found that member states with the richest 10% of citizens in Germany, Italy, France and Spain, approximately 25.8 million people, were collectively responsible for the same emissions as the entire population of 16 member states — approximately 84.8 million people.

On a global scale, Europe is responsible for 15% of global consumption emissions, despite being home to just 7% of the world’s population.

In a recent Euractiv webinar on Europe’s 2030 climate goals, Diederik Samson, Commission VP Frans Timmermans’s chief of staff, said: “By far, our biggest challenge is to create a just transition. Instead of repairing the damage afterwards, we need to prevent it during the transition.”

“Every transition has a sort of a Darwinistic nature, where power and money end up in the hands of a few.”

Although the EU’s path to approving the green deal looks clear, with the lack of consensus around the use of hydrogen and the stark carbon wealth divide, it remains to be seen if Europe’s future climate leadership is mere optics or if the grass is indeed greener on the other side.