Challenges of the decarbonisation of the economy

The European Union is leading the way down a path approached in different manners by other regions of the world with the same goal – achieving zero greenhouse gas emissions by 2050

Climate change is firmly on the agenda of citizens, businesses and governments today, and the number of countries and companies that have set deadlines for zero emissions continues to grow. However, the challenges involved in meeting the goal defined in the Paris Agreement are enormous.

Demand for energy continues to increase

The world population continues to grow and the quality of people´s standards of living is rising, thereby contributing to a spike in the demand for energy and, consequently, the use of resources. In this regard, we need to decarbonize the economy to ensure the environmental sustainability of the Earth and the future of life on our planet. We need to produce and use energy in a different manner in order to lessen the impact of human activity on nature. This process, which is already underway, and which is undoubtedly one of the biggest challenges facing mankind, was one of the topics discussed at the Galp Open Days event.

Susan Farrel, vice-president of IHS Markit, one of the speakers, immediately pointed out that the use of energy still accounts for 75% of greenhouse gas emissions, with the remaining percentage generated in other activities such as agriculture. She also explained that “China is the biggest emitter”, adding that the USA, India and the European Union (EU) and other countries are next on the list.

The EU is leading the way towards decarbonisation, and has established different pathways and mechanisms, as noted in turn by Jonathan Sultoon, an analyst at Wood Mackenzie, who added that attitudes differ in large regions of our planet, partly explained by the availability of energy resources. This is one of the factors that justifies, for example, the difference in attitude between “China, which still has resources, and the United States, where many have already been exhausted”. This country has committed above all to carbon capture and storage technologies, while countries in Asia and Oceania, led by Australia, are developing technologies to produce green hydrogen, with Japan and South Korea “focusing on the industrial sector. With regard to the use of hydrogen cells, these countries are more advanced than European nations, which focus more on electric vehicles”, explained Jonathan Sultoon.

Financial pressure

Rui Costa Neto, a professor at the Lisbon Higher Institute of Engineering and at Lusophone University, argued that the time is right for Europe to change its oil and gas-based energy paradigm and for the European economy to cease being dependent on it. “We need to produce our own energy”, he declared, adding that “the best and most efficient manner in which to do this is to go back to the production methods of the 1920s, when electrolysis of water was used to produce green hydrogen to supply the different industries”. As far as this professor is concerned, “switching to electrolysis means self-sufficiency and economic competitiveness”.

Susan Farrel and Sabrina Cescolini, manager of Intertek's Sustainability, Environmental Health and Regulatory Departments, highlighted the fact that pressure from the financial sector has been the main driver of energy transition, with a major impact on the development of decarbonisation technologies. Moreover, “this will provide great impetus, together with companies, in getting them involved in the solutions”, argued the latter.

And what will be the main catalysts of decarbonisation? There are obvious answers to this, such as government intervention, regulation and a reduction in subsidies for certain activities or industries registering a high consumption of primary energy. Furthermore, public pressure plays a major role, as Sabrina Cescolini pointed out, such as the promotion of energy transition by insurance companies due to the increased risks arising from extreme weather events.

The main technologies of change

According to Jonathan Sultoon, the technologies that will have the most successful impact on the decarbonisation of the economy are carbon capture and storage, and those linked to transport, or in other words, renewable technologies for the production of green hydrogen and electric mobility. He also included nuclear energy in the mix, “as it plays an important role in the economies of Japan, South Korea and China, which will have to invest in this sector in order to achieve zero emissions”.

As far as Sabrina Cescolini is concerned, there are major differences in the manner in which small and large companies are preparing for energy transition. “The process is complex and complicated and could discourage some of the former” she said, suggesting that “they should start by measuring their emissions, before standards are set and guidelines for change developed”. With regard to large companies, “they are already capable of collecting the necessary information, setting goals and achieving them”. However, Sabrina Cescolini argues that they should always be looking at what they need to do to reduce risks and public impact, not least due to the fact they are under widespread scrutiny. She also adds that they can play an even more significant role in the decarbonisation process if they can manage to use their influence to engage their partners in the process.