10 August 2022 – The US Senate has passed a multi-billion dollar climate package. At the same time, China terminates climate cooperation with the United States, which seems mainly rooted in the Taiwan conflict, but could also be the prelude to a new race between the superpowers for economic leadership towards a Net Zero society. And the United States is subsidising green hydrogen at $3 per kg, which should finally wake the sluggish Europeans from their summer night’s dream.
The US Senate gave its approval to investing hundreds of billions of dollars on clean energy and the environment on Sunday. The world’s two largest economies and emitters, the US and China, abruptly halted their climate cooperation just two days earlier.
No other economy in the world has so strongly imprinted the approach of competition stimulates business as that of the United States. The Cold War at the end of the last millennium had already shown how much the USA, as well as other free-market oriented countries, had profited from competition with communist-ruled nations.
Now that the last major communist-ruled AND economically successful nation, China, has for several years begun to outpace the West in the transition to a net-zero society, the United States has managed to launch its first major climate package.
We recall the early days of the space race between the then Soviet Union and the United States. In the beginning, things didn’t look so good for the Americans either, and the Soviets were able to celebrate success.
Just two days before the US Senate approved the 370 billion US dollar climate package, China broke off bilateral talks with the US government.
Beijing and Washington’s climate collaboration came to an end on Friday when China halted climate negotiations in retaliation for House Speaker Nancy Pelosi’s trip to Taiwan. The action shatters a discourse that was essential in achieving the Paris Agreement in 2015 and, more recently, produced diplomatic momentum on reducing methane at the COP26 climate meeting.
The dispute between the two economic superpowers may have been just the momentum needed to wake the sleeping giant USA from its dream. The Americans have shown that it is precisely in times of crisis that they are strongest in reaction and most powerful. Especially when someone sets out to deny them a place on the winner’s rostrum.
With a bogeyman like China already pouring billions of dollars into its green development, Americans’ ambition may finally have been reawakened. Good, not only for the planet, but also for global economic development.
With the new climate package, the US Senate has created a few facts that should give European lawmakers pause for thought.
According to a recent Hydrogen Europe analysis, green steel would need to become cost-competitive with steel produced using highly polluting fossil fuels if the price of green hydrogen fell to €1.50 ($1.53) per kilogram in the most bleak scenario.
Therefore, a price for green hydrogen below $1/kg could rapidly increase demand for green steel, as well as in other industrial sectors like cement and glass manufacturing.
To achieve this, the US package includes tax advantages for the production of hydrogen from renewable energies amounting to $3 per kilogram. This means that, even if massively subsidised by the government, green hydrogen is now more than competitive.
Global green hydrogen developers would be eager to take advantage of the $3/kg subsidy, so it would not be surprising to see many of them focus more of their time and resources on the US market – in part due to the lack of certainty surrounding H2 funding elsewhere.
So the Americans are not only ahead in green hydrogen now in steelmaking, but also with their low CO2 emitting EAF plants and quite a decent number of Direct Reduced Iron and Hot Briquetted Iron plants. While the Europeans are still trying to make up for their disaster with the burst natural gas plan.
And all this in the political summer hole. Perhaps the political summer break should simply have been cancelled this year. There are enough challenges to solve.
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