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Safeguard mechanism a good start but carbon offsets a short-term fix,
warns Fortescue Future Industries boss
By Simon
Johanson and Nick
Toscano
March 31, 2023
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.
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
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.”
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.
BLOOMBERG
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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