The Role of Hydrogen in a Carbon Trading Environment

By Alice LeBlanc, Environmental and Economic Consulting

While the threat of climate change is today’s greatest environmental challenge, it provides enormous opportunities to address a wide range of worldwide environmental problems associated with the use of fossil fuel. There is a growing consensus that unless anthropogenic emissions of greenhouse gases (GHG) are limited, their effects will be destructive to both economies and ecosystems and persist over time.

The United Nations Framework Convention on Climate Change and the recent Kyoto Protocol allow a variety of innovative economic mechanisms that can best be summarized as ”emissions trading” to help Parties to the treaty meet their emissions limitation commitments. These include emissions trading and Joint Implementation among developed countries and the Clean Development Mechanism for developed country investments in developing countries. These mechanisms offer the potential to channel huge sums of money into the development of renewable energy resources and energy efficient technologies worldwide. Several private and public initiatives are underway to promote international carbon emissions trading.

Emissions trading promotes least-cost solutions, provides financial incentives for innovation and overcontrol in emissions reductions, and allows flexibility to industry and other polluters. Because hydrogen fuel will eliminate or greatly reduce GHG emissions as compared to fossil fuels, a capped emissions trading system in the U.S., coupled with international trading among developed countries and the generation of carbon credits in developing countries, could stimulate financial flows to develop and implement hydrogen-based energy technologies. Hydrogen-based energy technologies will compete with other renewable and lower carbon energy sources, energy efficiency improvements, and biotic carbon emissions mitigation options. Their success will depend on cost-effectiveness relative to other carbon reduction options.

Serious domestic policy in the U.S. to limit GHG emissions will likely involve an emissions trading system modeled in part on the sulfur dioxide emissions trading system in the Clean Air Act of 1990. The experiences to date with this policy are indicative of the financial and environmental benefits that can be gained from a global and domestic GHG trading system. However, a U.S. GHG trading regime will be much more complex and far-reaching than that for sulfur dioxide. An early reduction credit program is an important first step toward establishing a domestic GHG emissions trading. The renewable industry can provide input to help shape such a program to ensure that renewables receive full financial incentives from GHG trading as soon as possible.

The climate treaty is ambiguous about details of some of the mechanisms to promote international trading. The politics of the treaty as it relates to developed and developing country cooperation has been contentious. Critical details that will determine the effectiveness of the Clean Development Mechanism in attracting private sector investment in developing countries have yet to be specified. This also offers an opportunity for the renewable industry to make known its preferences for this mechanism with the aim of promoting investments in renewable energy technologies worldwide.

©1998. All Rights Reserved. A Publication of the National Hydrogen Association.
This material may not be reproduced in any form without permission.

Home Page • Return to NHA News Index