Published on May 11, 2021
Power-to-X is key to reaching climate neutrality. Critical bottlenecks for launching PtX production and ramping up PtX markets are neither technology nor finance. What is missing are reliable regulatory frameworks for green hydrogen (H2) and PtX products, processes and policies. Developing such frameworks, defining PtX sustainability standards and establishing corresponding certification schemes are priority tasks for all stakeholders involved. They must finally be endorsed and enforced by national policy and international agreements.
To kickstart the discussion on truly sustainable PtX with all its facets, the International PtX Hub Berlin has drawn up an EESG Framework for PtX. It encompasses four basic dimensions: Economic, Environmental, Social and Governance.
For each of these dimensions, a multitude of sustainability concerns can be relevant. In order not to get lost in complexity, we suggest to group them into sets of four clusters for each dimension. They indicate the main topics to be addressed. However, clusters and concerns have different weight depending on the relevance and risk profile of the specific assessment case, be it an investment project, a production process or a policy initiative.
The Economic Dimension
- Value Added & Decoupled Growth
- Energy Mix & Transformation
- Trade & Technology Transfer
- Infrastructure & Public Finance
From an economic perspective, the production, use and trade of PtX products shall above all contribute to creating added value and stimulating growth in income and employment.
Economic growth, however, should be de-coupled from harmful environmental and climate emissions. PtX has great innovative potential. Together with international technology transfer this should ensure that the energy transformation – leading to a fundamental shift in the energy mix, away from fossil sources towards renewables – is mutually beneficial to all parties involved. This is particularly relevant when PtX products are traded internationally.
Assessing the economic dimension also requires a look at infrastructure equipment and logistic needs.
Finally, public finance will be affected in many ways – through revenues from taxes and trade as well as expenses for infrastructure investment, support for renewables and PtX or by assistance for efforts ensuring a just transition.
The Environmental Dimension
- Energy & Carbon Cycle
- Water, Land & Biodiversity
- Resources & Recycling
- Pollution Risks & Safety
Checking the environmental footprint of PtX is essential for any sustainability assessment. The electricity used in electrolysis, synthesis and refinement processes should stem from renewable sources. It should also be additional compared to an already envisaged path to expand renewables.
Another key concern is to ensure a closed carbon cycle of PtX production and use. This is relevant both for the initial power input into hydrogen production as well as for the carbon used in synthesis processes. It must be assessed whether the carbon stems from either Direct Air Capture (DAC), biogenic sources or Carbon Capture and Use (CCU), and how potential leakages can be avoided.
Hydrogen and PtX production must also go hand in hand with sound management of water, land and biodiversity.
In addition, resource requirements, such as the amounts of critical rare raw minerals needed and their recycling, must be analysed.
Finally, pollution and safety risks of hydrogen and PtX production, storage, transportation and use must be carefully screened.
The Social Dimension
- Jobs & Skills
- Human Rights & Labour Standards
- Health & Safety
- Access to Energy & Resources
Developing PtX economies based on renewable energy has manyfold social and societal repercussions. It is promising additional jobs, yet energy transition may also result in job losses in fossil energy and related sectors. Capacity building and trainings that focus on new skills requirements must be deployed to ensure a just transition.
Ensuring respect of human rights and of the ILO Core Labour Standards, not only in the first tier but along the entire value chain, is non-negotiable. ILO conventions against forced labour, child labour, and discrimination must be respected as well as freedom of association and the right to collective bargaining. In many instances, however, this is not the case.
In analogy to the environmental pollution concerns, health and safety risks of PtX production, transport and use must be monitored and avoided.
Furthermore, it is essential that PtX production does not negatively affect people’s access to energy or resources like water and land. On the contrary, PtX projects could include new installations of renewable power capacity or desalination plants, which might even generate co-benefits by creating win-win opportunities.
The Governance Dimension
- Stability & Rule of Law
- Regulatory Quality & Transparency
- Policy Commitment & Coherence
- Engagement & Empowerment
Governance concerns are relevant for both public administration and corporate business conduct. For domestic and international investment decisions political stability, the rule of law and regulatory quality are essential parameters.
Transparency is key to avoid and fight bribery and corruption.
The policy commitment to climate protection should be reflected in the country’s Nationally Determined Contribution (NDC) to the Paris Agreement. Policy coherence, the degree to which climate policy is integrated across economic sectors and supported by societal groupings, is another important indication of its sustainability.
Only if all relevant stakeholders are not only informed and involved but actively engaged and empowered, will the transition to an energy system based on renewables and PtX result in a strengthened and sustainable economy and society.
Assessing the sustainability of Power-to-X
The EESG Framework for PtX aims at sketching out a complete dashboard. Yet, its actual use and the prioritisation of concerns will have to depend on the respective evaluation task and the specificity of the observed case.
The full set of sustainability clusters and concerns is not always relevant at every assessment level – it depends on whether the focus is on PtX projects, products, processes or on policies. Neither do they apply at every link in the PtX value chain.
Their relevance should be screened in a due diligence process reflecting the respective risk profiles. For example, while some environmental and social concerns will be particularly relevant for impact assessments at the local and regional level, governance concerns are often more relevant when assessing the broader context of national and regional economies, societies and administrations.
Click here or the cover below to read the EESG Framework for Sustainable PtX. If you use graphics for your own purposes, please name the International PtX Hub as the source.
