Governments risk wasting vast amounts of taxpayer money due to poorly designed green hydrogen support schemes and subsidies for blue hydrogen — a technology that has no long-term future in a net-zero world, former Australian prime minister Malcolm Turnbull tells Recharge.
Turnbull — who was a signatory to the 2015 Paris Agreement and is now chairman of the Switzerland-based non-profit Green Hydrogen Organisation — says that while “no-one is suggesting that green hydrogen needs to be subsidised... there is an argument in favour of government providing support initially to really get the business community, in particular the financial community, comfortable with the risk”.
However, he strongly believes that there should be no public funding for blue hydrogen derived from natural gas with carbon capture and storage.
“The problem is it's so easy for a politician to say, ‘I'll support every colour of hydrogen’... and ‘let the market decide’,” he says, pointing to the fact blue hydrogen is unlikely to have a long-term future. Due to upstream methane emissions and the difficulties of capturing high proportions of CO2 in the methane reformation process, it will not help the world reach net-zero emissions.
“If you’re going to put money into any form of hydrogen, put it into what you not just think, but know has to be the winner,” he says, referring to green H2. “I wouldn’t ban [blue hydrogen], but I wouldn’t put a nickel into it as a government. It just isn’t going to be the long-term play.
“The fundamental problem with carbon capture and storage is it hasn’t worked. Honestly, how many times do you have to be disappointed by carbon capture and storage? Isn’t it the definition of madness to keep on doing same thing expecting a different result?”
If Turnbull — who was in office from September 2015 to August 2018 — were still leading Australia today, how would he support the nascent green hydrogen sector?
“I think the first thing you’ve got to do is ask the industry, ‘how can we help, you know, short of sending you large barrels of public money?’
“There may be a case for some sort of contracts for difference-type subsidy in the early years. You could think about, if you want to go to green steel, providing some assistance for steel makers or providing a mandate saying that government projects will require at least X% of green steel by such and such a date.
“Look, governments have to decide whether they want to cut emissions or not. One way or another, if you’ve got a policy objective, you've got to be prepared to spend some money to achieve it. Now what you should do in government is make sure you don’t spend any more than you need to.
“Asking people to pay more is always going to be hard. So you’ve got to be really careful. And whenever you’re doing subsidies in government, [you should] focus with a laser-like precision on additionality.”
This is something that Turnbull seems to feel very strongly about, not least because of “mind-blowing” failures by his successor Scott Morrison’s government.
“There’s a tendency for politicians to want to be seen to be doing something about the issue de jour [of the day],” he explains. “And that may involve a grant or a tax break or something like that. But you’ve got to really ask yourself whether you’re not just subsidising people to do something they’d do anyway.
“If you have a programme that says, for example, ‘we’re going to support energy efficiency, so we’ll provide some payment to encourage people to replace old fridges with new fridges’. The real question is, are you just paying people to do something they were going to do anyway? The same is true for tax breaks — you’ve got to really look at the additionality because the thing is to have a solution that has least cost to consumers.”
He continues: “So you’ve got to ask yourself, are you trying to achieve a press release which says ‘I, the politician, am doing something about the issue’, or are you trying to achieve a change in business behaviour, or some sort of economic outcome? And if it’s the latter, which is what it should be, then you’ve just got to work out what’s the least cost way of getting there.
“I’ll give you an example of a classic case in Australia. So when Covid hit, the government had a wage subsidy programme. Fair enough — most developed countries had something like that. But they didn’t have any clawback to apply to businesses whose revenues had not declined. And so about A$78bn ($56bn) went to businesses who basically didn’t need it. It’s just mind blowing. I mean, I’m surprised it hasn’t been a bigger issue, but that’s the kind of thing I’m talking about.”
Recharge spoke to Turnbull on the sidelines of the recent Green Hydrogen Global Assembly in Barcelona, organised by the Green Hydrogen Organisation, days before Scott Morrison's government was voted out of office.