The need for more regulatory support
It was also observed that a more enabling regulatory environment would be crucial to both increase clean energy production and galvanise demand by consumers.
For example, Germany’s recently reformed Renewable Energy Sources Act (EEG), which was originally enacted 20 years ago, set grid priority for onshore wind, solar and biogas, and provided them with generous feed-in tariffs. As a result, together with hydro and offshore wind, these renewable sources of energy now cater to almost half of the country’s electricity consumption.
It was noted that policymakers must also commit to long-term support. Spain and Italy had introduced feed-in tariffs for solar, only to then cut back on these incentives which decimated the industry.
Tax credits for renewables in the US were mentioned as another example of incentivising clean energy projects, although the panellists cautioned that the “carrot” approach might not be sufficient without the “stick”—a potential global carbon tax on polluting industries.
The panel agreed, however, that it might be challenging to get governments around the world to agree on a universal carbon price. According to the International Monetary Fund (IMF), only one-fifth of global emissions are currently covered by pricing programmes, and the global average price is a mere US$3 a ton compared to the approximate US$75 a ton required to keep global warming below 2°C above pre-industrial levels.
IMF data has also shown that fossil fuel subsidies made up US$5.9 trillion—or 6.8% of global GDP—in 2020. Without putting a price on carbon and cutting back on fossil fuel support, the panel discussed that green hydrogen would struggle to compete with its oil and gas or coal competitors.