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| 3 minutes read

What is "green-enough" for ESG?

“What is hip?  
Tell me, tell me If you think you know . . .
                      What is hip today, may become passé."
                                                       - Tower of Power - 1973                                                          

Maybe only “those of us of a certain age” recall the hit song above.  I was reminded of the lyrics after a call with a client fine-tuning their environmental, social and governance (ESG) policy and their future plans for sustainable (what they termed “green”) energy use. The following examples came up during our call when we considered the question, “what is green?”

They have been proud to say at least one of their facilities in Europe is “carbon neutral” to the extent its electricity comes from a nuclear power plant.  That may still be true, but they are now concerned about how they word their public sustainability statements, since the European Parliament this week objected to the classification of nuclear power as “environmentally sustainable.” Further, that outcome throws into doubt whether development of future nuclear projects within the EU will be able to attract “green investment” funds under the EU Action Plan on Sustainable Finance.

We all agreed “solar is good,” although we also acknowledged that large solar projects have faced challenges regarding their environmental impacts on the habitats of threatened or endangered species (one example is desert tortoises in the Mojave desert, but there are others) – concluding that “some solar is better than other solar . . . , “ requiring further due diligence.

Wind projects. Everyone liked that as well, despite a participant on the call having a “negative experience” on a project in the Midwest, where twice a year, thousands of bats choose to dodge their way between all the rotating wind turbine blades as they migrate to and from wherever bats call home – regrettably, not all of the bats make it, and this “environmental impact” has resulted in shutdowns of the turbines during certain time periods, not to mention negative PR.

We also discussed alternative fuels for fleet vehicles.  The trend is away from diesel.  We noted, however, that two large petroleum refineries in the San Francisco Bay Area recently received approvals from their County Board of Supervisors to overhaul their petroleum-based refineries so that they can produce “biofuels” (processed from vegetable oils and animal fats). This switch away from fossil fuels resulted in not one but two lawsuits, filed by the Center for Biological Diversity and Communities for a Better Environment. The suits object to this changeover in energy production, as it will demand more feedstock from what would otherwise be food supplies for human consumption (and because of the alleged increase use of chemical fertilizers and fuel to grow the crops or feed the animals that would ultimately become the source of the bio-fuels).  So, is it good to claim a bio-fuel fleet?

Finally, we discussed hydrogen, the sexy new alternative fuel being developed for among other markets, the trucking industry.  However, hydrogen requires a lot of electricity to break down the water (H2O) molecules into “H” and “O,” and lenders as well as investors now ask what fuel is used to create the electricity needed to create the hydrogen – this too is now a factor as to whether the hydrogen is “green-enough.”

  • If the electricity is produced from surplus renewable energy sources (most likely solar or wind), it will be considered “green hydrogen,” and will likely result in financing approval – "green is good."
  • If the electricity is produced from a natural gas-fired power plant, it will be considered “grey hydrogen,” and while the electricity costs may be less, there may not be the same market for selling the fuel; however, through some additional efforts using a steam process, the gas could be “reformed” so that the downstream customer could say it is producing “blue hydrogen.” That works better for the hydrogen producer, but the electricity generator may then have to engage in a separate “carbon capture and storage” project from its own emissions, which has also been found to be objectionable by some groups who do not agree with sequestering carbon dioxide in underground caverns.
  • There is also a way to produce “pink hydrogen” through electrolysis powered by nuclear energy – although that is not a practical option for the particular hydrogen project we were discussing and as noted above, there are groups who oppose nuclear power for waste disposal and security reasons.

A participant offered that  there may be some other alternatives called yellow and turquoise hydrogen, but by that time we were all relatively "gassed," and the call ended.

At the end of our discussion, we had failed to answer clearly the question, “what is green-enough?” but at least came up with some options for management to consider relative to refined high-level statements about their sustainability program and environmental, social and governance initiative.  However, I am beginning to think the bats dodging the wind turbine blades have a higher chance of success than we do in agreeing upon a common answer to this thorny question.

[Nuclear power and natural gas] “do not respect the criteria for environmentally sustainable economic activities.” (A voting majority of Members of the European Parliament.)


esg, sustainability, hydrogen, biofuel, nuclear, solar power, wind power, green energy