This morning I was directed to a new report by the Canadian Centre for Policy Alternatives (CCPA). As I have written previously, every time I get a notification about one of their reports, I hope that it will present an evidence-based analysis consistent with the quality of the individuals I know work there. Sadly, they always manage to disappoint. I could fill an entire section of my blog with examples of their disappointing reports.

This most recent report was written by two of my favourite foils: Economist Marc Lee and Public policy researcher Seth Klein. The report is titled Managed wind-down of BC’s fossil fuel industries: A just transition to a green economy and it once again crushes my hopes for good evidence-based public policy by this group. The report starts with the following text:

IMAGINE IT’S 2025 AND BECAUSE OF THE ESCALATING CLIMATE CRISIS, Asian governments have declared ambitious new climate action plans, including the elimination of metallurgical coal for steel manufacturing within five years, to be replaced by state-of-the-art hydrogen-powered furnaces 1; and an aggressive transition off of natural gas and toward renewables within a decade.

and honestly that was enough to cause me to decide to write this post.

Seriously how can one single sentence get so much wrong? Believe it or not, there is so much wrong with this first sentence that it will take over 500 words just to explain all the wrongness. So let’s begin.

Like many bad CCPA sentences this one includes a footnote. Let’s start with that. The footnote brings you to a Bloomberg report which says:

Steel could shed its reputation as a climate threat by using hydrogen instead of fossil fuels for as much as half of global output by 2050, according to BloombergNEF. The steel industry could adopt hydrogen for between 10% and 50% of output by mid-century given the right carbon pricing.

You read that correctly, the Bloomberg report suggests that if everything goes right by 2050 as much as half (but as little as 10%) of world steel production could move over from the use of metallurgical coal (coke) to hydrogen-based processes. Yet citing that reference, the CCPA authors argue that we should imagine (very apt language there) that 100% of Asian steel could transition off metallurgical coal by 2030 (20 years earlier than cited in the report and only 10 years from now). How they use that footnote to justify that claim is beyond me. But there is more.

It is entirely clear that the authors don’t understand the use of hydrogen in “green steel”. In “green steel” hydrogen is used as the reducing agent (a chemical not a thermal step). It does so by replacing coke. In traditional steel-making coke serves two purposes to generate heat and in the reduction step. In green steel, electricity (or ironically natural gas) is used to generate the heat while hydrogen is used for its chemical properties only. To make this completely clear, in green steel the furnaces don’t burn hydrogen! There are no “state-of-the-art hydrogen-powered furnaces“. A graphic of the process (from the Kusnir et. al., paper discussed below) is presented here:

The next issue is what the use of hydrogen means for energy use? In a recent evaluation: Adopting hydrogen direct reduction for the Swedish steel industry: A technological innovation system (TIS) study they crunched the numbers and those numbers were staggering.

The change implied for the local electricity system is a large one. The estimated increase is ∼3200 kWh electricity/ton capacity difference of which 2600 kWh are required for hydrogen production (SSAB et al., 2018; Vogl et al., 2018). At 1.5 Mt steel per year, this implies 4.8 TWh/y in additional electricity demand for this single facility.

Look again at that energy demand. Consider that the Site C Dam, once completed, is expected to generate 5,100 GWh (or 5.1 TWh/y) so the EXTRA energy for one mid-sized steel factory would require the entire output from the Site C Dam.

You may ask where all that energy is going? Well that is another thing the authors missed. As described in the article Swapping carbon for hydrogen, and how the steel industry can do it:

A steel mill converted from coal to hydrogen that produces 5 million tonnes of steel will require more than 44 tonnes an hour of hydrogen. Not only will vast quantities of additional hydrogen be needed to support the steel industry, but it will also need to be produced using alternative processes. Currently, around 95% of hydrogen is “grey”, – that means it is produced by extracting gas from fossil fuels.

Yes you read that correctly, the hydrogen used in this process is typically generated from natural gas because it is too expensive to generate from water.

Now let’s stop for a moment. I am over 600 words into this piece and I have only critiqued the first SENTENCE of this article. In that first sentence alone the authors have:

• misrepresented the time frame the Asian market could get off metallurgical coal;
• confused how hydrogen is used in the steelmaking process;
• ignored the incredible energy penalty of making steel using electricity;
• ignored the fact that the hydrogen itself is generated using natural gas; and
• omitted that natural gas is also often used as an energy source in green steel.

Notice how many of these omissions defeat the entire purpose of the article (you know getting off fossil fuels) since two of the steps involve natural gas.

I am not an expert on a lot of the topics in this report so I really can’t comment on a large proportion of this report. What I can say is that on the issues where I am familiar the information is either simply wrong or profoundly misunderstood. Since we are now over 800 words into this piece I will only do a quick run-through of some other obvious issues that I recognize as being off.

In the report, the authors gloss over how our economy is going to adapt to the elimination of all these natural resource jobs by suggesting that they can be replaced by service industry jobs….except service industry jobs build around the primary industry jobs. In the interior you can’t have service industry jobs if there are no primary industry jobs to bring in the initial funds that keep the communities running. You can’t keep a community operating by everyone cutting each other’s hair.

The authors gloss this over by talking about the jobs being replaced “by attrition” but attrition doesn’t pay the corporate property taxes that keep the community schools open and the community’s water running.

From a larger picture perspective, throughout the report the authors propose spending huge amounts of money while simultaneously cutting the knees out of the economy that would fund the economy. They talk about using public funds to create all this infrastructure then they talk about paying off workers to get them to retirement without explaining where all this money will come from.

In the section about decarbonizing our economy they come up with this one:

In addition, the provincial government should regulate that all existing buildings will need to be off gas by 2040.

I have addressed this canard in a previous blog post and put simply you can’t refit the entire building stock in BC in 20 years. I have also dealt with the energy innumeracy of the Green New Deal that serves as the underlying premise of this report. Similarly, it is not possible to make “a good jobs guarantee for those currently in fossil fuel industries” in an economy that has hollowed out its industrial and resource industries. These are promises we simply can’t fulfill.

My biggest laugh in the entire article (besides the “state-of-the-art hydrogen powered furnaces” was the suggestion that we could replace the fossil fuel industry jobs with

new investments around recycled steel production through electric-arc furnaces, perhaps located in or near a coal-mining community.

Seriously? Metal recycling has a number of natural limitations. Steel is very heavy and to recycle steel you need massive yards where the old steel materials (like bridges, ships etc…) can be deconstructed. Steel recycling facilities are mainly located close to water bodies because moving these heavy materials by water is the most efficient approach. When steel recycling plants are in the interior of a continent, it is because they are co-located with fabrication facilities that make use of the produced steel. No steel recycler is going to pay the huge energy penalty to move used steel over the coastal mountain range to our coal-mining communities to be recycled, nor will they pay the follow-up energy penalty of moving the produced steel back over mountain ranges to the ocean or across the continent to where it will be used.

So here we are again. Another CCPA report that starts with a false (nay impossible) pretense (eliminating metallurgical coal in 10 years) and goes downhill from there. It makes incredible claims and suggests alternatives that are either not feasible (a good jobs guarantee) or and virtually impossible (steel recycling facilities in the northeast). It argues we can pay for everything with the same money be it increased royalties, wind-down funds, infrastructure, money for communities and first nations and jobs. Except economies don’t work that way. You can’t eliminate primary industry and run economies solely on service-industry jobs. The numbers don’t add up any more than green steel can be produced in “state-of-the-art hydrogen-powered furnaces“.

Author’s Note

As a quick note, I do indeed know about the pilot project in Germany where one of the 28 nozzels in a steel mill was converted to using hydrogen which technically makes it partially powered by hydrogen. That would be the facility that expects to have upgraded the pilot test by 2030. That is a LONG!!!! way from Asia manufacturing all its steel using hydrogen in 2030. Moreover, given that Germany has closed (or is closing) all its nuclear plants and going over to coal, that hydrogen will likely be produced from natural gas, using coal powered-electricity.