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Interview

“Hydrogen was once seen as dangerous, it’s now seen as a savior”

Speaking ahead of Calcalist’s “The Energy Crisis: Here and Now” conference, Edward Morse, Managing Director, Global Head of Commodity Research at Citi Group, outlined his vision for the future of energy

James Spiro | 15:46  28.11.2021

“We’re in a relatively funny position in the world today. We’re in the middle of an energy transition away from fossil fuels, which dominated the entire pool spread,” said Edward Morse, Managing Director, Global Head of Commodity Research at Citi Group, in his opening remarks to James Spiro for Calcalist’s “The Energy Crisis: Here and Now” conference. Joining via Zoom, the former Chief Energy Economist at Lehman Brothers spoke about how the world can move away from fossil fuels to more renewable resources.

A Carrots and Sticks game

When asked how corporations can adopt more renewable forms of energy efficiency, Morse referred to incentives such as tax credits or inducements, as well as limitations placed upon companies that use too much energy. Drawing on the popular metaphor, he said that two main strategies should be used to help ease the transition.

“Carrots include tax credits for putting up wind or solar renewables,” he said. “They include other inducements in terms of discounts and direct subsidies by governments, but they also include Sticks for things like activities you can’t engage in, limiting the burning of fuels, or limiting the amount of time that energy enhancive industries can be consuming electricity. Most critically of all is finding the right price for carbon and methane to provide inducements for households and for companies.”

Morse has had a long career as an energy economist in the United States. After obtaining a Master’s from John Hopkins University and then a Ph.D. from Princeton University, he taught international relations at Princeton University's Woodrow Wilson School of Public and International Affairs from 1969 to 1975. In 1978, he joined the U.S Department of State and ultimately became Deputy Assistant Secretary of State for International Energy Policy. He served under Presidents Carter and Reagan as the U.S. representative at the International Energy Agency.

In 2006, Morse had joined Lehman Brothers as a Managing Director and Chief Energy Economist, being one of the “lonely voices” who had raised concerns about the oil pricing spike and its subsequent plunge in 2008. “We wrote a report saying this was a bubble and it had to burst. We did an analysis… looking at the relationship between finding and developing oil and gas resources and what their market value ought to be. So we could really do an analysis on fair market value, we saw that there was significant inflation in the oil and gas services sector.”

“Everyone admits that there is a NIMBY problem”

The topic of adopting more renewables might be popular on social media, but many communities still reject calls to put up wind turbines and solar panels, seen as large and unattractive, in their backyard.

“Everyone admits that there is a NIMBY problem,” Morse acknowledges, referencing the acronym for “Not In My Backyard.” The phenomenon suggests that residents in neighborhoods approve of new initiatives in theory but oppose them in their own areas. Renewables are trendy and ideal for the future, but many still don’t want to look at them each day.

“That NIMBY problem will, over time, be dealt with through new technology,” he continued. “I suspect by 2035 we will see green hydrogen coming into the marketplace in a very substantial way. That green hydrogen is going to come from renewables in the beginning, but it’s going to be self-fulfilling because hydrogen itself is a very versatile fuel, just like oil was a versatile fuel.” Morse highlights how it can help in the transportation market, specifically heavy vehicles, that require a lot of energy to fulfill their needs.

A mission to unify

Earlier this year, world leaders met at COP26 in Glasgow in an attempt to tackle some of the most pressing issues facing our world. As it battles climate change, world leaders are deciding how their governments can help in the effort to cool the planet, Morse also highlights how the investor community can help with the funding of new technologies.

“You need public policy but you also need inducements to get the investment going. If we go back to the COP24 meetings in Paris in 2015 there was a framework set up that finally got individuals who were in the investment community to get going with all kinds of incentives.” According to numbers he referenced speaking to Calcalist, by 2019 there was $250 billion of sustainability bonds, with that number doubling in 2020. “We’re already at the trillion-dollar mark this year, and we expect by 2024/2025 it’ll be around $5 trillion… So we’ve come a long way.”

A cleaner future

As his time speaking with Calcalist came to its end, Morse was asked what he, if given the opportunity, would bet on as the world’s next best energy source. “I think the highest probability is a hydrogen world emerging. Hydrogen was once seen as dangerous, it’s now seen as a savior, and we’re seeing it crop up all around the world including the Middle East, Europe, Japan, and China,” he concluded.

“The Energy Crisis: Here and Now” conference took place on November 29th and brought together a variety of leaders, CEOs, and experts to discuss climate forecasts in the coming years, economic potential and challenges of transitioning to green energy, and how GreenTech has the potential to change the world.

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