BASF, Hydrogen

overall rating:



Ella Tescari
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BASF is the largest chemical company globally, which gives it enormous weight in the green transition. Not only is it a significant carbon emitter, but it has the potential to lead the way in developing new eco-friendly technologies and practices. Like many others, BASF has made hydrogen an integral part of its strategy for reducing and ultimately eliminating carbon emissions. If most of its current hydrogen production still uses natural gas, it is working on several projects aiming to clean hydrogen production. This review will attempt to unravel the environmental and economic issues at stake when it comes to hydrogen production but also the concerns about potential risks of chemical reactions in the atmosphere. This last point shows very well that when it comes to climate change, there is always some degree of uncertainty on its extent, its implications, but also the impact of the measures taken to prevent it. A mitigated assessment that partly explains the score that I eventually opted for. 

What it's made of:


BASF is one of the largest producers of hydrogen in Europe. Hydrogen is a colourless, odourless and highly flammable gas. It is the most abundant element in the universe, it is almost always found in another compound, like water or methane. Hydrogen is in the spotlight as a solution to deal with the intermittency of renewable energies, as it essentially provides a way to store and transport energy. In theory, it can also replace the use of fossil fuels as a carbon-free feedstock in the production of chemicals and fuels and contribute to decarbonizing sectors that are difficult to electrify, like long-distance transportation and heavy industry. Hydrogen-powered fuel electric cells only emit water vapor and warm air. Thus, once produced, hydrogen emits none of the harmful substances associated with gasoline and diesel vehicles, such as nitrogen oxides, carbon dioxide or hydrocarbons. Crucially, the hydrogen economy is an international project. It is present in all the eight European Commission’s net-zero emissions scenarios in the 2050 horizon. Despite this international craze, hydrogen is an indirect greenhouse gas with a potential global warming effect due to chemical reactions in the atmosphere. Thus, the rate of leakage during synthesis is critical. But researchers found that with a leakage rate of 10%, the climate impact of hydrogen would be 6% of that of the fossil fuel system, which offers a net improvement. Another major challenge associated with hydrogen is to reduce production costs to make it competitive with conventional transportation fuels. Mainly because it contains less energy per unit volume than all other fuels, transportation, storage and delivery are more expensive on a per gasoline gallon equivalent (per-GGE) basis. In other words, hydrogen has great potential but its production remains very challenging, and subsequent research and investment must be made to reduce costs and exploit it. This is where large companies with extensive means such as BASF have a crucial role to play. 

How it's made:


As BASF acknowledges on its website, hydrogen production is one of the largest generators of CO2. Significantly, the environmental impact of hydrogen and its energy efficiency depends on how it is produced. We can distinguish different types of hydrogen, notably grey, blue and green hydrogen. The first type, grey hydrogen, is currently widely used. As its appellation suggests, it is the most environmentally damaging. Blue or “decarbonized” hydrogen is also made from natural gas but with carbon capture and storage (CCS). Finally, green hydrogen is the ultimate goal for hydrogen advocates. It is made from the electrolysis of water powered by renewables. The question is whether enough eco-friendly hydrogen can be produced in time to have a tangible impact on climate change. For now, BASF extensively produces grey hydrogen. Some of the company’s uses of grey hydrogen are for the mineral and oil industry for hydrogenations or as a blanketing gas for heat treatment. However, the chemical company has several projects on the way, notably regarding green hydrogen. It is also working on a less “green” but seemingly more accessible alternative, “turquoise” hydrogen with a large-scale plant on the 2030 horizon. The latter is made of methane pyrolysis (ie. the thermal cracking of natural gas into hydrogen and solid carbon). This resonates with the company's statement that hydrogenation is a pivotal aspect of its #NetZero2050 goal. In its roadmap to climate neutrality, BASF plans on investing 4 billion euros by 2050, which I found relatively small compared to its turnover of around 60 billion euros per year. This effort cannot be seen in isolation from a larger trend in the industry. For example, Total changed its name to TotalEnergies, to signify the diversification of its activities. Companies seem to understand that they have an interest in being key players in the field. Regardless of the reason behind such initiative, the publication of the last IPCC report recalls the urgency of more ambitious action.

Who makes it:


BASF SE is a German chemical and plastics manufacturing company. Founded in 1865, it is the largest chemical producer in the world. Today, it operates in more than 90 countries and employs some 117 600 people. BASF Group produces various products, from electronic recording accessories to oil and natural gas and cosmetic bases. While BASF's activities are inherently highly polluting, the company is often considered at the forefront of ESG. Its relative position in the ESG ratings places it above average in every case, sometimes by a wide margin, such as for CDP climate or CDP forest. CDP - Carbon Disclosure Project - is a not for profit charity that runs a global disclosure system to manage various organisations’ environmental impact. BASF is ranked among the top 25% of the participating chemical companies. Among the commitments that explain its high CDP ranking are the ongoing introduction of sustainable management at all relevant production sites and the commitment to source 100% of palm oil from certified resources. While these commitments may not seem outstanding, the fact that they allow it to be well above average is both favourable for the company’s rating and alarming for the industry in general. In terms of corporate ethics, BASF’s reputation has recently been tarnished because it was at the centre of a financial scandal. Thanks to tax optimisation and complex financial arrangements, the group has reduced its tax bill by some 1 billion euros in 5 years - a sadly legal practice, exacerbated by fierce tax competition between EU member states. To conclude, because it is at the forefront of many projects related to sustainability, BASF achieves a higher score despite its polluting activities, which remains majoritarian, as early players are crucial to enhance the transition to a green economy.