Sasol's Hydrogen and CBAM: The Coal-to-Chemicals Carbon Challenge

Sasol's Hydrogen and CBAM: The Coal-to-Chemicals Challenge

Sasol is South Africa's largest industrial company and one of the world's largest producers of synthetic fuels and chemicals from coal. At its Secunda complex in Mpumalanga, Sasol produces hydrogen as an intermediate in its coal-to-liquids (CTL) process — and this hydrogen has among the highest embedded emissions of any hydrogen produced globally.

Sasol's Hydrogen Production

Sasol's Secunda operations use the Sasol-Lurgi gasification process to convert coal into syngas (CO + H₂), which is then processed into liquid fuels, chemicals, and other products. Hydrogen is a key intermediate in this process.

Embedded emissions for Sasol's coal-derived hydrogen:

• Coal gasification process emissions: ~15–18 tCO₂/t H₂
• Energy consumption (coal-fired utilities): ~2–3 tCO₂/t H₂
• Total: ~17–21 tCO₂/t H₂

This is approximately 15–19 times higher than the EU default emission value for hydrogen (10.9 tCO₂/t with markup), and dramatically higher than green hydrogen (~0.5–1.5 tCO₂/t).

CBAM Implications for Sasol

Sasol's coal-derived hydrogen is not currently exported directly to EU markets — it is used internally in Sasol's fuel and chemical production processes. However, some of Sasol's downstream products (chemicals, polymers) that are derived from this hydrogen may be exported to EU markets.

Key question: Do CBAM obligations extend to downstream products derived from hydrogen?

The answer is nuanced:

• Direct hydrogen exports (CN 2804.10): Directly subject to CBAM
• Ammonia derived from hydrogen (CN 2814.10): Subject to CBAM, with embedded emissions including the hydrogen production emissions
• Downstream chemicals: Currently outside CBAM scope, but the EU has committed to reviewing scope expansion

Sasol's Decarbonisation Pathway

Sasol has committed to a decarbonisation pathway that includes:

1. Energy efficiency improvements at Secunda
2. Renewable electricity procurement to reduce Scope 2 emissions
3. Green hydrogen production as a long-term replacement for coal-derived hydrogen
4. Carbon capture at Secunda (under evaluation)

Sasol has announced a partnership with Air Products to develop a 10 GW green hydrogen project in South Africa, targeting EU export markets. This would produce green hydrogen with embedded emissions of ~0.5 tCO₂/t — a dramatic improvement over coal-derived hydrogen.

The Strategic Imperative

For Sasol, CBAM creates a powerful incentive to accelerate its decarbonisation:

• Current coal-derived hydrogen: ~18 tCO₂/t → CBAM cost at €65/tCO₂ = €1,170/t H₂ (if exported)
• Green hydrogen: ~0.5 tCO₂/t → CBAM cost = €32.5/t H₂
• CBAM saving from transition: €1,137.5/t H₂

This CBAM differential, combined with the green hydrogen premium in EU markets, creates a compelling business case for Sasol's green hydrogen transition.