The gridlock between investors, developers, policymakers and off-takers must be resolved to kick-start initial green hydrogen projects and to promote the development of a solid sector, according to the World Economic Forum.

In a recent paper, it states that existing market-driven factors are still not conducive for a speedy green hydrogen transition.

“A multi-faceted industrial policy is needed to facilitate the emergence of green hydrogen as a breakthrough technology in a world that is heavily locked into fossil fuel-based technologies,” it states. “Such a policy would help bridge the gap between market requirements, sustainability/climate requirements and hydrogen technology development.”

Green hydrogen industrial policy recommendations

Industrial policy must promote speedy adoption of green hydrogen technology and innovation and introduce a ban or mandated phase out of fossil fuel-based technologies (e.g. SMR, blast furnaces). Blacklisting certain technologies within a climate-consistent timeframe can open up space for decarbonised solutions. Alternatively, a whitelist of decarbonised technologies could achieve a similar result.

Secondly, financing for the uptake of breakthrough green hydrogen technology must be made available. The landscape of financing mechanisms for green projects is evolving rapidly and could include grants and loans for each phase of project development, tax rebates to promote carbon emission reductions by decreasing firms’ tax liability if they invest in carbon-neutral processes; carbon contracts for difference, and bilateral auctions, which can regulate the balance between demand and supply.

Industrial policy must ensure that there is sufficient and consistent demand for green hydrogen, the report adds.

Policy instruments to facilitate this objective include sustainable public procurement, which would serve as an initial and stable driver of demand for green goods and materials; the use of quotas for green materials, creating the foundation of a green materials market which currently does not yet exist.

An industrial policy that supports green hydrogen must factor in decarbonisation strategies to ensure that the adoption of policies is tailored to national and local conditions, to clearly signal the forthcoming changes to stakeholders, and to take its broader impact into consideration.

Regulations and standards must be agreed on across countries to allow for hydrogen trade and to determine its minimum quality. To protect local industry from the risk of carbon leakage and to impose the same carbon price on imported goods, carbon-based import taxes such as the proposed European Border Carbon Adjustment Measure could be considered.

Maximising green hydrogen opportunities in global south

Countries in the global south offer a high low-cost hydrogen potential with developing export-oriented hydrogen sectors, which entail support for the development of appropriate infrastructure to produce and export hydrogen.

For example, auctions have been held in Chile to support the deployment of the first 388MW of green hydrogen. Colombia’s green hydrogen strategy includes measures to support both hydrogen shipping capacity to meet expected international demand as well as firms’ export ambitions, while promoting the country’s role as a prospective logistics hub in the Caribbean.