No sooner had Hydrogen Insight published its excellent overview of government policy measures coming this year to catalyse the green hydrogen economy (“Prepare for lift-off | Why 2023 will be the year that green hydrogen moves from idea to reality around the world”, 3 January 2023), than both India and Portugal added their schemes to the growing list across the world.

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Just about no industrial activity has taken off successfully without the strong involvement and support of governments. Supporting the green hydrogen economy to overcome first-mover disadvantages means giving the low- or zero-carbon economy an opportunity to compete with oil, gas and coal.

Greenhouse gas emissions keep growing when they urgently need to fall. Our industry needs to ramp up, globally and fast. I’d go as far as to say that humanity depends on it.

Our current dependence on fossil fuels is underwritten by massive direct and indirect subsidies. Unwinding these damaging incentives should be the very first step.

And we need to go further to level the playing field, to encourage businesses to invest in research and development that benefits not only their firm, but society at large. Well-targeted schemes can also help new businesses get established until they grow large enough to be profitable.

To enable the green hydrogen industry to compete with fossil fuels, it is first necessary to identify a couple of the specific characteristics of our industry. Our sector is new, with significant uncertainties.

The capital expenditure for early large-scale renewable energy and green hydrogen projects are high. Long-term power-purchase agreements and offtake deals will likely be required for projects to go ahead.

Large infrastructure investments are required. New ports, storage facilities and pipelines will be needed. Some of this infrastructure will only be used by one or two green hydrogen producers or users, other forms of infrastructure can be shared more widely.

With these characteristics in mind, let’s consider ways in which governments can and are supporting the industry.

As ideal as it would be to have uniform and standardised support across the globe, this is unlikely to happen.

The way governments choose to support the green hydrogen economy will depend on many factors, including how developed the country is, whether it aims to mainly export, import or both use at home and ship abroad, and what the current energy mix is like.

In developing countries, expanding access to modern energy is just as important as reducing emissions and dependence on volatile fossil-fuel prices. Countries currently dependent on fossil fuel imports will be freer to set high standards for emissions, compared to those with significant fossil-fuel production.

A couple of trends are emerging:

Production credits, industry grants and other forms of tax advantages, like in the US through the Inflation Reduction Act, in India through the National Green Hydrogen Mission and those envisaged in Canada.

In adopting its Mission plans earlier this week, the Indian government committed to spend up to $2.4bn on hydrogen production, electrolyser manufacture and grants for pilot projects.

Contracts for Difference schemes are being developed in countries such as Norway and the UK. The objective with these schemes is to use government support to “fill the cost gap between low-carbon hydrogen and the high-carbon alternative”.

Within the European Union, a wide range of instruments are being developed, both at national and regional level. Many countries are considering various forms of state aid and industry support, and Germany and the Netherlands are providing leadership in supporting green hydrogen imports through H2Global.

The EU itself is also rolling out a wide set of measures, including Carbon Contracts for Difference.

Filling the gaps

Most emerging markets and developing countries (EMDCs) will not be able to put in place similar support schemes currently being offered in the US and other developed economies.

Multilateral development banks such as the World Bank and the European Investment Bank must therefore provide long-term financial support for projects in these countries. The fiscal terms and conditions, tax rates, land fees etc all need to be agreed in conjunction with the concessionary finance solutions that these development banks can provide.

The development banks also need to assist EMDCs with overall terms to make sure that they too, alongside countries such as the US, are at the forefront of the energy transition and can leverage the transition to address poverty and accelerate economic development.

Any scheme needs to ensure that competition is not distorted and that fair trade is not undermined. Limited government resources must be used wisely, catalysing but not displacing private investment.

To ensure that government support is effective and fair, complete transparency and accountability will be critical. Having simple and open support systems that are easy to understand will enable a quick take-off of international trade and fair markets. Openness is also the best way to minimise the risks for corruption or unnecessarily generous government support.

Lastly, the credibility and lift-off of our industry depends on high product and industry standards evolving.

In particular, emissions need to be accounted for accurately and fairly. The finer detail of our tax codes and other rules must be tight against greenwashing, ensuring that governments incentivise projects and products with genuinely low emissions.

Many countries and regions such as the EU are developing their own standards and requirements. While it would be ideal to have uniform rules, it is no surprise that governments are opting for different rules depending on whether they are hoping to export, mainly import and if they, for example, have their own oil and gas production.

This is where global industry efforts like our own Green Hydrogen Standard comes in, intended to create a bridge of mutual recognition from exporting to importing countries.

No support system will be perfect. In most cases, a wide range of instruments are likely to be required.

We need to share and learn from each other. It is not about competing regimes. It is a fight against the clock.

The EU shouldn’t criticise the US’s Inflation Reduction Act and its hydrogen tax credits, and mutterings about trade wars are deeply unhelpful. The bloc should instead be grateful to US green leadership and match or exceed it. How else will we beat fossils and climate change?

Jonas Moberg is the CEO of the Green Hydrogen Organisation, a Switzerland-based non-profit group.