Accelerate demand creation for low-emissions hydrogen by leveraging industrial hubs and public procurement
Governments should take bolder action to stimulate demand for low-emissions hydrogen. The implementation of policies such as quotas, mandates and carbon contracts for difference has already started, but remains limited in geographical coverage and scale. Governments can capitalise on the opportunity offered by existing hydrogen users and high-value sectors such as steel, shipping and aviation, which are often co-located in industrial hubs. Pooling demand in these hubs can create scale and reduce offtake risks for producers. Additionally, making use of public procurement for final products that consume low-emissions hydrogen in their production, and encouraging the development of markets where consumers are willing to pay small premiums for low-emissions hydrogen-based products, can help drive early adoption.
Support project developers to scale up low-emissions hydrogen production and drive cost reductions
Governments should provide targeted support to project developers in the scale-up phase to bridge the cost gap between low-emissions hydrogen and unabated fossil-based hydrogen. Timely support is critical to unlock investment decisions, as experienced in Europe with a wave of FIDs after the confirmation of funding for several large projects. Governments should also provide long-term visibility over the level and form of support so developers have clarity over future business cases and can attract investors. While initial projects may require substantial financial backing, support levels will decrease as the sector matures and costs decline. In addition to grants and subsidies, governments can explore other policy options such as loan guarantees, export credit facilities, and public equity investments which can help to reduce investment risk and lower the cost of capital, which is crucial for these capital-intensive projects.
Strengthen regulation and certification of environmental attributes for low-emissions hydrogen
The release of the ISO methodology provides a standardised approach to assessing GHG emissions. It is now time for governments to implement clear regulations that set thresholds for acceptable emissions levels in hydrogen production. Ensuring regulatory consistency with the ISO methodology and forthcoming standards can facilitate global interoperability. However, in addition, governments should intensify efforts to assess and verify upstream emissions from fossil fuel supply, ensuring transparency by making this data accessible to market participants and the public.
Identify opportunities to start developing hydrogen infrastructure
Governments should strengthen efforts to accelerate the development of hydrogen infrastructure to avoid further delays that risk slowing the scale-up of low-emissions hydrogen production and demand. Without timely infrastructure deployment, the link between supply and demand cannot be established, hindering market growth and creating uncertainty for both producers and consumers. Immediate action can include early planning, a focus on repurposing existing natural gas pipelines and storage facilities to minimise cost, streamlining regulatory frameworks to speed up permitting, and fostering cross-border co-operation on hydrogen networks. Public-private partnerships can also be leveraged to de-risk investments, ensuring that infrastructure keeps pace with hydrogen market development.
Support emerging markets and developing economies (EMDEs) in expanding low-emissions hydrogen production and use
EMDEs, particularly in regions such as Africa and Latin America, hold significant potential for low-cost, low-emissions hydrogen production. To unlock this potential, governments of advanced economies and multilateral development banks should provide targeted support, including grants and concessional financing, to address key challenges such as access to financing, which is a major barrier for project developers in EMDEs. Developing these projects can help to cover domestic needs, reduce import dependencies and potentially enable the export of hydrogen or hydrogen-based products like hot briquetted iron and fertilisers.
