IRENA UNIDO IDOS Green Hydrogen Industrial Development

GREEN HYDROGEN FOR SUSTAINABLE
INDUSTRIAL DEVELOPMENT
A POLICY TOOLKIT FOR DEVELOPING COUNTRIES
Acknowledgement
This report is the result of a joint effort between The The publication of this report, which was developed
United Nations Industrial Development Organization under the Global Programme for Hydrogen in Indus-
(UNIDO), The International Renewable Energy Agen- try, was made possible through the generous fund-
cy (IRENA) and The German Institute of Development ing from the Deutsche Gesellschaft für Internationale
and Sustainability (IDOS). It was authored by Smeeta Zusammenarbeit GmbH (GIZ). IDOS would also like
Fokeer, Jan Sievernich and Andrea Heredia (UNIDO), to acknowledge funding received from the German
Emanuele Bianco and Yury Melnikov (IRENA), and Rita Federal Ministry of Education and Research (BMBF)
Strohmaier, Almudena Nunez and Andreas Stamm through the project “Global Hydrogen Potential At-
(IDOS). The authors would like to express their sincere las” (HYPAT). The layout of the report was prepared by
gratitude to all those who contributed to this report. Maria Grineva (UNIDO).
Special appreciation is extended to the following

experts for their reviews of the report: Dolf Gielen
(World Bank), Freda Opoku and Eisuke Tachibana (Af-
rican Development Bank); Fabian Barrera, Matthias
Deutsch, Zaffar Hussain and Paul Münnich (Agora
Energiewende); Jan Frederik Braun (Fraunhofer – Hy-
drogen Cooperation MENA Head); Ute Collier, Ann
Kathrine Lipponer, Francisco Boshell, Luis Janeiro and
Paul Komor (IRENA); Cindy Parokkil, Maria Sandqvist
and Kirsi Silander-van Hunen (ISO); Rasmus Wendt
(NunaGreen); Deger Saygin (OECD); Michele Clara
(UNIDO); Rainer Quitzow (Research Institute for Sus-
tainability, Potsdam); Ludovico Alcorta (UNMERIT);
and Frank Wouters (Mena Hydrogen Alliance).
Disclaimer
This document has been produced without formal United Nations editing. The designations employed and
the presentation of the material in this document do not imply the expression of any opinion whatsoever
on the part of the Secretariat of UNIDO, IRENA and IDOS concerning the legal status of any country, territory,
city, or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic
system or degree of development. Designations such as “developed”, “industrialized” or “developing” are
intended for statistical convenience and do not necessarily express a judgement about the stage reached
by a particular country or area in the development process. Mention of firm names or commercial products
does not constitute an endorsement by UNIDO, IRENA and IDOS. Material in this publication may be freely
quoted or reprinted, but acknowledgement is requested, together with a copy of the publication containing
the quotation or reprint.
Copyright © 2023 UNIDO, IRENA and IDOS
2
GREEN HYDROGEN
FOR SUSTAINABLE INDUSTRIAL DEVELOPMENT
A POLICY TOOLKIT FOR DEVELOPING COUNTRIES
First edition
December 2023
Contents
Foreword.................................................................................................................................. 12
Executive summary............................................................................................................... 13
1. Introduction........................................................................................................................ 16
1.1. Why green hydrogen (GH2)?.............................................................................................................................16
1.2. Identifying potential GH2 producers............................................................................................................16
1.3. Exploring GH2 applications............................................................................................................................. 17
1.4. Global demand and the hydrogen industry’s future outlook................................................................18
1.5. A price forecast for GH2...................................................................................................................................18
1.6. What are the prospects for renewable-rich developing countries?.....................................................19
1.7. Overcoming the challenges of technological barriers and high production costs...........................19
1.8. Harnessing the transformative potential of GH2......................................................................................19
2. The GH2 industry: reframing the narrative................................................................. 22

2.1. Envisioning the role of GH2 in developing countries................................................................................23
2.2. .Unravelling the benefits and barriers of GH2 trade..................................................................................25
2.3. The potential of GH2 to transform industrial development...................................................................29
2.4. B
. uilding the GH2 value chain..........................................................................................................................33
2.5. The clover approach to GH2 development.................................................................................................35
3. Backward linkages in GH2 production.........................................................................38

3.1. Strategies for attracting investors to GH2 production............................................................................. 40
3.2. Sustainable procurement of electricity for electrolysers.......................................................................42
3.3. Technology acquisition and local manufacturing options......................................................................43
3.3.1. S
. cenario 1: Local content requirement (LCR).....................................................................................43
3.3.2.. Scenario 2: Long-term stimulation of the country’s own R&D.................................................... 44
3.3.3..Just transition aspects of hydrogen production projects..............................................................45
4. Local downstream market creation policies.............................................................48

4.1. Regulatory clarity and stability...................................................................................................................... 49
4.2. Providing support for early movers..............................................................................................................52
4.3. Demand creation policies...............................................................................................................................56
4.4. Value chain integration and coordination................................................................................................. 58
4 | GREEN HYDROGEN FOR SUSTAINABLE INDUSTRIAL DEVELOPMENT: A POLICY TOOLKIT FOR DEVELOPING COUNTRIES
GH2
5. Transport and distribution policies................................................................................64

5.1. Planning GH2 infrastructure, transport and storage..................................................................................... 65
5.1.1. P
. ipelines vs maritime transport............................................................................................................... 67
5.1.2. GH2 carriers................................................................................................................................................... 69
5.1.3..GH2 storage facilities...................................................................................................................................71
5.1.4..Just transition dimension...........................................................................................................................72
5.2. Regulating transport.............................................................................................................................................72
5.3. I.nfrastructure financing.......................................................................................................................................73
6. Options for international cooperation to support national policymaking........... 76

6.1. Co-financing the development of a policy framework................................................................................. 76
6.2. Multilateral cooperation in science, technology and innovation..............................................................77
6.3. K
. nowledge sharing: Dialogue and capacity development......................................................................... 78
6.4. P
. olicy to support financing from the Global North to the Global South.................................................79
6.5. I.nternational coordination for hydrogen trade routes...............................................................................80
6.5.1. I.ntergovernmental Memorandums of Understanding........................................................................ 81
6.5.2..International standards and certification............................................................................................ 82
6.5.3. .International collaboration for trade corridors.................................................................................. 83
6.5.4. .International collaboration for trading green products................................................................... 83
Policy sheets............................................................................................................................ 86
Bibliography..............................................................................................................................98
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List of Figures
Figure 1.1. Policy priorities for GH2 applications......................................................................................................................... 17
Figure 1.2. Hydrogen cost forecasts................................................................................................................................................ 18
Figure 1.3. Cumulative number of NHS by UN country classification and year of first publication...............................20
Figure 1.4. GH2 value chain linkages..............................................................................................................................................20
Figure 2.1. Publication of NHS by year of publication and region.......................................................................................... 22
Figure 2.2. Visualization of the global hydrogen partnership network.................................................................................26
Figure 2.3. Activity clusters along the GH2 value chain.............................................................................................................30
Figure 2.4. Contextual factors shaping the development of large technical systems such as GH2...............................34
Figure 2.5. The clover approach to the GH2 market...................................................................................................................36
Figure 3.1. Prerequisites for GH2 production projects...............................................................................................................39
Figure 4.1. Share of abatable industries in total exports 2022................................................................................................ 53
Figure 4.2. GH2 cluster model..........................................................................................................................................................59
Figure 5.1. Most cost-effective hydrogen transport pathway in 2050.....................................................................................68
Figure 5.2. Cost of hydrogen delivery for various transport distances.................................................................................69
Figure 5.3. Energy losses for different energy carriers...............................................................................................................71
Figure 5.4. Capital cost of a hydrogen pipeline, and total transport cost by cost component....................................... 74
Figure 6.1. Existing bilateral MoU as of October 2023................................................................................................................82
List of Tables
Table 2.1. Topics mentioned in NHS............................................................................................................................................... 24
Table 2.2. GH2 projects at advanced stages of development..................................................................................................28
Table 2.3. Activity clusters related to GH2 production.............................................................................................................. 32
GH2
List of Boxes
Box 2.1. Global Hydrogen Partnership Network...........................................................................................................................26
Box 2.2. The renewables pull effect............................................................................................................................................... 31
Box 2.3. Just transition....................................................................................................................................................................... 35
Box 3.1. Namibia..................................................................................................................................................................................38
Box 3.2. Trinidad and Tobago...........................................................................................................................................................39
Box 3.3. Namibia’s Implementation Authority Office................................................................................................................. 41
Box 3.4. Local manufacturing and technology development: Cases from NHS...................................................................45
Box 4.1. Example of GH2 strategy: Morocco..................................................................................................................................50
Box 4.2. Just Energy Transition Partnerships (JETPs)................................................................................................................. 55
Box 4.3. Green goods certification insights..................................................................................................................................56
Box 4.4. Chile: Antofagasta GH2 hub..............................................................................................................................................60
Box 4.5. Knowledge sharing in Chile’s solar energy industry.................................................................................................. 61
Box 5.1. Hydrogen as an indirect GHG............................................................................................................................................ 73
Box 5.2. Kochi Green Hydrogen (KGH2) Hub project.................................................................................................................. 74
Box 6.1. International Master’s Programme in Energy and Green Hydrogen....................................................................... 79
Box 6.2. EU’s Carbon Border Adjustment Mechanism (CBAM).................................................................................................84
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List of Abbreviations
ADB Asian Development Bank
AHJ Authorities having jurisdiction
BF-BOF Blast furnace – basic oxygen furnace
BMBF German Federal Ministry of Education and Research
BoP Balance of plan
CAPEX Capital expenditure
CBAM Carbon Border Adjustment Mechanism
CBDR Common but Differentiated Responsibilities
CCS Carbon capture and storage
CEM Clean Energy Ministerial
CO2 Carbon dioxide
CoC Certificate of conformity
COP Conference of Parties
CSR Corporate social responsibility
DFI Development finance institution
DRI Direct reduced iron
EBRD European Bank for Reconstruction and Development
ESMAP The Energy Sector Management Assistance Program
EU European Union
FDI Foreign direct investment
GCA Global Climate Alliance
GDP Gross domestic product
GEP Green Energy Park
GH2 Green hydrogen
GHG Greenhouse gas
GHIC Green hydrogen industrial clusters
GIZ German Agency for International Cooperation
GH2
GPHI Global Programme for Green Hydrogen in Industry
H2 Hydrogen
H4D Hydrogen for Development
IHEC International Hydrogen Energy Center
HFC Hydrogen and fuel cell
IAO Implementation Authority Office
IEC International Electrotechnical Commission
IPHE International Partnership for Hydrogen and Fuel Cells in the Economy
IRENA International Renewable Energy Agency
ISO International Organization for Standardization
JETPS Just Energy Transition Partnerships
Kg Kilogramme
KPIs Key performance indicators
LCOE Levelized costs of energy
LCOH Levelized costs of hydrogen
LCR Local content requirement
LDC Least developed country
LH2 Liquefied hydrogen
LOHC Liquid organic hydrogen carriers
MDBs Multilateral development banks
MENA Middle East and North Africa
MoU Memorandum of Understanding
Mt Million tonnes
MW Megawatt
MWh Megawatt hour
NDCs Nationally determined contributions
NGHRI Namibia Green Hydrogen Research Institute
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NH3 Ammonia
NHS National hydrogen strategy
OECD Organisation for Economic Co-operation and Development
O&M Operations and maintenance
OPEX Operations expenses
PEM Proton exchange membrane
PGM Platinum group metals
PPA Power purchase agreement
PPP Public-private partnership
PtX Power-to-X
RAB Regulated asset base
R&D Research and development
RE Renewable energy
SAF Sustainable aviation fuel
SDGs Sustainable Development Goals
SEZ Special economic zone
SOEC Solid oxide electrolyser cell
UN United Nations
UNECE United Nations Economic Commission for Europe
UNFCCC United Nations Framework Convention on Climate Change
UNIDO United Nations Industrial Development Organization
USAID United States Agency for International Development
VAT Value added tax
VRE Variable renewable energy
WACC Weighted average cost of capital
WASCAL West African Science Service Centre on Climate Change and Adapted Land Use
WTO World Trade Organization
GH2
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Foreword
Green Hydrogen represents a unique opportunity for the clean energy transition. Climate change is an existen-
tial threat to a sustainable future, but at the same time, facing up to the climate challenge is an opportunity to
promote prosperity and a brighter future for all. Green hydrogen and its derivatives will play a vital role in the
just energy transition.
This collaboration between UNIDO, the International Renewable Energy Agency (IRENA) and the German Institute
of Development and Sustainability (IDOS) has synergized our collective commitment to fostering a global energy
transition that leverages green hydrogen. This partnership focuses on amplifying international cooperation to
facilitate the investment, policy-making and clean technology adoption, which are essential for inclusive and
sustainable industrial development in line with the UN Sustainable Development Goals. All three organizations
emphasize the transformative potential of green hydrogen, especially for developing countries with vast renew-
able energy resources, viewing it as a catalyst for low-carbon industrialization and job creation. However, the
actualization of these economic benefits depend on factors like existing industrial capacity and accessibility to
technology. Therefore, it is pivotal to have further benefit-sharing mechanisms in place to safeguard a just tran-
sition for the society as a whole.
We still have our work cut out for us in making the energy transition a reality. Currently, no mature green hydro-
gen market exists. However, the number of countries with national hydrogen roadmaps has more than tripled
over the past two years, showing that many countries are readying themselves to start using green hydrogen and
are planning how best to benefit from the economic opportunities it will provide. An essential prerequisite to
the global scale up of green hydrogen is the development of the necessary policy and legal frameworks, and the
coordination of international standards. Without regulatory clarity, green hydrogen projects are unable to move
forward as they cannot plan or assess risk. This toolkit is the first to cover the entire green hydrogen value chain -
including backward linkages, production and end-use - with a specific focus on developing countries. Developed
under UNIDO’s Global Programme for Hydrogen in Industry, which was launched in July 2021, it provides strategic
guidance to maximize the local benefits of green hydrogen and includes concise policy sheets that outline the
options to achieve this.
Going forward, this toolkit will serve as a valuable resource for developing countries that aim to embark on a
pathway to industrialization fuelled by green hydrogen. It informs policymakers about the latest strategies, chal-
lenges and solutions for creating a local value chain around green hydrogen production. Based on these insights,
country-specific needs may subsequently be addressed through further cooperation and projects.
By facilitating green hydrogen production in developing economies, UNIDO, IRENA and IDOS are propelling the
clean energy revolution. We are supporting future industry leaders. We are caring for the workforce of tomorrow.
We are striving for the just transition of industry: evolution from pollution to solution. We are working towards a
sustainable future for all, driven by innovation.
Gerd Müller Francesco La Camera Anna-Katharina Hornidge

Director General, UNIDO Director General, IRENA Director, IDOS
Executive Summary
Green hydrogen (GH2) is gaining significant attention challenges need to be addressed. These include cost
within the global energy landscape. As a clean and impediments, political instability, weak regulatory
renewable energy carrier, GH2 holds the potential frameworks, bureaucratic hurdles, and the lack of off-
to transform a number of sectors, spanning heavy take agreements. Additional challenges arise from
industries to shipping and aviation. Its benefits are uncertainties in international transport and concerns
far-reaching, ranging from the reduction of green- regarding the scale and dynamics of clean hydrogen
house gas emissions to reinforcing energy security trade, including the role of blue hydrogen as a tran-
and creating opportunities for green industrializa- sitional technology. Hence, to successfully scale up
tion. However, to fully unlock GH2’s potential, an eq- GH2 production in developing countries, adaptations
uitable distribution of its benefits to all is indispen- across several dimensions will be necessary, includ-
sable. Against this background, the report “GH2 for ing in infrastructure, regulatory frameworks, financial
sustainable industrial development: A Policy Toolkit incentives and skills development. Concerted policy
for Developing Countries” reframes the prevailing actions are imperative to harness opportunities and
narrative by shifting its focus away from the role of effectively navigate the many challenges. This report
developing countries as producers and exporters in presents a comprehensive toolkit to guide strategic
the future hydrogen market to highlighting the sig- decision-making in this context.
nificance of the hydrogen value chain for developing
countries themselves. Navigating a just transition: A policy mission for
equitable change
GH2: Unveiling opportunities and addressing
challenges The development of the GH2 value chain hinges on
factors such as technological expertise, natural en-
GH2 possesses the potential to spark a transforma- dowments, a supportive business environment, and
tion that drives industrial development and fosters past industrial development trajectories. Effective
innovation, with potentially beneficial impacts on all policy coordination plays a crucial role in laying the
three dimensions of sustainability: economic (e.g. foundation for a robust localized GH2 value chain
green industrialization, energy independence, in- tailored to specific contextual factors. Policymakers
creased participation in global trade and markets), must prioritize strategic interventions and instru-
environmental (e.g. accelerating decarbonization, in ments to achieve green industrial diversification, en-
particular of hard-to-abate industries) and social (e.g. couraging both existing and emerging industries to
job creation, reliable energy access). engage in the production of green goods and maxi-
mize the benefits of GH2 production. Such diversifi-
The toolkit identifies seven primary economic activity cation has the potential to create more job opportu-
clusters within the GH2 value chain: in addition to the nities and enhance the export potential of high-value
primary activities of (1) renewable energy generation green goods compared to only producing and export-
and electrolysis, (2) conversion into Power-to-X (PtX), ing GH2. Countries that are unable to generate signif-
and (3) GH2 export, (4) local upstream manufacturing icant linkage effects should integrate GH2 trade with
of electrolysers and renewable energy equipment can benefit-sharing mechanisms. This approach helps
offer substantial impetus to the growth of the domes- prevent the formation of export-driven energy en-
tic GH2 industry. Similarly, (5) the decarbonization of claves within their borders and ensures a GH2 roll-
domestic industries, (6) of transport, and (7) attract- out that is deeply embedded in and advocates for a
ing foreign direct investment in energy-intensive in- just transition.
dustries represent opportunities to generate sustain-
able employment downstream, add long-term value A ‘clover approach’ presented in the report outlines
and enhance international competitiveness. four key strategic considerations for the implemen-
tation of GH2 production: (1) prioritizing local use
Despite the potential for growth and cross-sectoral before export (dual approach); (2) aligning with a
benefits in the GH2 industry, a number of multifaceted just transition and other national goals (integrated
| 13
Executive Summary
approach); (3) starting with smaller to medium-sized Stimulating market creation and demand for
projects (gradual approach), and (4) sequentially im- green goods
plementing GH2 production and application (phased
approach). By leveraging their comparative advantag- Governments have substantial influence in creating
es and integrating GH2 into their overall vision and initial demand for green goods produced with GH2,
strategy, developing countries can promote sustain- such as green steel. By prioritizing green goods over
able development, technological advancement, and traditional products in their public procurement ac-
the creation of jobs. tivities, governments can boost demand, support GH2
producers and set a precedent for others to follow.
In this context, the adoption of a comprehensive This approach can complement direct subsidies for
national hydrogen strategy focused on scaling up of green goods produced with GH2, with government
domestic green hydrogen production through en- funding serving as a market shaper rather than a
gagement in both upstream and downstream activ- mere hand-out. Additionally, public procurement can
ities becomes a crucial step. This strategy provides consider the local content of goods, giving preference
clear policy direction for both project developers and to those with a higher share of domestically manu-
investors. At the same time, it will only be effective factured components and local employment. Reliable
when coupled with a robust regulatory framework to certification measures are necessary to ensure added
create a conducive environment for GH2 investment. green value, i.e. low carbon emissions, of the goods
manufactured with GH2, justifying the initial price gap
Fostering inclusive technology advancement to conventional products.
and sustainable energy generation
Policymakers will also need to address market
Access to technology plays a pivotal role in the pro- distortions, particularly those arising from fossil fuel
duction of GH2, particularly given that core technol- subsidies that have an impact on the GH2 sector. To
ogies such as solar PV cells, wind turbines, and elec- promote the use of GH2 in downstream industries,
trolysers are predominantly manufactured in a few incentives such as price premiums and tax rebates
industrialized countries. One option is to implement can be introduced. Additionally, the implementation
local content requirements (LCRs) to bolster domes- of quotas and targets represents a viable mechanism
tic manufacturing and leverage investments in long- to establish a baseline for GH2 use in specific market
term research and development to encourage local segments, ensuring the fulfilment of CO2 intensity
innovation and technology advancement. The caveat, objectives.
however, is to prevent escalating project costs and to
maintain healthy market competition. Access to tech- Infrastructure, transport and storage solutions
nology facilitates access to energy, thus ensuring reli- for GH2
able energy availability and energy security.
Formulating comprehensive, long-term strategies for
The potential impact of large-scale GH2 production the transport of GH2 with a focus on efficient and
on agriculture and water and food security must not standardized regulations that govern the planning,
be overlooked and will require a delicate balance financing and safety will be key for enabling devel-
between competing demands for limited natural re- oping countries to participate in international trade,
sources. Comprehensive environmental and social particularly in the context of cross-border transport.
impact assessments are paramount in this context. This report discusses the most important questions
Suggesting possible revenue- and benefit-sharing policymakers must address when planning GH2 infra-
mechanisms, the report underscores the fundamen- structure, ranging from the balance between privately
tal role of social contracts in ensuring an equitable owned infrastructure and open-access systems, the
distribution of benefits. selection of domestic storage solutions and the stra-
tegic location of electrolysers and storage facilities.
It emphasizes the socioeconomic dimension of GH2
infrastructure development and the need to prioritize
the resilience and livelihoods of local communities.
GH2
The report examines the feasibility and challenges financing is imperative, with a significant share ear-
associated with pipeline construction and maritime marked for GH2 projects. Policymakers around the
transport, exploring alternative energy carriers such globe should aim to lower the cost of capital for GH2
as liquefied hydrogen (LH2), ammonia (NH3) and liq- projects, involving development finance institutions,
uid organic hydrogen carriers (LOHCs) as potential and establishing a transparent and predictable reg-
solutions for long-distance trade. Moreover, the es- ulatory framework. UNIDO and the World Bank are
tablishment of storage facilities will be crucial for mapping out financial support offered by develop-
ensuring reliable GH2 supply, particularly in response ment banks for hydrogen projects. The development
to fluctuations in renewable energy generation. Se- of international standards and certifications for hy-
curing investments for retrofitting existing natural gas drogen emissions, safety and operations is crucial for
networks and building new dedicated hydrogen infra- fostering market growth. International organizations
structure is essential. This can be achieved through such as ISO and UNIDO are actively working towards
various financing options, including public procure- formulating such standards, with a particular empha-
ment, de-risking measures, public-private partner- sis on ensuring the participation of developing coun-
ships and regulated asset base models. tries and active engagement in standard-setting pro-
cesses. This entails developing technical capacity and
Global partnerships, international collaboration harmonizing certification methodologies.
and financing strategies for GH2
International collaboration is essential for establish-
The rapid scaling up of global green hydrogen pro- ing early GH2 trade corridors. Such collaboratve ef-
duction calls for multilateral cooperation in science, forts are crucial for pooling resources, sharing knowl-
technology and innovation. International collabora- edge, setting common standards and accelerating the
tion is crucial to facilitate research on the environ- development of hydrogen infrastructure, which can
mental impacts of hydrogen and to develop methods mitigate the risks of isolated efforts and fragmented
to mitigate hydrogen leakage. International orga- initiatives. Moreover, adopting a unified approach to
nizations, such as UNIDO, IRENA, IEA and the World green financing and green product standards will bol-
Bank, amongst others, are pivotal contributors to re- ster the bankability of GH2 projects. While reaching a
search and knowledge dissemination in this context. global consensus on these unified approaches will be
Knowledge sharing is essential to bridge disparities challenging, it is indispensable for realizing a GH2
in hydrogen know-how and foster well-informed de- roll-out that delivers benefits to both people and
cision-making among policymakers. the planet.
To achieve the goals set forth in the Paris Agree-

ment, a substantial increase in international climate
| 15
1. INTRODUCTION
In pursuit of their commitment to achieving the goals the energy transition’s early stages. Greenhouse gas
set forth in the Paris Declaration, countries and busi- (GHG) emissions from existing facilities can thus be
nesses around the world are actively exploring sus- reduced while continuing to use current infrastruc-
tainable and clean energy alternatives. Green hydro- ture. Blue hydrogen comes with certain limitations,
gen (GH2), namely hydrogen derived from renewable however: it relies on finite resources, is susceptible to
energy sources, is gaining widespread recognition as fossil fuel price fluctuations, is tied to the costs and
the preferred choice for a number of applications. monitoring of CO2 transport and storage, and does
not enhance energy security. Moreover, the efficiency
of CCS is suboptimal as it is still associated with some
residual CO2 emissions, and the use of methane in CCS
1.1. Why green hydrogen? may give rise to upstream leakage, rendering blue hy-
drogen incompatible with net-zero emission goals.
GH2 is being championed as the fuel of the future for

being clean, storable and portable (IRENA, 2020a).
When combined with oxygen, hydrogen combusts to 1.2. Identifying potential GH2
producers
produce water and releases heat without emitting
carbon dioxide (CO2). Due to hydrogen’s high energy
density, it is ideal for fuelling energy-intensive indus-
trial processes that are difficult to electrify and can GH2 production is a viable option for countries en-
furthermore be used as feedstock for a number of dowed with abundant solar and wind power potential.
industrial applications. Moreover, as a clean energy The IEA (2023a) identifies many low- and middle-in-
carrier, GH2 can be stored for extended periods with come countries in Africa, the Middle East, Southern
minimal losses. Compared to grid-connected renewa- Asia and the western regions of South America as the
ble electricity, it can be more flexibly transported over most promising sites for GH2 production due to their
large distances to applications farther afield from the abundance of solar and wind energy. Most of these
renewable energy source. countries currently have very limited renewable en-
ergy production capacity and substantial efforts will
Blue hydrogen, which is produced with fossil fuel therefore be necessary to increase it and to decar-
and carbon capture and storage (CCS), can serve as bonize their CO2-intensive electricity grid before en-
an initial catalyst for the hydrogen market during tering into GH2 production.
GH2
are difficult to decarbonize due to the limited availa-

1.3. Exploring GH2 bility of low-carbon fuel alternatives.
applications Energy. As an efficient energy carrier with long-term

storage capabilities without significant losses, hy-
GH2 will not replace the decarbonization of the pow- drogen can play a pivotal role in stabilizing energy
er, transport, heating and cooling industries achieved grids that rely on solar and wind power. By mitigating
through electrification from renewable energy sourc- the fluctuations inherent in these renewable energy
es, but rather complement it. Figure 1.1. presents ap- sources, hydrogen can help ensure a consistent and
plications where GH2 and its derivatives provide a reliable supply of electricity.
distinct comparative advantage, namely:
Cost competitiveness and infrastructure availabili-
Hard-to-abate industries. Heavy industry currently ty will be key determining factors in the adoption of
uses hydrogen derived from fossil fuels, particular- additional hydrogen applications. For example, the
ly in oil refinement and the production of ammonia, use of hydrogen fuel cell vehicles and trucks will be
methanol and steel. Using GH2 as a high-grade heat contingent on fuel cell costs and the availability of
fuel can contribute to the decarbonization of these refuelling stations. Hydrogen can be integrated into
and other hard-to-abate industries. In addition, it existing natural gas networks and used in district
can serve as feedstock for a number of industrial heating systems or in hydrogen boilers and fuel cells
applications. for residential heating systems. Ammonia, on the oth-
er hand, has the potential of enhancing power system
Aviation and maritime transport. Hard-to-abate flexibility when used in gas turbines or can contribute
transport industries, such as shipping and aviation, to emissions reductions of coal-fired power plants.
Figure 1.1. Policy priorities for GH2 applications
Source: IRENA, 2022a
Note: The end uses are located on the x-axis according to estimated average daily hydrogen demand for industry, refuelling
stations and combustion devices with a power relationship. The end uses are located on the y-axis according to the differences
between the technological readiness levels of hydrogen-based vs electricity-based solutions. This is not a static picture and
priorities may change over time depending on advances in technologies.
| 17
Introduction
1.4. Global demand and the 1.5. A price forecast for GH2
hydrogen industry’s future
outlook Significant reductions in the costs of GH2 production
will be necessary to unlock its full potential. Its pro-
duction costs are currently 3 to 6 times higher than
In 2022, about 95 million tonnes (Mt) of hydrogen for grey hydrogen (USD 3-6/kg vs USD 1-2/kg), even in
were produced globally, with the majority generated the most favourable production sites. One major cost
through processes that rely on fossil fuels such as factor is the renewable electricity required to power
natural gas and coal, also known as “grey hydrogen”. electrolysers. GH2 produced in locations with abun-
Grey hydrogen was primarily used in industrial ap- dant renewable resources can enhance its cost com-
plications such as crude oil refining, ammonia pro- petitiveness. The cost compression of solar photovol-
duction and methanol synthesis, which collectively taic (PV) and wind technologies will also contribute to
account for nearly 93 per cent of total hydrogen con- lowering the costs associated with GH2 production.
sumption (IEA, 2023a).
Another priority is lowering the cost of electrolysers,
According to the International Renewable Ener- which could potentially lead to an 80 per cent reduc-
gy Agency (IRENA, 2023c), GH2 is expected to play a tion in investment costs in the long term. Among oth-
significant role in the energy transition towards the ers, this could be realized by increasing the size of
1.5°C climate goal by 2050. IRENA’s World Energy Tran- electrolysis plants to achieve economies of scale; au-
sitions Outlook 2023 projects a substantial increase tomating manufacturing to improve efficiency; opti-
in global GH2 production, reaching approximately mizing material sourcing to reduce reliance on scarce
492 million tonnes by 2050. As part of the transition materials such as iridium and platinum; enhancing
strategy, however, some residual blue hydrogen pro- durability; improving operational efficiency and flex-
duction, totalling around 31.5 million tonnes, will be ibility; customizing electrolysis systems for specific
inevitable (IRENA, 2023c). industrial uses, and leveraging learning rates to drive
down costs.
Figure 1.2. Hydrogen cost forecasts
Source: IRENA, 2020a
Note: “Today” captures best and average conditions. “Average” signifies an investment of USD 770/kilowatt (kW), efficiency of
65% (lower heating value -LHV), an electricity price of USD 53/MWh, full load hours of 3200 (onshore wind), and a weighted
average cost of capital (WACC) of 10% (relatively high risk). “Best” signifies investment of USD 130/kW, efficiency of 76% (LHV),
electricity price of USD 20/MWh, full load hours of 4200 (onshore wind), and a WACC of 6% (similar to renewable electricity today).
Based on IRENA analysis
GH2
1.6. What are the prospects 1.8. Harnessing the

for renewable-rich transformative potential of
developing countries? GH2
GH2 production provides countries with abundant Governments, international organizations and private
renewable energy resources the opportunity to enterprises around the globe have launched ambi-
strengthen their energy security and to reduce their tious initiatives and policies to support the develop-
vulnerability to external shocks. They will have the ment and use of GH2. These efforts entail strategies to
possibility to participate in the global hydrogen mar- promote research and development (R&D), facilitate
ket, which is projected to account for around 25 per infrastructure development, and to create supportive
cent of total hydrogen demand by 2050. According to regulatory frameworks for the widespread adoption
IRENA’s 1.5°C scenario (2022b), around 55 per cent of of GH2 technologies. While Japan was the first country
internationally traded hydrogen will be transported to develop a national hydrogen strategy (NHS) in 2017,
through pipelines. GH2 production in renewable-rich over 45 countries—primarily developed countries in
will open up new avenues for achieving net-zero in- Europe—have since published NHS as well. Develop-
dustrial development and creating local value addi- ing countries are rapidly catching up, with around 40
tion, leading to job creation, skills upgrading, invest- per cent of currently published NHS attributed to this
ment mobilization and wealth generation. In short, country group. However, as of October 2023, no tran-
engaging in GH2 production has the potential of rein- sition economy or least developed country (LDC) had
forcing developing countries’ overall economic resil- published a NHS (Figure 1.3)
ience and facilitating the development of diversified
and knowledge-based economies. This report explores various facets of policymaking
from the perspective of renewable-rich developing
countries to promote the development and adoption
of GH2 as a sustainable energy option. It address-
1.7. Overcoming the es what can be described as the “hydrogen dead-
challenges of technological
lock” which entails four key components: (i) supply,
(ii) demand, (iii) infrastructure, and (iv) internation-
barriers and high production al context/coordination. There is a clear need for
comprehensive policies and strategies in develop-
costs ing countries to create and sustain demand for GH2.
Policies that have been implemented in the past to
promote renewable energy efficiency and the manu-
Countries face several obstacles to fully leverage facturing of green goods can be adapted to factor in
GH2’s potential. The biggest challenges include the GH2; by focusing on market creation and leveraging
necessary technological know-how to produce GH2, existing policy frameworks, policymakers can foster
the scaling up of renewable energy generation and GH2’s growth as a viable energy solution.
electrolyser capacities, the high production costs,
lack of domestic markets and limited infrastructure. The report provides guidance for effective policymak-
Targeted policies and collaborative efforts are there- ing along the GH2 value chain. While existing litera-
fore necessary to successfully address these barriers ture comprehensively reviews policies for increasing
to GH2 production. Moreover, demand for and the renewable energy generation, this report focuses on
supply of GH2 will have to be simultaneously promot- other important areas such as the production of GH2,
ed. Policymakers have a crucial role to play in driving its transformation, GH2 transport infrastructure and
innovation, attracting private sector investment, and the creation of domestic demand for GH2. In addition,
in forging partnerships to effectively integrate hydro- it highlights international cooperation as a crucial
gen into their country’s energy mix. factor for supporting national policymaking efforts.
The report concludes with policy sheets that offer
concise guidance for policy design at every stage of
the GH2 value chain.
| 19
Introduction
Figure 1.3. Cumulative number of NHS by UN country classification and year of first publication
Figure 1.4. GH2 value chain linkages
GH2
Chapter 2 reframes the current hydrogen discourse Chapter 6 focuses on the importance of promoting
away from “producing for export” by shedding light collaboration between governments, industry stake-
on the value creation prospects for hydrogen-pro- holders and academia to effectively navigate the
ducing countries. That is, countries should not ex- complexities of the GH2 industry and how to capitalize
clusively rely on GH2 exports considering the high on the opportunities it presents. It explores different
technological and systemic uncertainties these en- strategies including co-financing policy frameworks,
tail, but should instead pursue the development and knowledge sharing initiatives, intergovernmental
implementation of a gradual, phased and integrat- agreements, financing support, optimal import-ex-
ed GH2 strategy. This requires the establishment of port coordination and green product trade policies.
a domestic hydrogen market to decarbonize existing By aligning a range of policies with one another, mo-
industries and plans to export any surplus GH2. Gov- bilizing resources and by embracing innovation, the
ernments should prioritize attracting investments in production and adoption of GH2 can be significant-
energy-intensive steel or base chemicals with the aim ly accelerated, unlocking a future that is powered by
of gradually moving into downstream industries that clean and sustainable energy.
use green steel or chemical feedstock, and integrate
into upstream industries that produce renewable The report concludes with concise policy sheets that
power generators and electrolysers. Such a long-term offer pragmatic guidance for policymakers. They sum-
vision calls for restructuring and aligning the coun- marize areas for policy intervention, including the un-
try’s energy, infrastructure, trade and industrial strat- derlying objectives of such interventions, key actions,
egies and policies with one another. potential tools, actor involvement and connections
with other policies. These recommendations provide a
Chapter 3 explores GH2 production in more depth clear policy direction for promoting project inception,
with a focus on GH2’s backward linkages, its pro- developing a NHS, establishing regulatory standards
duction’s core activities and their connections to and creating a conducive business environment. The
upstream industries. The chapter provides valuable concluding chapter also emphasizes the importance
insights into strategies for attracting renewable en- of supporting early movers by facilitating access to
ergy investments for GH2 production, which requires resources and promoting entrepreneurial activities.
reliable electricity supply for electrolysers, and ad- Additionally, it outlines mechanisms for stimulating
dresses concerns related to technology acquisition, commercial demand for GH2, implementing certifi-
risk mitigation and the local manufacturing of GH2 cations and seamless value chain integration. Final-
hardware. Additionally, policy measures that can fa- ly, it highlights knowledge co-creation and exchange
cilitate the widespread deployment of electrolysers through targeted educational initiatives, knowledge
and renewable energy sources are discussed. The so- sharing platforms and digital government resources.
cioeconomic dimension of GH2 production projects
is raised as well, highlighting the importance of ef-
fective policymaking in regulating and governing wa-
ter and land resources.
Chapter 4 focuses on the role of industrial policy in

facilitating the development of a domestic hydro-
gen market. It introduces a range of targeted policies
designed to stimulate domestic GH2 demand and to
promote its integration in the value chain. The chap-
ter emphasizes the need for comprehensive regu-
lations, early mover support, demand generation
mechanisms, and effective strategies for value chain
coordination. It also discusses the pivotal role local
market creation plays in driving the adoption and use
of GH2 as a clean energy solution.
In Chapter 5, a comprehensive analysis of current

technologies and associated challenges is presented,
with a focus on the intricate planning required for the
development of hydrogen grids and infrastructure.
Additionally, it reviews the necessary policies to bol-
ster this crucial segment of the GH2 value chain.
| 21
2. The GH2 industry: reframing
the narrative
The current global discourse on GH2 mostly reflects developing countries, reflecting the important role
the perspective of the Global North. The mission-ori- they play in international GH2 trade. This message has
ented policymaking of early movers through support- resonated more clearly in recent years: while the ma-
ive (e.g. the U.S. Inflation Reduction Act) and mandat- jority of NHS prior to 2022 had been published in the
ing (e.g. the EU’s Delegated Acts) industrial policies Global North, an increasing number of countries from
has significantly influenced the GH2 market’s growth the Global South have joined the ranks of economies
in developing and emerging economies. Major import planning to produce and use GH2 (see Figure 2.1.).
hubs, especially Germany, Japan and the Republic of
Korea, have established numerous partnerships with
Figure 2.1. Publication of NHS by year of publication and region
GH2
This report takes the perspective of countries in the exports, foreign direct investment (FDI) and the
Global South on GH2 development and shifts the implementation of large-scale hydrogen projects.
emphasis of the current narrative from “the rele-
vance of developing countries in the future GH2 mar- 4. GH2 fosters industrial development and innova-
ket” to “the relevance of the future GH2 market for tion. While the decarbonization of hard-to-abate
developing countries”. industries features prominently in many NHS,
countries also emphasize the potential of creat-
The exclusive focus on GH2 as a developing country ing new sustainable industries such as fertilizer
export has raised concerns about the fair distribu- and steel, and gaining a competitive advantage
tion of GH2’s benefits, sparking increasing resistance or even assuming leadership in hydrogen tech-
within local communities in these countries. This re- nologies, including electrolysers and fuel cells.
port thus delves deeper into the potential advantag-
es of GH2 production for developing countries, and 5. Most countries prioritize a gradual and se-
explores strategies to navigate and mitigate the risks quenced approach to GH2 production and use.
involved in this transformative venture. They start with small- to medium-scale projects
on both the supply and demand side.
6. The development of GH2 calls for a compre-

2.1. Envisioning the role of hensive overhaul of the socioeconomic system.
GH2 in developing countries

Countries recognize that the technological nov-
elty and capital-intense nature of GH2’s value
chain necessitate coordinated policymaking
Since the publication of Japan’s NHS in 2017, over across various policy areas, including educa-
45 countries—including around 40 per cent from the tion and training, infrastructure, and industrial
Global South—have followed suit by releasing their and structural policies aimed at facilitating a
own strategies, roadmaps and action plans to devel- fair and sustainable expansion of the domestic
op and use GH2. Although these plans differ in terms market. Some NHS also outline financial sup-
of targets and measures, they address similar issues port mechanisms.
that arise in relation to the creation of a sustainable
GH2 market, such as the drivers of GH2 production; 7. Countries recognize the potential risks associ-
the goals for domestic use and international trade; ated with GH2 production for the environment
sustainability and inclusive participation, and the and society. Some countries emphasize a bal-
need to overhaul the current socioeconomic system. anced use of land and water resources, while
We have identified ten key insights based on an anal- others promote a circular economy and a rein-
ysis of these documents: vestment of revenues from the GH2 value chain
into local communities.
1. Countries invest in GH2 for various reasons: par-
ticipation in the international trade of GH2 and 8. Stakeholder and civil society engagement play
its derivatives; decarbonization of the economy; a crucial role in increasing acceptance of GH2
energy supply security and diversification; accel- technologies. Inter-ministerial working groups
eration of innovation and industrial growth, and that include civil society, private and public
social and environmental (co-)benefits. stakeholders are being established and technical
roundtables organized that involve enterprises,
2. GH2 production. Countries are leveraging their industry associations, universities and research
local conditions and natural factor endowments. institutions to promote acceptance of new GH2
While most countries prioritize the development technologies. Additionally, advisory boards that
of hydrogen from renewable energy sources such include public policy and climate action experts
as solar and wind through electrolysis, they are have been created, and regular consultations
also exploring other clean production methods. with industry and affected communities are
being conducted. National hydrogen councils
3. Some countries are focusing on developing their and associations serve as focal points for GH2
domestic market before engaging in GH2 trade. strategy development.
Several countries have already identified spe-
cific “no-regret” applications that can be easily 9. Bold policy actions are needed in the short term
adapted to GH2, such as ammonia production for to ensure successful market ramp-up for GH2.
fertilizers, methanol as feedstock and synthetic While the market economy plays a pivotal role,
fuels for maritime transport. Other NHS prioritize exclusive reliance on the market alone does not
| 23
The GH2 industry: reframing the narrative
suffice given countries’ ambitious decarboni- exports and achieving self-sufficiency. Some
zation targets and the coordination challenges. country strategies identify specific regions for
NHS typically focus on mid- to long-term goals promoting trade partnerships. International co-
(2030, 2040 and 2050), but also include updates operation plays a crucial role in targeted actions
and action plans for the short term to continu- such as knowledge exchange, technology transfer,
ously adapt to the dynamic nature of technology collaboration in hydrogen technology R&D and in
and market trends. international standard-setting. While many NHS
emphasize international collaboration, region-
10. Hydrogen trade objectives are often linked to al partnerships are not always given the same
international collaboration. The majority of NHS prominence, despite their relevance in ramping
highlight countries’ potential role in future in- up the hydrogen market at the global scale.
ternational hydrogen trade, including imports,
Table 2.1. Topics mentioned in NHS
Aspects Measures/areas mentioned Country examples
Key drivers Participate in international trade of hydrogen and its Uruguay, Namibia
derivatives
Decarbonize the economy Chile, Türkiye
Strengthen energy security China, India
Diversify energy supply Germany
Innovation and industrial development Namibia, Uruguay
Environmental and social (co-)benefits Chile, South Africa
Identification of “no- Ammonia production for fertilizers Türkiye, Kenya
regret” areas
Methanol production as feedstock Uruguay
Steel production South Africa
Maritime shipping Chile
Quality infrastructure Safety standards Chile, China
Regulation of hydrogen storage India
Adoption of international technical standards for Columbia
hydrogen
Financial support Direct incentives, extension of subsidies, fee waivers, India
mechanisms grants
Environmental Balanced use of land and water resources, circular Chile
sustainability economy
Participation National GH2 advisory group comprising experts from India
academic and research institutions, industry and civil
society
Time frame Development of GH2 use until 2035, projected in three Chile
waves; update of NHS every three years
International International cooperation China
collaboration
Regional cooperation Uruguay
GH2
2.2. Unravelling the benefits scarcity of renewables. Therefore, importing GH2
and barriers of GH2 trade

or green intermediates such as direct reduced
iron (DRI) can help prevent reliance on costlier
and less sustainable alternatives.
As already briefly mentioned above, there are several
compelling reasons why renewables-rich developing 6. International GH2 trade can facilitate knowledge
countries should actively participate in GH2 produc- transfer and spillovers, thereby accelerating
tion and trade: socioeconomic development in GH2 exporting
countries. GH2 trade is creating a new global di-
1. The global effort to decarbonize hard-to-abate vision of labour and is generating jobs and value
industries that cannot be easily electrified is rein regions with abundant renewable resources.
liant on the involvement of developing countries While certain key technologies such as electro-
with abundant renewable resources. Internation- lysers are likely to be supplied by regions with
al hydrogen trade can support the decarbon- limited renewable energy sources (Verpoort et
ization efforts in both exporting and importing al., 2023), the overall expansion of technological
countries. capabilities and industrial capacities will bolster
domestic research, development and innovation
2. Export revenues enhance the trade balance and in GH2 exporting countries.
facilitate access to foreign currencies. The pro-
jected interregional trade of GH2 in 2050, estimat- To accelerate the global growth of the hydrogen mar-
ed at USD 280 billion, is anticipated to generate ket, hydrogen partnerships have been established
over half of its economic activity from developing between potential exporting and importing countries
countries (Deloitte, 2023). This burgeoning trade (see Box 2.1).
has the potential to trigger a cascading effect on
economic development, fostering local activities Yet, despite the ambitious goals associated with the
and job creation. GH2 market, its growth has been slow. In 2022, less
than 100 kilotons of hydrogen from electrolysis were
3. Hydrogen trade empowers countries within a produced, falling far short of the expected demand
democratically structured global energy land- by 2050 (IEA, 2023a). If all the announced electrolysis
scape, providing producing countries increased projects—including those at very early stages of de-
autonomy, strengthening their economic net- velopment—are realized, GH2 production could reach
works and elevating their political significance. around 27 Mt by 2030. Latin America, particularly
Additionally, it offers fossil-fuel exporting coun- Chile, Brazil and Argentina, could account for nearly
tries the opportunity to retain some of their ex- 6 Mt of production, while African countries, including
port revenues and maintain political influence Kenya, Mauritania, Morocco, Namibia and South Afri-
(IRENA, 2022e). ca, could produce about 2 Mt by 2030 (IEA, 2023a). The
majority of GH2 projects are still in their infancy, with
4. GH2 exports can facilitate domestic energy tran- only a few projects currently underway (see Table 2.2).
sitions by integrating renewable energy into the This is particularly true for export-oriented projects,
national energy grid. Such integration not only where less than 25 per cent of planned projects un-
drives down the cost of renewable energy in the til 2030 have reached the feasibility stage. Moreover,
country of production, but also improves energy two-thirds of the projected export capacities still lack
access and affordability for the local population. potential buyers, and only a few projects have signed
binding off-take agreements (IEA 2023a).
5. The trade of GH2 and its derivatives can prevent
stranded assets in both exporting and importing Cost challenges pose a significant obstacle to the
countries. By supporting the local decarboniza- rapid development of GH2 projects in developing
tion of industries in the exporting country, GH2 countries. The high capital costs associated with re-
exports can help avoid the implementation of newable energy and the expansion of electrolysis,
conventional, fossil-based projects that could be- coupled with risks related to political stability, reg-
come stranded assets in the future. The technical ulatory frameworks and bureaucratic procedures
components of the coal-based blast furnace-ba- such as licensing and land acquisition, undermine
sic oxygen furnace (BF-BOF) in steel production, the bankability of projects and prevent their timely
for example, have lifetimes of between 40 years implementation, especially in developing countries.
and 60 years, exposing them to carbon lock-in Demand-side stakeholders often adopt a cautious
and stranded asset risk by 2040 (Agora Industry “wait and see” approach, resulting in a lack of off-
and Wuppertal Institute, 2023). The production of take agreements.
GH2 may not be cost-competitive in the import-
ing country in the long term due to the country’s
| 25
Box 2.1. Global Hydrogen Partnership Network
Figure 2.2. Visualization of the global hydrogen

partnership network
Demand for GH2 is particularly high in Ger-

many, Japan and the Republic of Korea.
These economies have actively forged hy-
drogen partnerships with potential export-
ing countries. Germany has signed Mem-
orandums of Understanding (MoU) with
countries in sub-Saharan Africa (e.g. South
Africa, Namibia), Latin America (e.g. Chile),
the MENA region (e.g. Morocco, Saudi Ara-
bia, Egypt and the United Arab Emirates).
On the other hand, Japan and the Repub-
lic of Korea are focusing on Oceania, South
America and North Africa to find suitable
partners. On the export side, Australia, In-
dia, the United Arab Emirates (UAE), Saudi
Arabia, Chile and the Russian Federation
have also established a robust network with
other countries. Even countries that will not
necessarily rely heavily on GH2 trade in the
future, such as the United States, the United
Kingdom, France and China, have entered
into partnerships.
Source: Analysis based on data from the World Energy Council Germany (2023), World Energy Council (2022, p.7),
and own research
Note: Green shades refer to (slightly and strongly) export-oriented countries, blue shades to (slightly/strongly) import-orient-
ed countries, while light red colour indicates a neutral or rather self-sufficient position of countries.
The international transport of GH2 is still fraught and friend-/ neighbour-shoring. Recent reports high-
with technological and regulatory uncertainties, light, for example, the considerable renewable ener-
which impedes its cost-effective transport in line with gy potential and GH2 production within Europe’s bor-
technical and environmental standards (see Chapter ders (e.g. Quitzow et al., 2023). Policy frameworks that
5). Maritime transport of hydrogen (including conver- harness GH2’s domestic potential in industrialized
sion and re-conversion) can raise the landed costs of economies may discourage investment in developing
hydrogen significantly, placing countries located out- countries that lack comparable subsidy schemes.
side the pipeline distance from major import hubs at
a comparative disadvantage. Blue hydrogen, which serves as a transitional technol-
ogy, could extend the timeline of GH2 adoption. Major
The scale and dynamics of GH2 hydrogen trade re- importing countries such as Germany are increasingly
main uncertain. According to IRENA’s (2022b) 1.5°C considering the use of blue hydrogen as a transition
scenario, around 25 per cent of hydrogen production technology. While blue hydrogen may accelerate GH2
could be internationally traded by 2050, with about use and facilitate the transition to a GH2 future in the
half transported through pipelines. Importing coun- medium term, it is not fully emission-free and carries
tries, driven by energy diversification and security the risk of “lock-in”. In the short term, GH2 export-
concerns, are increasingly pursuing self-sufficiency ers, especially those relying on maritime transport for
GH2
international trade, may find it difficult to compete projects, consequently delaying the overall green
with the price of blue hydrogen. This might represent industrial transformation in these countries. Estab-
challenges for developing countries that are heavily lishing a strong business case within these countries’
reliant on GH2 exports, potentially jeopardizing the economies is therefore crucial. This will enhance their
viability of GH2 initiatives in these countries, failed resilience in anticipation of a global market expan-
GH2 projects could lead to political frustration and sion which at present remains uncertain.
societal backlash against further decarbonization
| 27
Table 2.2. GH2 projects at advanced stages of development. (Source: IEA, 2023b)
Project Country Status End Use Description
Helios Green Saudi FID Ammonia The Neom Green Hydrogen Company, a joint venture between
Fuels – Arabia ACWA Power, Air Products and NEOM recently achieved financial
NEOM close on 22 May 2023, with a total investment value of USD 8.4
billion. The world’s largest GH2 plant will be located in Neom
and is projected to generate up to 600 tonnes per day of green
ammonia for export from 4GW of solar and wind energy by the
end of 2026. An exclusive 30-year off-take agreement has been
concluded with Air Products. Over two-thirds of the investment
value are financed from 23 local, regional and international banks
and financial institutions.
Masdar United FID Synfuels TotalEnergies, Masdar, Siemens Energy and other companies
City – Green Arab are collaborating to establish a demonstrator plant in Masdar
Falcon Emirates City to produce sustainable aviation fuel (SAF) from GH2. The
demonstration project should pave the way to commercial
production of SAF.
Cleanenergy NAM FID Mobility The Ohlthaver & List (O&L) Group and CMB.TECH launched
Solutions the Cleanenergy Solutions Namibia joint venture to construct
Namibia Namibia’s first GH2 production plant in February 2022. The
demonstration plant is based in the Erongo region and is expected
to become operational by the end of 2023 and produce green
ammonia as transport fuel. It is to be followed by a 10-hectare
solar park, equipped with a 5 MW electrolyser. Environmental
studies have been carried out, and the funding has been approved
by the government.
OCP green Morocco Under Ammonia Morocco’s OCP, one of the world’s largest phosphates and fertilizer
ammonia construction companies (and an importer of ammonia) is currently developing
a green ammonia demonstration plant jointly with Green Energy
Park (GEP) and Fraunhofer IGB. The demonstration plant has a
capacity of four tons a day which is used for testing electrolyser
technologies and ammonia synthesis in a realistic intermittent
operation and on an industrial scale.
Unigel, BRA Under Ammonia Brazil’s largest fertilizer producer Unigel launched the country’s
phase I construction first industrial-scale green hydrogen and ammonia project in
Camaçari, Bahia province. 60,000 tonnes of ammonia are to be
produced from 60 MW of grid-connected renewable energy (RE)
per year, using Thyssenkrupp nucera electrolysers. Operational
by 2023, it will quadruple production during the second phase
up to 2025.
Haru Oni, Chile Operational Methanol, Siemens Energy, Porsche, Enel, ExxonMobil, Enap and others
phase I synfuels have built the world’s first integrated industrial-scale plant for
synthetic fuels in Patagonia. Large-scale production was planned
to start in April 2023. Two wind turbines at Haru Oni can create the
same amount of e-fuel as around six wind turbines in Germany.
The facility is expected to produce up to 550 million litres of e-fuel
in coming years.
Sinopec – China Operational Refining, Sinopec Xinjiang Kuqa GH2 pilot project entered operation in
Kuqa transport July 2023. The solar-to-hydrogen project produces up to 20,000
tonnes per year of GH2, along with the capacity to store 210,000
m³ of hydrogen (H2) and transport 28,000 m³ of H2 per hour.
With a focus on hydrogen transport and green hydrogen refining,
Sinopec also installed over 100 hydrogen refuelling stations to
accelerate GH2 development.
GH2
2.3. The potential of GH2 organic carbon source, such as dedicated energy
to transform industrial
crops or agricultural residues, creates a link be-
tween the energy and agriculture sectors and can
development thereby generate further employment opportuni-
ties (WWF et al., 2019).
The shift in the prevailing narrative highlights the sig- 3. Export of GH2 and PtX. Exporting hydrogen and its
nificance of GH2 production for developing countries, derivatives presents a significant opportunity for
emphasizing the economic opportunities it presents countries to enhance their foreign exchange earn-
throughout the value chain (see Fig. 2.3). By engaging ings and generate tax revenues. By tapping into in-
in both upstream and downstream activities of GH2 ternational energy markets, countries can attract
production, developing countries can generate sus- foreign investment that exceeds the amount need-
tainable employment; add long-term value; enhance ed to decarbonize their local industry and trans-
their international competitiveness, and mitigate risks port sector. Exporting countries’ mode of transport
associated with participation in global hydrogen trade. varies depending on their proximity to major im-
port markets: those in close proximity can export
The hydrogen value chain comprises seven primary hydrogen through pipelines, while those located
activity clusters or windows of opportunity (Stamm et beyond the 3,000 km pipeline distance have to rely
al., 2023), which can be pursued simultaneously or in on maritime shipping as their only option. In that
any preferred sequence. case, jumpstarting the export economy with PtX,
such as ammonia or methanol, will likely be a more
1. Renewable energy generation and electrolysis. GH2 cost-effective choice compared to molecular hydro-
production requires initial investments in renewa- gen, as the transport of GH2 in the form of liquid
ble energy sources such as solar and wind farms and hydrogen or liquid organic hydrogen carriers (LOHC)
in geothermal and hydroelectric installations, which significantly increases the total costs. The choice of
are contingent on regional resource endowments. exported commodities has a direct impact on the
Electric grids need to be developed, electrolysers potential for local economic spillovers.
installed and pipelines and tanks for water and
hydrogen transportation established. Water-scarce 4. Manufacturing of renewable energy equipment.
regions may also need to build and operate desali- The core activities around green hydrogen produc-
nation plants. These activities are capital-intensive tion involve backward linkages to upstream suppli-
and often require large-scale production, making ers of clean energy technologies, for example so-
it challenging for newcomers to enter the market. lar PV (e.g. solar cells, modules, and steel frames);
In most developing countries, foreign investment wind energy (e.g. towers, blades and gearboxes);
and imported technologies are likely to dominate geothermal (e.g. turbines, pumps, condensers); and
these activities. However, significant employment electrolysers (e.g. electrodes, electrolyte materials,
opportunities could arise during the construction membranes and stacks). Moreover, energy projects
phase, while job creation in operations and main- require storage solutions. Yet the supply market for
tenance (O&M) may remain limited. Technologically both wind and solar energy has high barriers to en-
advanced countries can develop indigenous capa- try: the solar PV wafer manufacturing capacity, for
bilities and capture value locally in services (e.g. example is highly concentrated in China, which ac-
construction and project development) as well as counted for 97 per cent of global capacity in 2021.
in manufacturing (e.g. steel tubes for wind turbines The remaining capacity is mainly located in the
and solar panels). Asia-Pacific region (the Republic of Korea, Malaysia,
Viet Nam and Thailand) (IEA, 2022a). Although mar-
2. Conversion into Power-to-X (PtX). The transport and ket dispersion of wind energy is higher, China leads
storage of hydrogen is costly, as it requires storage in wind turbine manufacturing, followed by Europe,
at either extremely high pressures or extremely low the United States, India and Latin America (GWEC,
temperatures. The commercially viable alternative 2021). The production of renewable energy technol-
is to convert hydrogen into derivatives, such as am- ogies has a major impact on employment: China’s
monia, methanol or synthetic fuels, which are eas- solar PV value chain alone accounted for 1.6 million
ier to store and transport. The choice of derivative jobs in 2021, surpassing employment in construc-
depends on the specific end use (e.g. ammonia for tion and installation (1 million), and in the opera-
fertilizer production and e-kerosene as aviation tion and maintenance of solar plants (0.8 million)
fuel) and transportation requirements. Producing (IRENA and ILO, 2022).
sustainable fuels from GH2 in combination with an
| 29
Figure 2.3. Activity clusters along the GH2 value chain
Mfr. of renewable Renewable

energy energy generation
technologies and electrolysis
4 1 Conversion
into PtX
Inverters Electricity
grid
Battery CO2
strogate Dedicated RE
Panels/
modules N2 PtX
Electrolysis
Synthetic
fuels
GH2
Renewable energy Methanol
Turbines Synthesis
Ammonia
Generators
RE production
LOHC
Pumps
Transmission
Transformation
GH2 Production
Blades
Generators
Towers
Storage
Steel Chemical Refineries
GH2 Fertilizer Plastics

Pipeline Ship Rail/Road PtX
INDUSTRY
Cement Glass Ceramics
TRANSPORT
Export Heavy & long - haul
transport
ENERGY
Buildings Electricity
End use in downstream sectors

3
Export of
GH2 and PtX
5 6 7
Decarbonization of Decarbonization FDI in energy-intensive
domestic industries of transport industries
Upstream Downstream
Backward linkages Forward linkages
5. Decarbonization of domestic industries. Many local as the EU’s Carbon Border Adjustment Mechanism
industries such as the chemical, iron and steel, ce- (CBAM). A shift towards GH2 is particularly relevant
ment, aviation, maritime and heavy cargo transport for economies with robust heavy industries, espe-
industries, can benefit from reengineering their cially if they export to markets with high decar-
operations by using GH2. Incentives to use GH2 bonization standards. Additionally, countries with
in these hard-to-abate industries—either as feed- a significant mining sector can greatly reduce their
stock or as an energy source—are buttressed by na- carbon footprint by adopting GH2 to align their en-
tional decarbonization goals, corporate standards ergy-intensive operations and exports to markets
enforced by leading enterprises in global supply with stringent decarbonization requirements.
chains, and international trade regulations such
GH2
6. Decarbonization of transport. Transport is a major 7. Attracting FDI in energy-intensive industries

contributor to GHG emissions in many low- and – renewables pull. Many industries are aiming
lower middle-income countries, even surpassing to decarbonize their global value chains over
industrial emissions. While battery-electric tech- the next two decades. In countries with limited
nology is the future for light vehicles, other seg- renewable energy and GH2 resources, there is a
ments such as long-range buses and heavy cargo growing incentive to import energy-intensive parts
transport may benefit from fuel cells or hydrogen and components such as aluminium, carbon-fibre
internal combustion engines as potential alterna- parts, green steel and energy-intensive chemicals
tives. However, the transition from diesel to low- or from countries with abundant renewable low-car-
zero-emission vehicles requires costly adjustments bon energy sources. As pressure to decarbonize
in the existing bus and truck industries. Despite material consumption increases, as carbon prices
these challenges, there are viable pathways to align rise and renewable energy and GH2 capacity
decarbonization efforts with local economic value. are ramped up, relocations of energy-intensive
Countries with large markets and diversified indus- processes are expected to rise significantly. This
tries have a competitive advantage in developing presents a promising opportunity for developing
low-carbon transport technologies as, for example countries to embrace green industrialization and
in the case of urban rail technologies in China and further advance their sustainability goals.
India, and fuel-cell mining haul trucks in Chile and
South Africa. Another viable pathway, which may
also be suitable for smaller economies, is retrofit-
ting traditional vehicles such as diesel buses with
low-carbon engines (e.g. battery-electric, fuel cell
or direct combustion).
Box 2.2. The renewables pull effect
The “renewables pull” effect refers to the attraction of energy-intensive industries and investment in
new industrial capacity in countries or regions with abundant renewable energy resources. This can
lead to increased deployment of renewable energy, job creation and value added in these countries
(Gielen et al., 2020). Industries that are likely to benefit from (at least partial) relocation in the future
include steel and chemicals, as the long-distance transport of intermediate (e.g. DRI, ammonia, basic
hydrocarbons) and (semi-)finished goods (e.g. steel, cast iron, urea, ethylene) to these industries will
be cheaper than the costs of hydrogen transport. Verpoort et al. (2023) estimate relocation savings of
around 20 per cent for imported steel and 50 per cent for urea and ethylene when there is a signifi-
cant electricity price difference of EUR 50/MWh between the trade partners. This presents a win-win
situation for trade partners, as projected for the case of steel: renewable-rich countries can export
green iron instead of iron ore and H2 and its PtX, resulting in an increase in local employment of ap-
proximately 16 per cent and a rise in value added of 18 per cent. By shifting to DRI imports, renewa-
ble-scarce regions can outsource the energy-intensive processing of iron ore while preserving the final
steps of steel production, strengthening their competitiveness in the green steel industry and protect-
ing over 90 per cent of jobs (Agora Industry and Wuppertal Institute, 2023). The first commercial-scale
steel factory based on GH2 is currently being built in northern Sweden, where electricity prices are ex-
tremely low and where there is an abundance of iron ore (H2 Green Steel). The rising cost of fossil fuels
due to stricter climate policies or higher CO2 prices, the reduced cost of renewable energy sources, for
example through technological advances, subsidies, policy-induced incentives, as well as increasing
demand for green materials and products (e.g. CBAM), will drive the renewables pull in the future.
Other factors that will have an impact include the costs of transport, the availability of other essential
inputs, and the relevance of domestic production (Samadi et al., 2023).
| 31
Table 2.3. Activity clusters related to GH2 production
Activity Employment
Aspects to consider Country examples
cluster effects
• Engaging in core activities requires
Significant during
substantial capital and scale. In most
Renewable energy
construction
developing countries, FDI and imported • To meet export demand of 10
generation and
but weak in
technologies are expected to play a leading million metric tonnes by 2030,
plant operation
electrolysis
role. Namibia intends to build local EPC

(depending also
• If not addressed early on, conflicts related to companies.
on type of RE
land and water use, and equitable access to
employed)
clean energy may arise.
• Capital- and scale-intensive, thus deterring

Significant during
new entrants. Core technologies are not • By 2025, Chile aims to prioritize the
Conversion
construction but
mature (e.g. direct air capture). FDI and deployment of GH2 in ammonia
into PtX
weak in plant
imported technologies are likely to play a production for domestic use.
operation
leading role in most developing countries.
• High investments in ports, pipelines and

storage capacities, as well as transport
• Namibia will prioritize the export
Substantial during mode-specific investments (for ammonia
of hydrogen derivatives including
the construction synthesis, generation of LOHC and deep-
ammonia, methanol, synthetic
phase, but the freezing hydrogen).
kerosene and hot-briquetted iron
Export of GH2 and PtX
potential for • Most potential exporting countries will

using iron ore from Brazil or South
forward and strongly depend on imports of industrial
Africa.
backward linkages equipment, which may considerably reduce
• Uruguay plans to develop a port
and technological net export revenues.
solution for synfuels export in
learning is fairly • Tax exemptions are often granted to investors
Montevideo by 2025.
limited (which are typically permitted to operate in
special economic zones), thereby reducing
the host country’s tax benefits.
• High market concentration (especially of

• China is promoting the
solar PV).
development of proton exchange
• Hydrogen technology patents (electrolysers
Mfr. Of renewable energy
membrane fuel cells.

and fuel cells).
• Namibia intends to construct
• Some inputs are more accessible for local
Strong employment and deliver local component
production (e.g. steel structures, wind towers,
effects manufacturing for GH2 production.
pumps, cables), while others such as PV
• Türkiye has well-established
cells, wind turbine components and blades
equipment
manufacturing industries for solar

are often technology-intensive and rely on
and wind energy components and
imports (IEA, 2022d; Global Wind Energy
plans to develop GH2 technologies.
Council, 2022).
• High switching/start-up costs for clean

technologies. • In Kenya, three fertilizer projects
Decarbonization
Large subsidies for incumbent competitors. are currently being developed.

Strong employment
of domestic
• It may be difficult to attract domestic • India supports GH2 production

industries
effects
customers due to initial price differentials to enhance low-carbon steel
between conventionally produced and production capacity.
“green” products.
GH2
• In Chile, researchers are developing

a stationary prototype of a fuel cell
mining truck to be placed on site
• Many emerging economies have established
at the Antofagasta PLC’s Centinela
Decarbonization of mobility
the domestic production of diesel vehicles,

copper mine.
driving up the costs of the shift to electric
• The Shipping Corporation of
Strong employ- and fuel cell technologies.
India (or its potential successor, a
ment effects • Lithium batteries and fuel cells are often not
private entity) will retrofit at least
produced locally, resulting in most developing
two ships to run on GH2 or other
countries relying on imported low-carbon
e-fuels by 2027.
transport solutions such as battery-electric
industries
• China is promoting R&D of large

buses, trucks and urban rail systems.
hydrogen energy aircraft and
is actively exploring fuel cell
applications in ships, for example.
• The Brazilian mining company

Vale and the Swedish start-up H2
Attraction of FDI in energy-
Green Steel signed an agreement

to study the development of green
• Comparatively high capital costs (due to industrial hubs in Brazil, using iron
intensive industries
Strong employ- political, regulatory and market risks) of ore briquettes produced by Vale
ment effects industry relocation dampen the renewables as input material for green steel
pull effect. production.
• ArcelorMittal concluded an MoU
with SNIM to assess the feasibility
of jointly developing a pelletization
plant and DRI plant in Mauritania.
2.4. Building the GH2 value Japanese applicants (IEA and EPO, 2023). A similar
chain
trend is observed for technologies related to hydro-
gen storage, distribution, transformation and appli-
cations, with between 84 per cent and 90 per cent
The opportunities discussed in Chapter 2.3 can be of patent activity taking place in industrial countries
simultaneously leveraged to create value. The so- in the Global North and China. Developing countries
cioeconomic impacts may vary significantly across may face challenges entering this highly concentrated
different activity clusters. While large-scale export market, given the ambitions of major importing coun-
projects can improve the balance of payments, they tries (Germany, Japan and the Republic of Korea) in
might not stimulate industrial capabilities as much as hydrogen technology development. However, some
projects focused on industry decarbonization or R&D countries may be able to leverage their expertise in
investments in new GH2 technologies. The realization related technologies, such as Fischer-Tropsch-Syn-
of these opportunities largely depends on contextual thesis for synthetic fuel production (South Africa) or
factors (see Figure 2.4) such as natural resources, the biofuel production (Brazil), giving them a competitive
policy framework and institutions, level of technology advantage in international markets.
and an enabling social and economic environment.
Natural endowment and locational factors. GH2 pro-
Technological knowledge. The GH2 value chain en- duction heavily hinges on natural endowments. Fac-
compasses various technologies that are used in tors such as solar irradiation and wind speed are
production, conversion, storage and in applications key determinants of low-cost hydrogen production,
across industry, transport, buildings and variable as electricity costs account for 90 per cent of over-
renewable energy (VRE) integration, with many of all hydrogen production costs. Countries with abun-
these exhibiting low to medium maturity levels. Pat- dant renewable energy resources and access to water
ent activities in hydrogen production technologies sources have a significant advantage in terms of pro-
are dominated by European, the United States and ducing low-cost GH2. Water availability and quality
| 33
are crucial for both hydrogen production and up- technology indigenization. Countries that export oil
stream processes such as cooling solar PV modules. and gas often possess transferable industrial capabili-
Freshwater resources tend to have higher permeate ties that can be easily transferred to GH2 investments,
rates compared to seawater (IRENA and Bluerisk, e.g. in the production and operation of refineries and
2023), reducing the cost of GH2 production. Addition- other chemical plants, as well as pipelines and stor-
ally, the availability of minerals such as silicon and age facilities. South Africa has accumulated techno-
copper for solar PV modules, rare earths for wind tur- logical capabilities in coal liquefaction based on the
bines, nickel for alkaline and solid oxide electrolys- Fischer-Tropsch process, which includes the handling
er cells (SOEC), and platinum group metals (PGM) for and processing of hydrogen and the conversion of
proton exchange membrane (PEM) electrolysers and power-to-liquid. A transparent financial system, sta-
fuel cells play a critical role in the production of hy- ble banks and favourable investment conditions, such
drogen-related technologies. The domestic availabili- as availability of risk capital, market liberalization and
ty of iron ore is also advantageous for the production trade openness, also facilitate the integration of GH2
of DRI. Other locational factors include the presence into the domestic economy.
of underground salt caverns for storing bulk amounts
of gaseous hydrogen, as well as the proximity to im- Previous industrial development trajectories demon-
port markets, as transport may increase the costs of strate the advantages associated with investing in so-
hydrogen significantly. cioeconomic endowments compared to relying exclu-
sively on factor-cost advantages (Neary, 2003). Greater
Public policy and policy structure. Developing a robust diversification and economic complexity unlock a
GH2 value chain requires careful public policy consid- multitude of new economic opportunities through
erations and public resource allocation to promising a recombination of existing assets and capabilities.
pathways and projects. To ensure a fair energy tran- This, in turn, accelerates dynamic knowledge spill-
sition, it is crucial to implement strategies that incor- overs (Hidalgo et al., 2018; Hidalgo and Hausmann,
porate mechanisms to share both benefits and risks 2009). It is thus essential for countries with factor-cost
based on realistic projections. The quality of policy advantages in GH2 to avoid the formation of energy
structure is equally important and entails a range of enclaves and to instead prioritize investments in do-
important governance aspects. Political stability plays mestic linkages, technological learning and support
a pivotal role in attracting FDI for the development for institutions.
and expansion of clean energy technologies. Robust
institutional capabilities facilitate coordination and
cooperation between the public and private sector
and the development and enforcement of appropriate
Figure 2.4. Contextual factors shaping the
standards. Additionally, strong public institutions pro- development of large technical systems such
mote transparency, accountability and the alignment as GH2
of industrial policies with societal goals.
Facilitating the expansion of the GH2 market. The

more diversified a country’s economy is, the more
effectively the linkage effects in both upstream and
downstream GH2 production can be harnessed. Diver-
sified economies can leverage their local capabilities
for backward linkages, incorporating GH2 into existing
downstream industries and preparing them for the
low-carbon transition. Existing industry clusters, e.g.
in the automotive industry, can accelerate the domes-
tic expansion of the GH2 market. Air traffic hubs such
as those in Qatar, Dubai, Abu Dhabi and Addis Ababa,
offer opportunities to co-locate synthetic aviation fuel
production. Infrastructure, including ports, rail, pipe-
lines, etc., can be adapted to support GH2 production.
Geostrategic assets, such as the Suez and Panama ca-
nals, provide opportunities for hydrogen storage and
related services, as well as the co-location of down-
stream industries (Van De Graaf et al., 2020). Advanced
technological capabilities embedded in firms and re- Source: Adapted from Lipsey et al. (2005), p. 56.
search institutions foster knowledge generation and
GH2
Box 2.3. Just Transition
An inclusive and sustainable rollout of GH2 production must build on (i) civil society, by ensuring eq-
uitable access to GH2 technologies and community involvement in decision-making; (ii) skilled work-
force, by investing in education and training and by supporting workers to transition from fossil fuel
industries; (iii) productivity and innovation, by attracting investments to sustainable projects and the
development of GH2 technologies; and (iv) the environment, by addressing potential environmental
injustices linked to GH2 production.
A Just Transition further implies a broad and equitable distribution of benefits from hydrogen produc-
tion across society. The capital- and technology-intensive nature of GH2 production presents chal-
lenges in terms of generating direct employment and community-level benefits. In countries with low
industrial and technological capabilities, the potential for linkage effects may be limited. While large-
scale export projects can improve the balance of payment, they may only stimulate limited industrial
capabilities and may have unintended consequences such as the Dutch disease effect, windfall gains
for real estate investors, and rent-seeking behaviour among stakeholders. Governments should in-
troduce benefit-sharing mechanisms and develop clear and transparent guidelines in a participatory
manner to ensure a fair distribution of the gains from hydrogen investments (see Section 3.3.3).
2.5. The clover approach to

GH2 development
By refocusing their efforts, developing countries can
identify and leverage the specific advantages they
stand to gain from entering the GH2 market. The ad-
vantages may include economic decarbonization,
sustainable growth, technological advancement, and
the creation of new employment opportunities. Many
developing countries have already recognized the
potential of these advantages and have incorporated
them into their NHS. NHS must be seamlessly inte-
grated into existing policy frameworks and address
the uncertainties related to GH2 trade. This strategy
plays a pivotal role in reducing risks and promoting
the stability of the GH2 sector in production coun-
tries. In this context, initiatives need to be developed
along two important dimensions: (i) the structural
dimension, which determines the GH2 sector’s con-
tribution to sustainable development in these coun-
tries, and (ii) the time dimension, which outlines the
phased roll-out of the GH2 sector over time.
Four key aspects that many developing countries

have already included in their NHS emerge:
| 35
Figure 2.5. The clover approach to the GH2 market (illustration by authors)
Dual: Export and local use. GH2 and PtX exports may large-scale export projects, preventing the creation of
have substantive spillovers, e.g. when inputs are enclaves with their respective political and socio-eco-
sourced locally. Such projects are often associated nomic risks is crucial.
with conditions that do not encourage local linkages.
Domestic value creation, industrial linkages, techno- Phased: Planning the production and application of
logical learning and permanent employment are more GH2 in steps
likely to be achieved when GH2 is produced for local
uses, i.e. for decarbonizing the domestic economy and 1. Existing green applications. Matching the GH2 supply
for promoting green industrialization. with demand, especially in the early stages of mar-
ket formation, is particularly challenging. One effec-
Integrated: Alignment with other development tar- tive approach is to leverage existing infrastructure,
gets. Successful GH2 development hinges on close incorporate GH2 into current infrastructure systems
alignment with broader national goals. Countries must without the need to retrofit and use incumbent pro-
therefore have a clear vision of how GH2 can con- cesses. This strategy can accelerate market ramp-up
tribute to the clean energy transition, to the achieve- (Cordonnier and Saygin, 2022). Industries that rely
ment of the SDGs and the establishment of a resil- on fossil fuel-based hydrogen as feedstock can grad-
ient economy. Investing in renewable energy and ually transition to greener processes by substituting
grid infrastructure is a “no-regret” option, benefitting a growing share of their “grey” hydrogen with GH2.
local industries and communities while also creat-
ing favourable conditions for the hydrogen industry’s 2. Capitalize on emerging market opportunities. Coun-
growth. Creating leverage through regional coopera- tries with major airport hubs or large container
tion. Promoting regional cooperation can be particu- ports should consider engaging in the production of
larly advantageous for smaller countries, e.g. through synthetic jet and maritime fuel as an entry point into
the development of joint education and training pro- the hydrogen market. Countries that rely on ammo-
grammes and collaboration opportunities to develop nia or fertilizer imports can significantly reduce their
high-quality infrastructure, thereby streamlining the exposure to international price shocks and save for-
implementation of the GH2 industry. eign currency by engaging in the production of green
ammonia.
Gradual: Promoting the implementation of small- to
medium-sized projects of hydrogen production and 3. Promote green industrialization. The strong popula-
local offtake, despite the strong economies of scale tion growth projected in many developing countries,
offered by GH2 production. Pilot and demonstration especially in Africa, and the urban migration trends
projects enable learning-by-doing and learning-by-in- will increase demand for basic materials such as
teracting, especially when accompanied by R&D in- iron, steel and cement. According to the IEA, demand
vestments and international knowledge transfers. In- for these industrial products will increase by 50 per
novations in small-scale ammonia production show cent between 2020 and 2030 (IEA, 2022b). Countries
promise in enabling local green fertilizer production, in the Global South can benefit from building up a
even for small-holder agriculture (Brown, 2018; Kizu- green heavy industry and avoiding carbon-based
na, 2023). On-site ammonia production in rural com- stranded assets, reducing their dependence on sys-
munities can lower costs and emissions, enhance food tem-relevant material imports and exploiting their
security by reducing import dependencies and benefit early-mover potential in the international trade of
remote areas (e.g. Vrijenhoef, 2017). When supporting green commodities.
GH2
| 37
3. Backward linkages in GH2
production
Upscaling GH2 production to 491 Mt in line with IRE- need to be implemented at a much faster pace and
NA’s 1.5°C scenario (IRENA, 2023c) is linked to signifi- on an unprecedented scale, with investments match-
cant challenges. This is particularly true for countries ing national gross domestic product (GDP) (see Box
in the Global South, where substantial changes will 3.1.). Developing countries that aim to become leaders
be necessary to address the inadequate infrastruc- in GH2 production must be prepared to substantially
ture, the lack of regulatory frameworks and financial increase their renewable energy capacity relative to
incentives, as well as the need to bolster skills devel- their current power systems (see Box 3.2.)
opment and policymaking experience. These changes
Box 3.1. Namibia
Nearly half of Namibia’s population is employed in agriculture. The initiatives outlined in the coun-
try’s NHS are almost on par with the nation’s GDP. The lighthouse project Hyphen Hydrogen Energy
has secured a 40-year concession for a vast land area of over 4,000 km², with a projected invest-
ment of USD 9.4 billion in a green hydrogen venture. To put this into perspective, Namibia’s GDP
in 2021 was USD 12.2 billion. The government expects the successful implementation of these bold
plans to result in the creation of about 185,000 direct and indirect jobs.
GH2
Box 3.2. Trinidad and Tobago
Trinidad and Tobago, one of the few Caribbean countries with a developed industrial sector and
classified as a high-income economy according to the World Bank, currently produces around 2.5 Mt
of grey hydrogen for its thriving chemical industry. The national hydrogen roadmap views this as an
opportunity to gradually enter the hydrogen market, with the goal of producing 4 million tonnes of
GH2 annually by 2065. This will require the installation of 57 GW of offshore wind power plants. To
put this into perspective, the installed capacity of all power plants in the country in 2021 was nearly
20 times lower (about 3 GW, mostly natural gas-fired).
Experience in producing grey hydrogen is not neces- Policymakers must therefore focus on attracting in-
sarily useful for scaling up GH2 production because vestments to accelerate the deployment of renewable
the technologies needed are inherently different (in energy sources, develop strategies to supply renew-
terms of input requirements). GH2 production neces- able electricity for GH2 production, facilitate the ac-
sitates the development of dedicated infrastructure quisition of necessary technology imports, encourag-
for the delivery of electricity and water to electroly- ing the growth of renewable energy technology and
sers; land availability; specific skill sets, and poten- equipment in the manufacturing sector, and create an
tially even the local manufacturing of electrolyser enabling environment for upstream supply chain de-
components (see Figure 3.1.). velopment. Establishing and maintaining social con-
tracts throughout these efforts is imperative.
Figure 3.1. Prerequisites for GH2 production projects
| 39
Backward linkages in GH2 production
renewable energy sector. This vision should include

3.1. Strategies for attracting specific targets for capacity expansion and emissions
reduction that span several decades. In a first step,
investors to GH2 production governments should identify short-term targets (5
years), medium-term targets (10–15 years) and long-
Most countries in the Global South have limited fi- term targets (around 20 years and beyond) for renew-
nancial stimulus measures to support the deploy- able energy and for both the energy and industrial
ment of electrolysers. Instead of relying on support- sectors. Strategic planning provides a clear roadmap
ing policies, they often adopt an “open to business” for progress and facilitates effective implementation
approach, with local policymakers focusing on ad- of renewable energy policies. To mitigate risks and
dressing country risk factors to attract foreign inves- attract investors, policymakers must prioritize the es-
tors rather than providing subsidies (Craen, 2023). tablishment of a long-term and transparent regulato-
Foreign enterprises sponsored over 70 per cent of ry framework. This can be achieved by implementing
all renewable energy generation projects in develop- measures that are widely adopted (see Chapter 4).
ing and transition economies in 2019, a number that
is even higher in some developing countries (World In the context of GH2 production, a long-term vision
Bank and Energy Charter Secretariat, 2023). Investors necessitates the development of a comprehensive
face three major risks: (i) technological, (ii) political, NHS, which should contain clear guidelines for the
and (iii) commercial. hydrogen value chain’s development, an overarch-
ing framework for future regulations, defined roles
• Technological risks are associated with the quality for government bodies and future support measures.
of engineering and the reliability of the equipment The key objectives include establishing the most con-
being used. ducive environment with clearly defined long-term
regulations that align with international standards.
• Political risks can materialize in the event of unex- These include:
pected changes to the regulatory framework during
the project’s lifespan. • Development of a NHS and establishment of na-
tional hydrogen governance regulations.
• Commercial risks refer to the uncertainty of long-
term off-take agreements and prices. • Establishment of a framework for long-term land
allocation based on leasing mechanisms, which is
These risks have real-world consequences. For exam- particularly important for locating renewable ener-
ple, although techno-economic analysis suggests that gy sources required for electrolysis.
Egypt and Libya have the potential to supply signifi-
cant amounts of hydrogen to Europe, their socio-eco- • Development of a technical standards system and
nomic potential is comparatively low, particularly rel- regulatory framework for implementing large-scale
ative to most European countries. Such elevated risks investment projects, aligned with international
imply higher financing costs and a reduced likelihood standards and practices (including permitting pro-
of successfully implementing large-scale hydrogen cedures, data access, etc.).
projects (Braun et al., 2023). While investors bear pri-
mary responsibility for managing technological risks, • Introduction of national hydrogen regulations as
both political and commercial risks are typically cov- an energy carrier, which necessitates not only an
ered in regulations. The World Bank identified 119 alignment with existing international standards
arbitration disputes between investors and govern- such as International Organization for Standardi-
ments involving renewable energy projects initiated zation/International Electrotechnical Commission
before 1 February 2022 (since 1998). The most preva- (ISO/IEC), but also active participation in the de-
lent political risk in such disputes are adverse regu- velopment of new standards.
latory changes (World Bank and Energy Charter Sec-
retariat, 2023). Given its control over regulation and • Creation of a national green financing system (tax-
governance, the public sector plays a critical role in onomies) aligned with international standards on
mitigating risks for international investors, especial- GH2 production.
ly in countries with low investment ratings or where
concerns about information asymmetry might arise • Alignment of the national hydrogen production
(IRENA, 2023a; World Bank and Energy Charter Secre- certification system for carbon footprints with in-
tariat, 2023). ternational practices; given the absence of univer-
sally recognized standards, consultations will be
To ensure a successful green transition, governments necessary to determine the optimal approach.
must develop an ambitious long-term vision for their
GH2
• For electrolysers, a detailed regulatory framework Investments in renewable energy can be facilitated
for implementing hydrogen projects is necessary. by establishing a transparent and competitive frame-
This includes the development of specialized reg- work for renewable electricity generation that at-
ulations for hydrogen valleys (regulatory sandbox- tracts investors to new projects. The traditional form
es), policies on local content (both for establish- of remuneration for such projects is through long-
ing assets for green hydrogen production and for term power purchase agreements (PPAs) that offer in-
O&M), and implementing R&D and educational vestors stable cash flow and minimize country-specif-
programmes. ic risks. PPAs are typically concluded following open
and transparent auctions, ensuring a high level of
The establishment of a one-stop shop holds signifi- competition and continuous price reductions.
cant promise in bolstering a region’s appeal for FDI.
The concept of a one-stop-shop aims to streamline Renewable energy projects typically require high ini-
processes for potential investors by consolidating in- tial capital expenditure (CAPEX) and have minimal
formation, permits and services in a single location operating expenses (OPEX) across the project’s lifes-
or website. By eliminating the need to navigate mul- pan. As a result, the weighted average cost of capital
tiple channels, a one-stop-shop reduces bureaucratic (WACC) plays a significant role in determining the fea-
hurdles/ red tape and saves time. Moreover, it pro- sibility of such projects. The CoC for utility-scale solar
vides comprehensive assistance to investors, cover- PV and onshore wind projects between 2019 and 2021
ing a wide range of services, such as helping investors ranged from 3 per cent to 4 per cent in China, and
meet regulatory requirements, providing access to fi- from 10 per cent to 11 per cent in Egypt and Tunisia,
nancial resources, and identifying local partners and respectively (IRENA, 2023b). Pioneering projects may
suppliers. By offering readily accessible and clear in- often entail additional cost factors, such as under-
formation to investors, it builds trust and confidence developed local supply chains, logistics and regula-
in the investment process. Such transparency creates tory frameworks. These challenges can be addressed
an environment that is conducive to investments and through cost-effective instruments such as feed-in
minimizes the potential for miscommunication or tariffs or tax incentives, as well as through the estab-
misunderstandings. One notable example of a suc- lishment of a dedicated government body, such as a
cessful one-stop-shop is Namibia’s IAO (see Box 3.3). one-stop-shop (see Box 3.3).
Box 3.3. Namibia’s Implementation Authority Office
The Implementation Authority Office (IAO) plays a crucial role in supporting the implementation of
Namibia’s hydrogen strategy. It is responsible for overseeing hydrogen projects that are implemented
on state-owned land, including the management of land auctions, regulatory reviews, permitting and
financing. It engages with developers, contractors and investors, fostering strong relationships with the
private sector and overseeing project contracts. As a one-stop-shop, it provides the necessary resources
and consultations to streamline investment processes. The government aims to establish a special
economic zone (SEZ) with favourable conditions for private sector-led development. Any obstacles that
arise are promptly addressed, including negotiations with license owners to secure land. Careful project
sequencing is implemented to minimize risks and maintain transparency (Ministry of Mines and Energy
Namibia, 2022).
| 41
Due to the significant cost reductions in solar and GH2 production should not divert investments from
wind energy production achieved over the past 15 and overshadow the decarbonization efforts in other
years, renewable electricity has become the most af- industries such as the power, transport and heating
fordable alternative to fossil fuels in most countries. and cooling industries (the latter benefitting from
As a result, the level and duration of subsidies now electrification). Countries with a high share of renew-
required by countries from the Global South embark- able energy in their power generation, such as Uru-
ing on a renewable energy development trajectory guay or Brazil, have an advantage in GH2 production
will be significantly lower than those in Global North due to their experience in renewable energy tech-
countries at the beginning of the century. To increase nologies and a supportive enabling and regulatory
the generation of renewable electricity, regulators environment. A decarbonized grid can provide clean
can consider establishing a dedicated hydrogen fund, electricity around the clock, increasing electrolysers’
which can be used to implement financial stimulus output. Moreover, certification systems can ensure
measures, such as tax incentives, including reduced that sustainable electricity is consumed by grid-con-
corporate income tax, equipment import tax waivers nected electrolysers.
and value added tax (VAT) exemptions. Accelerated
depreciation can also be offered to provide short- Export-oriented GH2 production projects in the
term financial relief and make GH2 projects more at- Global South will be impacted by the additionality
tractive to investors seeking faster returns. Addition- requirements adopted by importing markets, such
ally, low-interest loans and national green bonds set as the EU, which is one of the two major regions for
to tap into additional funding sources and to raise future hydrogen imports. Additionality—which was
foreign capital for GH2 projects can be introduced, initially introduced in the EU—mandates that the
with the government’s clear commitment to sus- electricity used in the production of hydrogen must
tainability, as well as exclusive government funding come from renewable sources that would have oth-
rounds, reserved for GH2 projects within the fund’s erwise not been generated. This measure aims to en-
mandate (see Chapter 4). sure that GH2 production does not displace the use of
green electricity, which might result in existing green
Finally, international cooperation mechanisms should electricity users resorting back to fossil fuel-based
be leveraged to foster collaboration and facilitate electricity, consequently contributing to an overall
GH2 projects between countries. With over 40 inter- increase in GHG emissions.
governmental agreements on hydrogen trade glob-
ally as of May 2023, there is a strong foundation to Additionality is primarily an economic and political
involve governments, businesses and academia from constraint rather than an engineering constraint.
different nations in joint project implementation. The Countries in the Global South can adopt distinct
strengthening of relationships with key stakeholders additionality principles tailored to their own hydro-
in the global hydrogen market should be prioritized gen consumption levels. This allows for more relaxed
as well, including hydrogen-importing countries, requirements if the hydrogen is intended for domes-
technology suppliers, international development tic use rather than for export. Policymakers should
banks and regional hydrogen associations. be cautious when imposing stringent additionality
requirements, as it may hinder a rapid deployment
of hydrogen production for achieving economies of
scale. This potential conflict may arise because strict
3.2. Sustainable procurement additionality criteria can introduce complexities
of electricity for electrolysers

and increase project costs. A comprehensive hydro-
gen certification and tracking system should there-
fore be introduced, which, however, can be quite re-
Renewable electricity plays a crucial role in GH2 pro- source-intensive. Nevertheless, such measures are
duction, with approximately 20 GW required for every crucial to ensure that hydrogen projects are genu-
1 Mtpa GH2 produced. Most countries determined inely environmentally sustainable rather than to
their national renewable energy targets between 2000 simply appear to be “green” on the surface, espe-
and 2010s, without considering the energy needs for cially if policymakers have ambitions to export hy-
GH2 production. It was only after 2020 that GH2 start- drogen or its derivatives to the EU, where stringent
ed gaining traction as an energy carrier in national environmental standards apply.
strategies. To promote transparency and facilitate the
deployment of additional renewable energy, coun- It is worth noting that there is currently no globally
tries have two options: either (i) revise their targets agreed approach to establishing additionality
to incorporate electrolysers’ energy requirements, or requirements in GH2 production. Countries such as
(ii) exclude the electricity consumed by electrolysers Australia, China, Japan, the United Kingdom and the
from their current targets (IRENA, 2021). United States have adopted approaches that differ
from the EU’s. For example, Australia and Japan do
GH2
not set a maximum emissions threshold for certifying It remains uncertain whether the current concen-
low-carbon hydrogen, while specific requirements tration of core hydrogen technologies can be sus-
for the additionality of electricity for electrolysers tained in the long run. The manufacturing of hydro-
have not yet been introduced in Australia, China, the gen equipment requires natural resources, including
United Kingdom and the United States (IRENA and critical minerals, and technologies to process them.
RMI, 2023). Applying a uniform additionality concept The supply chain for hydrogen equipment is still in its
to all countries may not be practical. Different regions early stages, with electrolyser manufacturing capac-
face unique challenges such as grid constraints, ity currently 100 to 1,000 times smaller in scale than
power outages, limited access of local communities what is currently needed. To achieve economies of
to electricity, and varying levels of compliance scale, it is crucial to use more cost-effective materials
and monitoring capabilities. Adopting a nuanced and automate electrolyser manufacturing plants. This
approach that considers these factors is therefore far will contribute to a reduction in dependency on ma-
more beneficial. terials such as PGMs and ensure a more sustainable
and efficient production process.
It is worth exploring the possibility of countries in the
Global South engaging in negotiations with import- As GH2 projects continue to expand, developing coun-
ing countries for more equitable trade conditions tries face the threat of becoming reliant on technolo-
for GH2 and its derivatives. As potential GH2 suppli- gies and supply chains owned or controlled by other
ers, hydrogen exporters should be given the oppor- countries and foreign companies. This dependence
tunity to discuss and establish terms of trade that may restrict their ability to engage in the production,
consider their unique contexts and requirements. operation and maintenance of these technologies,
This approach would promote fairness and bolster and thus limit their access to relevant knowledge and
collaborative efforts in shaping the global hydrogen skills. Consequently, they may lack technological sov-
market, potentially leading to a more inclusive and ereignty and thus be unable to adapt or innovate in
sustainable energy transition that benefits all. At the the future. While it may not be feasible for most coun-
same time, developing countries should prioritize in- tries to effectively compete in all steps of the supply
vestment in renewable energy to progressively decar- chain, recent crises have brought to light the vulner-
bonize their power grids. They will thereby lay the ability of supply chains, O&M security and the costs
foundation for future projects that can fully adhere of global events such as COVID-19 and regional con-
to strict additionality criteria. flicts. Policymakers must therefore strike a balance
between these competing considerations. They can
choose between two major scenarios, which allow for
different risk management strategies and the realiza-
3.3. Technology acquisition tion of opportunities specific to the country.
and local manufacturing

options 3.3.1. Scenario 1: Local content
requirement (LCR)
Access to technology is a crucial factor in the develop-
ment of a GH2 industry. Reliance on new technologies To enhance the local content in the creation of new
may pose a challenge for countries in the Global South electrolysis and renewable power plants, mandatory
as such reliance may impede economic growth and and measurable requirements for the share of local
hinder the transition towards a green economy. The content in equipment, labour and services should
current global technology supply chain for solar and be introduced. These requirements can represent a
wind energy as well as battery-based energy storage mandatory condition for participation in subsidy pro-
is heavily concentrated in China and to a much lesser grammes or for eligibility for additional support.
degree in countries from the Global North. China also
holds the largest share of global water electrolyser Local content requirements (LCRs), i.e. a predefined
manufacturing capacity, accounting for approximate- minimum local content threshold, have been intro-
ly 40 per cent, while the EU and the United States duced as part of the eligibility requirements for de-
hold 20 per cent each. There are plans to implement velopers to participate in renewable energy auctions.
additional electrolyser manufacturing projects, which This has been the case in Brazil, Morocco, South Af-
will lead to a more diversified regional distribution of rica, Türkiye and the United Kingdom, among many
electrolyser manufacturing capacity by 2030. By then, others. The outcome has been mixed, depending on
China and the EU are projected to hold 25 per cent of policy design, implementation and context. LCRs have
global manufacturing capacity each, while the United been successful in South Africa’s wind tower segment,
States will maintain its current share of 20 per cent for example, but have faced some challenges with
(IEA, 2023c). turbine manufacturing, which is more technologically
| 43
demanding (IRENA, 2019). LCRs can be gradually in- substantial investments and are associated with high
creased to encourage the use of local resources. Mon- risks. As of 2020, leaders in patenting hydrogen-re-
itoring mechanisms can ensure investor compliance lated technologies had already emerged, with Europe
with these requirements. Additionally, incentives, accounting for 28 per cent, followed by Japan (24 per
such as long-term tax breaks and subsidies to facili- cent), and the United States (20 per cent), with the
tate the establishment of factories in the given coun- Republic of Korea and China on the leading countries’
try can be introduced to attract foreign vendors to heels (IEA and EPO, 2023). Moreover, the successful
partner with local investors. development of green hydrogen production technol-
ogies is path-dependent on industrial preconditions
In three countries from the Global South that imple- and the presence of a number of related industries
mented LCRs and that auctioned the highest renew- (principle of economic relatedness). Müller and Eich-
ables capacity up to 2019, namely Brazil, India and hammer (2023) produced a list of 36 “Green H2 Prod-
South Africa, developers gradually shifted towards ucts” needed for stand-alone hydrogen production
roles that are more easily borrowed from other in- plants, which are comparatively complex to produce.
dustries, such as project development or ancillary Manufacturing these products could represent an
services. Establishing manufacturing capacity is more opportunity for countries to achieve a green diver-
challenging, and any growth observed is primarily sification of their manufacturing sector and avoid
limited to less sophisticated components. Moreover, technology dependency. Possible policy instruments
the implementation of LCRs may increase project to achieve this include coordinating efforts with in-
costs. Simply establishing an LCR does not guarantee ternational partners to reduce supply chain risks,
the creation of a competitive manufacturing sector. making joint investments in critical supply chain
Instead, such restrictions create an artificially local- components; creating information platforms for clean
ized market, the volume and long-term development technology manufacturing partnerships; sharing best
of which are subjective and entirely determined by practices for favourable investment conditions; pro-
the local regulator’s decisions (e.g. in terms of subsi- moting resource-efficient technologies; establishing
dies) and the pace of national economic growth. These sustainability standards, and facilitating participa-
uncertainties may negatively impact the decisions of tion of countries from the Global South in the GH2
major developers to deploy corresponding manufac- supply chain.
turing capacities in the country. Without guaranteed
long-term sales and a global market for the produced
goods, these investments become meaningless. As a
result, a risk of manufacturing capacity shortage to
meet the LCRs may arise. This, in turn, may lead to
delays in the implementation of planned renewable
energy projects and to increased costs due to the lack
of competition in the market (Bazilian et al., 2020).
3.3.2. Scenario 2: Long-term

stimulation of the country’s own
R&D
In this scenario, multi-year strategic public invest-
ments in R&D are made to foster the growth of the
research ecosystem and encourage an increase in the
number of patents. Regulators play a crucial role in
creating a supportive investment environment for
start-ups and facilitating the commercialization of
technologies. One notable example in the context of
hydrogen is South Africa, which launched the Hydro-
gen South Africa (HySA) research, development and
innovation programme in the late 2000s.
Implementing this scenario in countries in the Glob-

al South is challenging due to the diverse nature of
hydrogen technologies, which impacts multiple in-
dustries and scientific disciplines. The development
and commercialization of such technologies require
GH2
Box 3.4. Local manufacturing and technology development: Cases from NHS
Namibia’s hydrogen strategy aims to boost economic development by gradually increasing local con-
tent manufacturing. The local production of towers and blades and the localization of solar cell and
module manufacturing could have a significant impact on the country’s GDP, generating USD 11 billion
by 2035–2040, and creating an additional 11,000 jobs annually. However, due to the complexity in-
volved, the production of core electrolyser components is expected to remain overseas in the medium
term. Nonetheless, balance of plant (BoP) and assembly facilities could be localized once domestic
demand reaches a scale of 3-4 GW per year. Localizing the manufacturing of stacks (non-membrane)
and BoP could generate USD 5 billion and create an additional 5,000 jobs by 2035–2040. Numerous
opportunities for local manufacturing will also arise in the bioenergy industry for the production of
biogenic CO2. Namibia’s hydrogen strategy involves the establishment of the Namibia Green Hydrogen
Research Institute (NGHRI), which will conduct R&D, provide training and help localize the value chain.
The NGHRI will serve as a science and technology park for university-industry-government consortia
with a wide range of activities.
Colombia’s NHS (Ministerio de Minas y Energía de Colombia, 2010) promotes the establishment of
local industries to develop hydrogen technologies across the value chain. This includes companies
involved in the manufacturing, assembly and installation of equipment, engineering firms, as well
as firms engaged in component and equipment processing. Additionally, the government plans to
support domestic R&D in low-carbon hydrogen by leveraging existing funds for science, technology
and innovation. Through this policy, the regulator aims to bolster Colombia’s domestic capacity and
assess the possibility of creating a National Hydrogen Centre in the future to industrialize and export
these technologies.
3.3.3. Just transition aspects of distribution of benefits. This can be achieved by pro-
hydrogen production projects viding access to renewable electricity and water sup-
ply, stimulating local industry and fostering educa-
tion and R&D (Altenburg et al., 2023).
The GH2 transition will have significant implications
for energy, water and food security. Furthermore, im- Energy access and security
pacts on land use, ecosystems and biodiversity must
be anticipated. The challenge lies in minimizing neg- In many potential GH2-producing countries, a signif-
ative externalities while ensuring that the resulting icant share of the population still lacks access to the
benefits and revenues resulting from GH2 adoption electricity grid and/or relies on fossil fuels for their
are shared across the entire country. In developing energy needs. This is the case in many African coun-
policy measures, it is important to note that GH2 pro- tries in particular. Consequently, a transition towards
duction projects will be more sustainable and long- a GH2 market presents a unique opportunity to ad-
term if they are implemented in accordance with the dress these issues by simultaneously enhancing both
principles of a just transition. Countries in the Glob- local energy access and security while accelerating
al South often face multiple challenges in meeting decarbonization efforts based on expanding renewa-
citizens’ basic needs, including access to electricity, ble energy sources to ensure universal energy provi-
clean water, employment, clean air in cities and ed- sion – any surplus clean energy can be employed for
ucation. When deploying large-scale GH2 production GH2 production. To achieve this goal, voluntary ener-
projects in these countries, it is essential to avoid ex- gy compacts and corporate social responsibility (CSR)
acerbating these issues and instead to contribute to initiatives can play a key role in realizing clean and
addressing them in line with the SDGs. A replication affordable energy for all (SDG 7).
of the practices of the oil, gas and mining industries,
which often focus on opaque export-oriented pro-
jects reliant on natural resources, should be prevent-
ed. GH2 production projects should serve as catalysts
for green industrialization, and promote an equitable
| 45
export revenues are important considerations, they

Water security should not come at the expense of energy, water or
food security.
GH2 is produced through the process of electrolysis,
which splits water into oxygen and hydrogen using Public participation and the involvement of local
renewable energy. While water is a principal input communities are integral to the formulation of strate-
for GH2 production, it is important to consider over- gies to ensure that all stakeholders’ voices are heard
all water consumption. Under IRENA’s 1.5°C scenario, and that public perceptions of loss and injustice are
GH2 production would consume around 12 billion m3 considered (Upham et al., 2022). The management of
of water annually (IRENA and Bluerisk, 2023). Although a just industrial transition entails accepting and nav-
this number may seem daunting, it is only a fraction igating trade-offs between different dimensions of
of the water presently being consumed by other sec- justice, equity and participation rather than focusing
tors. For example, agriculture alone consumes up to on a predetermined “win” in all dimensions. Moreo-
2769 billion m3 annually. It could nonetheless still ver, the different dimensions of sustainable energy
pose challenges in regions already facing local water development (environmental, social and economic)
stress. Most areas with high solar potential are arid may conflict with one another (ibid.). For example,
and are often affected by water scarcity – a problem while an accelerated transition to renewable energy
that climate change will severely exacerbate in the may result in more equitable electricity access for the
future, particularly in African countries. While treat- population, it may also result in the unjust displace-
ing wastewater or desalinating seawater may provide ment of certain local communities from their farm-
additional freshwater resources, the latter requires land. To prevent the dominance of hegemonic actors
substantial energy inputs. Striking a balance between or entrenched majority views in decision-making pro-
the competing water needs of GH2 production and of cesses, it is crucial to give a voice to under-represent-
communities already feeling the impacts of climate ed groups. Engaging women and youth, in particular,
change is therefore crucial. Additionally, water use will be essential for a successful and inclusive GH2
in local communities extends beyond drinking water transition. They are equally affected by its conse-
consumption and includes agricultural needs, which quences and will increasingly contribute to the work-
directly impact food security. force that will drive this transition.
Land use and food security To ensure a fair distribution of the benefits from hy-
drogen investments, governments can thus adopt a
GH2 production, particularly if electrolysers are pow- participatory approach and develop clear guidelines.
ered by solar energy, is usually quite land-intensive. Some strategies in this context include:
For example, a 1 GW electrolyser requires around 2
GW of solar PV, which translates into an estimated • Generating fiscal revenues by leasing public land
26 km2 of land (assuming 75 MW per km2). While ad- or maritime areas to renewable energy projects.
vancements in technology can mitigate the land im- The rent charged should relate to the difference
pact, it remains a critical concern. Land requirements between the project’s levelized costs of energy
may compete with agricultural activities, potentially (LCOE) or of hydrogen (LCOH), and the regional or
affecting local food supply and food security. Other global market’s LCOE/LCOH, while also accounting
land conflicts related to displacement, property de- for transport costs. This approach can be informed
valuation or environmental degradation may arise, by existing economic literature on resource rent is-
impacting not only individual citizens but also indus- sues in extractive economies.
tries such as tourism. On the one hand, the displace-
ment of water and land use from agriculture to GH2 • Reinforcing the reinvestment of profits in the host
production may jeopardize food security. The estab- country by imposing restrictions on excessive in-
lishment of a GH2 sector, on the other hand, can income repatriation and promoting benefit-sharing
crease food security by providing a low-carbon input requirements, e.g. investors can be required to
for fertilizer production (Bezdek, 2019; Mukelabai et make community development investments if they
al., 2023). want to participate;
Inclusiveness and shared benefits • Supporting citizen participation schemes for ener-
gy projects such as energy cooperatives and other
In light of the security concerns already outlined, it forms of “distributed ownership”;
is crucial for governments to consider the resilience
and livelihoods of local communities when plan- • Earmarking fiscal revenues for broad-based or
ning the roll-out of GH2 production. While potential pro-poor spending, e.g. for education and research
benefits such as employment opportunities and or structural transformation of regions, especially
GH2
those negatively affected by the transition to a protests, legal disputes and project delays, ultimate-
low-carbon economy; ly undermining the initiative’s success. Additionally,
the absence of social contracts may neglect impor-
• Using fiscal revenues for direct payments to citi- tant environmental considerations, potentially caus-
zens. Examples of successful models include the ing long-term harm to ecosystems and local environ-
Alaska Permanent Fund Dividend Scheme which ments, which can have far-reaching consequences
pays an annual dividend from mineral royalties to for both the project and communities involved.
all Alaskan residents, and Mongolia’s resource-to-
cash payment programme that uses coal-mining Other proposed measures to enhance community re-
revenues to provide cash transfers to all citizens; silience and protect ecosystems include conducting
integrated socio-environmental impact assessments,
• Saving fiscal revenues for future generations and/ which can determine the true cost and feasibility of
or long-term public investments, e.g. the Norwe- GH2-related infrastructure projects before construc-
gian Oil Fund. tion commences. Pricing or regulatory interventions
to internalize environmental externalities on a broad
Social contracts in the context of GH2 production scale can achieve both a reduction of harmful impacts
projects primarily revolve around the welfare of local and enhance GH2 competitiveness by narrowing the
communities. They can vary depending on the specif- price gap with other hydrogen production methods.
ic context: CSR can play a significant role in ensuring a just and
sustainable GH2 transition. Local, regional and inter-
• In indigenous communities, social contracts national partnerships may also mitigate the securi-
may include revenue-sharing agreements, job ty risks associated with GH2 production. Ultimately,
opportunities for community members and in- achieving a GH2 sector that benefits both people and
vestments in community development, such as the planet will require the cooperation of all stake-
improved housing and healthcare facilities. holders, including government, the public and the
private sector.
• In developing countries with limited access to
electricity, social contracts for a GH2 project
may require developers to allocate a share of
renewable energy production to local electricity
consumption, ensuring cleaner and more relia-
ble power for all.
• In regions with a high renewable energy poten-

tial, social contracts may involve training and
employing local residents in the O&M of power
plants, creating job opportunities and contribu-
ting to the local economy.
• In water-stressed areas, social contracts asso-

ciated with GH2 plants may include agreements
to support local agriculture through sustainable
water management practices or desalination
projects sized to provide water to the local
population.
Projects may be technically and economically fea-

sible, but without the establishment of social con-
tracts, their overall success can be significantly im-
peded, highlighting the importance of addressing
community concerns and fostering mutually ben-
eficial relationships between project stakeholders
and affected communities. The absence of social
contracts in project development, including GH2
initiatives, can result in a host of detrimental out-
comes. Communities may feel excluded and perceive
a lack of transparency in decision-making process-
es, resulting in increased resistance and opposition
to such projects. This resistance can manifest in
| 47
4. Local downstream market
creation policies
Effective policy coordination is essential for creating metals such as aluminium; chemicals such as ammo-
local GH2 markets and establishing a comparative nia for fertilizers, and petrochemicals; non-metallic
advantage in green industrial diversification. With- minerals such as cement, and to mining, which can
out policy support, this process is likely to unfold employ domestically produced GH2 either as a feed-
extremely slowly, if at all. Policymakers should there- stock or as a combustion fuel. Apart from industri-
fore prioritize policy interventions and policy instru- al applications, hydrogen can also be used in other
ments to facilitate the development of a localized industries such as PtX, energy storage, mobility and
GH2 value chain. heating. GH2-based industrialization may also result
in the establishment of local upstream manufactur-
Developing countries with abundant renewable ener- ing of electrolysers and renewable energy equipment
gy resources can produce GH2 competitively and lev- (see Section 3.3.2). Where not specified otherwise,
erage it for industrialization. To reap the long-term the policy options discussed in this chapter can be
benefits of the GH2 industry, establishing a localized applied to any of the industrial sectors addressed in
GH2 value chain that includes downstream green this report.
industries as end- or intermediary users of local-
ly produced GH2 is crucial. This requires a shift to- “Green goods” are products that are manufactured
wards green industrial diversification by encouraging using processes, technologies or materials that have
existing and new industries to produce intermediary a reduced carbon footprint, i.e. products with a lower
“green goods” such as green ammonia or green steel. environmental impact than conventional alternatives.
This can also lead to the production of final end prod- Green manufacturing plays a crucial role in efforts to
ucts (e.g. green fertilizers) or further intermediary decarbonize industries and to achieve the climate
green products (e.g. green car part manufacturing). goals outlined in the nationally determined contribu-
Such green industrial diversification is associated tions (NDCs) to the Paris Agreement. In addition to ad-
with higher levels of employment and higher export dressing the environmental imperative, green goods
potential for high-value green goods than the pro- also present major economic opportunities for devel-
duction and export of GH2 alone. oping countries. As these countries experience rising
income levels and lose their comparative advantage
The local value chain has the potential of expand- in low-cost labour, they can leverage their lower re-
ing its reach to various industries such as hard-to- newable energy costs to develop a new comparative
abate industries including iron and steel; non-ferrous advantage in the production of green goods. This shift
GH2
towards a green industry also enhances these econo-

mies’ competitiveness in the global industrial market, 4.1. Regulatory clarity and
stability
especially in light of policies such as the EU’s CBAM.
Sequencing regulatory measures over market crea-

tion phases and time can provide the necessary pre- Countries embarking on a GH2-based industrializa-
dictability for market participants and investments. tion trajectory must have a clear and long-term vision,
The initial market creation phase ranges from tech- as well as an acute awareness of potential technolo-
nical readiness to multiple large-scale projects, as gy disruptions. To fully capitalize on the opportuni-
described in the clover approach (see Section 2.5). ties presented by the GH2 industry, countries must
Whether these projects build on existing industries assess the production, domestic consumption and
or expand into new ones depends on the starting export potential of GH2. This assessment serves as
point of the respective country’s industrial structure the foundation for setting government goals, devel-
and composition. As such, LDCs may have little to no oping strategies and ensuing adaptability to innova-
existing industrial base, while more advanced and/or tions and changes in the supply chain. Several factors
energy-producing economies from the Global South need to be considered when designing policies for
may already have a pre-established industrial base. the GH2 industry. They include the country’s capac-
The objective for policymakers in the market crea- ity for renewable energy, its existing gas infrastruc-
tion phase is thus to demonstrate the viability of full- ture, the feasibility of hydrogen transportation, and
scale commercial facilities and to cultivate a secure the availability of a skilled workforce. Local industry
environment for project developers, investors and regulations also play an important role in shaping the
key value chain stakeholders to scale the market. This GH2 industry. Crafting effective GH2 industrial strat-
requires developing a comprehensive policy pack- egies begins with defining the role of GH2 in future
age with supporting measures. Over time, this policy economic growth. This entails addressing challeng-
package can be adapted to the market’s evolution: es such as job creation, trade opportunities, supply
from a gradual expansion of applications and project chain risks and energy security. An integrated ap-
size along with cost reductions to eventually achiev- proach that aligns with the country’s national goals
ing a mature and competitive industry for products and considers trade-offs is essential for maximizing
manufactured using GH2. Various policy options are the benefits of GH2.
introduced in the following sections to achieve the
aforementioned objectives: In formulating a GH2 vision, policymakers should
avoid a strictly “top-down” strategy and instead
1. Ensuring regulatory alignment, transparency and adopt a participatory approach involving both public
long-term stability to mitigate risks for businesses and private stakeholders, which will help build trust
and investors. Implementing a streamlined govern- and create a shared vision. For instance, the Plata-
ance framework that offers a single point of con- formaH2 Argentina brings together actors from the
tact for project developers. public and private sectors and from civil society, and
encourages corporate, industrial, trade union, aca-
2. Supporting early adopters operating in high-risk demic, technical and scientific segments to be part
segments of the industry while providing targeted of the debate on Argentina’s GH2 policy. This inclu-
incentives to attract the necessary (foreign) financ- sive approach provides direction for growth by guid-
ing for the value chain. ing business expectations and activities in the GH2
value chain without dictating how to achieve success
3. Stimulating commercial demand (both intermedi- but instead empowering entrepreneurship: “It is not
ary and final) by bridging the price gap as a sup- about levelling the playing field but about tilting it
portive measure during the local value chain’s towards the desired goals” (Mazzucato and Kattel,
take-off phase. Enforcing requirements for local 2023). The government’s GH2 vision is consolidat-
content and employment to ensure local benefits. ed in a public document such as a “roadmap” and
clarifies the “w”-questions of hydrogen in a country:
4. Promoting integration, risk-sharing and skills de- “why hydrogen”, “where in the country”, “when is it
velopment across various sectors and industries happening”, and “which applications”. By defining an
along the value chain can improve efficiency and integrated plan with the necessary activities to better
increase investment attractiveness. assess hydrogen’s potential (IRENA, 2020b), countries
can effectively align their efforts in the GH2 industry
(see Chapter 2.1 for additional information on country
visions for the hydrogen industry).
| 49
Local downstream market creation policies
Once a clear vision has been articulated, the mission-oriented policy approach that sets out
adoption of an NHS or roadmap signals stability one or several missions, i.e. compelling and am-
and provides a sense of strategic direction for all bitious tasks that provide direction and inten-
stakeholders involved. A long-term government tion, may be very useful when transitioning to a
strategy offers clear policy direction for the in- new energy matrix. Committing to concrete tar-
dustry about future market conditions and targets through policy action can be instrumental in
geted projects. The strategy should explicitly out- bringing all GH2 stakeholders on board, ensuring
line hydrogen targets across the value chain and that different industries’ visions are aligned in
define key performance indicators (KPIs) for ad- scale and timing (IRENA, 2020b). Translating these
vancing GH2 deployment. GH2 strategies should milestones into binding short-term targets signif-
adopt a cross-sectoral approach and look beyond icantly reduces policy risks for stakeholders and
the boundaries of individual industries. The in- potential investors, offering them concrete provi-
teractions between different industries must be sions and numbers to work with. Short-term tar-
considered as well to promote synergies and gets may include quantified CO2 reduction targets,
spillovers along the GH2 supply and value chain, quotas and standards that incentivize GH2 adop-
and to address the cross-sectoral national devel- tion in end-use industries, paving the growth of
opment goals informing the government’s GH2 GH2’s ecosystem. The establishment of KPIs, such
vision. Due to the necessarily broad scope of the as the European Commission’s recently proposed
envisioned actions, it is crucial to firmly embed EU-wide 2030 target for a 50 per cent share of re-
and align the GH2 strategy document with other newable hydrogen consumption in industry pro-
existing strategies for industry, energy, FDI, skills vides direction and market foresight to all stake-
development and innovation, as well as other holders in the GH2 value chain (Hydrogen Council
relevant strategies. and McKinsey and Company, 2022).
Policymakers can operationalize the pursuit of

long-term GH2 goals by breaking them down into
manageable tasks and milestones. Adopting a
Box 4.1. Example of GH2 strategy: Morocco
The Kingdom of Morocco launched a regional initiative to establish an economic and industrial
sector centred on green hydrogen, ammonia and methanol. This initiative is driven by Moroc-
co’s commitment to energy transition, the reduction of GHG emissions, and support for partner
countries in their decarbonization efforts. With an ambitious investment plan of around USD 9
billion (MAD 90 billion) by 2030 and about USD 76 billion (MAD 760 billion) by 2050, Morocco aims
to drive the growth of its GH2 industry. The timeline for adopting GH2 in industry consists of
three phases: 2020–2030, 2030–2040 and 2040–2050. In the short term, the focus is on using GH2
as a raw material in local industries such as fertilizer production, while also exploring oppor-
tunities to export hydrogen products to countries pursuing decarbonization. The medium-term
objective involves driving down costs and establishing favourable environmental regulations to
facilitate economically viable projects both at the domestic and international level. Morocco’s
long-term vision includes expanding the use of green hydrogen in sectors such as electricity
storage, transportation, industry, residential heating and urban mobility. To achieve these am-
bitious goals, Morocco plans to establish a National Hydrogen Commission, develop technology,
infrastructure and markets; implement favourable regulatory measures, and invest in research
and innovation to enhance the competitiveness of national companies in the GH2 industry.
GH2
Policies that establish clear, long-term regulatory 1. Ensure business registration and licensing pro-
definitions and standards are essential for creating cedures are clear, logical and valid. If necessary,
a favourable environment for investors in the GH2 in- streamline the process to reduce bureaucracy and
dustry. This not only applies to GH2 production, but corruption;
also to green goods manufactured by end-user indus-
tries, such as green steel. Given that GH2 projects of- 2. Simplify tax codes to encourage investment and
ten span several decades, policy certainty is crucial to entrepreneurship;
enhance long-term investment security and minimize
the risk of stranded assets. Additionally, the regulato- 3. Strengthen property rights and enforce contracts
ry framework can support downstream industries by to provide businesses with greater certainty and
developing green goods standards and certifications, security;
public-private cooperation initiatives and guidelines
for green public procurement (see Section 4.3). In- 4. Establish effective dispute resolution mechanisms;
ternational standards, such as as those established
under ISO Technical Committee 197 on hydrogen 5. Create a transparent and predictable regulatory
technologies, can be adopted to facilitate access to environment that fosters competition and prevents
international markets of green goods and technology regulatory capture;
components needed for the construction of GH2 clus-
ters (UNIDO, 2023a). Such standards may also serve as 6. Invest in education and skills development to build
a foundation for developing local standards tailored human capital and increase productivity (see Sec-
to specific local contexts. Technical industrial process tion 4.4).
standardization increases operational safety and re-
duces technology risks. Permitting is a major bottleneck that hampers the
GH2 value chain’s development. The establishment of
The speed and prevalence of GH2 and the roll-out of greenfield industrial development projects requires
green goods as well as the financial backing they are available land for construction. However, the lengthy
likely to receive are heavily influenced by the regu- and complex environmental grid management and
latory system’s efficiency and transparency, and the other permitting processes often lead to significant
ease of licensing and operating for industrial proj- delays or even hinder the construction of GH2 facili-
ects. Excessive regulatory barriers can hinder indus- ties and infrastructure (IEA, 2019). To address this is-
trial development and the GH2 industry’s growth. sue, governments should aim to remove unnecessary
Such barriers can have a significant impact on the red tape while ensuring that no corners are cut, which
costs and risks of doing business, thus discouraging could undermine legitimacy and potentially lead to
potential investors and entrepreneurs. Complex or conflict. One approach to streamline and accelerate
inefficient provisions for property registration, tax permitting procedures is the creation of one-stop-
codes, contract enforcement, availability and cost of shops at both the local and national levels. These
loans, financial reserve requirements and insolvency designated agencies or departments serve as a cen-
resolution can significantly slow down project devel- tral point of contact for all permitting-related mat-
opment. Simplifying government structures can enters. Such centralization helps reduce administrative
hance efficiency and transparency, as long as capac- burdens and provides applicants with a clear and ef-
ities are not compromised. Other factors to consider ficient channel to navigate the permitting procedure.
include legal protections for (minority) investors, cor- Where multiple agencies are involved, interagency
ruption, availability of skilled labour (see Section 4.4), coordination becomes crucial to streamline permit-
and the quality of infrastructure (see Chapter 5). Es- ting procedures. Establishing effective communica-
tablishing and firmly imposing balanced regulations tion mechanisms helps prevent the duplication of ef-
and permits that address valid interests can help forts and reduces processing times. Additionally, the
avoid disputes between enterprises, communities relevant authorities must have adequate capacities
and the government. to manage all permit applications in a timely manner.
Other options can be explored to further streamline
Reviewing and adjusting bureaucratic hurdles can permitting, such as:
effectively reduce costs and lead times for project
development. Policymakers play a crucial role in es- • Developing standardized permitting templates
tablishing a stable and predictable environment that and forms: this simplifies the permit application
protects investors’ interests and helps attract long- process. They should provide clear guidelines on
term investment for large-scale projects. The follow- the necessary information and documentation,
ing measures should be considered: making it easier for applicants to compile the re-
quired materials.
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• Implementing time-bound approvals: govern- phased and dual strategy and depicts the share of
ments can set specific timeframes for each stage of manufacturing industries whose carbon emissions
the permitting procedure to ensure that applica- can be abated through the use of GH2 in countries’
tions are reviewed and approved within a reasona- total export basket. While no data are available for
ble timeframe. Clear deadlines and accountability much of Africa (marked in grey), Mozambique, Egypt,
mechanisms help prevent unnecessary delays and Morocco and South Africa appear to have signifi-
ensure timely decision-making. cant opportunities to decarbonize their existing ex-
port-oriented industries with GH2, as indicated by
• Providing online application systems: Developing their share of “abatable” industries in total exports
online platforms or portals for permit applications (WITS, 2023). Morocco and South Africa are consid-
can significantly accelerate the permitting proce- ered among the most promising GH2 producer coun-
dure. They allow applicants to submit their appli- tries. Morocco’s OCP Group, for example, recently
cations, track progress, and receive updates elec- pledged an investment of USD 13 billion for the pe-
tronically, reducing paperwork and administrative riod 2023–2027 to green its fertilizer production and
burdens. mining activities. The country has set ambitious goals
for the production of green ammonia by 2027 (1 mil-
• Offering expedited permitting options: govern- lion tonnes), facilitated by in-house green energy (5
ments can introduce expedited or fast-track op- GW) and seawater desalination (560 million m3) (OCP
tions for certain types of low-impact projects that Group, 2022).
meet specific criteria. These options prioritize pro-
jects that have minimal environmental or social The GH2 production potential of developing countries
impacts, allowing them to proceed more quickly. may be high, but without local up-takers, greenfield
GH2 project development will be necessary to attract
new downstream industries. The competitive mar-
ginal cost of GH2 in the mid-term, enabled by abun-
4.2. Providing support for dant renewable energy and short transport distances,
early movers
may encourage established industrial enterprises to
relocate or open new sites in economies with lower
operating costs related to (direct or indirect) carbon
Some countries in renewable-rich regions such as pricing or the competitiveness of clean energy. This
Latin America, Northern and Southern Africa and the process is referred to as the “renewables pull effect”
Middle East have a unique opportunity to capitalize (for details, see Box 2.2) of countries that draw FDI
on their GH2 potential and become early movers in and the establishment of production sites due to
providing a range of decarbonized goods and servic- their attractive marginal cost of GH2 (Samadi et al.,
es. This includes engaging in low-carbon manufactur- 2023). This “renewables pull effect” can catalyse the
ing in hard-to-abate industries, manufacturing equip- green diversification potential of hydrogen in indus-
ment for electrolysers and GH2 infrastructure, mining try, as exemplified by the relocation of the green iron
and technology services. Supporting early mover pro- and steel production industry to Oman, Mauritania
jects will be key in establishing a strong presence in and South Africa (Swansy, 2023). Harnessing the re-
international export markets. The potential scope of newables pull requires a comprehensive analysis of
a country’s GH2 strategy and value chain will depend the investment determinant in the country’s ener-
on whether it already hosts industries that can em- gy-intensive industries. While low renewable energy
ploy GH2 as feedstock or fuel. If that is the case, such costs attract foreign enterprises, governments should
facilities should serve as the natural starting point avoid lowering these costs too much, as the potential
for early mover brownfield GH2 projects. While GH2 benefits may quickly evaporate.
can replace grey hydrogen as a feedstock in chemical
industries such as fertilizer production, its adoption The building of a new industrial facility involves sig-
may initially increase OPEX due to the currently high- nificant CAPEX and requires vast amounts of available
er price of GH2. For industries that can use GH2 as land. It also provides an opportunity for purposeful
a fuel, such as steel, glass and ceramics, significant construction within a coherent planning framework,
CAPEX will be required to retrofit production sites. e.g. a GH2 industrial cluster (see Section 4.4). By
adopting advanced and sustainable GH2 technology
The government plays a crucial role in promoting the from the outset, developing countries can engage in
adoption of GH2 in enterprises through policy incen- “greenfield leapfrogging”, i.e. bypass fossil fuel-based
tives, support and the creation of a future market- production methods. This strategy mitigates the
place. Figure 4.1 illustrates the potential for brown- costs, stranded assets and pollution associated with
field development of green industries in line with a traditional industrialization.
GH2
Figure 4.1. Share of abatable industries in total exports 2022
Source: WITS UN Comtrade - Created with Datawrapper
Early-mover projects in emerging technologies such industrial projects. According to the Organisation
as GH2 are often perceived as high-risk investments for Economic Co-operation and Development (OECD)
for both brownfield and greenfield developments, (Cammeraat et al., 2022), de-risking public finan-
particularly in developing countries. While a strong cial instruments can contribute to crowding in pri-
regulatory framework and security are an important vate funds, thus maximizing the efficiency of public
precondition, they may not be sufficient to attract in- spending. Government support can have a multipli-
vestments in GH2 projects. To bridge the initial fund- er effect by tipping the balance in favour of private
ing gap and encourage early GH2 adoption in the mar- investment, creating spillovers between investment
ket creation phase, additional government support areas (Mazzucato, 2021). Such financial instruments
for both CAPEX and OPEX is particularly beneficial. can cover various phases of project development, in-
Credit-enhancing mechanisms can provide a buffer cluding feasibility studies and demonstrations. Public
for private investors, thereby facilitating the entry funding should be offered at the inception of the GH2
of senior lending into project structures and attract- value chain to support first movers and to keep the
ing institutional investors into the nascent market. impact on government budgets low (IRENA, 2022a).
De-risking effectively lowers the cost of capital for For example, in its NHS, Chile announced that it will
hydrogen projects, which reduces hydrogen costs and launch a funding round of up to USD 50 million to
hence drives uptake (Hydrogen Council, 2021). support companies and (inter-)national consortia in
investing in scalable and replicable GH2 projects in
By fast-tracking access to public funding for GH2 pro- the country. Even though such mechanisms may be
jects, the government can facilitate value chain de- challenging for many developing countries to finance,
velopment and accelerate its suitability for private sensible public investment is a key enabler for long-
financing as the market matures. Government can term public benefit.
provide direct project funding, co-financing or condi-
tional grants, as well as various government-backed Blended finance, which combines concessional pub-
loans (soft, concessional, convertible, contingent, lic funds with commercial funds, can be a powerful
subordinated) to reduce financial risks and provide means to direct more private finance towards impact-
the necessary upfront capital investment for local ful investments that are unable to proceed on strictly
| 53
commercial terms. One of the most compelling as- Government can also play a crucial role in supporting
pects of blended finance is that it uses relatively low early-stage (high-risk) GH2 projects by providing eq-
amounts of strategic public or institutional funding uity financing in exchange for a stake in the project.
(e.g. from the Global Environment Facility) to rebal- This injection of venture capital not only helps miti-
ance a project’s risk profile. By infusing concessional gate the financial risks associated with such projects
funding (such as grants or low-interest loans), pio- but also boosts investor confidence, as the govern-
neering investments become attractive to private in- ment’s investment demonstrates its commitment to
vestors, particularly in emerging markets where high the project’s success. By taking equity shares in such
investment risk perceptions prevail (Mutambatsere et early movers, governments move beyond de-risking
al., 2022). Initiatives such as the SA-H2 Fund and SDG and lead by example, taking risks as well and po-
Namibia One have raised over USD 1 billion to accel- tentially earning returns on their public investment.
erate the development of South Africa and Namib- Furthermore, public ownership offers advantages
ia’s GH2 industry through innovative blended finance in terms of ensuring benefit-sharing and allows the
solutions (Engineering News, 2023). government to have a say in project operations be-
yond its regulatory role. It is important to establish
The blended finance approach unlocks new sources conditions such as reinvestment of profits and re-
of financing for development projects considered strictions on share buy-backs to ensure that pub-
too risky or unattractive to private investors alone. lic investment is structured less like a handout and
Thereby, crucial support for innovators can be pro- more like a market-shaping strategy, driven by public
vided during their growth stage, helping to finance objectives (Mazzucato, 2021). For example, Namibia’s
higher-risk demonstration projects (EIB, 2022). Intro- government acquired a 24 per cent equity stake in
ducing additional provisions such as implementing Hyphen Hydrogen Energy, and expects the value of
risk-sharing mechanisms to mitigate offtake-, tech- these shares to increase substantially by the end of
nology scale-up- and operational risks, as well as en- the feasibility study. This provides flexibility for the
suring flexibility in terms of loan tenor to help match government to decide whether to retain, sell or di-
the long economic lifespan of hydrogen assets is also lute its interest based on the project’s success and
recommended. Public support for R&D may also be the equity investment’s potential, securing a favoura-
necessary for complex demonstrations of applica- ble return on its investment. Moreover, the project is
tions at low-technology readiness levels. This applies expected to employ an estimated 3,000 workers, with
to the steel industry, for example, which requires fur- 15,000 construction jobs supported over the four-
ther refinement and demonstration of DRI produced year construction period. Over 90 per cent of these
with 100 per cent hydrogen. It also applies to further jobs are expected to be filled by local Namibians (The
explorations of the emerging option of ammonia. Brief, 2023).
De-risking efforts can facilitate large-scale demand
for hydrogen and hydrogen-based products, includ- The global bonds market with a debt volume of
ing improvements and innovations related to hydro- around USD 100 trillion is twice the size of the equi-
gen storage (IEA, 2019). ty market (valued at USD 50 trillion). This vast pool
of resources can be effectively mobilized to support
Public funding support schemes can be used for com- GH2-based industrialization. Green bonds, which are
petitive bidding processes to create a market for pro- fixed-income securities specifically designed to fi-
ject development. Through calls for project proposals nance environmentally sustainable projects, such as
and a competitive bidding process, the government green goods manufacturing (Mathews, 2023), have
can select the most promising projects. This approach gained significant traction in recent years. It is pro-
encourages project developers to submit high-quality jected that green bond issuances will grow from USD
proposals while ensuring that the government sup- 0.5 trillion in 2021 to USD 5 trillion by 2025, and are
ports the most viable projects. Competitive bidding likely to play a role in absorbing investment in GH2
promotes transparency and fair competition in the projects (ibid). Green bonds are typically issued by
allocation of resources or contracts. It can be used governments (sovereign), private entities (corporate),
to award subsidies, grants, incentives or other forms or national and multi-national development banks.
of financial support to projects that meet specific Major issuers offer a favourable risk ratio, reducing
criteria or objectives. Blended finance mechanisms the financing risks associated with these projects
can also be awarded through a competitive bidding while being accountable to investors regarding the
process (IRENA, 2023a). In Oman, for example Hy- management of proceeds and the environmental im-
drom, a large independent GH2 entity, awards govern- pacts. This fosters confidence and encourages long-
ment-owned parcels of land to GH2 projects through term involvement (Pavlovic, 2021). Consequently,
bids on an online auction platform. Winning develop- bonds serve as a powerful tool in redirecting substan-
ers are expected to deliver integrated projects cov- tial capital investments from fossil fuels to sustaina-
ering the full GH2 value chain, and to partner with a ble green projects such as GH2 initiatives. To harness
government-owned entity. the full potential of the bond market for the hydrogen
GH2
industry, development finance and commercial banks First-loss guarantees can play a crucial role in pro-
should incorporate GH2 into their green financing and viding direct financing for developing countries. This
investing taxonomies. The introduction of “hydrogen mechanism involves a public funding source (e.g. gov-
bonds”, tailored to the unique characteristics of GH2 ernment, development banks, national programmes
investments, would facilitate the use of the bond or export credit agencies) offering a guarantee to
market for the hydrogen industry. eligible projects. Senior project lenders can thereby
reduce their risk exposure within predefined param-
Fiscal incentives can provide crucial financial margin eters (EIB, 2022). If the project succeeds, the public
for a GH2 project to succeed. These can take the form guarantee would not be used, thus avoiding any draw
of tax credits, exemptions, rebates or deductions, on public resources. The guarantee can be linked to
which are straightforward and effective supply-side the local value chain addition by the GH2 investment
mechanisms that do not require upfront budget ex- to ensure that it generates local benefits beyond sim-
penditure. These incentives can be granted for either ply the GH2 project. This instrument can serve as an
investments (per $, supports CAPEX) or production incentive for the initial development of GH2 value
(per output, supports OPEX). Investment tax credits chain projects, with the potential of gradually phas-
or accelerated depreciation reduce the tax burden ing out public support as the need for it diminish-
of GH2 investments through earlier write-off, there- es. It is important to note that sovereign guarantees,
by attracting private capital (IRENA, 2022a). Such tax i.e. guarantees backed by the government directly or
reductions can boost project development activity through a state agency, bear substantial financial risk.
but could also lead to government missing out on Industrial projects initially incur losses and GH2 is not
potential tax revenue – this trade-off must be care- expected to be price-competitive before 2030 in the
fully weighed in advance. Subsidies, on the other face of grey alternatives (depending on factors such
hand, which might be constrained by budget limita- as carbon pricing). Given this inherent uncertainty,
tions, could potentially be provided by multilateral the question arises who will be willing to bear the fi-
development banks or donor countries. They are an nancial risk necessary to jumpstart the GH2 industry.
effective means to make the use of GH2 in produc- Even if most guarantees remain unused, the failure
tion more economically viable. For example, offering of a single project can have a major impact on the
a price premium on GH2 for steel producers (see Sec- budget. Consequently, first-loss guarantees should
tion 4.3) that are starting to use GH2 as an input can only be offered following a comprehensive risk as-
compensate for higher OPEX. Such an approach could sessment on a case-to-case basis, including a thor-
be designed to temporarily and gradually phase out ough evaluation of the project’s business plan. Alter-
the premium price as the cost of green steel produc- natively, a development bank or other donor could
tion becomes more competitive. Subsidized OPEX of provide such guarantees.
GH2 adopters translates into lower market prices and
thus increased competitiveness of green goods, driv-
ing sustained demand.
Box 4.2. Just Energy Transition Partnerships (JETPs)
Just Energy Transition Partnerships (JETPs) are a new financing mechanism that assist heavily coal-de-
pendent emerging economies in their just energy transition efforts through concessional loans. These
partnerships support countries as they shift away from coal production and consumption, addressing
social consequences through worker training, job creation and economic opportunities for affected
communities. The first JETP, established at COP 26 in Glasgow, pledged USD 8.5 billion for South Africa,
with additional partner countries, namely India, Indonesia, Viet Nam and Senegal announced later.
The donor pool has increased to include multilateral development banks and development finance
agencies, enabling faster progress compared to UN climate talks, where oil and gas-producing coun-
tries may block agreements. South Africa’s JETP Implementation Plan, released at COP 27 in Sharm el-
Sheikh in November 2022, outlines priority investments in the electricity and GH2 industries, totalling
investment needs of USD 98 billion. This highlights the significant scale of change necessary for a just
energy transition (IISD, 2022).
| 55
regular goods), and to thus establish green goods as

4.3. Demand creation policies an export commodity. Moreover, certifications create
market incentives for producers to adopt GH2 and
other clean technologies, as certified products often
The GH2 market’s growth has brought the issue of enjoy preferential treatment in procurement process-
demand to the forefront: can downstream industries es or in consumer preferences. Product labelling can
afford to absorb locally produced GH2, and will the further extend the visibility of green goods’ unique
GH2 industry’s products find enough buyers? Policy- selling proposition to consumers. Section 6.5 pro-
makers have several options to stimulate commercial vides additional insights on the international coordi-
demand for GH2 in multiple applications across end- nation aspect of certification in the context of green
use industries and for the green goods they produce. product trade.
Demand-side policies can strategically kick-start
markets and provide downstream users with visibility Green public procurement is an established policy in-
on the GH2 value chain’s trajectory. This can help re- strument to help scale up value chains through pub-
duce the cost competitiveness gap, increase investor lic sector investment (Baker, 2021). Governments can
confidence and attract investments from equipment play a crucial role in creating a stable initial driver
manufacturing to infrastructure. Over time, econo- of demand for (certified) green goods produced with
mies of scale will take hold, enabling the different GH2. For example, governments can promote the cre-
applications to mature into self-sustaining market ation of a market for green steel by prioritizing its use
competitiveness (EIB, 2022). in government-funded construction projects, includ-
ing buildings, bridges, railways and transport fleets
Certifications will play a pivotal role in assuring the (IRENA, 2022a). By choosing to spend slightly more
green value of goods produced with GH2. Certifica- to cover the green premium of GH2 producers rather
tions are a standardized and reliable means to verify than resorting to traditional providers, governments
and validate products’ emissions performance and can stimulate demand, support producers and set an
their sustainability credentials, for example certify- example for others to follow suit. This approach can
ing that the hydrogen used in the manufacturing pro- be considered as an alternative to direct subsidies
cess was produced from renewable (or low-carbon) for green goods produced with GH2, with government
sources. They help establish trust and transparency funding serving as a market shaper rather than a
in the market by ensuring that producers’ claims their hand-out. Additionally, public procurement can con-
goods’ green attributes are credible and backed by sider the local content of goods, favouring those with
independent assessment. This is crucial to pull for- a higher share of domestically manufactured compo-
ward demand with the willingness to pay a green nents and local employment.
premium (the price difference between green and
Box 4.3. Green goods certification insights
As the GH2 industry is still in its nascent years, the development of specific certification schemes is
still ongoing. Certifications play a crucial role in verifying the sustainability of the entire supply chain,
e.g. from hydrogen production to the final product, or specific parts of the supply chain, typically up to
the point of production. These schemes assess a number of factors such as the hydrogen production
process’ carbon intensity, the use of renewable energy sources, the reduction of lifecycle emissions,
and adherence to environmental standards. They involve rigorous assessment processes, including
third-party verification and compliance with established criteria and standards. Monitoring month-
ly additionality ensures continued compliance by measuring the incremental impact of the certified
activities in reducing carbon emissions beyond the predefined baseline of the business-as-usual sce-
nario. While a certification of green attributes is essential for the export of green goods, obtaining
certification from export destinations can be quite costly. Robust data collection and monitoring sys-
tems include regular data submissions, verification by independent auditors, and adherence to stand-
ardized protocols or methodologies established by the certification scheme. Voluntary certification
schemes, such as the Steel Climate Standard (Global Steel Climate Council and Trinity Consultants,
2023), promote compliance among producers. It is important to avoid weak or diluted certification
conditions and institutions to maintain trust in the green goods market.
GH2
Governments can stimulate demand for green goods alike. Redirecting some of the savings to other less
produced with GH2 by offering financial incentives harmful sources can facilitate the transition for in-
to prospective end users in the market. These incen- dividual consumers and industry. For example, com-
tives can take the form of subsidies, price premiums pensating lower- and middle-class households with
and tax rebates, targeting the downstream segment cash payments tied to their loss of benefits can help
of the GH2 value chain. By offering subsidies or tax mitigate affordability concerns. This is already the
rebates at the production, purchase or end-user case in Saudi Arabia, for example.
levels, governments can effectively lower OPEX for
green goods manufacturers, resulting in lower prices Following successful project inception, downstream
and increased demand for such goods. Price support industrial GH2 applications such as in steel, chemi-
measures such as revenue top-up and stabilization cals and refineries may necessitate specific support
mechanisms can also be implemented. To finance to ensure that offtake sufficiently covers operating
these incentives, developing country governments costs. This support can assume the form of offtake or
may opt for tax rebates, while subsidies and price price guarantee schemes, which often replace previ-
premiums could potentially be funded by multilateral ous forms of direct assistance:
development banks or donor countries. Linking these
incentives to industrial performance criteria can fur- 1. Offtake guarantees are contractual agreements
ther maximize their impact. Section 6.4 explores the whereby a buyer commits to purchasing a prede-
options of policy support financing from the Global termined quantity of GH2 at a specified price over
North to the Global South. a predefined period. This arrangement secures a
stable income stream for the project developer,
Quotas and targets can provide additional support regardless of price fluctuations in the hydrogen
to generate demand and foster a stable market. They market.
can address various entry points into the GH2 value
chain: 2. Price guarantees entail commitments by a gov-
ernment or other entity to pay a predetermined
1. Quotas for minimum quantity of GH2 used in spe- price for GH2, irrespective of the prevailing market
cific market segments; price. The project developer is thereby guaranteed
a fixed price for the GH2 produced, mitigating the
2. Legal or voluntary targets to meet CO2 intensity risk of price fluctuations in the market. However,
goals at a sectoral level (similar to low-carbon fuel this does not guarantee that the project will sell
standards) or to provide a given share of output all of its GH2, as the developer must still compete
from low-carbon inputs (as with renewable trans- against other producers in the market.
port fuel obligations).
Ensuring transparency and planning security are
Such quotas and targets are particularly effec- essential when allocating budgets for GH2. A clear
tive when coupled with price support mechanisms outlook on the expected support regime for a min-
and purchase incentives. Governments must, how- imum of 5-10 years in advance must be provided
ever, consider the challenges and costs of their when project delivery relies on public support. This
implementation. can be achieved by establishing a schedule of public
support budgets, committing to a minimum volume
Correcting market distortions that disincentivize new of projects, and defining transparent decision rules
renewable technology adoption is crucial to ensure for adjusting subsidization based on technological
GH2’s competitiveness. One effective approach is advancements. Given the time-intensive nature of
phasing out fossil fuel subsidies in exchange for up- hydrogen projects, this level of visibility significantly
stream exploration and downstream price subsidies reduces risk and enhances the attractiveness of pro-
for customers (Hydrogen Council, 2021). Even though jects for financing (Hydrogen Council, 2021).
this requires compensation instruments to ensure
social acceptance, it is an effective means for gov-
ernments to tilt the industrial energy market in the
desired direction. This does not require public spend-
ing: the amount saved from eliminating fossil fuel
subsidies can be used for GH2 support measures,
thereby achieving a double impact. Reducing sup-
port schemes for established energy sources for heat
and fuel may be politically challenging due to the re-
sulting changes in costs for consumers and industry
| 57
case in Oman, for example. By adopting such partner-

4.4. Value chain integration ships, sector collaboration can be encouraged around
key projects while avoiding the selection of winners
and coordination from the outset. In addition to open collaboration
initiatives, the establishment of working groups and
To successfully embark on GH2-based industriali- export panels can nurture a deeper understanding
zation, developing countries should prioritize the of the evolving market, economic, regulatory and en-
formulation of robust industrial policies, conduct vironmental contexts (EIB, 2022). This facilitates the
investment evaluations and engage in strategic fore- exchange of knowledge and learning among stake-
sight. Their hydrogen industry plans and policies holders, ensuring a more informed decision-making
must be well-designed and coordinated, with a focus process. To mitigate risk, a gradual approach can be
on stimulating economic linkages. They must contrib- adopted, starting with the funding of smaller projects
ute to local industrial development and foster the to reassure investors (IEA, 2019). Subsequent projects
growth of a local supply industry for GH2 components can benefit significantly from the lessons learned and
and equipment to avoid common pitfalls and prevent knowledge gained from initial projects, while also in-
new patterns of dependency. This approach will ena- creasing awareness of available public funding and
ble developing countries to maximize the benefits of partnership options.
GH2-based industrialization and promote sustainable
development (Fokeer et al., 2022). Green Hydrogen Industrial Clusters (GHIC) are indus-
trial regions or clusters that share GH2 (production,
Government can play a pivotal role in mitigating the transport and use), renewable energy electricity and
salient risks associated with a new chapter of indus- other resources for various purposes, including ma-
trial development, such as the complexity of the value terial production, heating and cooling, local mobility
chain. Many potential coordination challenges in the and industrial feedstock (UNIDO, 2023a). The devel-
emerging GH2 market can be effectively navigated opment of GH2 industrial clusters can be facilitated
with a comprehensive and integrated industrial poli- through public initiatives devised by local author-
cy approach that encompasses the entire value chain. ities, partnerships with the private sector and opti-
This requires aligning and optimizing projects across mized government spending. These clusters serve as
the value chain to simultaneously nurture various di- hubs to grow GH2 demand, particularly in industries
mensions of the GH2 ecosystem. Coordination efforts such as refining, ammonia, methanol and steelmak-
may include the identification of relevant projects, ing (IEA, 2019). To effectively develop interdependent
the screening of promising use cases and the prioriti- GH2 projects, a value chain approach that focuses on
zation of public investments (EIB, 2022). Governments suitable geographical locations is key. By identifying
can also address coordination challenges by orches- potential cluster development sites where multiple
trating the timing of private sector investments, pos- end-users can share GH2 production, transport, stor-
sibly through the provision of guarantees. Achieving age capacity and green goods manufacturing, any as-
effective value chain coordination requires a robust sociated costs and risks can be shared, resulting in
implementation strategy in addition to a sound policy a reduced levelized cost of hydrogen (UNIDO, 2023a).
logic (Mazzucato and Kattel, 2023): most contempo- For example, collaborative procurement among all
rary industrial policies are implemented in a “water- end-users in a cluster may involve the conclusion of
fall moment” following lengthy decision-making pro- long-term contracts for future GH2 supply, thus pool-
cesses that separate policy design from institutional ing buying risk based on the anticipated demand
learning and implementation. Continuous and grad- scale and timing while offering more certainty for in-
ual experimentation or trials to determine the most vestors (IEA, 2019).
effective policies can yield multiple solutions and
foster ongoing learning.
Until GH2 finance mechanisms and business plans

have sufficiently matured, projects with sizable invest-
ments, such as commercial-scale greenfield industrial
site development, could benefit from a public-private
partnership structure (or even public ownership).
This approach involves a combination of direct pub-
lic investment and multi-stage competitions to award
contracts, often through a public enterprise, as is the
GH2
Figure 4.2. GH2 cluster model
GH2 Storage
Company 1
Renewable
energies Water
GH2 Station
Company 2
GH2 Pipeline Company 3
Electrolyzer GH2 Industrial

Battery Energy cluster 1
storage storage GH2 Production
Electricity Company 1 Company 1

generation for GH2
(It can belong to the cluster
or be external) Company 2 Company 2
Combined cooling Electricity Ground heat
heating and power pump
(CCHP)
Company 3 Company 3
End users GH2 Industrial

Water Waste cluster 2
Internal
transportation
Cluster’s utilities
GH2 Industrial cluster
GH2 Cluster network

Source: UNIDO, 2023a
The sharing and efficient use of resources within a Authorities play a crucial role in facilitating the de-
cluster can significantly reduce energy and material velopment of consortia among companies along the
waste, thereby enhancing sustainability. For example, GH2 value chain. These consortia can work together
excess heat generated by one industry can be effec- to devise solutions that reduce the high initial in-
tively utilized by adjacent industries, thus conserving vestment required for cluster development. The need
energy. Additionally, implementing circular econo- for extensive upfront investment in transmission
my initiatives within clusters can play a crucial role and distribution infrastructure can be minimized by
in waste management and recycling. By promoting co-locating GH2 demand and supply, for example (IEA,
the recycling and reuse of key materials, clusters can 2019). Additionally, existing industrial hubs with es-
minimize waste and decrease reliance on raw materi- tablished hydrogen users for refining and chemicals,
als. That is, incorporating circular economy principles including ammonia, can leverage their infrastructure,
into cluster design can enhance the industry’s eco- thus reducing the need to develop demand for equip-
nomic and environmental performance. The integra- ment in new sectors. For instance, the H2AR Consorti-
tion of industrial GH2 end-use applications in coastal um in Argentina serves as a collaborative workspace
hubs holds immense future potential. By establishing for companies engaged in the hydrogen value chain,
such hubs, access to port facilities can be ensured, from production to application, fostering innovation
allowing for efficient GH2 trade through international and accelerating local market development. Various
shipping routes. Moreover, these hubs can also serve actors, including hydrogen producers, consumers,
as a platform for using GH2 and its derivatives as fuel utilities and infrastructure companies collaborate on
for shipping and trucking. The proximity to offshore pilot projects to define efficiencies, costs and opera-
wind and solar PV energy sources in certain locations tion parameters, providing investment signals for the
further enhances the viability of coastal hubs for GH2 industry’s growth in the local market. This collabo-
integration (Clean Hydrogen Joint Undertaking, 2023). rative approach aims to expedite innovation and the
advancement of Argentina’s hydrogen industry.
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Box 4.4. Chile: Antofagasta GH2 hub
Chile, as the first Latin American country with an NHS, is committed to fostering a thriving GH2 in-
dustry. The Antofagasta region plays a key role in this endeavour due to its abundant solar and wind
resources, coastal location and strategic position in the GH2 value chain. With a potential solar capac-
ity of 1,400 GW, the region presents ideal conditions for GH2 initiatives. There is significant hydrogen
demand in the mining, explosives and fertilizer industries, with Antofagasta PLC planning to adopt
hydrogen-based transport and green ammonia for blasting operations (Antofagasta PLC, 2022).
Chile’s NHS outlines ambitious development plans until 2050, aiming for 38 GW of electrolyser capac-
ity and an annual GH2 production of 2.8 million tonnes and 5.6 million tonnes of green ammonia in
Antofagasta by 2050. The GH2 industry’s economic impact is substantial, with projections of generating
around USD 700 million in annual tax revenues, benefitting at least one quarter of existing companies,
and creating thousands of jobs by 2050. Careful planning can optimize water supply synergies through
new desalination capacities. However, to achieve these goals, over USD 70 billion in cumulative invest-
ments are needed by 2050, with renewable capacities comprising between 40 per cent and 65 per cent
of total investments, followed by hydrogen generation (13 per cent to 32 per cent), hydrogen condi-
tioning and derivatives synthesis (9 per cent to 17 per cent), electrical infrastructure (3 per cent to 13
per cent), and export ships (2 per cent to 11 per cent) (Altmann et al., 2022). CORFO, Chile’s Economic
Development Agency, has selected project proposals to accelerate GH2 production plant development
in Antofagasta, with operations commencing by December 2025. “Antofagasta Minería Energía Renova-
ble (AMER)”, led by Air Liquide SA, plans to produce 60,000 tonnes of e-methanol annually, contributing
substantially to the region’s GH2 efforts with an 80 MW electrolyser, supported by USD 11.7 million in
CORFO funding. Additionally, ENGIE SA’s “HyEx” project aims to generate 3,200 tonnes of GH2 annually,
reducing over 30,000 tonnes of CO2 emissions yearly by supplying Enaex for green ammonia produc-
tion, with USD 9.5 million in CORFO funding.
The implementation of comprehensive training and operation and maintenance of hydrogen and fuel cell
educational initiatives prioritizing the value and safe- equipment. Hydrogen safety training encompasses
ty of GH2 is crucial to effectively address knowledge two major categories: (i) awareness training, and (ii)
gaps and skill shortages. By conducting broad educa- professional training. Awareness training is designed
tional campaigns centred around GH2 technologies, to cater to a diverse range of stakeholders, including
public awareness of hydrogen and its important role the general public, early adopters of hydrogen and
in achieving low-carbon development objectives can fuel cell (HFC) technologies, and professionals from
be successfully raised. Additionally, targeted training various fields associated with hydrogen technologies.
programmes can effectively enhance the workforce’s This type of training typically covers fundamental
skill set, equipping workers with practical capacities aspects of hydrogen properties and emergency re-
that align with the emerging GH2 value chain. Such sponse protocols. On the other hand, specialized pro-
programmes also have the potential to address con- fessional training can be tailored to specific groups,
cerns surrounding a Just Transition. For instance, the including:
Government of India announced a coordinated skill-
ing programme in its 2023 National Green Hydrogen • hydrogen technicians
Mission document, which will bring together insti- • gas and pipe fitters
tutions, training centres, universities, industry and • design engineers
businesses to incorporate global best practices and • installers
developments. • operators of hydrogen production and utilization
equipment
An in-depth understanding of safety measures for • authorities having jurisdiction (AHJs)
hydrogen and its derivatives, particularly ammonia, • first responders
is crucial to guarantee the secure implementation,
GH2
By offering targeted education and training be directed towards consortia instead of individu-
programmes, governments can ensure that al businesses, thus facilitating the diffusion of in-
professionals in different industries obtain the novation and cost reductions throughout the value
necessary skills and knowledge to safely engage chain. In addition, intra-governmental coordination
with hydrogen technologies. and information exchange can help optimize the use
of knowledge and resources by avoiding duplication
To enhance the hydrogen industry’s growth and of demonstration costs.
competitiveness, governments should actively en-
courage knowledge exchange between business- Creating centralized digital public matchmaking
es, and ensure that new market entrants gain ac- platforms that connect funding options with stake-
cess to previous R&D efforts and demonstration holders can be a major catalyst for project financ-
projects that have received public funding. This is ing. Currently, the lack of a well-established GH2
particularly important given the concentration of financing ecosystem means that many projects pri-
knowledge in the hydrogen value chain in terms of marily/initially rely on public funding, often with
patents and trademarks – future growth of project limited knowledge of available options. Similarly,
scales and financial requirements could further in- prospective GH2 investors may face challenges in
tensify this concentration, leading to higher prices navigating multiple financing streams, each with its
for GH2 in the long run (Cammeraat et al., 2022). own bureaucratic hurdles. Matchmaking platforms
By supporting demonstration projects, companies managed by the government can streamline the
gain practical experience and valuable knowledge selection and allocation process for both investors
through learning-by-doing. Public support for such and developers, effectively reducing coordination
projects should be contingent on (at least partial) barriers (IRENA, 2022a). By combining the reliability
knowledge sharing. In the emerging international and inclusiveness of a centralized platform with a
GH2 market, certain enterprises may be reluctant user-friendly digital interface ensures accessibility
to share valuable information to protect their com- and ease of use.
petitive advantage. The government’s role is thus to
incentivize knowledge sharing while maintaining a
strong investment case for businesses. Funds could
Box 4.5. Knowledge sharing in Chile’s solar energy industry
The Chilean Economic Development Agency (CORFO) has made significant strides in the development
of Chile’s solar energy industry since 2016. Despite its focus on the national solar industry, multiple in-
dustries and stakeholders are effectively involved. Two key instruments were established to strength-
en coordination among various actors and sectors (Mazzucato and Kattel, 2023):
• An inclusive and collaborative platform which facilitates co-creation and knowledge exchange. By
embracing a bottom-up approach, it enables the active participation of both public and private
sector actors, fostering mutual trust and synergies. Through this collaborative endeavour, a shared
vision can be developed, thus ensuring collective ownership and engagement.
• A dedicated clean technology institute which serves as a hub for interdisciplinary research focused
on advancing solar energy solutions. By encouraging cross-disciplinary collaboration, the institute
brings together experts from various fields to explore innovative approaches and address technical
and economic challenges. This targeted public sector support is crucial in driving progress in the
solar energy industry.
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Government-backed advisory services can provide

targeted support and guidance to project promoters
and help them navigate the evolving financial land-
scape (EIB, 2022). Expertise in navigating risks and
in blending finance solutions specifically for GH2
projects is essential. To effectively address the com-
plexities and lengthy development timelines of GH2
projects, advisory resources should be adequately
sized and tailored. In addition to providing guidance,
advisory services can offer hands-on project devel-
opment assistance for large-scale ventures involv-
ing multiple stakeholders and value chain segments.
Having a neutral advisory partner can accelerate deci-
sion-making and project activities. Advisory services
also play a fundamental role in mitigating uncertain-
ties by facilitating the review of financing, econom-
ic and technical alternatives that influence project
viability and bankability. For instance, such support
can be used to explore avenues to aggregate demand
around GH2 production centres or integrate PtX in re-
newable energy projects. To deliver on this, advisors
must have in-depth industry knowledge, including in
GH2 production and equipment. By leveraging advi-
sory support, projects can access potential financing
faster and position themselves for necessary public
support or guarantees to ensure bankability.
GH2
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5. Transport and distribution
policies
Transport and distribution networks, along with the • pipelines

necessary infrastructure, play a crucial role in ef-
ficiently moving GH2 from production sites to con- • ports and terminals
sumption destinations. Hydrogen is mostly produced
on-site in clusters that co-locate production and de- • cargo ships and trains for hydrogen and its deriv-
mand. In the future, however, as economies of scale atives
improve, it may become more profitable to establish
large-scale hydrogen production facilities and dis- • large-scale hydrogen storage
tribute hydrogen to users that are located farther
away (Cammeraat et al., 2022). Section 6.5 examines • conversion technologies and plants
potential trade routes and patterns in more detail.
• refuelling station networks for hydrogen-powered
As global demand for GH2 continues to rise, both trucks, ships, planes and trains
production volumes and transport distances will in-
crease. This will necessitate the development of a • upgraded transmission networks to harness re-
centralized GH2 production system that includes a newable energy potential
comprehensive hydrogen storage and transport in-
frastructure. This network will connect regions with The low energy density of hydrogen compared to
favourable GH2 production conditions to demand natural gas presents significant technical challenges
centres in domestic and international markets. Inter- when repurposing existing infrastructure. One cubic
national coordination will be essential in cross-bor- meter of hydrogen contains only one-third of the
der GH2 trade to ensure the infrastructure’s effective energy found in one cubic meter of natural gas at
functioning. Retrofitting and repurposing the existing equivalent pressure and temperature. Moreover, hy-
natural gas networks, as well as constructing new drogen has a considerably lower boiling point of -253
dedicated hydrogen infrastructure will be required, °C compared to -162 °C for natural gas. The transmis-
including: sion of hydrogen therefore necessitates a conversion
of hydrogen into a form with higher density, such as
GH2
liquefaction or transformation into substances such between the government, industry and other stake-
as ammonia, LOHC or synthetic hydrocarbon fuels holders that can be leveraged to achieve this goal.
(IRENA, 2022c). Not only do these hydrogen deriva-
tives have higher energy density, they are also more Robust public policies must be implemented to sup-
suitable for long-distance trade and transport. port the development of a GH2 grid. Repurposing
parts of existing fossil gas infrastructure to accom-
The large-scale conversion and reconversion of hy- modate GH2 transport is a cost-effective approach
drogen present significant challenges, including high that capitalizes on existing infrastructure while meet-
energy consumption and technological uncertainties. ing growing GH2 demand. Prior to initiating the gas
This ambiguity contributes to the overall costs of hy- grid’s conversion to hydrogen, policymakers should
drogen production (Roland Berger, 2021), and directly conduct comprehensive planning assessments as an
impacts the profitability and perceived risks of GH2 initial step to identify “no-regret” areas for hydrogen
projects. As a result, investments in GH2 have primar- pipelines based on industrial demand. Furthermore,
ily focused on production and end-user applications. the transport sector’s projected increase in demand
To achieve widespread GH2 adoption and decarboni- should be considered when determining pipeline
zation, efficient transportation solutions for GH2 must placement. These planning assessments will not only
be developed. This requires planning relevant hydro- identify necessary supply lines but can also help mit-
gen infrastructure projects early on in alignment with igate the risks associated with oversizing, stranded
the broader hydrogen strategy. Local infrastructure assets or abandoned projects. Avoiding failed green
requirements for hydrogen transport need to be eval- hydrogen projects is important, to avoid political
uated to identify the appropriate economic model for frustration and backlash against further decarbon-
transport infrastructure and efforts between the pub- ization projects.
lic and private sectors need to be coordinated. Policy-
makers should take these key considerations into ac- The following guiding questions serve as a starting
count when planning, regulating and financing a GH2 point for developing hydrogen infrastructure plans,
transport network. By addressing these factors, the offering policymakers in both developed and devel-
development of GH2 infrastructure can be effectively oping countries valuable insights (BMBF, 2021):
integrated with the country’s overall hydrogen strate-
gy, enabling efficient GH2 transportation and acceler- What is the desired balance between privately
ating its adoption for decarbonization purposes. owned infrastructure and open-access systems?
Privately owned infrastructure presents several ad-

vantages, such as providing investment incentives,
5.1. Planning GH2 promoting competition and fostering innovation.
infrastructure, transport and

However, an overreliance on private ownership may
result in uneven distribution, lack of coordination
storage and potential market failures. Open-access systems,
on the other hand, have the potential of ensuring fair
market access, preventing monopolies and encour-
The government plays a leading role in identifying aging collaboration, but may encounter challenges in
domestic and international routes and preferred terms of funding and maintenance if not well-regulat-
transport solutions and GH2 infrastructure, which ed. Policymakers can strike a balance that encourag-
should be outlined in roadmaps and strategies. Align- es private investment while ensuring fair competition
ing these strategies with concrete long-term energy and accessibility. To achieve this, regulatory frame-
plans is crucial to attract investment and maximize works should address potential monopolistic ten-
planning efficiency. The capital-intensiveness and dencies, ensure cost recovery and safeguard against
long-term nature of such infrastructure projects in- infrastructure gaps.
volves detailed planning based on considerations of
the projects’ potential to create long-term depen- What are the most viable domestic GH2 storage
dencies for industrial and residential users (IRENA, options, considering both physical (location,
2021). Cross-border integration can further bolster geological features) and chemical (carrier)
infrastructure capacity plans and improve the overall aspects?
system’s efficiency by linking production and demand
centres (Hydrogen Council, 2021). The successful Physical storage options such as salt caverns, deplet-
growth of the global liquefied natural gas (LNG) mar- ed gas reservoirs and aquifers, provide large-scale
ket is a valuable lesson in international collaboration and long-duration storage capabilities, but may be
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Transport and distribution policies
limited by geological constraints. On the other hand, Should hydrogen and electricity infrastructure
chemical carriers such as ammonia can facilitate hy- be planned within an integrated framework or
drogen transport and provide energy density bene- separately?
fits, but entail energy conversion losses and the need
for additional infrastructure. To design an optimal An integrated framework enables cross-sectoral plan-
storage system, policymakers need to evaluate the ning, fostering synergies between hydrogen and elec-
geological features of available sites and consider in- tricity systems. This approach ensures flexibility and
tegrating both physical and chemical storage options addresses specific sectoral needs. Integrated plan-
to ensure the storage system’s flexibility, reliability ning entails complex coordination and decision-mak-
and cost-effectiveness. ing processes. On the other hand, separate planning
may overlook opportunities for efficiency gains and
Should electrolysers be located close to the system optimization. Policymakers must carefully
centres of renewable energy supply, with evaluate the advantages of integration while consid-
storage options placed centrally in the grid? Or ering the interdependence between hydrogen and
should both rather be located in the vicinity of electricity infrastructure. By aligning policies accord-
demand? ingly, they can find a balance between reaping the
benefits of integration and mitigating the challenges
Co-locating electrolysers with renewable energy involved.
sources offers numerous benefits, including reducing
transmission losses and enhancing overall efficiency How can decision-making processes for
in GH2 production. However, focusing exclusively on hydrogen network planning accommodate
proximity to renewable energy sources may inadvert- uncertainties related to demand, production
ently lead to transport constraints for the produced sites and import routes, while also considering
GH2 and to the underutilization of other potential the critical long-term role of decarbonization?
sites. To enhance supply reliability, policymakers
should consider locating storage facilities closer to Uncertainties may lead to potential delays in infra-
demand centres. Policymakers should take local fac- structure development. Balancing immediate needs
tors such as existing infrastructure, renewable energy with long-term goals is key for effective and sustain-
availability and demand patterns into account. Stra- able planning. Adopting flexible planning methodol-
tegic priorities, including the share of GH2 for export, ogies such as a scenario-based approach to address
should also be considered to optimize the location uncertainties may prove beneficial. These methodol-
of electrolysers and storage facilities. A balanced ap- ogies allow for the incorporation of various potential
proach helps avoid future lock-in effects. outcomes, enabling adaptive infrastructure develop-
ment. By setting long-term decarbonization goals,
Is regional/international coordination or policymakers can take strategic decisions and avoid
an integrated decision process necessary lock-ins to high-carbon pathways. To ensure resil-
for infrastructure planning/development to ience and alignment with decarbonization objectives,
efficiently integrate GH2 into the energy system policymakers should conduct robust scenario analy-
in terms of technology and costs? ses, engage with stakeholders and continuously re-
view and update their plans in response to evolving
Regional/international coordination has the poten- technologies and market conditions. This approach
tial to unlock significant benefits, such as economies enables them to navigate uncertainties and achieve
of scale, optimized resource utilization and knowl- sustainable infrastructure development.
edge exchange. By implementing an integrated de-
cision-making process, policymakers can streamline How can public engagement be effectively
planning, reduce redundancy and ensure compati- cultivated to gain support for new large-scale
bility across regions. However, coordination efforts GH2 infrastructure projects?
may encounter political and logistical challenges,
and an integrated process may require extensive data Public engagement builds trust, raises awareness and
sharing and stakeholder engagement. Despite these contributes to project legitimacy. By involving stake-
challenges, policymakers should prioritize cooper- holders, policymakers can foster a sense of ownership
ation among regions and nations to establish com- and gain valuable insights into potential concerns and
mon technical standards. When concerns related to benefits. To ensure effective engagement, policymak-
sovereignty, security and data sharing are addressed, ers should design inclusive and transparent process-
all parties involved can reap the benefit of regional/ es that prioritize accurate information dissemination,
international cooperation. address public concerns, and emphasize the societal
GH2
and environmental advantages of large-scale GH2 in- 1. the presence of unused or under-used pipelines
frastructure projects. By actively involving the public, alongside existing ones that can continue to meet
policymakers can create a foundation of support and demand for natural gas; and
promote the projects’ successful implementation.
2. the existence of a sizable hydrogen market with
significant initial uptake, which will attract more
5.1.1. Pipelines vs maritime users once the network is established.
transport Both natural gas transmission and dedicated hydro-
gen pipelines typically use carbon steel materials.
The repurposing of existing gas pipelines for the However, it is worth noting that hydrogen-specific
transportation of hydrogen is a feasible and cost-ef- standards, such as the “ASME B31.12” code for inland
fective option. Onshore or offshore pipelines are the hydrogen pipelines, impose stricter requirements
preferred choice for hydrogen transport. They are the compared to their natural gas counterparts (ASME,
most efficient and inexpensive means for transport- 2020). This is due to hydrogen’s ability to reduce the
ing hydrogen, with a range of up to 2,500 km to 3,000 ductility and fracture toughness of pipeline materi-
km (IEA, 2022c). The global natural gas transmission als, as well as to increase the rate of fatigue growth.
pipeline network is extensive, currently spanning Hydrogen’s chemical properties can lead to hydrogen
over 1.2 million km, with an additional 200,000 km of embrittlement, a phenomenon where the presence
pipeline projects in various stages of development. of hydrogen induces cracks in the steel, thereby ac-
However, as the pursuit of net-zero emissions goals celerating pipe degradation. Nevertheless, there are
continues, there may be a decline in natural gas con- viable options to address these potential challenges,
sumption over time, which could result in stranded which can vary depending on the specific pipeline
assets within the gas network. Some researchers ad- (IEA, 2022c):
vocate the repurposing of part of the existing infra-
structure to enable hydrogen transport, though the • Regularly monitor pipeline integrity using methods
long-term technical and economic feasibility are still such as in-line inspections and pigging;
a subject of debate.
• Apply a hydrogen barrier coating to provide protec-
The transition to 100 per cent hydrogen supply poses tive measures for the pipelines;
a huge challenge. Achieving full conversion requires
an immediate shift to 100 per cent hydrogen within • Optimize pipeline pressure to remain within the re-
each segment of the affected network. This entails the quired threshold values;
installation of new compressors, storage facilities and
the replacement of meters, compressors, monitoring • Minimize pressure swings to mitigate the potential
equipment and existing gas appliances. To ensure impact on pipeline integrity.
cost-effectiveness, the dimensioning of repurposed
pipelines must be optimized while meeting capacity Authorities must consider certain formal and bureau-
requirements. Offshore pipelines are associated with cratic factors when contemplating the transition of
unique challenges, including pressure limitations, fa- an existing pipeline to a new commodity, for example
tigue cracking and embrittlement, necessitating fur- establishing clear criteria to determine when a new
ther research to ensure their suitability for hydrogen operating approval is necessary, taking into account
transport. However, if and once these technical barri- factors such as the concentration of hydrogen trans-
ers are overcome, the repurposing of gas pipelines for ported. Additionally, it is important to acknowledge
hydrogen provides a faster and more cost-effective that many current long-term transmission contracts
alternative to building entirely new dedicated hydro- are in effect for these pipelines. Governments must
gen networks (for more details see Section 5.3), while therefore devise strategies to amend these contracts
also mitigating the risks associated with stranded as- if they intend to shift from natural gas to hydrogen.
sets. It should be noted, however, that the long-term
technical and economic viability of repurposed pipe- When the repurposing of existing infrastructure for
lines remains a subject of debate due to the absence hydrogen transport is not technically feasible or
of precedent cases. The feasibility of repurposing gas when there is still demand for natural gas, construct-
pipelines for hydrogen transport hinges on two con- ing new hydrogen pipelines alongside existing natu-
ditions (IEA, 2022c): ral gas pipelines is an alternative strategy. This offers
several advantages as established right-of-way and
existing siting permits can be capitalized, resulting in
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cost savings and shorter timelines for pipeline devel- and the Iberian Peninsula to France. The Mediterrane-
opment. By using the same routes and infrastructure an Hydrogen Pipeline project H2Med aims to connect
used by natural gas pipelines, the construction of new Portugal and Spain with France and Germany, supply-
hydrogen pipelines can benefit from the groundwork ing around 10 per cent of the EU’s hydrogen demand
already laid, reducing the need for extensive land by 2030 (Hydrogen Central, 2023).
acquisition and permitting processes. This approach
provides a practical solution for integrating hydro- The most feasible option for ramping up GH2 trade
gen into existing energy networks while maximizing and transporting large amounts of hydrogen over
efficiency and minimizing disruptions to the overall long distances is maritime transport. While the pipe-
system (IEA, 2022c). line option may be viable for certain regions, it is not
practical for areas that have the greatest demand and
The use of onshore or offshore pipelines for cross-bor- are located outside the MENA region, namely Europe,
der trade is significantly limited by the availability of Japan and the Republic of Korea. Sea vessels are the
existing networks and the lead times required for only realistic option for transporting large amounts
dedicated pipeline construction. The planning and of hydrogen from net GH2 exporters to net GH2 im-
construction of a dedicated hydrogen pipeline de- porters outside of pipeline range as depicted in Fig-
pends on various factors, including bureaucratic ef- ure 5.1 and Figure 5.2. Major technical and economic
ficiency and acceptance by the population directly challenges might impede the roll-out of a truly global
affected. Currently, there are plans to transport GH2 hydrogen ecosystem until at least 2030.
from North Africa to Germany and other Central Eu-
ropean countries through Italy, and from North Africa
Figure 5.1. Most cost-effective hydrogen transport pathway in 2050 as a function of project size and
transport distance
Source: IRENA, 2022c
GH2
transport market expands. The study highlights the

5.1.2. GH2 carriers potential for substantial improvements in LOHC tech-
nology due to scale effects and learning curves. Fac-
Hydrogen can be transported via vessels using three tors contributing to cost reduction include increased
main carriers: (i) liquefied hydrogen (LH2), (ii) am- equipment production volumes, economies of scale
monia (NH3), or (iii) LOHC. LOHCs chemically bind for larger plants, advancements in materials, plant ef-
hydrogen to a carrier material and release it at the ficiency, and standardization for hydrogenation and
destination. As such, they require a higher number dehydrogenation processes as well as in carrier sub-
of landings—and thus ships—compared to ammonia. stances. The full commercialization of carrier tech-
Regardless of carrier option, the transport and re-/ nologies is expected to lead to cost cuts in conver-
conversion of/into hydrogen significantly increases sion and reconversion plants. Direct costs related to
the landed costs of hydrogen, more than doubling the storage, transport and handling are significant. LOHC,
cost of production (Roland Berger, 2021). with its operational advantage, is anticipated to lev-
erage its cost advantages in complex and storage-in-
A 2021 study by Roland Berger predicts significant tensive multimodal transport routes, as conversion
cost reductions across all carriers as the hydrogen and reconversion costs decrease significantly.
Figure 5.2. Cost of hydrogen delivery for various transport distances
Source: IEA, 2022c. IEA analysis based on data from Guidehouse (2021) and IAE (2016)
Notes: ktpa = kilotonnes per year; LH2 = liquefied hydrogen; LOHC = liquid organic hydrogen carrier. Includes conversion, export
terminal, shipping, import terminal and reconversion costs for each carrier system (LH2, LOHC and ammonia). The import and
export terminals include storage costs at the port. Pipelines refer to onshore transmission pipelines operating at ranges be-
tween 25% and 75% of their design capacity during 5 000 full load hours. Electricity transmission reflects the transmission of the
electricity required to obtain 1 kg H2 in an electrolyser with a 69% efficiency located at the distance represented by the x-axis.
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Ammonia’s cost development path is distinct due to Selecting the most suitable carrier depends on
its well-established commercial synthesis process operational factors and cost considerations, as no
and trade, which limits the potential for cost reduc- single carrier is universally ideal for all transport
tions in conversion, storage and transport. However, scenarios. For instance, despite higher costs, LH2
considerable cost reductions can still be achieved may be preferred for high-purity hydrogen and when
through additional cracking and purification process- on-site reconversion is impractical. While ammonia
es, along with decreased energy requirements (Ro- is a cost-effective option for small-scale multimodal
land Berger, 2021). Moreover, the existing ammonia transport, safety regulations and increased costs may
transport infrastructure, particularly in ports and ter- tip the scales in favour of LOHC. Integrating existing
minals, can be used and expanded. While the use of heat sources at the off-taker could enhance the vi-
ammonia as a shipping fuel is not as technologically ability of ammonia and LOHC, potentially reducing
mature as ammonia transport itself, it has the poten- required temperatures. Ultimately, the best choice
tial to create additional demand and contribute to a for a specific supply route must be determined on a
decarbonization of the emission-intense shipping in- case-by-case basis, taking individual circumstances
dustry. However, caution is advised as the widespread into consideration.
use of ammonia as a shipping fuel may disrupt the
global nitrogen cycle if not carefully regulated (Wolf- It is anticipated that multiple technologies will co-
ram et al., 2022). On the other hand, green methanol exist in the market during the ramp-up and scaling
can also serve as a shipping fuel, leveraging substan- phase of hydrogen transport. The technology ulti-
tial existing port infrastructure without posing the mately chosen depends on factors such as market
same toxicity risks as ammonia. Despite being green, uptake speed, potential for cost reduction, and the
methanol still emits CO2 when burned as a fuel. The ability to provide a safe and user-friendly solution.
expanded use of ammonia as a hydrogen carrier and This introduces significant uncertainty in the future of
fuel for shipping can have unintended consequenc- long-distance GH2 distribution and trade, including
es for the fertilizer supply chain, potentially slowing the risk of technological lock-in and stranded assets
down the decarbonization of fertilizer production. for carrier infrastructure, such as ports and convert-
Moreover, the current bottleneck in shipbuilding for ers. International coordination is crucial to ensure a
ammonia transport poses a significant challenge that clear path forward and prevent delays in infrastruc-
will take years to resolve. ture roll-out, especially with regard to GH2 trade (see
Section 6.5). Policymakers should avoid reliance on
To secure green hydrogen for end-uses, trading green just one mode of transport when planning export
ammonia will need to undergo ammonia cracking infrastructure, and instead opt for a mix of carrier
to convert ammonia back to hydrogen at scale. This technologies that leverage their respective strengths
technology is still in its early stages and faces nu- and that remain adaptable to future developments.
merous challenges that need to be overcome before Another cautious approach could involve expanding
affordable, off-the-shelf cracking units can be man- existing in-country trade infrastructure for ammonia,
ufactured. Alternatively, ammonia can be used di- methanol or other GH2 products and its derivatives.
rectly as an energy vector, serving as a fuel without The uncertainties surrounding GH2 transport infra-
the need for cracking. Therefore, an export-focused structure for trade emphasizes the need for a dual
strategy reliant on ammonia may not yield favourable approach that includes a significant share of local
results for many countries simultaneously. GH2 use.
Compared to LOHC and ammonia, the liquefaction

of hydrogen is expected to be associated with lower
costs and energy reductions due to the already wide-
spread availability of the technology (Roland Berg-
er, 2021). Additionally, considerable investment cost
reductions for LH2 storage, transport and stationary
storage are anticipated, as are improvements in boil-
off losses.
GH2
Figure 5.3. Energy losses for different energy carriers
Source: IEA, 2022c
Notes: LH2 = liquefied hydrogen; NH3 = ammonia; LOHC = liquid organic hydrogen carrier. Numbers show the remaining energy
content of hydrogen along the supply chain relative to a starting value of 100, assuming that all energy needs of the steps would
be covered by the hydrogen or hydrogen-derived fuel. The Haber-Bosch synthesis process includes energy consumption in the
air separation unit. Boil-off losses from shipping are based on a distance of 8 000 km. For LH2, dashed areas represent energy
being recovered by using the boil-off gases as shipping fuel, corresponding to the upper range numbers. For NHs and LOHC, the
dashed area represents the energy requirements for one-way shipping. which are included in the lower range.
5.1.3. GH2 storage facilities 3. Storage at ports will also be needed when hydro-
gen’s maritime transport takes off.
With the significant role hydrogen is expected to play
in the energy system, the importance of storage can- Demand for hydrogen storage differs from that for
not be overstated in ensuring hydrogen’s reliability. natural gas, which is primarily driven by seasonal
Efficient storage solutions serve multiple purposes in demand for heating. Hydrogen demand is less influ-
this context: enced by seasonality, but the significant fluctuations
in electricity generation from variable renewables
1. They enable the balancing of supply fluctuations necessitate flexible hydrogen storage to not only ef-
arising from electrolysers powered by variable re- fectively meet demand but to also minimize the need
newable electricity, while also accommodating for for excessive infrastructure capacity (IEA, 2022c).
seasonality in hydrogen demand. There are two major methods for storing hydrogen:
(i) physical, and (ii) chemical. The physical approach
2. Storage plays a crucial role in providing energy uses geological formations underground to store hy-
security by mitigating the impacts of supply dis- drogen in liquefied or compressed form, similar to
ruptions caused by trade conflicts, unforeseen natural gas. The chemical route involves conversion
outages and natural disasters, ultimately reducing processes using liquid carriers such as ammonia,
price volatility. methane or LOHCs.
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5.1.4. Just Transition dimension • Adoption of technical standards and regulations;
The infrastructure construction phase of ports, pipe- • Adjustment of formal requirements such as ap-
lines and storage capacities provides temporary em- provals, permits, contracts, etc.;
ployment opportunities that are significant in nature.
However, these investments are capital-intensive • Implementation of risk assessment regimes for
and require large-scale operations, making it diffi- leaks and security;
cult for new players to enter the market. As a result,
foreign investments and imported technology tend • Reaching international agreements for cross-bor-
to dominate these core activities in most develop- der transport.
ing countries. While the local workforce is involved in
construction work, the potential for sustainable job The establishment and adoption of global stand-
creation lies in training, skills development and ed- ards for hydrogen transport across different carrier
ucation to capture the technically more demanding options is essential to ensure a secure, efficient and
maintenance and technician roles. transparent environment for cross-national projects.
This entails defining the requirements for product
Building new infrastructure for GH2 entails land re- quality and safety and determining the environmen-
quirements which may cause disruptions to agricul- tal impact. Such market rules are urgently needed
tural use and local food supply, displacement of pop- to facilitate the necessary investment in hydrogen
ulations, property devaluation and environmental transport infrastructure and carrier technologies.
degradation. It is therefore essential to develop holis- Early adopters that build large-scale hydrogen trade
tic strategies that consider all dimensions of the GH2 hubs and port- or industrial clusters will have the
transition. Governments must prioritize the resilience opportunity to shape the standards that will define
and livelihoods of local communities when planning the future of GH2 distribution. These standards will
GH2 infrastructure for a just hydrogen transition. also encourage importing countries to diversify their
While potential benefits in terms of employment and hydrogen sources, creating export opportunities for
export revenues are significant, they should not come producer countries located far from demand centres.
at too high a price, such as water and food security or
social disruption. This is discussed in more detail in To maximize GH2’s decarbonization benefits and
Section 3.3.3. prevent negative climate impacts in the short term
(see Box 5.1), the lessons learned from the ongoing
methane leakage issue must be applied. A well-reg-
ulated hydrogen value chain can effectively mitigate
5.2. Regulating transport the risks of leakage. Immediate action must be taken
to obtain the necessary scientific evidence and tools
that will support the implementation of effective pol-
Similar to GH2’s industrial applications, its distribu- icies and regulations. These measures should be im-
tion calls for comprehensive, clear and long-term plemented at the global level and require multilateral
regulations that facilitate planning, financing and coordination (see Chapter 6 for further details).
safety. This becomes even more critical for cross-bor-
der transport as it plays an essential role in creating a
viable global GH2 market and in facilitating trade. It is
therefore imperative to adopt standardized protocols
for GH2 transmission and to promote international
coordination to prevent distribution bottlenecks in
both export and local value chains (see Section 6.5.2
for a discussion on standards and certification coor-
dination at the global level).
Given the growing importance of GH2 infrastructure,

governments must carefully evaluate their institu-
tional requirements to effectively regulate these sys-
tems. This evaluation should consider the availability
of institutional resources and explore the possibili-
ty of implementing new regulatory arrangements or
authorities. Key policy areas to be addressed are:
GH2
Box 5.1. Hydrogen as an indirect GHG
While hydrogen itself is not a direct GHG and does not produce GHG emissions when combusted as a
fuel, its release into the atmosphere can still have climate impacts. This is because hydrogen interacts
with other gases and chemicals, affecting the concentrations of methane, ozone and water vapour.
In fact, hydrogen has a 100-year global warming potential that is around 11 times higher than car-
bon dioxide (Warwick et al., 2022). These impacts are not associated with the direct use of hydrogen
in industrial or other applications, but rather with potential leakage during the transport and han-
dling processes. Due to its small molecule size, high diffusivity and low viscosity, hydrogen can leak
throughout the entire value chain. The lack of comprehensive data on hydrogen leakage rates poses
challenges in assessing the potential risks and impacts. Currently, empirical measurements for on-site
hydrogen production and industrial usage focus primarily on operational safety, with hydrogen leak
detectors typically operating above the threshold for hydrogen gas flammability. Furthermore, data on
the extent of hydrogen leakage in pipelines and compressors are limited. Research to evaluate how
leakage levels may change when repurposing natural gas infrastructure for hydrogen must be carried
out. Additionally, as hydrogen expands into new applications, the development of international trade
and infrastructure will be necessary. Operations involving the loading and unloading of pressurized or
liquefied hydrogen in trucks, ships or storage tanks present notable risks in terms of potential leakage.
5.3. Infrastructure financing The assessment process for such projects will play
an important role in ensuring that the infrastructure
is designed to progressively increase the share of
As outlined in Section 5.1, there has been a lack of GH2 in the pipelines and in the overall grid. By the
focus on hydrogen transport infrastructure devel- end of the transition period, this will require dedi-
opment compared to its production and end-uses. cated hydrogen assets for transmission, storage and
At present, only around 10 per cent of proposed hy- distribution (Hydrogen Council, 2021).
drogen investments are directed towards infrastruc-
ture, highlighting an investment gap of about 85 per Repurposing existing gas grids offers significant fi-
cent to the estimated USD 200 billion required by nancial benefits compared to building entirely new
2030 (Hydrogen Council and McKinsey and Company, infrastructure. Figure 5.4 illustrates that repurposing
2022). Government should prioritize infrastructure natural gas pipelines for hydrogen use can reduce
investment to bridge this gap and initiate the de- the required CAPEX by 65 per cent to 94 per cent
velopment of this foundational element of the GH2 relative to new, purpose-built hydrogen pipelines
value chain. For a meaningful and large-scale tran- (IRENA, 2022c). This range depends on the pipeline’s
sition, however, it is essential to also simultaneous- diameter size, with the narrowest type (500 mm)
ly leverage private sector financing, expertise and showing the highest difference in price, especially
priority-setting. The main challenge lies in securing when considering compression. While not covered in
investments for the retrofitting and repurposing of this report, and important consideration for invest-
existing natural gas networks as well as establishing ment planning is the expected lifetime of a repur-
new dedicated hydrogen infrastructure. Policymak- posed pipeline relative to a new one, i.e. the capital
ers have a range of options to support this endeav- cost per year of operation. Public financing will play
our, but the choice of intervention should be based a crucial role in funding anchor projects and reduc-
on the existing grid’s stage of development. ing transport costs in support of the GH2 market’s
development. De-risking measures can also attract
As mentioned, to facilitate the development of GH2, private investment in midstream hydrogen projects
existing natural gas networks will need to be retro- (Hydrogen Council, 2021). These measures may in-
fitted and new pipelines constructed. Selected pro- clude loans, grants and debt guarantees, as outlined
jects should focus on showcasing successful transi- in more detail in Section 4.2.
tions from natural gas to dedicated hydrogen assets.
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Figure 5.4. Capital cost of a hydrogen pipeline (left), & total transport cost (right) by cost component
Source: IRENA, 2022c
Public-private partnerships (PPPs) offer a promising managed, and risks and returns are shared between
avenue for increasing infrastructure investments. the government and the private enterprise. To miti-
Projects with substantial investment requirements, gate risk, a gradual approach that starts with funding
such as commercial-scale GH2 export and import smaller projects can provide reassurance to investors
infrastructure, can benefit from PPPs while GH2 fi- (IEA, 2019). Subsequent projects can then leverage
nance mechanisms and business plans mature. Such the knowledge and experience gained from earlier
partnerships involve a combination of direct public projects, while raising awareness of public financing
investment and multi-stage competitions for award- and partnership options. The coordination challenges
ing contracts. For example, the government can con- that PPPs often face can be addressed through clearly
tribute necessary land and permits, while capital defined responsibilities starting in the planning stage
investments are shared, and the private enterprise (Cammeraat et al., 2022).
provides technical expertise. The project is jointly
Box 5.2. Kochi Green Hydrogen (KGH2) Hub project
The Kochi Green Hydrogen (KGH2) Hub project is an ambitious initiative led by the India Hydrogen
Alliance (IH2A) and the regional Government of Kerala. It aims to establish a large-scale green hy-
drogen hub equipped with a 150 MW electrolyser and comprehensive storage and transport infra-
structure, involving a total investment of USD 575 million. The project will be developed through a
public-private project consortia structure, with participation from industry, state-owned enterprises,
government and multilateral funding agencies, and will be governed by a two-tier KGH2 govern-
ance structure, consisting of a public-private advisory group and project consortia structures (India
Hydrogen Alliance, 2022).
GH2
Constructing new dedicated infrastructure is essen-

tial for facilitating the growth of GH2 as a clean energy
carrier and connecting emerging areas of demand and
supply. By linking industrial clusters and GH2 hubs
with export infrastructure, there is potential for a
profitable business model that can attract private in-
vestment and international financing from importing
countries, which will facilitate trade-related transport
development. Governments can provide incentives
for private sector investment in large infrastructure
projects by guaranteeing returns through a regulat-
ed asset base model (RAB). Such models guarantee
returns for investors in network utilities by providing
principles for determining price caps. They allow for
both private and public ownership of the infrastruc-
ture assets. The RAB primarily evaluates the value of
assets used for regulated functions and serves as an
accounting measure that reflects past investments in
network infrastructure. Through current cost account-
ing, the RAB considers a realistic replacement value
when estimating the present value of long-lasting in-
frastructure (Makovšek and Veryard, 2016). The regu-
lated returns could, for example, use pricing based on
improving performance over time. Introducing price
ceilings and floors may help foster efficiency further.
Such a RAB can remain in place even when the GH2
market approaches maturity, ensuring that infra-
structure providers can operate competitively and
efficiently (Hydrogen Council, 2021).
As the GH2 market matures, the importance of an-

cillary services such as a buffering and storage will
increase, enabling PtX and making hydrogen a flexi-
ble energy vector. The associated infrastructure will
play a key role in the efficient distribution of hydro-
gen along the value chain, including grid operation,
conversion for export and feedstock reserves for in-
dustry. Ultimately, this can lead to a profitable busi-
ness case, with revenues replacing financial support
policies. However, before bankable offtake schemes
become a reality, governments should incentivize
hydrogen storage construction through public stor-
age procurement. This can be achieved by issuing
tenders or contracts to private companies for the
design, construction and operation of storage facili-
ties. The procurement process should include specific
requirements for storage capacity, safety standards
and environmental considerations. The government
should also consider strategic placement of storage
facilities to facilitate GH2 transport and distribution
to relevant end-users, industries and export markets.
By providing financial support or incentives for the
establishment of storage facilities, governments can
address one of the key challenges in scaling up hy-
drogen take-up, namely the ability to effectively store
and distribute hydrogen.
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6. Options for international
cooperation to support national
policymaking
Countries in the Global North have a significant ad- 6.1. Co-financing the
development of a policy
vantage in terms of financial and human resources
as regards the development of hydrogen policies
compared to countries in the Global South. Figure
1.3 shows that out of over 45 NHS published as of framework
June 2023, 60 per cent were from developed coun-
tries. Policymakers in countries in the Global South Developing a policy framework for hydrogen is re-
face resource limitations, including a lack of qualified source-intensive and requires a qualified and ex-
personnel and competing priorities for other, more perienced team. Hence, identifying solutions to
pressing issues. International collaboration is crucial co-finance the development of a policy framework
for addressing these challenges and accelerating the can accelerate its creation. Examples of co-financers
development of a comprehensive hydrogen policy of strategy and roadmap development include the
framework in many countries. This can be achieved German Agency for International Cooperation (GIZ),
through co-financing the creation of a policy frame- the United States Agency for International Develop-
work, knowledge sharing, intergovernmental MoU, ment (USAID) and various multilateral development
policy-supporting financing from the Global North to banks (MDBs). GIZ has supported the development
the Global South and policies for trading green prod- of national hydrogen strategies in Chile, Kenya and
ucts. By leveraging international cooperation, coun- Namibia, for example, and is active in many other
tries can bridge gaps and ensure a more inclusive and countries. USAID supports research, capacity devel-
sustainable hydrogen transition. opment and policymaking in the field of renewable
energy and hydrogen through its Scaling Up Renew-
able Energy (SURE) programme. During the period
2017–2022, over 5,000 individuals worldwide were
trained in clean energy (USAID, 2022). USAID has
also assessed the hydrogen potential of countries
such as India and Mauritania. The national hydrogen
GH2
strategies of Colombia, Costa Rica, Panama, Paraguay,

Trinidad and Tobago and Uruguay were developed 6.2. Multilateral cooperation
in science, technology and
with the support of the Inter-American Development
Bank. The European Bank for Reconstruction and De-
velopment (EBRD) is assisting Azerbaijan and Egypt
in assessing their hydrogen potential (Makhmudova, innovation to accelerate
2023; Zgheib, 2022). global GH2 production and
To accelerate global GH2 adoption, the necessary application
policy and legal frameworks need to be developed,
international standards coordinated and R&D efforts
on GH2 technologies supported. Recognizing this There is a clear argument in favour of multilateral
need and to encourage GH2 use to decarbonize in- cooperation in science, technology and innovation
dustry and promote low-carbon industrial develop- to address the challenge of GH2 use (Stamm et al.,
ment around the world, UNIDO launched its Global 2012). The rapid scaling up of global GH2 as outlined
Programme for Green Hydrogen in Industry (GPHI) in in international strategy documents necessitates the
July 2021 (UNIDO, 2023b). The GPHI focuses on techni- establishment of a new complex and expansive tech-
cal cooperation for developing countries, aiming to nical system within a very short timeframe. Histori-
strengthen local GH2 policies, enhance local financial, cally, the development of large systems such as the
technical and knowledge capacities and to develop power system, railroad and telecommunications took
local pilot projects. several decades, involving experimentation and the
identification of best practices. In the context of GH2,
The United Nations Economic Commission for Europe a global system must be established within a very
(UNECE), with support from donor countries, has con- short time, starting with the large-scale production
ducted assessments on the hydrogen potential of of a green commodity and the logistics related to the
countries in Central Asia and the Caspian region (UN- establishment of a global trade framework for sub-
ECE, 2023). In addition, the Asian Development Bank stances that are difficult to handle (i.e. hydrogen and
(ADB) collaborated with Georgia to launch a project in its derivatives) as well as applying this framework in
2022 that aims to develop a policy, strategy and reg- different offtake industries. Each step of the supply
ulatory framework for green hydrogen development chain presents a range of technological and system-
with private sector participation (ADB, 2022). The ic uncertainties that must be addressed. To navigate
World Bank’s Hydrogen for Development (H4D) Part- these uncertainties and enable stakeholders to make
nership aims to bring together hydrogen stakehold- informed policy decisions, substantial R&D efforts
ers, identify synergies, foster capacity development, and knowledge dissemination are crucial. This will
regulatory solutions, business models and technol- ensure that the most recent information and knowl-
ogies to facilitate the roll-out of low-carbon hydro- edge guide policymaking at every stage of the GH2
gen in developing countries. As part of this effort, the value chain.
ESMAP Green Hydrogen Support Program supports
governments and the private sector by providing in- The development of GH2 presents an opportunity for
vestments and regulatory solutions and developing many industrializing countries to gain a competitive
quality project pipelines in Brazil, Chile, India, Mauri- edge and advance their economies. Certain challeng-
tania and Namibia, amongst others. es must, however, be addressed at the multilateral
level, such as the challenge of maximizing hydro-
Prioritizing funding for research and the develop- gen’s decarbonization potential while minimizing any
ment of guidelines for policymakers from interna- adverse climate impacts in the short term (see Box
tional organizations such as IRENA, UNIDO, IPHE, 5.1). As already mentioned, by establishing a well-reg-
OECD and UNECE is crucial in the emerging field of ulated hydrogen value chain, the risks of leakag-
hydrogen. These institutions’ projects primarily focus es can be effectively mitigated. Urgent actions are
on research on hydrogen policy and technologies, re- needed to develop the necessary scientific evidence
sulting in the production of high-quality reports and and tools that will facilitate the implementation of
guidelines that are freely available to all interested effective policies and regulations. Some key points
parties, including policymakers in developing coun- for consideration include:
tries. IRENA’s first report on the role of renewable
hydrogen was published in 2018 with the support of
Japan (IRENA, 2018). In the past five years, several doz-
en reports have been made available to policymakers
to facilitate their entry into the hydrogen industry.
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Options for international cooperation to support national policymaking
• Support research endeavours aimed at advanc- collaboration and information exchange, policymak-
ing knowledge about hydrogen’s potential global ers can gain a comprehensive understanding of the
warming effects, which still harbour some uncer- GH2 industry and make informed decisions that ben-
tainties. This includes the development of climate efit all. One such example is the International Hydro-
models capable of incorporating the unique gen Energy Center (IHEC), which was established by
characteristics of hydrogen leakage and facilitat- UNIDO with China’s support in Beijing in 2021. It aims
ing a comprehensive assessment of its environ- to develop capacity, disseminate knowledge and ad-
mental impact. vance research in hydrogen in developing countries
(UNIDO, 2021).
• Invest in research initiatives to collect evidence
and minimize uncertainties related to the risks as- In addition to collaborative research, the most com-
sociated with hydrogen leakage across the entire monly used formats for knowledge sharing include
value chain, with specific emphasis on repurposed educational initiatives (such as funding internships,
natural gas infrastructure. MSc and PhD programmes, capacity development
trainings, etc.) and forums (conferences, dialogues,
• Identify effective strategies and best practices to etc.). To date, only few educational programmes exist
address hydrogen leakage, encompassing technical that focus explicitly on cultivating substantial compe-
solutions for the detection and repair of leaks. tencies in GH2. One notable case is the collaboration
between West African Science Service Centre on Cli-
• Implement robust methodologies for measuring, mate Change and Adapted Land Use (WASCAL), RWTH
reporting and verifying hydrogen leakage, estab- and Forschungszentrum Jülich (see Box 6.1).
lishing standardized protocols to ensuring accura-
cy and consistency. Capacity development events are the most common
form of knowledge dissemination in the field of hy-
drogen policy. Such events, which can be conduct-
ed both online and in-person, are already being or-
6.3. Knowledge sharing: ganized by H2Diplo (GIZ), the International PtX Hub
Dialogue and capacity

(GIZ), USAID-SURE, IRENA, UNIDO and many others.
The primary objective of such events is to provide
development policymakers with a comprehensive overview of the
hydrogen industry within a short timeframe (usual-
ly a few hours or days), enabling them to effectively
Despite the vast amount of publicly available resourc- formulate national hydrogen policies. However, the
es on hydrogen policy and technologies, many tech- volume of content, its complexity, multidisciplinary
nical and systemic uncertainties prevail. In addition, nature, cross-sectoral aspects and language barri-
knowledge about hydrogen among policymakers re- ers pose significant challenges to upskilling partic-
sponsible for developing and implementing hydrogen ipants. To foster successful educational initiatives,
policy in their countries is unevenly distributed. The it is crucial to integrate a variety of approaches and
dissemination of knowledge in all its possible forms methodologies. This includes incorporating both the-
is therefore crucial. oretical and practical assignments, encouraging both
collaborative group work and individual work, brain-
Knowledge dissemination is essential to effective- storming sessions, gamification, personalized learn-
ly address the disparities between the Global North ing pathways with dedicated support from tutors and
and the Global South. The Global North, which has far professors, and leveraging modern educational tech-
more experience and financial resources, can signifi- nologies. While these practices have been effectively
cantly contribute to the hydrogen industry’s develop- implemented by international business schools in ex-
ment. The Global South, on the other hand, possesses ecutive training programmes, their use in the upskill-
in-depth knowledge of the local peculiarities that dif- ing of policymakers is still relatively uncommon.
fer considerably from conditions in the Global North.
To bridge these gaps, it is imperative to facilitate
knowledge sharing at multiple levels, ranging from
ministers to frontline policy developers. By fostering
GH2
Box 6.1. International Master’s Programme in Energy and Green Hydrogen
The West African Science Service Centre on Climate Change and Adapted Land Use (WASCAL), under the
sponsorship of the German Federal Ministry of Education and Research (BMBF), has initiated an Inter-
national Master’s Programme in Energy and Green Hydrogen, an interdisciplinary study programme to
address the energy challenges of adaptation and resilience to Climate Change in West Africa. WASCAL is
a fully West African international organization with a focus on academic and transdisciplinary research,
developing graduate-level scientific capacity and serving policymakers in West Africa with science-based
recommendations on adaptation to climate change impacts and land use management. The master’s
programme offers expertise in hydrogen at Forschungszentrum Jülich and RWTH Aachen University, both
located in Germany.
Source: WASCAL, Jülich and Aachen
Conferences and forums on hydrogen policy have 6.4. Policy to support

financing from the Global
gained significant traction and have become more di-
verse, targeting policymakers at different levels and
regions. These events serve as platforms for policy-
makers to exchange ideas and insights on hydrogen North to the Global South
policy. The first high-level Hydrogen Energy Ministeri-
al Meeting, primarily aimed at policymakers, was held The financing of the clean energy transition, particu-
in Japan in 2018, with the participation of 300 repre- larly in the Global South, is a critical aspect of the
sentatives from 21 countries, and has taken place an- hydrogen supply chain. It is imperative to address
nually since (Ministry of Economy, Trade and Industry, the broader challenge of financing the transition to
2018). In separate side events, hydrogen policy has a 1.5°C pathway. The most viable approach involves
become part of larger international forums on climate directing financing towards decarbonization efforts
policy and energy transition, such as the Conference in countries where these are more cost-effective and
of Parties (COP) by the United Nations Framework where there are abundant opportunities for renewa-
Convention on Climate Change (UNFCCC), the Clean ble energy development, namely in the Global South.
Energy Ministerial (CEM), IRENA Assembly and Collab- Countries in the Global South possess immense un-
orative Framework on Green Hydrogen, G20 and many tapped potential for renewable energy sources, mak-
others. Dialogues between policymakers can also ing it economically feasible to invest in their clean
take place bilaterally. For example, the Federal Min- energy transition. To achieve this scenario, countries
istry of Economic Cooperation and Development and in the Global South will require a comprehensive
the Federal Ministry for Economic Affairs and Climate overhaul of their economies, with annual investment
Action of Germany organize green hydrogen sympo- requirements ranging from 2 per cent to 4 per cent of
siums, forums, dialogues and capacity development national GDP (GCA Collaborative, 2022). However, lim-
events in partner countries, including Kenya, Nigeria, ited resources and fragmented financial systems pre-
Kazakhstan, Oman, Namibia, Saudi Arabia, Ethiopia vent low- and middle-income countries in the Global
and Angola. Examples of high-level regional forums South from achieving the necessary investment levels
that bring together policymakers and the private sec- without a substantial increase in financing from the
tor include the European Hydrogen Week (held since Global North. The challenge thus lies in creating a po-
2020), the World Hydrogen MENA (held since 2021) and litical and regulatory framework at the international
the Africa Green Hydrogen Forum (first held in 2022). level that fosters mutual trust and attracts invest-
ments, primarily from the private sector.
| 79
There is a clear bias towards the Global North when

it comes to renewable energy financing. While some 6.5. International
coordination for hydrogen
developing countries such as Brazil, Chile and India
have succeeded in attracting substantial investments
in renewable energy, the majority of developing and
emerging countries has received a disproportionately trade routes
lower share of total global investments in renewables.
This discrepancy is particularly evident for countries At present, the hydrogen industry operates primarily
classified as “least developed”, which received less at the local level, with production and consumption
than 1 per cent of total investments in renewable taking place within the given facility. The transport of
energy between 2013 and 2020 (IRENA, 2023a). At the hydrogen over long distances remains a significant
15th Conference of Parties (COP15) of the UNFCCC in hurdle due to logistical complexities and high costs.
Copenhagen in 2009, developed countries committed Once these challenges are resolved, however, the
to the collective goal of mobilizing USD 100 billion an- possibility of establishing global trade routes for hy-
nually for the Global South. As revealed at COP26 in drogen could become a reality. In 2022, global hydro-
Glasgow in 2021, developed countries had not fulfilled gen imports were valued at approximately USD 300
their pledge. To put this into perspective, the financ- million. The United States and The Netherlands were
ing of projects related to GH2 production, transport the leading importers of hydrogen in 2021, each ac-
and use in emerging markets and developing coun- counting for around one-third of global hydrogen im-
tries would require an annual average investment ports. The top 10 import markets represented nearly
ranging from USD 250 billion to USD 500 billion be- 90 per cent of global hydrogen trade. Canada and Bel-
tween now and 2050 (Gielen et al., 2023). gium were the top exporters of hydrogen, supplying
the United States and The Netherlands, respectively
Developing countries face significant challenges in (IRENA and WTO, 2023).
narrowing the cost gap between GH2 and its alter-
natives (such as grey hydrogen in industry and fos- Global hydrogen trade, although growing, is still rel-
sil fuels in the energy sector) and establishing the atively small compared to other commodities such
necessary GH2 infrastructure. To address this gap, as ammonia and methanol, which reached USD 17.5
international climate financing must be markedly billion and USD 14.1 billion in imports in 2022, re-
increased. Members of the research initiative Global spectively. The trade landscape for ammonia is more
Climate Alliance (GCA), which consists of institutions global compared to hydrogen, with the United States
and individuals from Europe and India, propose es- and India being the top destination markets for am-
tablishing a Global Climate Alliance with broad par- monia in 2021. Other economies such as Morocco, the
ticipation from key countries in both the Global North Republic of Korea, China, Taiwan (Republic of China),
and South (primarily the G20), based on the princi- Thailand, Brazil and Chile are also major import mar-
ple of Common but Differentiated Responsibilities kets for ammonia. The top five suppliers of ammonia
(CBDR). Within this alliance, legally binding commit- in 2021 were Trinidad and Tobago, the Russian Feder-
ments could be announced and monitored, not only ation, Indonesia, Saudi Arabia and Algeria (WTO/IRE-
in terms of reducing GHG emissions but also in terms NA, 2023). China stands out as the largest market for
of contributing funds to a Climate Financing Pool and methanol, accounting for 25 per cent of global meth-
facilitating technology transfers. These commitments anol imports, while other significant import markets
could be overseen by an existing global institution including India, The Netherlands, the United States,
such as the World Bank or the International Monetary the Republic of Korea and Japan have similar import
Fund. Financing could be generated through various shares, ranging from 5 per cent to 7 per cent in 2021.
mechanisms, including carbon tax programmes, the The primary methanol suppliers are natural gas pro-
redirection of special drawing rights, or official de- ducers, including Trinidad and Tobago, Saudi Arabia,
velopment assistance (GCA Collaborative, 2022). Until Oman, the United Arab Emirates, the United States
such a large-scale alliance is established, policymak- and the Russian Federation (IRENA and WTO, 2023).
ers can aim to reduce the risks of GH2 production pro-
jects by lowering the cost of capital (including through Hydrogen and its derivatives have the potential of
blended financing), combining public investments becoming globally traded commodities in the future.
with substantial private investments, and engaging The emergence of green variants opens up new av-
development finance institutions (DFIs) and MDBs. enues for transporting solar and other renewables
The establishment of a transparent and predicta- across borders, effectively enabling the transport of
ble long-term regulatory framework, as discussed in “sunshine”. This transformative capability holds the
Chapter 4, plays a crucial role in this process. promise of fundamentally reshaping the existing
GH2
trade landscape of hydrogen, ammonia and meth- Bilateral agreements can evolve into multilateral
anol. The primary catalyst for this transformation agreements over time. For example, Panama is plan-
would be the price of the supplied commodity, with ning to establish an intergovernmental organization
the cost of electricity serving as a key determinant in to facilitate international trade of GH2 and its de-
GH2 production. rivatives (Argus, 2023). Regional cooperation among
neighbouring countries rather than mere bilateral
GH2 is expected to be most economically produced agreements between importers and exporters may
in regions that possess a favourable combination of unlock opportunities to identify common approaches
abundant renewable resources, available land, access to overcoming barriers in hydrogen development and
to water and efficient energy transport and export ca- application, such as standardization, certification, lo-
pabilities to meet the demand of major centres. The gistics, supply chain, critical minerals, etc.
current MoU with developing countries (see Section
6.5.1) highlight this trend. They boast ample renew-
able energy resources, exporting their locally pro-
duced commodities to countries in the Global North.
The International Hydrogen Trade Forum, coordinated
by UNIDO, was launched in July 2023, and has further
amplified efforts to accelerate international hydro-
gen trade. It brings together Australia, Brazil, Canada,
Chile, Germany, Japan, Saudi Arabia, the Republic of
Korea, The Netherlands, United Arab Emirates, United
Kingdom, United States, Uruguay and the European
Commission on behalf of the EU to accelerate inter-
national GH2 trade. Its primary objective is to provide
a dedicated platform to foster dialogue between the
governments of importing and exporting countries.
From this starting point, more can and should be
done, including intensified efforts in elaborating in-
ternational standardization, the creation of trade cor-
ridors and the development of policies for favourable
trade of green products.
6.5.1. Intergovernmental
Memoranda of Understanding
Many countries have established a Memorandum of

Understanding (MoU), Joint Declarations of Intent or
other forms of partnerships to manifest their inten-
tions to collaborate in the clean energy and hydrogen
industry. While MoU or partnership agreements may
typically lack substantive obligations to detail the
specific agenda of cooperation, the act of signing an
MoU or similar agreement is significant in providing
government and ministry officials with an endorse-
ment for future work. Thus, while a MoU in and of it-
self is not crucial for initiating physical hydrogen or
technology trade between countries, initiating such
cooperation without one can be more challenging.
Based on the map of existing MoU, the EU and East

Asia remain key import nodes on the network, as de-
picted in Figure 6.1. Over the past years, several new
MoU have been concluded with countries in the Glob-
al South, including MENA, sub-Saharan Africa and
Latin America.
| 81
Figure 6.1. Existing bilateral MoU as of October 2023
6.5.2. International standards and ISO, 2022). Developing countries must actively engage
certification in this process to ensure they can benefit from the
global GH2 market. These benefits include access to
the global GH2 market, attracting investments and
The international community has made progress in partnerships by demonstrating that they are “hydro-
developing standards for hydrogen emissions, safe- gen-ready”, facilitating technology transfer, building
ty and operations. While ISO and UNIDO are joining technical capacity, reducing trade barriers, and shap-
forces to develop international standards in the field ing the development of standards to align with their
of systems and devices for the production, storage, unique needs.
transport, measurement and use of hydrogen, there
is still plenty of work that needs to be done to finalize Developing countries willing to invest in GH2 should
the standards, especially in the areas of safety, oper- actively monitor the progress of international stand-
ations and leakage (see Section 5.2) (IEA et al., 2023; ards development and at the same time participate in
GH2
international standard setting. Developing countries accelerate the development and deployment of GH2
can benefit from the work and resources of existing in- infrastructure. This not only speeds up the transition
ternational organizations and initiatives, such as UN- to clean energy, but also mitigates the risks of isolat-
IDO and International Partnership for Hydrogen and ed, fragmented and competitive efforts. A successful
Fuel Cells in the Economy (IPHE), to accelerate their energy transition requires the identification of best
engagement in setting hydrogen standards and cer- routes, i.e. “no-regret” options in which to invest as
tification. Developing countries should furthermore soon as possible. Moreover, international collabo-
invest in building the necessary technical capacity to ration helps establish common standards and certi-
verify compliance with international hydrogen stand- fications for GH2, promoting transparency, trust and
ards to ensure the long-term stability of hydrogen efficiency in cross-border trade (see Section 6.5.2).
projects. This can be achieved through training, work- Consistent standards facilitate the interoperability
shops and technical assistance programmes. UNIDO’s of GH2 systems and technologies, enabling different
activities to raise awareness and involve developing countries to seamlessly engage in energy exchang-
countries in international standards development can es. Creating GH2 trade corridors calls for agreements
be particularly beneficial in this regard. Inclusivity in and investments in infrastructure, including pipelines,
international standard-setting processes ensure that storage facilities and transport methods. These cor-
all voices are heard, and that countries’ specific needs ridors can help developing and emerging economies
are considered in the development of standards. access the necessary infrastructure to support their
nascent GH2 industry.
In addition, developing countries should closely mon-
itor GH2 certification scheme developments in Global
North countries and advocate for alignment of meth- 6.5.4. International collaboration
odologies for such certification and for the interop-
erability of certification systems. Currently, the three
for trading green products
major certification systems (EU, United Kingdom and
United States) have very different characteristics. The Apart from GH2 and its derivatives, developing coun-
different approaches to the certification schemes (in tries should also consider entering into the produc-
terms of criteria, scope and methodologies) that are tion of green products, such as green steel and green
currently being implemented by different countries fertilizers. In this context, unified approaches to green
suggest that greater coordination is needed to pre- financing, together with green product standards will
vent diverse accounting methodologies from becom- enhance the bankability of hydrogen projects. The tax-
ing a barrier to the creation of a global GH2 market onomy of green finance and reporting provides consis-
(IEA et al., 2023). tency and transparency for climate investments, and
aligning it globally will unlock financing opportunities.
The lack of standardized certification methodologies Green product standards, such as for steel or other
can create obstacles to cross-border GH2 trade and products derived from GH2, will enable the creation
hinder international cooperation, risking locking-in of high-value industrial clusters in countries from the
suppliers to a single off-taker and restricting trade to Global South, reducing the cost gap between “grey”
bilateral agreements. By promoting consistency and and “green” products (for more details, see Section
harmonization, developing countries can ensure their 4.3). Oman, the UAE and Mauritania, for example, are
GH2 production finds a larger set of potential buyers. considering such a strategy (Gielen et al., 2023). How-
This will facilitate their market access and increase ever, reaching consensus on unified and standardized
their investment attractiveness with risk mitigation. approaches will be challenging and requires funda-
mental changes in countries’ collaborative efforts to
address the climate crisis. In recent years, countries
6.5.3. International collaboration from the Global North (primarily the EU) have start-
for trade corridors ed implementing new international trade regulation
mechanisms based on carbon footprint accounting.
These mechanisms are aimed at preventing carbon
International coordination to create early GH2 trade leakage and safeguarding the competitiveness of local
corridors is a crucial step in the hydrogen industry’s suppliers amidst varying national carbon regulation
transition. This collaboration ensures the establish- conditions. The first of such mechanisms is the EU’s
ment of a clear and defined path forward and may help CBAM, which started its first phase in October 2023.
prevent delays in GH2 infrastructure roll-out. By fos-
tering international partnerships, such as the Interna-
tional Hydrogen Trade Forum (see Section 6.5), coun-
tries can pool their resources and share knowledge to
| 83
Box 6.2. EU’s Carbon Border Adjustment Mechanism (CBAM)
The European Union’s CBAM is a tool designed to address carbon leakage concerns and promote clean-
er industrial production both within the EU and in non-EU countries. It is an import tax designed to
ensure that the carbon price of imported goods is equivalent to that of domestically produced goods,
thereby aligning with the EU’s climate objectives and preventing the undermining of its environmental
efforts. By introducing a carbon price on imports, the CBAM aims to encourage the adoption of cleaner
production methods worldwide and to contribute to the EU’s ambitious climate targets.
The CBAM initially targets carbon-intensive imports such as cement, iron and steel, aluminium, fer-
tilizers and electricity, aiming to capture more than 50 per cent of emissions in the covered sectors.
CBAM will be gradually phased in over time to allow for a predictable and proportionate transition for
businesses. During the transitional period, which started in October 2023, importers of goods within
the scope of the new rules will only have to report GHG emissions that are embedded in their imports
(direct and indirect emissions), without making any financial payments or adjustments. Once the per-
manent system enters into force in January 2026, importers will need to annually declare the quantity
of goods imported into the EU in the preceding year and their embedded GHG, and fulfil the import tax.
Source: European Commission, 2023
CBAM has led other Global North countries, includ- designed to achieve this goal, as producers of green
ing the United States, United Kingdom, Canada, the products within countries would gain competitive
Republic of Korea and Japan, to consider imple- advantages over “non-green” imports. On the other
menting similar regulatory measures. In the future, hand, the full-scale implementation of these mecha-
this may also extend to China and South Africa ( Ad- nisms with tracking and certification may take years,
nett, 2023; Byers, 2021; Deloitte, 2022). In this context, and unintended consequences such as barriers to
it remains unclear whether a combination of diverse competition, technology transfers and the redirec-
national counterparts to CBAM would be the optimal tion of carbon-intensive products to other markets
mechanism for stimulating global decarbonization could arise.
and optimizing financing. On the one hand, they are
GH2
| 85
Policy Sheets
GH2
| 87
GH2
| 89
GH2
| 91
GH2
| 93
GH2
| 95
GH2
| 97
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GREEN HYDROGEN FOR SUSTAINABLE

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2. The GH2 industry: reframing the narrative................................................................. 22

3. Backward linkages in GH2 production.........................................................................38

4. Local downstream market creation policies.............................................................48

5. Transport and distribution policies................................................................................64

6. Options for international cooperation to support national policymaking........... 76

ADB Asian Development Bank

AHJ Authorities having jurisdiction

BF-BOF Blast furnace – basic oxygen furnace

BMBF German Federal Ministry of Education and Research

BoP Balance of plan

CAPEX Capital expenditure

CBAM Carbon Border Adjustment Mechanism

CBDR Common but Differentiated Responsibilities

CCS Carbon capture and storage

CEM Clean Energy Ministerial

CO2 Carbon dioxide

CoC Certificate of conformity

COP Conference of Parties

CSR Corporate social responsibility

DFI Development finance institution

DRI Direct reduced iron

EBRD European Bank for Reconstruction and Development

ESMAP The Energy Sector Management Assistance Program

FDI Foreign direct investment

GCA Global Climate Alliance

GDP Gross domestic product

GEP Green Energy Park

GH2 Green hydrogen

GHG Greenhouse gas

GHIC Green hydrogen industrial clusters

GIZ German Agency for International Cooperation

GPHI Global Programme for Green Hydrogen in Industry

H4D Hydrogen for Development

IHEC International Hydrogen Energy Center

HFC Hydrogen and fuel cell

IAO Implementation Authority Office

IEC International Electrotechnical Commission

IRENA International Renewable Energy Agency

ISO International Organization for Standardization

JETPS Just Energy Transition Partnerships

KPIs Key performance indicators

LCOE Levelized costs of energy

LCOH Levelized costs of hydrogen

LCR Local content requirement

LDC Least developed country

LH2 Liquefied hydrogen

LOHC Liquid organic hydrogen carriers

MDBs Multilateral development banks

MENA Middle East and North Africa

MoU Memorandum of Understanding

MWh Megawatt hour

NDCs Nationally determined contributions

NGHRI Namibia Green Hydrogen Research Institute

NHS National hydrogen strategy

OECD Organisation for Economic Co-operation and Development

O&M Operations and maintenance

OPEX Operations expenses