New Research Reveals Current Hydrogen Policies Insufficient to Meet Global Hydrogen Ambitions
A new policy brief by Cambridge Econometrics and the University of Exeter reveals that current hydrogen policies are insufficient to meet global hydrogen ambitions, highlighting the need for additional policies to kickstart global green hydrogen production.
Using a new economic model which simulates the deployment of hydrogen production technologies in response to different policy levers, Cambridge Econometrics’ team of economic modelling experts explored the impacts of a global mandate for green ammonia for use in fertilisers and a global carbon price on all hydrogen production.
Producing green hydrogen to make ammonia for fertilisers is viewed by many market analysts and governments as an early route to create a large-scale green hydrogen market. This would cut emissions from ammonia production – which currently accounts for around 2% of all global emissions – and could reduce production costs and unlock the use of green hydrogen in other sectors.
Modelling results revealed that even with these additional stringent policies, green hydrogen is only cost competitive in some world regions where there is access to low-cost renewable.
We modelled a global carbon price levied on hydrogen production that starts at zero in 2025 and increases linearly to $200/tCO2 in 2050. The cost of fossil-fuelled hydrogen reaches the same level as electrolytic hydrogen with dedicated renewables in some world regions in 2050 and when this is combined with a mandate on electrolytic hydrogen for use in ammonia production, cost parity is achieved earlier due to faster learning-by-doing effects
Co-author and Managing Economist, Cambridge Econometrics
In Brazil – which has great potential for wind power generation – green hydrogen can be cost-competitive with domestic fossil-fuelled hydrogen under current policies. However, even in regions with cheap renewables like Brazil, there is a risk of demand and supply being mismatched without demand-side policies such as mandates
Head of Global Environment, Cambridge Econometrics
The report is part of the Economics of Energy Innovation and System Transition (EEIST) project, funded by the UK Government’s Department for Energy Security and Net Zero.
Our findings might temper the ‘hydrogen hype’ from some governments and businesses. However, green hydrogen is the only realistic option for decarbonising fertiliser production and for making clean steel, and it may have a role in other sectors such as aviation. Achieving the ‘tipping point’ of cost-competitive green hydrogen is tough but necessary, and will likely require strong and sustained policy support.
Senior Lecturer in Innovation, Energy and Climate, Global Systems Institute, University of Exeter
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