A collaborative report from the International Renewable Energy Agency (IRENA) and the World Trade Organization (WTO), released on December 9th, sheds light on the global hydrogen trade landscape and the policies required to escalate green hydrogen production. Green hydrogen, produced exclusively from renewable energy sources, has emerged as a pivotal element in the transition away from fossil fuels and the decarbonization of sectors challenging to electrify, such as certain industrial processes, shipping, and aviation.
The global shift towards low-carbon energy necessitates a rapid increase in green hydrogen production. IRENA estimates that, in a scenario where global temperatures are limited to no more than 1.5°C above pre-industrial levels, hydrogen and its derivatives could account for 14% of global final energy consumption by 2050.
Presently, a significant portion of global hydrogen production, approximately 95 megatons per year, relies on fossil fuels, contributing substantially to climate change rather than aiding decarbonization efforts. The report underscores the urgency of reshaping the hydrogen landscape, transitioning existing uses to clean hydrogen sources, and expanding overall hydrogen production more than five-fold by 2050. Achieving this expansion will demand an unprecedented scaling up of renewable generation capacity and electrolyser capacity.
Roland Roesch, Director of IRENA’s Innovation and Technology Centre, remarked, “In a net-zero world, the current landscape of hydrogen production and consumption needs to change dramatically.” He further emphasized the critical role of global trade in linking regions with low production costs to areas with high demand.
The report highlights that expanding green hydrogen production will necessitate the development of new supply chains, potentially impacting international trade in renewable hydrogen, associated commodities, equipment, and services along the value chain.
The publication underscores how reducing tariffs on essential products, establishing reliable infrastructure, realigning domestic support programs, and promoting green government procurement can foster green hydrogen supply chain development and facilitate the transition to a low-carbon economy. Additionally, international trade could play a pivotal role in bridging the gap between supply and demand for green hydrogen, especially in economies where domestic production may fall short of meeting domestic demand.
Aik Hoe Lim, Director of the WTO Trade and Environment Division, emphasized, “Open, predictable, and coherent trade will be key to fostering green hydrogen value chains.” He noted the importance of standards and verification procedures in building a sustainable hydrogen market and suggested that WTO disciplines can offer guidance on developing international standards and harmonizing national regulations.
The report also delves into the opportunities and challenges presented by green hydrogen and its derivatives, such as green methanol and green ammonia, for developing economies. It underscores the necessity for international cooperation and regulatory alignment to encourage technology development, enhance transparency, and stimulate market growth in the green hydrogen sector.