Navigating the challenges needed to accelerate the global hydrogen trade and achieve our 2030 climate goals

The global push for low-carbon hydrogen is crucial for achieving climate goals and reducing reliance on fossil fuels. However, some challenges threaten to slow progress and derail efforts to meet the 2030 climate targets. BCG’s analysis provides a comprehensive overview of these challenges and proposes strategic measures to accelerate the global hydrogen trade.

Current State of Hydrogen Trade
The current landscape of low-carbon hydrogen production and trade is marred by high costs and limited infrastructure. The production of low-carbon hydrogen, which includes green hydrogen (produced through electrolysis powered by renewable energy) and blue hydrogen (produced from natural gas with carbon capture and storage), is still in its nascent stages. The equipment and energy required for production are expensive, making hydrogen less competitive compared to traditional fossil fuels.

Projected Shortfalls
BCG’s projections indicate that, by 2030, export-oriented projects will produce only 3 million tonnes per annum (Mtpa) of low-carbon hydrogen. This figure is significantly below the 8 Mtpa required to maintain the trajectory needed to limit global temperature increases to 2°C. This shortfall underscores the urgent need for accelerated development and deployment of hydrogen production facilities and infrastructure.

Marine Transport and Infrastructure Challenges
One of the critical aspects of hydrogen trade is its transportation. While marine transport capabilities for hydrogen are expected to be adequate, Europe’s hydrogen import pipeline capacity is anticipated to fall short. This infrastructural gap could hinder the efficient distribution of hydrogen from production sites to demand centers. To address this, substantial investments in pipeline infrastructure and alternative transportation methods, such as shipping liquefied hydrogen, are necessary.

Strategic Actions for Governments and Companies
Governments and companies can undertake several strategic actions to close the projected gap in hydrogen production and trade:

1. Investment in Technology and Infrastructure: Governments and private sector actors must invest heavily in the development of hydrogen production technologies and the necessary infrastructure for its transportation and storage.
2. Policy Support and Incentives: Effective policy frameworks and incentives are crucial to drive the hydrogen market. Governments need to implement policies that reduce the cost of hydrogen production and provide subsidies or tax incentives for companies investing in hydrogen technologies.
3. International Collaboration: Since hydrogen trade is inherently global, international collaboration is vital. Countries need to work together to establish standards, trade agreements, and joint investments in hydrogen projects.
4. Scaling Up Production: Companies must focus on scaling up the production of low-carbon hydrogen to achieve economies of scale, which can significantly reduce costs. This involves not only increasing the number of production facilities but also enhancing the efficiency of existing technologies.
5. Public-Private Partnerships: Collaborative efforts between the public and private sectors can drive innovation and investment in the hydrogen sector. Public-private partnerships can leverage the strengths of both sectors, combining the innovation and agility of private companies with regulatory support and funding from governments.

Long-term Vision and Sustainability
The long-term vision for hydrogen trade involves creating a sustainable and resilient hydrogen economy. This vision includes integrating hydrogen into various sectors, such as transportation, industry, and power generation, to reduce carbon emissions across the board. Additionally, the development of green hydrogen, which relies entirely on renewable energy sources, is paramount for ensuring the sustainability of the hydrogen economy.

Conclusion
Accelerating the global hydrogen trade is essential for meeting climate targets and transitioning to a low-carbon economy. The challenges are significant, but with concerted efforts from governments, companies, and international bodies, these obstacles can be overcome. By investing in technology, infrastructure, and collaborative efforts, the global community can build a robust hydrogen economy that plays a pivotal role in combating climate change and ensuring a sustainable future.