Hydrogen is often presented as a ‘silver bullet’ for decarbonisation due to its potential to be used as a fuel to heat homes, power planes and ships, and produce chemicals. But only green hydrogen is truly sustainable – and it is expensive and energy inefficient to produce compared to alternatives like direct electrification. Therefore, the most important question when considering green hydrogen’s role in decarbonisation is not whether it can be used as a sustainable fuel, but whether it should be and for what purposes.

What is hydrogen, and how do we make it green?

• Hydrogen has many industrial applications, from oil refining to fertiliser production. While it is the most abundant element in the universe, there are limited ways to harness it. Most hydrogen today is produced from natural gas using a process called steam methane reformation. This hydrogen is often referred to as grey hydrogen.

• Grey hydrogen production releases carbon dioxide (CO2), meaning its continued use is not compatible with decarbonisation trajectories. While the steam methane reformation process can be combined with carbon capture and storage (CCS) to produce what is known as blue hydrogen, the efficacy of this process is not fully known and it is likely to still result in CO2 emissions.

• Therefore, if hydrogen is to play a significant role in reducing emissions from hard-to-electrify sectors, an alternative production method is needed. This is where green hydrogen comes in – produced using electricity, which powers an electrolyser to split hydrogen from water molecules. As long as the electricity used comes from a renewable source, this process does not produce CO2 either at the point of generation or combustion.

• So what is the downside? Green hydrogen will require a significant amount of electricity to meet global hydrogen demand. While this is not a reason to discount green hydrogen from the future energy mix, it is a reason to limit its application to the sectors without other decarbonisation options.

Where is green hydrogen needed?

• Green hydrogen has a number of attributes that make it attractive as a clean energy source: it can be burnt to produce energy; used in a fuel cell to convert hydrogen into electricity; store energy; and be used as a feedstock to produce other clean fuels such as ammonia, methanol or sustainable aviation fuels (SAFs). Importantly, no CO2 is produced when hydrogen is combusted, meaning when renewable electricity is used to produce green hydrogen via electrolysis it is a truly sustainable fuel.

• Producing green hydrogen is not cheap, and it is an inherently inefficient process. This means it’s preferable to directly electrify all sectors where this is possible (such as domestic heating and road transport), as it is a cheaper and more efficient route to decarbonisation.

• Green hydrogen will be crucial to decarbonising sectors where direct electrification is not possible. Supply of green hydrogen should first be targeted towards those industries heavily reliant on grey hydrogen today. Supply must also be ramped up – and quickly – for sectors that have no other route to decarbonisation.

• As shown in the following diagram, shipping and aviation are two such sectors, with green hydrogen and hydrogen-derived fuels best placed to meet the high energy and long-distance fuel requirements.

The challenge

• There isn’t yet a significant supply of green hydrogen, and it will not be scaled significantly in the immediate future. Despite being a theoretically abundant fuel, in the coming years it will still be limited in supply while the industry is scaled.

• There’s a risk that if this supply is targeted towards sectors that can be electrified or have other routes to decarbonisation, there will not be a secure supply of green hydrogen available for those sectors with no alternative to decarbonise. Furthermore, this green hydrogen will have been used inefficiently.

• Similarly, without regulation sending a clear demand signal for green hydrogen from ‘no regret’ use sectors, like shipping and aviation, there is a risk that hydrogen production will not ramp up at the speed and scale needed.

What is the current policy landscape?

Adopted in 2020, the EU's Hydrogen Strategy (COM/2020/301) recommended policy actions in five areas: research and collaboration, international cooperation, building a market and infrastructure for hydrogen, investment assistance, and production and demand support. The full list of actions was implemented by the first quarter of 2022.

Following this, in 2022, the Fit for 55 legislative package aims to cut greenhouse gas emissions in the EU by at least 55% by 2030. The goal of the regulations on the use of renewable and low-carbon fuels in maritime transport (FuelEU maritime) and on ensuring fair competition for sustainable air transport (also known as the ReFuelEU aviation initiative) were accepted by the Council in July and October 2023, respectively. However, both pieces of legislation support the use of fuels in aviation and shipping that are not sustainable long-term, such as LNG (a fossil fuel) or biofuels (where there are large questions about scalability and land-use impacts). In addition, they do little to support the use of green hydrogen in shipping and aviation. It is vital that the next EU hydrogen strategy and updates to shipping and aviation legislation focus on rolling out green hydrogen fuels. Read more about our research on this in our Green Hydrogen Gap Report.

What we need from policymakers

• Production of green hydrogen will not be scaled at the pace required without clear policies and regulations driving its demand. Here are our recommendations to achieve this:

• Hydrogen strategies must recognise that green hydrogen has a unique, long-term role to play in decarbonising hard-to-electrify sectors, such as shipping and aviation, that have no other routes to decarbonisation.

• Hydrogen strategies should make clear that green hydrogen should only be used in these sectors that don’t have alternatives and regulate to ensure it is not taken forward as a major decarbonisation strategy for those sectors that do have alternatives, such as home heating and road transport.

• Adopt a cross-departmental approach to hydrogen policy, ensuring that transport stakeholders are involved in decision making on future uses of green hydrogen (and direct air capture).

Want to learn more? Read our Green Hydrogen Gap report here.*

* This factsheet draws on information and statistics included in the Green Hydrogen Gap report and supporting research conducted by Arup.