Governments and regulators need to create programmes that better support low-emission hydrogen production, according to a new report from the International Energy Agency.

In its Global Hydrogen Review 2023, the IEA warned there is an urgent need to switch existing applications from fossil fuel-based hydrogen to low-emission hydrogen, which accounts for just 0.7% of total hydrogen demand. The agency added that without a substantial increase in demand, low-carbon hydrogen producers will struggle and the industry’s viability will falter.

With inflation on the rise, the IEA also noted that “greater investment is needed to close the cost gap between low-emission hydrogen and unabated fossil fuels-based hydrogen.” Without a switch to low-emission hydrogen, climate and decarbonisation goals may be missed, the IEA says, highlighting its importance in the clean energy sector.

While international cooperation and initiatives could create 0.8-3 million tonnes of low-emission hydrogen demand by 2030, the true impact of those pledges is still unknown, the IEA says. That’s because the initiatives mostly target new hydrogen applications rather than ones in better-suited sectors like refining. Last year, less than 1% of the 41m t of hydrogen used in refining was of low-carbon emissions, Kallanish learns.

Around the world, governments are trying to make low-emission hydrogen production attractive by putting a tremendous amount of funding, tax credits and initiatives behind their offers. Schemes like the Hydrogen Production Tax Credit in the US have spurred production, however, wider issues continue to delay projects.

The report released on Friday noted that some programmes and support schemes simply wait too long to provide funding to project developers once a scheme has been announced. To counter this, the IEA recommends that leaders prioritise funding availability in short order and evaluate the efficiency of their licensing and permitting processes to avoid further delays.

In addition, to keep investments flowing, any regulations should be balanced and in line with regular market monitoring, the agency says. This includes anticipating lead time on projects involving infrastructure developments, such as pipelines and underground storage.