Cost reduction in low-carbon hydrogen: effective but insufficient to mitigate carbon emissions

Abstract

Many countries have announced hydrogen promotion strategies to achieve net zero CO2 emissions around 2050. The cost of producing low-carbon (green and blue) hydrogen has been projected to fall considerably as production is scaled up, although more so for green hydrogen than for blue hydrogen. This article uses a global computable general equilibrium (CGE) model to explore whether the cost reduction of green and blue hydrogen production can mitigate the use of fossil fuels and related carbon emissions. The results show that cost reduction can raise low-carbon hydrogen consumption markedly in relative terms but marginally in absolute terms, resulting in a modest decrease in fossil fuel use and related carbon emissions. The cost reduction of low-carbon hydrogen slightly lowers the use of coal and gas but marginally increases the use of oil. If regional CO2 taxes are introduced the increase in green hydrogen production is considerably larger than in the case of low-carbon hydrogen cost reduction alone. However, if cost reduction in low-carbon hydrogen is introduced in addition to the CO2 tax the emissions from fossil fuels are only marginally reduced. Hence, synergy effects between the two measures on emissions are practically absent. A low-carbon hydrogen cost reduction alone is effective but insufficient to have a substantial climate impact. This study also calls for modeling development to capture special user preferences for low-carbon hydrogen related to climate mitigation when phasing in new energy carriers like hydrogen.