Financial dynamics, green transition and hydrogen economy in Europe

Abstract

The introduction of the Next Generation funding scheme provides an opportunity for the EU-25 to make significant financial progress towards a radical and fully sustainable Green economy. This study examines the financial implications of a complete transition to hydrogen energy. In this paper, we propose the Hydrogen Production Safe Supply and Storage energy model by analyzing the conversion of electricity from offshore wind farms to hydrogen, which serves as both an energy storage and fuel for a variety of sectors, including transportation, households, industries, and governments. We analyze the financial impact of the Green transition across the EU-25 economies, based on a panel auto-regressive distributed lag model and the simulation procedure proposed by Jordan and Philips (2018). In addition to electricity production and consumption, the variables used include greenhouse gas emissions, real output per capita, and total environmental tax revenue. According to the study's financial insights, increased renewable electricity production results in a significant reduction in household energy consumption, as well as an increase in consumption in the transportation, industrial, and public sectors. These findings underscore the economic implications of transitioning to renewable energy and highlight the financial imperatives, such as targeted state aid, the immediate expansion of the hydrogen supply network, further research on safe mobile hydrogen containment, and an extensive upgrade of the regional hydrogen supply network within the EU-25.