Coal tar, a major by-product of the coal industry, presents considerable difficulties in its refining and conversion into fuels due to its complex chemical composition and physical properties, such as high viscosity, corrosiveness, thermal instability, etc. Here we report a new route for producing hydrogen-rich gases together with carbonaceous materials, including carbon nanotubes, through the microwave-initiated catalytic deep dehydrogenation of coal tar using inexpensive iron catalysts. The resulting carbonaceous materials generated over the catalyst were investigated using a variety of techniques including scanning electron microscopy (SEM), transmission electron microscopy (TEM), temperature programmed oxidation (TPO) and Raman spectroscopy. Importantly, we have found that an aqueous emulsion feed of the coal tar enables considerably easier handling and an enhanced hydrogen production whilst also significantly reducing the extent of catalyst deactivation. This behaviour is shown to be assisted by the phenomenon of micro-explosion that enhances mass and heat transfer during the catalytic reactions.