Hydrogen: The State of the Global Transition

Hydrogen is widely seen as a cornerstone of the global energy transition — particularly for sectors that are difficult to electrify, such as heavy industry, shipping and aviation. Yet despite growing ambition, progress remains uneven. Emissions are still high, costs remain a challenge, and large-scale deployment is slower than hoped.

This article explores the current state of hydrogen production, the barriers holding back renewable and low-carbon hydrogen, and the policy and investment actions needed to unlock meaningful progress.

Emissions: Little Progress So Far

Today, hydrogen production is still heavily reliant on fossil fuels. As a result, it is associated with nearly 1,300 million tonnes of CO₂-equivalent emissions each year. Despite years of discussion and pledges, there has been no meaningful reduction in these emissions — in fact, they have edged upward in recent years.

Global hydrogen production approached 100 million tonnes in 2024, and while this growth has kept the average emissions intensity roughly stable over the past five years, stability is not the same as progress. Without structural change in how hydrogen is produced, emissions will remain stubbornly high.

Costs: The Economic Gap Widens

Renewable and low-carbon hydrogen — produced using renewable electricity or paired with carbon capture — is still significantly more expensive than hydrogen made from unabated fossil fuels.

In recent years, the cost gap has actually widened. Slower-than-expected deployment, inflationary pressures, and falling fossil fuel prices have all worked against clean hydrogen’s competitiveness.

Electrolysers, a key component in renewable hydrogen production, are expected to become cheaper over time through scale-up, innovation and improved manufacturing. However, these cost reductions depend heavily on deployment pace. Without stronger demand and clearer investment signals, cost declines will remain slower than projected.

Deployment: Still a Small Share of the Market

Renewable and low-carbon hydrogen production reached around 0.8 million tonnes in 2024, accounting for less than 1% of global hydrogen supply.

Based on projects that have reached a final investment decision (FID), production could exceed 4 million tonnes by 2030. However, this represents only 9% of all announced hydrogen projects, highlighting a significant gap between ambition and execution.

The challenge is no longer announcing projects — it is converting them into operational capacity.

Why Clear Emissions Rules Matter

One of the biggest obstacles to investment is regulatory uncertainty. In many countries, it remains unclear what level of emissions qualifies hydrogen as “low-carbon” or “renewable” for the purposes of subsidies and support schemes.

Clear rules that define emissions thresholds — aligned with, or consistent with, International Organization for Standardization (ISO) methodologies — are critical.

Why this matters:

• Investors face compliance risk without regulatory clarity

• Inconsistent rules fragment markets and limit international trade

• ISO-aligned standards enable mutual recognition of hydrogen certificates

• Emissions-based regulation supports technology-neutral approaches

Key indicators of success include:

• The number of countries with ISO-consistent emissions thresholds

• The share of global hydrogen production covered by these rules

International collaboration is already underway through initiatives led by the International Energy Agency and the International Partnership for Hydrogen and Fuel Cells in the Economy, which aim to build a common certification framework and shared language for hydrogen markets.

Stimulating Demand Is Essential

Supply alone will not drive the hydrogen transition — demand must be actively created.

Policy measures that encourage the use of renewable and low-carbon hydrogen in sectors where hydrogen is already used (such as refining, ammonia and methanol production), as well as in high-value new applications, are essential.

Effective demand-pull policies include:

• Carbon contracts for difference

• Fuel standards and mandates

• Public procurement requirements

• Grants, tax incentives and loan guarantees

Why demand matters:

• It unlocks supply-side investment

• It enables economies of scale and cost reductions

• It accelerates innovation and demonstration projects

• It supports emerging applications like green steel, shipping and aviation

Progress will be measured by how many countries implement these policies and how much of global hydrogen demand they ultimately cover.

International developments — such as negotiations around the International Maritime Organization Net-Zero Framework — could provide crucial long-term visibility for maritime fuel demand and stimulate off-take agreements.

The Role of Firm Offtake Agreements

One of the biggest challenges for project developers is securing creditworthy, long-term buyers.

While many off-take agreements have been announced in recent years, most remain non-binding or preliminary. Without firm commitments, projects struggle to reach final investment decisions.

Securing long-term, binding off-take agreements is the single most effective way to de-risk hydrogen projects and unlock financing.

Buyer alliances — such as those focused on sustainable aviation, maritime transport and steel — are increasingly helping to aggregate demand and negotiate stronger agreements.

Scaling Finance in Emerging Markets

Emerging markets and developing economies (EMDEs) have enormous potential to produce cost-competitive renewable hydrogen. Yet progress in these regions remains limited.

The main barriers are financial:

• Higher cost of capital

• Limited access to concessional finance

• Infrastructure and regulatory gaps

Scaling up concessional finance — alongside technical assistance — is essential to help large projects in EMDEs reach final investment decisions. This must also be paired with strategies that prioritise domestic value creation, rather than relying solely on exports.

Recent progress includes:

• Development finance support for large-scale hydrogen initiatives

• Project financing in countries such as Namibia, Brazil and Paraguay

• Multilateral commitments to support projects reaching FID by 2030

Success will be measured by the amount of renewable and low-carbon hydrogen capacity in EMDEs that reaches final investment decision with concessional finance support.

Conclusion: From Ambition to Execution

Hydrogen has a critical role to play in the energy transition, but progress will not happen by default. Emissions remain high, clean hydrogen is still expensive, and deployment is lagging behind ambition.

Clear emissions standards, strong demand-side policies, firm off-take agreements, and targeted concessional finance — especially in emerging markets — are all essential to move from announcements to action.

The next phase of the hydrogen transition will be defined not by promises, but by execution.