Here's how global trade will be key to unlocking the full potential of the green hydrogen market

The world is rapidly moving from ambition to action when it comes to tackling climate change.

Government officials, executives, researchers, and other parties around the world are looking to help accelerate the ongoing energy transition, as a necessary condition for growth and sustainable development. Against this backdrop, Deloitte's Green hydrogen: Energizing the path to net zero report reveals that green hydrogen is moving into prime position as a solution for hard-to-abate sectors, and investments to help accelerate this opportunity should take place now. Produced from electrolysis using renewable electricity such as solar and wind, green hydrogen is gaining momentum and making headway as a potential breakthrough technology that can help to achieve climate neutrality by 2050.

Inclusive, global trade is the key

Free trade can help lower the cost of energy transition. Deloitte's outlook showcases a steady hydrogen market growth, from $642 billion in annual revenue in 2030 to $1.4 trillion per year in 2050, in which green hydrogen comprises some 85% of the hydrogen market. Global trade between major regions can represent almost one-fifth of total clean hydrogen volume. If they seize the opportunity, export revenues from clean hydrogen can help today's fossil fuel exporters offset declining revenues from oil, natural gas, and coal.

Trade is critical to the affordable decarbonization of the world economy. Free trade can spur economic development by supporting local activity, improving trade balance, and facilitating the global energy transition. Deloitte's analysis suggests that the clean hydrogen economy could support up to 1 million new jobs per year by 2030, and double that pace over the following two decades, out of which 1.5 million jobs a year could be supported in developing countries.

The opportunity for developing economies

Regions with high renewable endowment and ample land availability could likely produce cost-competitive green hydrogen in quantities that exceed domestic needs. By 2050, four regions collectively could account for about 45% of global hydrogen production and 90% of trade: North Africa and Australia have the highest export potential compared to their domestic demand, followed by North America and the Middle East; South America and sub-Saharan Africa can also actively take part in global trade, with some 10% of traded volumes. On the import side, Japan and Korea — facing resource and land availability constraints — are likely to heavily depend on global trade, importing 90% of their demand between 2030 and 2050. Europe, China, and India can produce substantial amounts of hydrogen but also are like to rely on imports throughout the transition. A diversified transport infrastructure can be key to help facilitate global trade.

Global trade is mostly about derivatives

The most commonly traded products are hydrogen derivatives — ammonia, methanol, and sustainable aviation fuels (SAF) — which are easier to transport over long distances.

In Deloitte's outlook, ammonia accounts for 70% of traded volumes in 2030 in hydrogen-equivalent terms. As demand for pure hydrogen scales up, ammonia can also become a more prevalent long-distance shipping option, and this commodity could account for just over half of 2050 global trade in hydrogen-equivalent terms.

Methanol and SAF are naturally global markets. Between 2030 and 2050, about one-third of methanol and almost half of SAF are traded between major regions, such as North Africa, Middle East, North America, Australia, and Europe.

Due to transport challenges, when possible, pure hydrogen should be produced domestically (90% of global consumption) or imported via pipelines from neighbouring regions.

Investments should take place now

By maximizing low-cost resource use at the global scale, free trade can lower the total cost of the hydrogen supply chain compared to a protectionist pathway with interregional volumes limited to a quarter of their optimal level. Importantly, investments to accelerate this opportunity should take place now.

Fixed assets should be planned with a long-term view, to help avoid lock-in effects. Planning should prioritize production infrastructure and trade routes that withstand technological, geopolitical, and deployment uncertainties.

International cooperation will likely be crucial to help foster the timely growth of the clean hydrogen market—and to help ensure a level playing field across global regions and economies. Governments may need to offer support to initiate market ramp-up, which could encourage some countries to engage in a race for economies of scale to dominate the future market. Through appropriate international agreements, standards harmonization, and industrial policy coordination, governments can leverage synergies for climate and energy policies to help deliver a sound, growing market benefiting all.

To find out more, read Deloitte's Green hydrogen: Energizing the path to net zero report.

This article was created by Deloitte with Insider Studios.

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