How to foster a resilient, efficient and clean hydrogen ramp-up – A comparative assessment of EU and US support systems

Achieving climate targets in hard-to-electrify sectors such as energy-intensive industries, aviation and maritime requires rapid uptake of renewable and low-carbon hydrogen despite market uncertainties. However, hydrogen will contribute to decarbonization only when its production comes with zero or very limited greenhouse gas emissions. Moreover, limited public funding calls for an efficient allocation of support. Public support systems for hydrogen need to address this conundrum of greenhouse gas effectiveness, economic efficiency and resilient market uptake with a suitably designed instrument mix. A key question is how to identify ex-ante gaps and deficiencies in the instrument mix. This paper develops assessment criteria for such support systems, expanding existing assessments beyond supply-side policies and electrolytic hydrogen. The criteria are then applied to the most relevant deployment policies in the European Union, including but not limited to the Hydrogen Bank, and the United States, namely the Inflation Reduction Act and the Bipartisan Infrastructure Law. The findings indicate that the EU support system is more stringent regarding greenhouse gas effectiveness and economic efficiency than the US support system but poses greater risks to rapid market uptake due to its complexity and limited focus on domestic supply chains. The results are partially validated by recent market developments based on the IEA Hydrogen Projects Database, while the infancy of the market prevents a complete ex-post evaluation. The findings imply that the EU support system could benefit from strengthening domestic manufacturing, while the US should consider establishing a governance mechanism that enables a phaseout of fossil-based hydrogen production.