Related News

Global trade set to bounce back after sluggish 2023: WTO

ECAs continue to favour fossil fuels over clean energy, data shows

EU makes fresh bid for OECD export credit fossil fuel ban

Green shoots signal brighter trade picture for 2024: UN

WTO advances fossil fuel subsidy reform plans

The World Trade Organization (WTO) and International Renewable Energy Agency (IRENA) are calling on governments around the world to implement trade policies to support the rapid increase in green hydrogen production needed to transition to a low-carbon economy.

Produced by passing an electric current through water molecules, hydrogen gas currently supplies 2.5% of global final energy demand. The vast majority of global hydrogen production uses electricity derived from fossil fuels, and as a result, IRENA says, is responsible for more than 830 million tonnes of carbon dioxide emissions each year.

Green hydrogen – made using renewable power – is seen as a key pillar in replacing fossil fuels and decarbonising sectors that cannot easily be electrified, such as some industrial processes, shipping and aviation. To keep global warming at no more than 1.5°C above pre-industrial levels, 14% of global final energy demand should be supplied by green hydrogen, a quarter of which could be satisfied through international trade, according to IRENA. This will require both a dramatic ramp-up of overall green hydrogen production and the transition of existing hydrogen production to clean sources.

To achieve this, policies need to be implemented to facilitate the trade of the necessary equipment and services – such as that related to renewable electricity generation and electrolyser capacity – as well as the trade of renewable hydrogen itself and the commodities produced with it, say the agencies in a joint report.

“In a net-zero world, the current landscape of hydrogen production and consumption needs to change dramatically,” says Roland Roesch, director of IRENA’s Innovation and Technology Centre.

For governments, this means lowering tariffs on key products  as well as realigning regulatory frameworks, domestic support programmes and subsidies, the two organisations say.

“Open, predictable and coherent trade will be key to fostering green hydrogen value chains,” says Aik Hoe Lim, director of the WTO’s Trade and Environment Division.

To scale up and facilitate enough global trade in green hydrogen, the WTO and IRENA propose policymakers take five concrete actions.

The first is to address trade barriers along the green hydrogen supply chain. “Trade in goods and services along the green hydrogen supply chain is affected by various barriers to trade, including tariffs and non-tariff measures,” the report says. It adds that a large number of WTO members have set tariffs higher than 5% for hydrogen as a commodity, for derivatives such as ammonia and methanol, and for products along the supply chain, such as electrolysers, compressors, generators and fuel cells.

However, ensuring sufficient political will exists to tackle these barriers might be easier said than done. Earlier this year, conditions set by Germany for its green hydrogen tender were met with a furious response from India, which aspires to become a major global exporter of the gas. Among restrictions, the tender required green hydrogen producers to be located less than 500km from the renewable energy plant from which they draw power, according to Reuters.

In comments reported by local and international media during the July International Conference on Green Hydrogen, Raj Kumar Singh, India’s minister of power and new and renewable energy, said: “For decades, these countries have given speeches on the benefits and ethics of free trade and now those countries are setting up barriers, which is shameful. Barriers can be put up by both parties… [and] if you do, we can put them up as well.”

The second action, likely to be less contentious, is to implement standards to guarantee the environmental integrity of green hydrogen production and provide information on the production process and emissions footprint along the value chain. Frameworks for areas such as carbon measurement methodologies, definitions of low-carbon hydrogen or verification already exist. As such, the WTO and IRENA suggest governments ensure that their national context is properly reflected by engaging in technical committees in international bodies like the International Organization for Standardization and the International Electrotechnical Commission.

The third recommendation is to implement support policies for green hydrogen. This, the WTO and IRENA say, means phasing out fossil fuel subsidies – a topic that was at the heart of numerous increasingly ill-tempered exchanges between Cop28 attendees.

“Redirecting fossil fuel subsidies would make it possible to incorporate costs of environmental externalities not reflected under subsidised prices, which would render green hydrogen more competitive,” the report says, adding that “subsidy reforms must be mindful of the various economic and social forces at work, as well as the imperative for a just and equitable transition.”

Fourth on the list for policymakers is to use sustainable government procurement to foster green hydrogen demand. “Government procurement is of great economic importance, accounting for between 10 and 15% of national GDP, on average, and about 13% of world GDP,” the report says. “Through sustainable government procurement policies, governments can influence private-sector producers by purchasing low-carbon goods and services, creating markets for new entrants and stimulating innovative solutions.”

The final action point is to increase international co-operation on green hydrogen trade. The WTO highlights its Committee on Trade and Environment as a potential forum for dialogue, and its Aid for Trade initiative as a means to facilitate technology transfer partnerships that can help to expand domestic manufacturing capacity. For its part, IRENA points to the Alliance for Industry Decarbonization and the Collaborative Framework on Green Hydrogen as vehicles for co-ordinated action.