Carbon Intensity Regulation Imperative for Global Low Carbon Hydrogen Market

European Union is the only region currently considering emissions across the full life cycle

February 22, 2024


Emissions from green hydrogen produced from 100% grid power could be as high as 50 kilograms of CO2 equivalent per kilogram of hydrogen (kgCO2e/kgH2) – worse than brown hydrogen – if the electrolyzer is connected to a grid powered by fossil fuels. The findings were a part of Wood Mackenzie’s Horizons report.

This situation might occur if around 30% of the 565 GW of announced or operational green hydrogen projects are connected to the grid.Top of Form

Currently, the global hydrogen market is dominated by carbon-intensive grey or brown hydrogen, totaling around 90 million tons per annum. However, significant changes are expected in both the volume and composition of hydrogen supply.

Wood Mac Hydrogen Emission Graph

In the case of green hydrogen, most emissions come from the electricity used by the electrolyzer. To be truly “green,” the electrolyzer should run entirely on renewable power, the report suggests.

However, due to the unpredictable nature of renewables, many projects plan to connect to the grid to maximize electrolyzer use and lower costs. Yet, if access to renewable power is limited, green hydrogen projects might have to connect to grids with high carbon intensity, posing a significant risk.

For blue hydrogen, emissions can arise from various stages like natural gas production, transportation, reforming, and energy usage. While it’s possible to capture and store most of these emissions, capturing over 60% of the carbon dioxide during hydrogen production is expensive and hasn’t been widely tested on a large scale yet.

Life-cycle emissions

The report highlights that hydrogen’s environmental impact extends beyond its production phase. With over 40% of the projected capacity intended for export, it’s essential to consider the full life-cycle emissions, including processes like ammonia production and transportation.

When hydrogen needs to be transported, emissions occur throughout the entire supply chain, not just during production. For instance, shipping hydrogen over long distances, such as from Australia to Northeast Asia or the Middle East to Europe, results in additional emissions.

While some countries have set carbon intensity standards for low-carbon hydrogen, they often only focus on production emissions. However, developers and buyers of blue and green hydrogen must address emissions at every stage of the value chain.

Many projects plan to use ammonia as a carrier for hydrogen transportation due to its cost-effectiveness and technological readiness. However, the overall emissions from the entire ammonia value chain, including synthesis, transportation, and cracking, can significantly impact the carbon intensity of the final hydrogen product, potentially adding 1-4.5 kgCO2e/kgH2.

Regulatory compliance

The report emphasizes that emissions from transport and processing are crucial factors in determining whether hydrogen sources meet regulatory standards. For instance, green hydrogen with a 20% grid supply and blue hydrogen with 60% capture fails to meet EU or Japanese requirements. Even U.S. blue hydrogen, with 95% capture converted to ammonia and shipped to the EU, barely meets the European carbon intensity threshold. Converting ammonia back into hydrogen in countries like the Netherlands would exceed this threshold.

However, green hydrogen produced using 100% renewable power and converted into green ammonia would have emissions below the EU threshold, even if shipped from Australia. But if imported hydrogen contains even a small amount of grid power, it might struggle to meet EU and Japanese standards. Therefore, exporters must focus on reducing emissions from ammonia, transportation, and processing to comply with regulations.

Subsidies are crucial for supporting low-carbon hydrogen supply and demand, influencing project economics significantly. Carbon intensity thresholds are a key factor in incentive frameworks, with the EU being the only region currently considering emissions across the full life cycle. In the U.S., requirements for eligibility for production tax credits are becoming more stringent, but they currently only consider emissions up to the production stage.

The European Commission proposed a detailed new framework for green hydrogen producers within the EU and from other countries exporting to the region to ensure it is produced using renewable electricity.

In Asia, Japan and South Korea plan to expand the scope of emissions gradually to include ammonia conversion and transportation emissions, although this hasn’t been implemented yet.

In December, the UK government unveiled a £2 billion (~$2.19 billion) government investment initiative to help expand green hydrogen production in the country, spanning from the Southwest of England to the Highlands over the next 15 years.