The Future of Green Hydrogen Value Chains: Geopolitical and Market Implications in the Industrial Sector

Conclusion and Policy Recommendations

This paper addresses the potential for green hydrogen adoption at scale in three key industrial applications: ammonia, methanol, and steel production. Building on existing literature that assesses countries’ potential for green hydrogen production (Pflugmann & De Blasio, 2020), we add critical insights from a value chain perspective. We propose an analytical framework to cluster countries into five groups based on resource endowment, current industrial production, and economic relatedness.

Our findings offer more granular insights into the different roles countries could assume in future green hydrogen markets. Thus, they contribute empirical evidence to the ongoing debate on the geopolitics of hydrogen, and elucidate the distribution of potential economic gains and losses and the associated geopolitical and market implications. Analyzing a country’s potential value chain positioning in future green hydrogen markets can guide policymakers in defining strategic industrial policies for each country group: Frontrunners. Countries with vast resource endowments and considerable market shares in today’s hydrogen industrial applications could evolve into frontrunners by integrating green hydrogen value chain segments of production and industrial applications. Potential frontrunners should focus on industrial policies that foster the up-scaling of green hydrogen production and industrial applications. Upgraders. Countries with adequate resources for green hydrogen production and highly related economic activities could potentially upgrade their value chain position and attract green hydrogen-based industries. Potential upgraders could benefit from strategic partnerships with frontrunners to foster technological and know-how transfer. Policies should focus on attracting foreign capital—for example, by lowering market risk, developing public-private partnerships, and forming joint ventures (Asiedu, 2006; Bürer & Wüstenhagen, 2009; Busse & Hefeker, 2007).

Green hydrogen exporters. Resource-rich countries without upgrading potential should prioritize green hydrogen exports and would benefit from partnerships with green hydrogen importers to deploy enabling infrastructure and reduce market risk. Further coordination among green hydrogen exporters on international standards Belfer Center for Science and International Affairs | Harvard Kennedy School 29 for green hydrogen production could avoid conflict and facilitate trade at global scale. Green hydrogen importers. Resource-constrained countries with industrial hydrogen-based production will need to develop strategic partnerships to ensure secure and stable green hydrogen supplies.

Furthermore, stimulating innovation and knowledge creation through targeted policies will be critical to sustain competitiveness during the transition to a low-carbon economy and avoid industrial relocation to frontrunners or upgraders. Bystanders. Countries with significant constraints along all three critical variables of resource endowment, current positioning in hydrogen markets, and economic relatedness should assess whether some of these constraints, such as limited infrastructure or freshwater availability, could be overcome.