Abstract

This report studies countries' role in future green hydrogen industrial markets, focusing on three key applications: ammonia, methanol, and steel production. Today, these sectors are among the largest consumers of hydrogen, accounting for about 41% of global demand, and are expected to increase their shares due to global decarbonization efforts. Analyzing a country’s potential positioning in these markets is key to helping policymakers define strategic industrial policies.

To elucidate the impact of the transition to a low-carbon economy on energy value chains, we propose an analytical framework to cluster countries into five groups based on the variables of resource endowment, existing industrial production, and economic relatedness:

Frontrunners. These countries could lead in green hydrogen production and industrial applications at scale globally. Potential frontrunners should focus on industrial policies that foster green hydrogen up-scaling to gain global leadership.

Upgraders. Countries with adequate resources for green hydrogen production and highly related economic activities could potentially upgrade their value chain positioning 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.

Green hydrogen exporters. Resource-rich countries with limited upgrading potential should prioritize green hydrogen exports and would benefit from partnerships with green hydrogen importers to deploy enabling infrastructure and reduce market risk. Furthermore, coordination of international standards for green hydrogen production and use would facilitate trade on a 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. Additionally, stimulating innovation and knowledge creation through targeted policies will be critical to sustaining competitiveness and avoiding industrial relocations to frontrunners or upgraders.

Bystanders. Countries with significant constraints along all three critical variables should assess whether some of these constraints, such as limited infrastructure or freshwater availability, could be overcome to integrate into future green hydrogen value chains. Otherwise, they will continue to be the final importers of industrial products.

Countries in these groups face unique challenges and opportunities, which we exemplify through case studies focusing on the United States, Germany, and Thailand.

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