De-risking green hydrogen? Insights from Chile and South Africa

Proponents of green hydrogen projects argue that investment in this new industry has to be ‘de-risked’ to overcome industry-specific uncertainties and other challenges typical to developing countries. However, some scholars have warned against de-risking strategies because of the financial burden as well as broader economic and political dependencies they may induce. This policy perspective discusses de-risking with regard to financial drawbacks. It focusses on Chile and South Africa, two countries that are likely to play a major role in emerging green hydrogen global value chains. The authors contend that facilitative value-chain oriented policies are the preferable option for de-risking, whereas recently introduced credit schemes could, indeed, lead to a debt trap. They suggest that partners from the Global North assume a higher share of the risk involved with financing green hydrogen projects. Even in that case, de-risking does not guarantee late-comer development, and potential economic and political dependencies ought to be assessed.