Green hydrogen support with overlapping climate policies

Many administrations, including the EU and the US, have introduced substantial support policies for electrolytic hydrogen. However, interactions of such policies with existing climate policies remain poorly understood. Here, we combine an analytical and a numerical model to investigate the combination of emissions trading, renewable electricity subsidies, and electrolytic hydrogen support. We find that supporting hydrogen reduces renewable subsidies, while emissions prices increase unless the operation of hydrogen electrolysis flexibly responds to electricity prices. Even without explicit regulations on electricity sourcing, the increase in electricity demand for hydrogen production is almost entirely covered by additional renewable electricity generation. If subsidized hydrogen is explicitly required to be matched with additional renewable electricity (“green hydrogen”), the amounts of emissions and renewable electricity remain constant, but the prices of emissions and electricity decline, and support costs for renewable electricity and hydrogen increase. Overall, matching requirements inflate the hydrogen-policy-related system costs by 2–7%. We conclude that promoting the price-responsiveness of hydrogen electrolysis offers greater potential for synergies with emissions trading and renewable electricity subsidies than enforcing strict matching requirements.