The recent pullback from green hydrogen projects worldwide is casting a long shadow over efforts to meet critical emissions reduction targets. Once celebrated as a cornerstone of decarbonizing hard‑to‑abate sectors, green hydrogen—produced via electrolysis powered by renewable electricity—has suffered a wave of cancellations and delays. Without the anticipated scale‑up of low‑carbon hydrogen production, industries such as steelmaking, heavy transport and fertilizer manufacturing may have to rely on fossil fuel alternatives for longer, imperiling national and international commitments to slash greenhouse gas emissions.

Scaling Shortfall and Policy Backpedaling

Ambitious plans announced just a few years ago have faltered in the face of cost overruns and weak offtake agreements. Europe, which aimed for 40 gigawatts (GW) of electrolyser capacity by 2030, now expects barely a third of that figure to materialize—some 12 GW at best. Governments from Italy to Portugal have reallocated hydrogen subsidies toward other green gases such as biomethane, while France trimmed its 2030 electrolysis target by more than 30 percent. The Netherlands, once a poster child for hydrogen innovation, slashed project funding and redirected climate‑fund support to nuclear development. In Australia, flagship ventures like the Pilbara Renewable Energy Hub lost backers such as BP, which withdrew from a proposed $55 billion facility, citing strategic realignments and prohibitive production costs. These high‑profile exits reflect a growing consensus that policy frameworks have failed to guarantee sufficient demand or affordable pricing to make large‑scale electrolysis investments viable.

The policy retreat matters because green hydrogen was positioned as the critical fuel for sectors that resist direct electrification. Iron and steel plants, which require intense heat, and long‑haul shipping are prime examples. With the hydrogen supply chain in limbo, many companies are either deferring decarbonization plans or pivoting toward more mature alternatives—such as bio‑based carbon capture or ammonia fuel made from fossil hydrogen paired with carbon‑capture technology. These stop‑gap measures, while helpful, fall short of the deep emissions cuts envisioned under net‑zero roadmaps. The International Energy Agency’s latest projections suggest that to limit warming to 1.5 °C, global hydrogen output from renewable sources must exceed 450 million tons per annum by 2050—some 75 times the current level of low‑carbon hydrogen capacity under construction. The yawning gap between ambition and reality threatens to derail progress well before mid‑century.

Economic Barriers and Market Hesitancy

At the heart of green hydrogen’s troubles lie economics. Electrolyser modules remain expensive, and the wobbly supply chains for critical components—such as high‑grade polymers and precious‑metal catalysts—have kept capital expenditure several times that of traditional grey hydrogen. Even in regions awash with inexpensive solar and wind power, production costs for green hydrogen hover around $6–7 per kilogram, compared with $1–2/kg for hydrogen derived from natural gas without carbon capture. This cost delta has priced prospective buyers out of the market. Steelmaker Dirostahl in Germany, for example, has shied away from hydrogen‑fired furnaces because contracted prices top 150 euros per megawatt‑hour (MWh), while conventional gas can be procured for under 35 euros/MWh—rendering green hydrogen economically untenable.

Moreover, prospective offtakers have hesitated to sign long‑term supply agreements in the absence of clear policy signals and stable pricing mechanisms. Despite hundreds of millions in subsidies earmarked by Spain and Portugal for hydrogen offtake, no anchor customers have stepped forward to commit to predictable volumes. This market vacuum has left developers unable to secure project financing, prompting them to shelf expansions or cancel entirely. In the United States, nearly all announced projects have stalled before reaching final investment decisions, underscoring that generous tax credits and loan guarantees alone cannot overcome fundamental market hesitancy.

Infrastructure and Technical Hurdles

Even if capital were available, the physical infrastructure necessary to transport and store hydrogen at scale is sorely lacking. Hydrogen’s low volumetric energy density demands high‑pressure pipelines or cryogenic liquid tanks—options that require extensive retrofitting of existing gas networks or the construction of entirely new corridors. Spain envisions a 2,600 km hydrogen grid linking the Iberian Peninsula to northwest Europe, yet operators anticipate multi‑year delays due to permitting complexities and ballooning construction costs. In the absence of a unified European hydrogen backbone, individual countries struggle to justify the investment required for cross‑border linkages, creating patchworks of stranded assets and limiting the potential for a truly integrated hydrogen economy.

Storage poses additional challenges. Geological formations suitable for hydrogen—such as salt caverns—are geographically constrained, while compressed‑air and metal hydride storage technologies remain at early demonstration scales. Without adequate seasonal storage, hydrogen producers must either throttle output during periods of renewable overgeneration or incur expensive blending and conversion losses. These technical hurdles exacerbate the cost problem, as project developers incorporate contingency buffers into their financial models, further eroding investment appeal.

Implications for Emissions Targets

The retreat from green hydrogen casts a long shadow over decarbonization pathways, particularly for the hard‑to‑electrify sectors. Steel production, responsible for more than 7 percent of global CO₂ emissions, was slated to transition many blast furnaces to green hydrogen‑based direct reduction processes by the early 2030s. With few large‑scale hydrogen suppliers on the horizon, steelmakers are now extending the life of coal‑fired blast furnaces and investing in incremental energy efficiency upgrades rather than full‑scale hydrogen transitions. Similarly, in heavy transport—where battery technology remains weight‑ and range‑constrained—green hydrogen trucks and fuel‑cell ships were expected to break ground on pilot fleets by 2025. Those timelines have stretched into the next decade, jeopardizing emissions reduction targets set by the International Maritime Organization and the European Commission.

In the power sector, green hydrogen was envisioned as a long‑duration storage medium to manage seasonal variations in renewable generation. Absent affordable hydrogen, grid operators may lean more heavily on natural‑gas peaker plants or expensive interconnectors, locking in fossil fuel dependency. The cumulative effect is potentially hundreds of millions of additional tonnes of CO₂ emitted annually, making it markedly harder for countries to keep on track with their Nationally Determined Contributions under the Paris Agreement.

Rethinking the Hydrogen Strategy

To salvage the situation, industry experts and policymakers are calling for a recalibrated approach. First, clarity on pricing mechanisms—such as guaranteed floor prices, long‑term purchase agreements and carbon‑credit auctions—could de‑risk investments and stimulate demand. The idea is to create a two‑tier market, one for early adopters under subsidy protection and another for mature producers operating on commercial terms. Second, tighter integration between power markets and hydrogen projects could allow grid operators to offer ancillary services—frequency regulation and congestion management—in exchange for curtailment rights, thus improving electrolyser utilization rates.

Third, a shift toward “hybrid” production models may bridge the cost gap. Combining intermittent renewables with dispatchable biogas or nuclear power could deliver more consistent electrolyser feed and lower unit costs. Similarly, pairing electrolysers with local industrial clusters reduces transport and storage expenses, creating mini‑hub ecosystems where hydrogen can circulate among steelmakers, refineries and chemical plants. Some regions in Northern Europe and the US Gulf Coast are already piloting such clusters with mixed success.

Finally, extending the timeline for large‑scale green hydrogen roll‑out acknowledges the current commercial realities without abandoning long‑term climate ambitions. Emissions targets could be reframed to include interim milestones based on market‑ready technologies—such as blue hydrogen with carbon capture or ammonia with partial decarbonization—while reserving green hydrogen for the sectors where it remains the only viable zero‑carbon option.

Absent such adjustments, the collapse of green hydrogen initiatives threatens to derail not just national strategies but global efforts to bend the emissions curve before 2030. Meeting net‑zero goals may still be possible—but only if governments and industry leaders move swiftly to restore investor confidence, align infrastructure investments with realistic deployment schedules and ensure that green hydrogen becomes both technically and economically sustainable at scale. Otherwise, the world may find itself locked into a high‑carbon trajectory far longer than climate science can tolerate.

(Adapted from Reuters.com)