The necessity to harmonize global and national green hydrogen standards

In this blog we explain how GH2’s global Green Hydrogen Standard interacts with emerging national and regional standards and definitions, using three examples: the EU’s definition of “renewable hydrogen” under the 2018 Renewable Energy Directive; the greenhouse gas emissions thresholds for production tax credits under the United States’ Inflation Reduction Act 2022; and Australia’s proposed Hydrogen Guarantee of Origin scheme.

In the 12 months since the Green Hydrogen Organisation (GH2) was launched, dozens of countries have developed and refined their hydrogen strategies as part of their efforts to address climate change and promote greater energy security. You can review the latest developments via the GH2 country portal.

Even a cursory review highlights a growing challenge: the fractured landscape of definitions and standards. To start, there are the deliberately vague references to “low carbon” and “clean hydrogen” (which are often highly misleading). Yet even within the green hydrogen sector, strategies and policies differ widely on their definition of renewable energy. The boundaries of the greenhouse gas accounting system, the emission thresholds at which hydrogen is considered green, and whether other human rights and sustainability criteria should apply also wary widely. These inconsistencies are undermining efforts to accelerate the production and use of green hydrogen.

Green hydrogen producers and consumers need clarity and consistency in order to plan for the long term, including to secure offtake agreements, financing (equity, debt, insurance and investment guarantees) and to obtain government and community approval. Clear global standards support policy and project development, lower costs for producers and consumers, and help build support and confidence in the market for green hydrogen.

Accordingly, one of the first priorities for GH2 was to establish a global standard for defining green hydrogen and certifying green hydrogen production: the Green Hydrogen Standard.

Green hydrogen projects that meet the Green Hydrogen Standard are licensed to use the label “GH2 Green Hydrogen” and are eligible to obtain and trade GH2 certificates of origin for green hydrogen and derivatives such as green ammonia. The Standard provides certainty and transparency to investors and other stakeholders that green hydrogen is exactly that: hydrogen made with renewable electricity which conforms to the highest standards on emissions, ESG and the sustainable development goals.

A global approach is essential to unlocking green hydrogen’s potential. At the same time, we  acknowledge that the development of natural resources and energy markets is in the domain of sovereign governments to be exercised in the interest of their citizens and national development. Green hydrogen will be produced in dozens of countries around the world. Each country has opportunities and constraints that need to be accommodated. Recent developments in the EU, the US and Australia highlight the challenges.

One of the most important policy announcements in 2022 has been the European Commission’s REPowerEU package made in response to Russia’s invasion of Ukraine. The targets for renewable green hydrogen were increased to 10 million tonnes of domestic production and 10 million tonnes of imports per annum by 2030. As part of this package, the Commission published two draft “Delegated Acts” (DAs) – draft regulation establishing which renewable liquid and gaseous transport fuels of non-biological origin (RFNBOs) would qualify as “renewable hydrogen”¹. The EC proposes an emissions threshold of 3.4 kgCO2e/kgH2, which is based on a 70% reduction compared to a fossil fuel (gas) comparator. The draft DAs include a requirement to produce green hydrogen from new ‘additional’ renewable electricity generation; that the installations which are generating electricity have not received support in the form of operating aid or investment aid; and that green hydrogen projects which are connected to the grid will have to demonstrate that power produced is not only from a renewable source but also used or stored within the hour it was produced. For some of these aspects there is a transition period until 1 January 2027 (see Figure 1). These requirements differ substantially from GH2’s approach. You can read GH2’s response to the drafts DAs here.

In late August, US President Biden signed the Inflation Reduction Act (IRA), a ground-breaking climate, tax and healthcare package. On climate change and clean energy it is a game changer, with models suggesting it will help reduce US emissions by around 40% below 2005 levels by 2030 and unlock $370 billion in funding and tax credits to drive investment in renewable energy sources such as wind and solar, “qualified clean hydrogen”, clean technologies such as electric vehicles, heat pumps and battery storage, as well as penalties on highly polluting methane emissions.

The law includes a breakthrough tax credit for “qualified clean hydrogen” which would pay producers up to $3 per kilogram of hydrogen from 2023 depending on the levels of lifecycle emissions and staff wages. As an alternative, a producer could choose an investment tax credit of up to 30% of the cost of the hydrogen production facility. The threshold of 0.45kg CO2e/kg hydrogen to access the highest subsidy is lower than GH2’s threshold of <1kg, although the system boundaries to be used in these calculations are not yet clear and require close attention (see box).

In some jurisdictions, like with Australia’s Hydrogen Guarantee of Origin scheme, regulators are avoiding the question of thresholds altogether. The Australian government scheme includes hydrogen sourced from coal, gas and renewables, with no limit on emissions. Instead, the scheme will “measure and display key attributes of how and where a unit of hydrogen is produced including its carbon intensity”, allowing customers “to choose the product best suited to their needs”, i.e., allowing the market to determine demand and pricing.

It is clear that these three jurisdictions are approaching the definition and certification of “green hydrogen” very differently. In the EU, while the REPowerEU package includes a clear preference for green hydrogen made from renewable energy, the high emissions threshold seems to have been designed to accommodate blue hydrogen projects with much larger emissions. Restrictive “additionality” criteria may significantly curtail green hydrogen production and imports. In the US, “qualified clean hydrogen” is expected to include a substantial amount of fossil fuel-based hydrogen, albeit with a clear preference for projects with the lowest greenhouse gas emissions.

In all three cases, it is important to emphasize that the detailed rules are yet to be finalised. None of these approaches sufficiently addresses the environmental, social and governance issues associated with green hydrogen production. Green hydrogen producers need to manage a wide range of issues including land use planning, water use (and desalination), health and safety, community consultation, labour and human rights considerations, to name but a few. There are also opportunities to leverage green hydrogen development to promote local economic development. These challenges and opportunities need to be integrated into green hydrogen standards, as illustrated in the proposed criteria H2Global funding concept. A green hydrogen project might have low emissions, but if it its construction undermines water security or violates human rights, it clearly should not be accepted or certified.

The Green Hydrogen Organisation is currently in a dialogue with a group of countries about their rules and hydrogen standards; it is envisaged that the Green Hydrogen Standard will form the basis for the further development of their regulatory environment. Nevertheless, we expect some governments will continue to promote different definitions and standards based on their needs and comparative advantages. It is unlikely that we will see convergence on definitions and standards any time soon.

We are often asked how GH2 plans to manage the tension between our global standard and emerging national and regional requirements. The answer is quite straightforward. There is no tension. All governments have rules for activities within their borders. It is no exception when it comes to the emissions profile of the production of green hydrogen. Those that decide to follow the Green Hydrogen Standard, will have the option to within the Standard to demonstrate their meeting of national requirements.

For example, GH2’s certification of a project in North Africa that plans to export green hydrogen or green ammonia to Europe can include an assessment of whether the project is “RFNBO ready”. Thus, a single certification process can be used to independently verify that the project satisfies both the global Green Hydrogen Standard and the relevant EU rules as they apply to imports.

Another example: if a producer in the United States decides to have its green hydrogen certified according to the Green Hydrogen Standard, they can have their emissions verified at <1kg CO2e/kg in accordance with the Green Hydrogen Standard (based on the method developed by the International Partnership for Hydrogen and Fuel Cells in the Economy) and at <.45kg CO2e/kg threshold in accordance with the “through the point of production” system boundary being developed under the IRA.

A producer in Australia could – through a coordinated procedure – have their emissions certified under Australia’s national Hydrogen Guarantee of Origin scheme, and have their production certified as “green” under the global Green Hydrogen Standard. The first would confirm that emissions have been measured according to national standards; the latter would confirm that emissions are <1kg CO2e/kg, and that the project satisfies global best practice on ESG and development metrics, thereby meeting the requirements to be licensed to use the label “GH2 Green Hydrogen”.

GH2 procedure has been designed to avoid red-tape and duplication. Under the Green Hydrogen Standard, demonstrating adherence to credible and comprehensive national requirements shall be deemed sufficient to meet GH2’s accreditation and certification requirements. The credibility and comprehensiveness of national requirements will be considered as part of the independent appraisal process, including broad based consultation with project stakeholders.

GH2 will adjust these procedures as the specific national regulations are agreed based on the demand from green hydrogen producers and green hydrogen customers. In the meantime, the Green Hydrogen Standard provides a credible and globally applicable reference point for project developers that are looking to fast track project development in accordance with global best practice.

GH2 will continue to advocate for greater convergence in emissions and sustainability standards, which will lower compliance costs for developers (and their customers) while ensuring that the growing green hydrogen industry has close to zero-emissions and contributes to sustainable development.