Fiscal Terms and Incentives

Key considerations

• In the early stages of green hydrogen development, it is likely that the industry will rely on fiscal incentives as new technologies are rolled out and scaled up. Fiscal incentives to reduce the costs and tax payments by project developers, as well as subsidies for individual projects or through public schemes, may be provided by governments to raise investments. However, as green hydrogen becomes increasingly competitive, taxes will become of greater importance as a source of revenue.
• Host governments will need to analyse and model how fiscal decisions made today impact investments and government revenues from green hydrogen in the future. The overlay of taxes and incentives will form the shape of the framework and implementation agreements between host governments and project developers.
• Each host government will need to identify the optimal mix of fiscal instruments and terms to meet its objectives. Contracts will therefore need to include responsive terms which allow for the adjustment and allocation of overall financial benefits between host governments and investors in response to variables that affect project profitability.
• A fiscal regime that is clear and transparent for the government, companies and citizens and sufficiently simple to monitor and apply for taxpayers and tax administrations will be critical, in particular in emerging and developing economies.