Green hydrogen support with overlapping climate policies

Oliver Ruhnau and Paul Lehmann
Additional contact information
Paul Lehmann: University of Leipzig, Faculty of Economics and Management Service

No 2025-09, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: 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.

Keywords: Environmental policy; electrolytic hydrogen; emissions trading; renewable energy; energy markets; welfare and redistribution; demand-side flexibility (search for similar items in EconPapers)
JEL-codes: C61 D47 Q21 Q28 Q41 Q48 (search for similar items in EconPapers)
Pages: 32
Date: 2025-10-27
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ewi.uni-koeln.de/de/publikationen/gree ... ng-climate-policies/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:021699

Access Statistics for this paper

More papers in EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI) Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Williams ().