REPORTOCTOBER2022ENVIRONMENTANDNATURALRESOURCESPROGRAMTheFutureofGreenHydrogenValueChainsGeopoliticalandMarketImplicationsintheIndustrialSectorLaimaEickeNicolaDeBlasioEnvironmentandNaturalResourcesProgramBelferCenterforScienceandInternationalAffairsHarvardKennedySchool79JFKStreetCambridge,MA02138www.belfercenter.org/ENRPStatementsandviewsexpressedinthisreportaresolelythoseoftheauthor(s)anddonotimplyendorsementbyHarvardUniversity,HarvardKennedySchool,ortheBelferCenterforScienceandInternationalAffairs.Thedesignationsemployedandthepresentationofthematerialonthemapsinthisreportdonotimplytheexpressionofanyopinionwhatsoeverconcerningthelegalstatusofanycountry,territory,cityorareaorofitsauthorities,orconcerningthedelimitationofitsfrontiersorboundaries.Copyright2022,PresidentandFellowsofHarvardCollegeREPORTOCTOBER2022ENVIRONMENTANDNATURALRESOURCESPROGRAMTheFutureofGreenHydrogenValueChainsGeopoliticalandMarketImplicationsintheIndustrialSectorLaimaEickeNicolaDeBlasioiiAbouttheProgramTheEnvironmentandNaturalResourcesProgram’smandateistoconductpolicy-relevantresearchattheregional,national,international,andgloballevel,andthroughitsoutreachinitiativestomakeitsproductsavailabletodecision-makers,scholars,andinterestedcitizens.Overthepast30yearsenvironmentalpolicyhaschangeddramatically.Todayitisanintegralpartofenergypolicy,economicdevelopment,andsecurity.Securitymeansnotonlyprotectionfrommilitaryaggression,butalsomaintenanceofadequatesuppliesoffoodandwater,andtheprotectionofpublichealth.Theseproblemscannotbeaddressedfromonedisciplineorfromtheperspectiveofoneissueoronecountry.Theworldofthefuturewilldemandtheintegrationofmultipleneedsandvaluesacrossbothdisciplinaryandgeographicboundaries.Formore,visitbelfercenter.org/ENRPAcknowledgmentsTheauthorsthankAndreasGoldthau,SilviaWeko,HenryLee,JohnHoldren,VenkyNarayanamurti,andAbhishekMalhotraforfeedbackandcommentsonearlierversionsofthispaper.DeclarationofInterestsTheauthorsdeclarethattheyhavenocompetingpersonalorfinancialintereststhatmighthavebiasedthisresearch.iiiBelferCenterforScienceandInternationalAffairsHarvardKennedySchoolAbouttheAuthorsLaimaEickeisaResearchFellowattheBelferCenter’sEnvironmentandNaturalResourcesProgramandtheScience,Technology,andPublicPolicyProgram.Herresearchfocusesonthedecarbonizationpathwaysofcountriesworldwide,valuechainsofrenewableenergytechnologies,andhowbothaffectgeopolitics.AttheBelferCenter,shespecificallyfocusesongreenhydrogen.EickeiscurrentlypursuingaPh.D.attheWillyBrandtSchoolforPublicPolicyinErfurt,Germany,andisaResearchAssociateattheInstituteforAdvancedSustainabilityStudies(IASS).SheholdsaM.Sc.withhonorsinsocio-ecologicaleconomicsandpolicyfromtheViennaUniversityofBusinessandEconomicsandaB.A.ininternationalrelationsandLatinAmericanstudiesfromtheTechnicalUniversityofDresden.ShepreviouslyworkedattheGermanCorporationforInternationalCooperation(GIZ),theGermanyMinistryforInternationalAffairs,twoNGOs,andinconsultancy.Eickeisapassionateobserverandyouthadvocateininternationalclimatenegotiations.NicolaDeBlasioisaSeniorFellowleadingBelferCenterresearchonenergytechnologyinnovationandthetransitiontoalow-carboneconomy.Withmorethan25yearsofglobalexperienceintheenergysector,Dr.DeBlasioisanexpertinnavigatingthechallengesofstrategicdevelopmentandtechnologyinnovationtowardsustainablecommercialsuccessatscale.Throughhisresearchandexperience,hehasgainedconsiderableinsightintotheimpactofinstitutionaldevelopmentandinnovationactivitiesonotherfacetsofbusinessstrategy.Dr.DeBlasiospent17yearsatEni,oneoftheworld’sleadingenergycompanies,mostrecentlyasVicePresidentandHeadofR&DInternationalDevelopment.PriortojoiningHarvard,hewasSeniorResearchScholarinthefacultyofSIPAatColumbiaUniversityandProgramDirectorTechnologyandInnovationattheCenteronGlobalEnergyPolicy,wherehewasalsoDirectorofStrategicPartnerships.Dr.DeBlasioholdsadegreeinChemicalEngineeringfromthePolitecnicoofMilanUniversity.HespecializedatSt.AndrewsUniversity,Scotland,andthenatEniCorporateUniversity,wherehefocusedonenergyeconomics.HeisauthorofthebookValueofInnovation,andhasextensivelypublishedandlecturedonenergy,innovation,projectevaluationandcatalysis.vBelferCenterforScienceandInternationalAffairsHarvardKennedySchoolTableofContentsExecutiveSummary...........................................................................................51.Introduction....................................................................................................72.LiteratureReviewandFramework...............................................................92.1FramingtheChallenge....................................................................................................................103.BuildingtheGeopoliticalMapofGreenHydrogenIndustrialApplications................................................................................................134.ThePotentialforIndustrialApplicationsofGreenHydrogeninAmmonia,Methanol,andSteelProduction.............................................154.1TheGeopoliticalPotentialforGreenHydrogen-BasedAmmoniaProduction................154.2TheGeopoliticalPotentialforGreenHydrogen-BasedMethanolProduction................154.3TheGeopoliticalPotentialforGreenHydrogen-BasedSteelProduction........................164.4TheGeopoliticalPotentialforGreenHydrogenIndustrialApplications..........................175.CaseStudies—OpportunitiesandChallenges...........................................185.1TheUnitedStates—aFrontrunner.................................................................................................185.2Thailand—aPotentialUpgraderDrivingGreenIndustrialization........................................185.3.Germany—anImport-DependentDecarbonizingIndustrialPower..................................196.GeopoliticalandMarketImplications........................................................217.ConclusionandPolicyRecommendations.................................................248.Literature......................................................................................................25viAgiantladlebacksawayafterpouringitscontentsofred-hotironintoavesselinthebasicoxygenfurnaceaspartoftheprocessofproducingsteelattheU.S.SteelGraniteCityWorksfacilityThursday,June28,2018,inGraniteCity,Ill.(APPhoto/JeffRoberson)1BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolExecutiveSummaryTheglobaltransitiontoalow-carboneconomywillsignificantlyimpactexistingenergyvaluechainsandtransformtheproductiontoconsumptionlifecycle,dramaticallyalteringinteractionsamongstakeholders.Thankstoitsversatility,greenhydrogenisgainingeconomicandpoliticalmomentumandcouldplayacriticalroleinacarbon-freefuture.Furthermore,itsadoptionwillbecriticalfordecarbonizingindustrialprocessesatscale,especiallyhard-to-abateonessuchassteelandcementproduction.Overall,hydrogendemandisexpectedtogrowby700%by2050(BP,2019).Currently,thetwocentralchallengestogreenhydrogenadoptionanduseatscalearelimitedinfrastructureavailabilityandcost.WhilerecentspikesinfossilfuelpricesduetothewarinUkrainehavemadegreenhydrogencost-competitivewithblueandgreyhydrogen(Radowitz,2022),fromalong-termperspective,theInternationalRenewableEnergyAgency(IRENA)predictsadeclineingreenhydrogencostsbyupto85%by2050(IRENA,2020),makingitthedominanthydrogenform(IRENA,2022).2Anewframeworktoassesscountries’rolesinindustrialgreenhydrogenvaluechainsThisreportstudiestherolecountriescouldplayinfuturegreenhydrogenindustrialmarkets,focusingonthreekeyapplications:ammonia,methanol,andsteelproduction.Today,thesesectorsareamongthelargestconsumersofhydrogen,accountingforabout41%ofglobaldemand,andareexpectedtoincreasetheirsharesduetoglobaldecarbonizationefforts(IRENA,2022).Analyzingacountry’spotentialpositioninginthesemarketsiskeytohelpingpolicymakersdefinestrategicindustrialpolicies.Toelucidatetheimpactofthetransitiontoalow-carboneconomyonenergyvaluechains,weproposeananalyticalframeworktoclustercountriesintofivegroupsbasedonthevariablesofresourceendowment,existingindustrialproduction,andeconomicrelatedness:Frontrunners.Thesecountriescouldleadingreenhydrogenproductionandindustrialapplicationsatscaleglobally.Potentialfrontrunnersshouldfocusonindustrialpoliciesthatfostergreenhydrogenup-scalingtogaingloballeadership.Upgraders.Countrieswithadequateresourcesforgreenhydrogenproductionandhighlyrelatedeconomicactivitiescouldpotentiallyupgradetheirvaluechainpositioningandattractgreenhydrogen-basedindustries.Potentialupgraderscouldbenefitfromstrategicpartnershipswithfrontrunnerstofostertechnologicalandknow-howtransfer.Policiesshouldfocusonattractingforeigncapital,forexample,byloweringmarketrisk,developingpublic-privatepartnerships,andformingjointventures.Greenhydrogenexporters.Resource-richcountrieswithlimitedupgradingpotentialshouldprioritizegreenhydrogenexportsandwouldbenefitfrompartnershipswithgreenhydrogenimporterstodeployenablinginfrastructureandreducemarketrisk.Furthermore,coordinationofinternationalstandardsforgreenhydrogenproductionandusewouldfacilitatetradeonaglobalscale.Greenhydrogenimporters.Resource-constrainedcountrieswithindustrialhydrogen-basedproductionwillneedtodevelopstrategicpartnershipstoensuresecureandstablegreenhydrogensupplies.Additionally,stimulatinginnovationandknowledgecreationthroughtargetedpolicieswillbecriticaltosustainingcompetitivenessandavoidingindustrialrelocationstofrontrunnersorupgraders.3BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolBystanders.Countrieswithsignificantconstraintsalongallthreecriticalvariablesshouldassesswhethersomeoftheseconstraints,suchaslimitedinfrastructureorfreshwateravailability,couldbeovercometointegrateintofuturegreenhydrogenvaluechains.Otherwise,theywillcontinuetobethefinalimportersofindustrialproducts.Countriesinthesegroupsfaceuniquechallengesandopportunities,whichweexemplifythroughcasestudiesfocusingontheUnitedStates,Germany,andThailand.ThegeopoliticalmapofgreenhydrogenintheindustrialsectorThelow-carbontransitioninexistingenergyvaluechainswillalsogiverisetonewmarketandgeopoliticaldynamicsanddependencies.Ouranalysiselucidateskeygeopoliticaltrendsthatcouldshapeinternationalrelationsintheupcomingdecades,withcountriescompetingforindustrialleadership,markets,andopportunitiesforjobcreation.Onlyafewcountries,includingChinaandtheUnitedStates,mayemergeasclearfrontrunners.Thesecountrieshavevastresourceendowmentsandconsiderablemarketsharesintoday’shydrogenindustrialapplicationsthatwouldenablethemtointegratethegreenhydrogenvaluechainsegmentsofproductionandindustrialapplications.Locatingindustrialfacilitiesclosetolow-costgreenhydrogenproductionwouldcreatevaluebyincreasingacountry’scontroloversupplychainsandminimizinghydrogentransportationcosts.Thesecountriescouldthusreapthemostextensivebenefitsandbecomegeopoliticalandmarketwinners.However,thesedynamicscouldspuragreenraceforindustrialleadership,creatingtensionsininternationalrelations.Furthermore,competingdynamicsforgreenhydrogen-basedindustriescouldfostermarkettensionsbetweengreenhydrogenimportersandupgraders.Resource-richcountries,suchasThailandandMexico,havethepotentialforgreenindustrializationandwouldlikelycompetewithimport-dependentindustrialpowersformarketshareandjobs,leadingtonewgeopoliticaltensions.Second,newdependenciesmightemerge.Mostcountriesthatcurrentlyhavehighlydevelopedammonia,methanol,orsteelindustries,suchasSaudiArabia,Japan,andGermany,areresourceconstrainedandwoulddependongreen4hydrogenimportstomeetdemand.Hence,fromageopoliticalperspective,dependenciesandsupplydisruptionriskswilllikelypersistinalow-carbonenergyworld,butwillbedifferentfromthoseoftoday.Thesenewgeopoliticaldependencieswillinvolvenewalliancesandwillalsobeafunctionoffuturemarketstructures.Likenaturalgasmarkets,hydrogenmarketswillemergeasregionalones,butonlyglobalandmorestructuredmarketswillallowforriskreduction.Finally,tensionsbetweenhigher-incomecountriesintheGlobalNorthandlower-incomecountries,oftenlocatedintheGlobalSouth,mightintensify.Ouranalysisshowshowthepotentialforthethreeindustrialhydrogenapplications—ammonia,methanol,andsteel—isunevenlydistributedacrosstheglobe.Althoughthereareopportunitiesforeconomicgainsinallworldregions,mostfrontrunnersaremiddle-tohigh-incomecountries.Manylower-incomecountries,especiallyinAfrica,willbelimitedtogreenhydrogenexportssincetheycannotcompeteinvalue-addedsegmentsofthevaluechains.Hencethepromiseof‘sustainabledevelopment’andgreenindustrialization,oftenassociatedwiththeenergytransition,mightnotbereplicableeverywhere.Thismightintensifytheneedfortechnologytransferandfinancialsupporttoenablesustainabledevelopmentandgreenindustrializationforall.5BelferCenterforScienceandInternationalAffairsHarvardKennedySchool1.IntroductionGreenhydrogen1couldplayasignificantroleinthedecarbonizationofhard-to-abateindustrialsectors,suchassteelandcement.Globalhydrogendemandisexpectedtogrowby700%by2050(BP,2019),fromtoday’s70milliontonsperyear(IEA,2019).Theuseofhydrogenatthisscalewillsignificantlyimpactexistingvaluechains2andcreateeconomicopportunitiesforcountriesthatstrategicallypositionthemselvesinfuturegreenhydrogenmarkets.Togainleadership,severalcountries,includingtheUnitedStates,Norway,andChile,havestartedtoadoptindustrialpolicies;thesepoliciessupportgreenhydrogenadoptionatscaleandfosterinnovationinkeyindustries(IEA,2021a).Previousstudiesonthegeopoliticsofhydrogenhaveanalyzedthedifferentrolesthatcountriescouldadoptinfuturegreenhydrogenmarketsandhowtheassociatedeconomicgainsmightaffectinternationalrelations(Pflugmann&DeBlasio,2020;VandeGraafetal.,2020).Thesestudiesmainlyidentifiedthecountrieswithahigherpotentialforgreenhydrogenproductionandtheassociatedmarketandgeopoliticalimplications.Incontrast,fewstudieshavefocusedonthedemandforgreenhydrogendrivenbytheindustrialsector(IRENA,2022).Sinceindustrialapplicationsdrivethemajorityoftoday’sfossilfuel-basedhydrogendemand,thissectorwillmostlikelyplayakeyroleinshapingemerginggreenhydrogenvaluechains.Thiswillbeespeciallytrueintheearlystagesofadoptionwhenfragile,nascentmarketdynamicswillbesupportedbythesector’shighereconomiesofscaleandarelowerriskthanotherpotentialapplications(IRENA,2022).Thisstudyanswersthequestionofwhichcountrieshavethepotentialtoplayacriticalroleingreenhydrogenvaluechainsinkeyindustries,notonlyforgreenhydrogenproductionbutalsoinitsindustrialapplications.Tothisend,wedrawonamixed-methodsapproach.First,weproposeaframeworktoclustercountriesbasedonthreevariablesthatwouldgivethemadistinctadvantageinfuturegreenhydrogenmarkets:resourceendowment,currentindustrialproduction,1Greenhydrogenreferstohydrogenproducedbywatersplittingusingrenewableelectricity.2Weusetheterm‘valuechain’todefineamoreconceptualdesignofbusinessrelationshipsbetweenstakeholdersthatsupportthedevelopmentandadoptionofamarketortechnologyatscale.Thisdiffersfromtheterm‘supplychain,’whichistypicallyusedtodefineasetofoperationalrelationshipsdesignedtobenefitasinglestakeholderanddeliverproductsorservices.6andeconomicrelatedness.3Wethenapplythisframeworktoidentifycountries’potentialinusinghydrogenatscaleforthreeindustrialapplications:ammonia,methanol,andsteelproduction.Finally,weanalyzethreecountrycasestudies,illustratingthechallengesandopportunitiesofdifferentcountrygroupsintheirstrategicindustrialpositioninginfuturegreenhydrogenmarkets,andoutlinetheirconcretepolicyoptions.Ourfindingshighlighthowthepotentialforgreenhydrogenproductionandassociatedindustrialapplicationsisdistributedunevenlyacrosstheglobe.WearguethatcountriesliketheUnitedStatesandChina,whocanleadinbothgreenhydrogenproductionanditsindustrialapplications,couldemergeasfrontrunnersinagreenhydrogeneconomy.Otherresource-richcountries,suchasThailandorMexico,havethepotentialforgreenindustrializationandwilllikelycompetewithimport-dependentindustrialpowersformarketshareandjobs,leadingtonewgeopoliticaldependenciesandtensions.Thispapernotonlycontributesempiricalevidencetotheongoingdebateonthegeopoliticsofhydrogenbutintegratesitbasedoninsightsfromtheglobalvaluechainliterature.Ourfindingsdemonstratethatthisperspectiveoffersnewinsightsintoboththedifferentrolescountriescouldassumeinagreenhydrogeneconomyandthedistributionofassociatedeconomicgainsandlosses.Furthermore,itprovidesguidanceandrecommendationsfordefiningstrategicindustrialpolicies.Theremainderofthispaperisstructuredasfollows:Section2reviewsexistingliteratureonthegeopoliticsofgreenhydrogenandthescholarlydebateonglobalvaluechainsandproposesaframeworkforunderstandingeconomicgainsinagreenhydrogeneconomy.Section3describesthemethodologyusedforanalyzingacountry’sroleingreenhydrogenvaluechains.Section4drawsthegeopoliticalmapofgreenhydrogenapplicationsforammonia,methanol,andsteelproduction.Section5usesthreecasestudiestoanalyzetheopportunitiesandchallengesfordifferentcountrygroupsinemerginghydrogenmarkets.Section6addressesthegeopoliticalchallengesandopportunitiesarisingfromgreenhydrogenadoptionintheindustrialsector.Finally,Section7addressesconclusionsandpolicyrecommendations.3Economicrelatednessindicatesthepercentageofrelatedactivitiesinaparticularlocation;therelatednessωbetweenalocationcandanactivitypiscalculatedbasedonthefollowingformula:ωcp=(∑p′Mcp′ϕpp’)/(∑p′ϕpp′),whereMcpreferstoamatrixindicatingthepresenceofactivitypinlocationc;ϕpp′isameasureofsimilaritybetweenactivitiespandp′;Forfurtherdetailsonthemethodology,see(OEC,2021a).7BelferCenterforScienceandInternationalAffairsHarvardKennedySchool2.LiteratureReviewandFrameworkThedebateonthegeopoliticalimplicationsofanemerginghydrogeneconomyhasintensifiedoverthepastfewyears.Scholarshavearguedthattheprojectedrapidgrowthingreenhydrogendemandmightleadtonewgeopoliticalopportunitiesandchallenges(IRENA,2022;Pflugmann&DeBlasio,2020;VandeGraaf,2021;VandeGraafetal.,2020).Newtradepatternsmightgiverisetonovelexportchampions,andresource-poorcountriesmightfacenewgeopoliticaldependencies(Pflugmann&DeBlasio,2020).Inthiscontext,hydrogenhasbeenidentifiedasthe‘newoil’(VandeGraafetal.,2020).Authorshavealsowarnedthatemerginghydrogenmarketscouldleadtogeo-economiccompetitionandconflict(Blondeeletal.,2021).Somestudieshaveanalyzedthepotentialforhydrogenproductionworldwidetoidentifypotentialwinnersinfuturegreenhydrogenmarkets(Pflugmann&DeBlasio,2020;VandeGraaf,2021).Othershavediscussedpotentialglobaltradepatternsandgovernance(VandeGraafetal.,2020).Fewarticleshintattheimportanceofvaluechainsininternationalrelations(Blondeeletal.,2021;Lebrouhietal.,2022;Noussanetal.,2021;VandeGraafetal.,2020).Butonlyveryfewexamineindetailthegeopoliticalimplicationsofhydrogenadoptionatscaleinindustrialapplicationsandtheassociatedimpactonvaluechains(IRENA,2022).Someofthesestudieshaveexploredthetechnologicalandcostimprovementsinhydrogenapplications(Chenetal.,2019;Lebrouhietal.,2022)orexaminedhydrogenvaluechainsincountry-specificcasestudies,forexample,inGermany(Colemanetal.,2020),Japan(Nagashima,2018)andtheUnitedStates(Ruthetal.,2020).However,therehasnotbeenacomprehensive,empiricallydrivenanalysisoftherolecountriescouldassumeingreenhydrogenvaluechains.Therefore,webelievethatthegeopoliticalandmarketimplicationsofhydrogenadoptionatscalerequirefurtheranalysis.Weaddressthisgapusinginsightsfromglobalvaluechainliterature.Thisperspectiveoffersnewinsightsintothedistributionofgainsandlossesinagreenhydrogeneconomyamongdifferentcountrygroupsbasedonacountry’spotentialtoengageingreenhydrogenvaluechainsegments.Inouranalysis,criticalsegmentsoffuturegreenhydrogenvaluechainsincludeitsproduction,distribution,andutilization—focusing,asdiscussed,onindustrialapplicationsofgreenhydrogen,suchasammonia,methanol,andsteelproduction(seeFigure1).8GreenhydrogenproductionDistributionIndustrialapplicationsFigure1.GreenhydrogenvaluechainsegmentsforindustrialapplicationsLiteratureonglobalvaluechainshighlightsthatthefinalvalueofaproductincreasesineachmanufacturingstageandvariesalongvaluechainsegments.Resourceextractionistheleastprofitablesegmentofavaluechain,whereasthevalue-addedinindustrialapplicationsismuchhigher(Gereffi&Lee,2012;Pipkin&Fuentes,2017).Inthecaseofgreenhydrogen,thisimpliesthatindustrialapplications,suchasammonia,methanol,orsteelproduction,couldyieldmoreaddedvaluethansimpleproductionandcommoditytrading.Inthiscontext,itcanbebeneficialforcountriestoimprovetheirvaluechainpositioningbymovingfromlower-tohigher-valueactivities(Gereffi,2005,p.171),aprocessreferredtoasupgrading.Chinaisasuccessfulexampleofvaluechainupgrading.Inthepastthreedecades,Beijinghassupportedthesolarandwindgreenenergysectorsthankstofavorableandstablepoliciesaimedatgrowingitsglobalmarketsharesandtherequiredskilledlaborforce(Binz&Truffer,2017;Chen&Lees,2016;Gandenbergeretal.,2015).PursuinggreenindustrializationhasbeenespeciallyimportantfortheGlobalSouthcountries,wherepolicymakershaveusedstrategicindustrialpoliciestotrytoupgradetheircountry’svaluechainposition(Bazilianetal.,2020;Pipkin&Fuentes,2017).Afewstudieshavehighlightedtheimportanceoftechnologytransferandknowledgespilloversfromrelatedindustriesinenablingupgradingprocessesinrenewableenergyvaluechains(Pipkin&Fuentes,2017;Tajoli&Felice,2018).Nascenthydrogenmarketsmightprovidenewopportunitiesforcountriestoupgradealongvaluechainsandattractadded-valueapplicationsandsectors.Furthermore,evolvingvaluechainshavesignificantimplicationsonthedistributionofgainsandlosses,especiallywithrespecttovaryingdegreesofsegmentationorintegration.Ananalysisofexistingenergyvaluechainshelpstohighlighthowstakeholderspositiontheirofferings,forexamplebyadoptingsustainablebusinessmodels,specializingincriticaltechnologiestogainacompetitiveadvantage,orrespondingtoregulatoryconstraints.However,thesedecisionsgenerallyresultintwooutcomes:segmentationorintegration.9BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolSegmentedvaluechainsconsistofstakeholdersspecializinginsinglesegmentstogainauniquecompetitiveadvantage.Ontheotherhand,integrationreferstocombiningdifferentsegmentsinonefirmorlocation(Gereffietal.,2005).Integrationhasusuallybeenassociatedwithgainsinhighervalueaccumulationandamoresubstantialdegreeofcontrol(Gereffi,2005;Gereffietal.,2005).Countriescouldthusbenefitbyintegratinggreenhydrogenvaluechains’productionandindustrialapplicationssegmentsinvariousways.Integrationcouldincreasethelocaladdedvalueandcreatejobs;itcouldreducedistributioncosts(IRENA,2020),increasecontrol,andreducedependencies,whichcanalsocreatevulnerability.ThelatterhasbecomeevenmoreapparentintherecentsupplychaininterruptionsduetoCOVID-19(Øverlandetal.,2020)andthewarinUkraine(Simchi-Levi&Haren,2022).Thebenefitsassociatedwithintegrationalongvaluechainsmightincentivizecarbon-intensiveindustriestorelocateclosertolow-costgreenhydrogenproductionlocations(IRENA,2022),whichstrategicindustrialpoliciesmightfurtherincentivize.Wearguethatcombiningthetworesearchstreamsonglobalvaluechainsandthegeopoliticsofhydrogencanprovidenovelandmoregranularinsightsintothedifferentrolescountriesmightassumeinfuturegreenhydrogenmarkets.Previousstudiesonthegeopoliticsofhydrogenhighlightedthecountriesthatcouldbenefitfromtheadoptionofgreenhydrogenatscaleandthosethatcouldbenefitfromgreenhydrogenapplicationsindomesticmarkets.Integratinginsightsfromglobalvaluechainsliterature,wearguethatcountriesthatcombinebothgreenhydrogenvaluechainsegments—productionandindustrialapplications—couldemergeasfrontrunnersinfuturegreenhydrogenmarkets.Thisisbecausethesynergiesderivingfromtheintegrationofthesetwosegmentsenablecountriestoleverageandcompoundtheintrinsicvalueofeachsegment,whileincreasingcontrolovervaluechainsandreducingdependencies.102.1.FramingtheChallengeBuildingandexpandingexistingliteratureonboththegeopoliticsofhydrogenandglobalvaluechains,thispaperanalyzesacountry’spotentialinfuturegreenhydrogenmarkets,focusingontwosegmentsofitsvaluechain:a)productionandb)industrialapplications,usingthreecriteria:resourceendowment,currentindustrialproduction,andeconomicrelatedness.Resourceendowment.Greenhydrogenishydrogenproducedbysplittingwatermoleculesintohydrogenandoxygenusingrenewableelectricity.Theavailabilityofplentifulrenewableenergysources,suchassolarandwind,togetherwithfreshwateravailabilityandenablinginfrastructure,isthuscriticalforproducinggreenhydrogenatscale.Accordingly,thesevariableshavebeenusedbyPflugmannandDeBlasio(2020)toassessgreenhydrogenpotentialsglobally.Industrialproduction.Existingandmaturehydrogenmarketsincreasethepotentialforgreenhydrogenadoptionbecausetheyprovidesectoralknowledgeandskills,enablinginfrastructure,strongnetworks,andpracticesthatofferacompetitiveadvantagecomparedtonewmarketentrants(Lambkin,1988).Thesizeofexistinghydrogenmarketscanbemeasuredbasedonsectoralproductionfiguresandhasbeenusedasanindicatoroffuturegreenhydrogendemand(IRENA,2022).Economicrelatedness.Theglobaltransitiontoalow-carboneconomywillsignificantlyimpactexistingenergyvaluechainsandtransformtheproductiontoconsumptionlifecycle,dramaticallyalteringstakeholders’interactions.Sinceglobalvaluechainsarenotstatic,thisdynamismmustbeaddressedusingtheconceptofeconomicrelatedness.Futuregreenhydrogendemandcoulddivergefromcurrenthydrogenmarketdynamics;forexample,ashard-to-abatesectorsdecarbonize,economicincentivestorelocateindustrialgreenhydrogenapplicationsclosertolow-costgreenhydrogenproductioncouldemerge(IRENA,2022).Relatedeconomicactivitieswouldbuilduptransferableskillsthatcanincreasethepotentialfornewmarketsandsectoraleconomicgrowth(Hausmann&Hidalgo,2011;Hausmannetal.,2014;Hidalgoetal.,2018;Hidalgoetal.,2007).Forthisreason,economicrelatednesshasbeensuccessfullyusedtopredictneweconomicopportunitiesandthegrowthofspecificproductsorindustriesatanationalorsubnationallevel(Hausmannetal.,2014;Neffkeetal.,2011).11BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolTable1.Keycriteriaforassessingcountries’rolesinvaluechainsforgreenhydrogenapplicationsResourceEndowmentIndustrialProductionEconomicRelatednessCountryGroup++(+/-)1:Frontrunners+-+2:Upgraders-+(+/-)3:GreenHydrogenImporters+--4:GreenHydrogenExporters--(+/-)5:BystandersUsingthesethreecriteria,weclustercountriesintofivegroups(seeTable1):Resource-richcountrieswithindustrialhydrogen-basedproductionshowthebestpreconditionstoemergeasfrontrunners(Group1).Resource-richcountrieswithhigheconomicrelatednesshavethepotentialtobecomevaluechainupgradersbyexpandingtheirindustrialhydrogenapplicationsordevelopingnewgreenindustrializationopportunities(Group2).Resource-poorcountrieswithindustrialhydrogen-basedproductionrelyongreenhydrogenimportsfortheirindustrialapplications(Group3).Resource-richcountrieswithoutindustrialhydrogen-basedproductionorrelatedeconomicactivitiescouldbecomehydrogenexporters(Group4).Finallyresource-poorcountrieswithoutindustrialhydrogen-basedproductionwillbe‘Bystanders’(Group5).Thesecountrieswill—mostlikely—notbeabletointegrateintogreenhydrogenvaluechainsandwillcontinuetobeimportersoffinalproducts.Toelucidatethevaluechaindynamicsandimplicationsofgreenhydrogenadoptionatscale,wefocusouranalysisonthreemajorindustrialapplications:ammonia,methanol,andsteelproduction.4Today,theseapplicationsareamongthemostsignificantconsumersofhydrogen;theircombineddemandaccountsfor41%ofglobalhydrogensupplyandisexpectedtofurtherincreaseduetoindustrialdecarbonizationefforts(IRENA,2022).Ammonia(accountingforabout27%ofglobalhydrogendemand)mainlyservesasafeedstockinchemicalprocesses,especiallyinfertilizerproduction,butalsoforcoolingsystemsorexplosives(IEA,2019,p.56).Ammoniacouldalsobeusedasahydrogencarrierforthelong-distancetransportofgreenhydrogen(DeBlasio,2021;IEA,2019).Mostmethanol(accountingfor11%ofglobalhydrogendemand)isusedinthechemicalindustry(IEA,2019).Likeammonia,methanolcouldfurtherenableglobalhydrogen4Refiningwouldbeanotherprominenthydrogenapplication,accountingfor33%ofcurrentdemand[IRENA(2019).Hydrogen:Arenewableenergyperspective.InternationalRenewableEnergyAgency.(Excludedfromtheanalysis.)]12marketsasitcanbeusedasafuelorasacarrierforthetransportofhydrogen(IEA,2019).Finally,steelproduction(accountingfor3%ofglobalhydrogendemand)representsahard-to-abatesectorrequiringhigh-heatprocesses,whichcannotbeeasilyachievedbyelectrification.TheIEAestimatesthatthissector’sdemandwillsignificantlyincreaseashydrogen’ssharecouldgrowfromtoday’s7%toeventuallycover100%ofsteelproductionbysubstitutingnaturalgas(IRENA,2019a).Whileouranalysisfocusesongreenhydrogen,weacknowledgethatfossilfuel-basedhydrogen,especiallyincombinationwithCCStechnologies,couldplayaroleinemerginghydrogenvaluechains,especiallyintheearlystages.Whilemorethan99%oftoday’shydrogensupplyisbasedonfossilfuels,theshareofgreenhydrogenisexpectedtoincreasesignificantly.Furthermore,recentsurgesinfossilfuelpricesduetothewarinUkrainehavemadegreenhydrogencost-competitivewithblueandgreyhydrogen(Radowitz,2022).Fromalong-termperspective,IRENApredictsadeclineingreenhydrogencostsbyupto85%by2050(IRENA,2020),makingitthedominanthydrogensource(IRENA,2022).Finally,itisimportanttonotethatourframeworkonlyelucidatesacountry’spotentialtoengageinfuturegreenhydrogenvaluechains.Itshouldnotbeseenasapredictionofthefuture.Whilehighpotentialsindicatetheexpectationoffutureeconomicgainsalongvaluechains,countriesmayormaynotliveuptotheseexpectations,dependingonhowmarketdynamicsandinteractionsbetweennationalandinternationalpoliciesplayoutinthefuture.13BelferCenterforScienceandInternationalAffairsHarvardKennedySchool3.BuildingtheGeopoliticalMapofGreenHydrogenIndustrialApplicationsOuranalysisleveragesamixed-methodapproachtodefineacountry’spotentialinindustrialgreenhydrogenapplications.Buildingontheframeworkdescribedintheprevioussection,westartbyclusteringcountriesintofivegroupsbasedonthecriticalvariablesofresourceendowment,existingindustrialproduction,andeconomicrelatedness.Leveragingcasestudies,wethenelucidatetheopportunitiesandchallengesforfrontrunners,upgraders,andgreenhydrogenimporters,thecountrygroupsthatwillmostlikelyshapefuturehydrogenvaluechains,markets,andgeopolitics.Todefinetherolecountriescouldplayinfuturegreenhydrogenmarkets,thefollowingcodingwasused:Resourceendowment:Forcodinggreenhydrogenproductionpotentials,weusethemethodologydevisedbyPflugmannandDeBlasio(2020):‘zero’impliesresourcesconstraints,definedaseithera)renewableenergysourcespotential5lowerthan1.5timesacountry’sprimaryenergyconsumption,6alsotakingintoaccountlandconstraintswithpopulationdensitieshigherthan150inhabitantspersquarekilometer;b)freshwaterrenewableresourceslowerthan800cubicmetersperinhabitant;7orc)limitedinfrastructurepotentialtooperatehydrogenproduction,transportation,anddistributionatscale,basedonascorebelow4(outof7)oftheoverallinfrastructurescoreintheWorldEconomicForum’s2019GlobalCompetitivenessIndex(WEF,2019).Otherwisecountrieswerecodedwith‘one.’Industrialproduction:Existingindustrialhydrogenapplicationswillmostlikelyimproveacountry’sroleinfuturegreenhydrogenvaluechainsandmarkets.Hencethiscriteriumiscodedas‘one’ifacountry’sexistingglobalmarketsharefortheproductioncapacityofammonia(USGS,2021)andsteel(Worldsteel,2021)is5Thecombinedpotentialforrenewableelectricityproductionpercountryiscalculatedbasedonthewindpowerpotential,whichisbasedonNREL(2014),andthesolarpowerpotential,whichisbasedonPietzeckeretal.(2014).6Primaryenergyconsumptionisbasedontheyear2019(EIA,2019).7Countrieswithfreshwaterresourcesbelowthisthresholdpredominantlyusethemfordrinking,householdconsumption,industrialuse,and/orirrigationandhavenoadditionalcapacitiesforincreasedwaterdemandforhydrogenproduction(PflugmannandDeBlasio,2020).FreshwaterresourcedataarebasedonAQUASTAT(2020).14above1%,orinthecaseofmethanol,8acountry’sshareofglobalnetexportsisabove1%.9Otherwise,itiscodedas‘zero.’Economicrelatedness:Comparativelyhigheconomicrelatednesswillmostlikelyimproveacountry’sroleinfuturegreenhydrogenvaluechainsandmarkets.Hencethiscriteriumiscodedas‘one’ifacountry’seconomicrelatednesstoammonia,methanol,orsteelproductionishigherthantheglobalaverage;10otherwise,itiscodedas‘zero’(OEC,2021a).Firstwemapcountries’potentialrolesingreenhydrogenvaluechains,lookingatammonia,methanol,andsteelproductionseparately.Inasecondstep,webuildanintegratedmapacrossthesethreeapplications.Wecodeeachcriteriumas‘one’ifitwasmetinatleasttwoofthethreeindustrialapplications;otherwise,wecodeditwith‘zero.’Thisallowsustoidentifyfrontrunnersacrossmultipleindustrialapplications.Overall,frontrunners,upgraders,andgreenhydrogenimportersarethegroupsthatwillshapefuturehydrogenmarketsandgeopoliticsmorethanothers.Toelucidatetheassociatedvaluechaindynamics,weusethreecasestudies:theUnitedStatesforfrontrunners,Thailandforupgraders,andGermanyforgreenhydrogenimporters.Itshouldbenotedthatthecurrentdominanceinindustrialhydrogenapplicationsandmarketswasnotthedrivingselectionparameterforthesecasestudies.Forexample,whileChinaandIndiadominatetoday’ssteelmarkets,theyareinfluencedbyuniquedomesticdynamicsthatcannotbeeasilytransferredtoothercountries(Goldthauetal.,2020).Therefore,weselectedcountriesthatshowcasedynamicsandpatternsrepresentingtheentiregroup,andprovideconsistencyacrossthethreeanalyzedindustrialgreenhydrogenapplications.Whilesomecountriesareindifferentcountrygroupsdependingontheapplication,theUnitedStatesandThailandareinthesamecountrygroupinallcasesandGermanyintwooutofthree.Finally,wealsoprioritizedageographicallydiversedistributiontoincludekeyregionalmarkets.SeeSection5foradetailedanalysis,includinganoverviewofcurrentpoliciespromotinggreenhydrogendevelopmentanddeployment.8Sincewecouldnotaccessmethanolproductionglobaldata,werelyonapositivenettradebalanceasaproxyforacountry’smethanolproduction.Whilethisapproachdoesaccountforcountrieswithsmallproductionsconsumeddomesticallyorsupplementedwithimports,neverthelesstheproxyallowsustoidentifykeyglobalmethanolexporters.MethanoltradebalanceswerederivedfromOEC(2021b).9Thisthresholdwaschosentoensurethatonlykeyplayersinglobalmarketsareconsidered.10BasedonOEC(2020),theeconomicrelatednessglobalaveragesare0,152forammonia,0,134formethanol,and0,248forsteel.15BelferCenterforScienceandInternationalAffairsHarvardKennedySchool4.ThePotentialforIndustrialApplicationsofGreenHydrogeninAmmonia,Methanol,andSteelProductionThefollowingsectiongivesanoverviewoftherolescountriescouldassumeinfuturevaluechainsforgreenhydrogen-basedammonia,methanol,andsteelproduction.4.1.TheGeopoliticalPotentialforGreenHydrogen-BasedAmmoniaProductionToday’stopproducersdominatingammoniamarketsareChina(26%marketshare),Russia(10%),theUnitedStates(10%),Indonesia(4%),andEgypt(3%).OuranalysisshowsthatChina,theUnitedStates,andIndonesiaarewellpositionedtobecomefrontrunnersingreenhydrogen-basedammoniamarkets.RussiaandEgyptarelimitedintheirabilitytoproduceordistributegreenhydrogenatscale,Russiabecauseofinfrastructureconstraints,andEgyptduetolimitedfreshwateravailability.Othertoptenproducers,suchasCanada(3%marketshare)orPoland(2%),couldsignificantlyincreasetheirglobalmarketshares,thankstofavorablegreenhydrogenproductionpotentials.Countrieswithhighresourceendowmentsandhigheconomicrelatedness,likeMexico,Spain,andThailand,couldevolveintogreenammoniaupgraders.Finally,countrieswithhighgreenhydrogenproductionpotentialsbutlowtransferrableskillscouldalsobenefitbyexportinghydrogentoimport-dependentammoniaproducerssuchasEgyptorGermany(seeFigure2).16Figure2.Geopoliticalmapofgreenammoniaproductionpotential4.2.TheGeopoliticalPotentialforGreenHydrogen-BasedMethanolProductionFouroutoftoday’stopfivemethanolexporters—SaudiArabia(13%marketshare),TrinidadandTobago(11%),Oman(9%),andtheUnitedArabEmirates(6%)—arelimitedintheirpotentialtoproducegreenhydrogen.Therefore,theywouldneedtorelyonimportstomaintaintheirpredominanceinfuturegreenmethanolmarkets.Incontrast,largeexporters,suchasNewZealand(4%marketshare),theUnitedStates(3%),Chile(3%),andNorway(2%),couldincreasetheirmarketsharesandevolveintofrontrunnersthankstotheirhighresourceendowmentsandsignificanteconomicrelatedness.CountriessuchasChina,Mexico,Spain,orTurkeywithhigheconomicrelatednessindicatingtransferrableskills,butnotthecurrentindustrialproductionneededtobecomefrontrunners,couldstillupgradetheirpositioningbyattractingindustriesusinggreenmethanol.Countrieswithouthighlytransferrableskills,likeAustralia,Namibia,andMorocco,couldstillbenefitbybecominghydrogenexporterstocountrieswithextensivegreenmethanol-basedindustriesbutlowproductionpotentials(seeFigure3).17BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolFigure3.Countrypotentialformethanolproductionbasedongreenhydrogen18Figure4.Countrypotentialforsteelproductionbasedongreenhydrogen4.3.TheGeopoliticalPotentialforGreenHydrogen-BasedSteelProductionToday’ssteelproductionisdominatedbyChina,whichaccountsforalmost57%ofglobalmarkets,followedbyIndia(5%marketshare),Japan,theUnitedStates,andRussia(4%each).WhileChinaandtheUnitedStatesarewellpositionedtobecomefrontrunnersinfuturegreensteelmarkets,Japan,Hungary,Russia,andothermajorsteelproducersfaceresourceendowmentconstraintsandwoulddependongreenhydrogenimports.SmallerproducerssuchasFrance(0.6%marketshare)orSpain(0.6%)couldbenefitfromevolvingmarketdynamicsandincreasemarketsharesthankstotheirhigheconomicrelatedness.Countrieswithgoodresourceendowmentsandeconomicrelatedness,suchastheBalticStates,Morocco,Turkey,andThailand,couldtrytoattractgreensteelproduction,thusgainingnewvalue-creatingopportunities.CountrieslikeNorway,Chile,andNamibiacouldbecomegreenhydrogenexporterstocountrieswishingtodecarbonizetheirsteelproduction(seeFigure4).4.4.TheGeopoliticalPotentialforGreenHydrogenIndustrialApplicationsOuranalysisshowshowonlyafewcountries,suchasCanada,China,andtheUnitedStates,havethepotentialtoemergeasleadersinatleasttwoindustrialgreenhydrogenapplications.Themajorityofcurrentsteel,ammonia,andmethanolproductionlocationsfaceresourceconstraintsandmightdependonhydrogenimportstodecarbonize.Producingnationsthatleadinatleastoneindustrialgreenhydrogenapplication,likeSpainandMexico,couldupgradetheirvaluechainpositionbasedonrelatedeconomicactivities.Mostpotentialgreenhydrogenproducersaregoodlocationsforatleastoneofthethreegreenhydrogenindustrialapplications,andmightconsidertheintegrationofvaluechainsegments,whereascountrieswithlowereconomicrelatedness,suchasChile,Norway,orNamibia,couldfocusongreenhydrogenexports.Whilethemappingindicatesthatthereareopportunitiesforcountriesinallworldregions,mostcountriesinSouthAmericaandAfricafaceconstraintsthatlimittheirpotentialforanactiveroleinindustrialgreenhydrogenvaluechains(seeFigure5).IndustrialApplications19BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolFigure5.Countrypotentialforatleasttwoindustrialgreenhydrogenapplications205.CaseStudies—OpportunitiesandChallenges5.1.TheUnitedStates—aFrontrunnerTodaytheUnitedStatesisoneoftheworld’sleadinghydrogenproducers,accountingfor13%ofglobaldemand,with80%ofthisproductionderivingfromnaturalgasthat,evenifcost-competitivecomparedtogreenhydrogen,hasamuchhighercarbonintensity(IEA,2019).Atthesametime,thecountry’svastsolar,wind(Osmani,2013),andfreshwaterendowments(AQUASTAT,2020;Pflugmann&DeBlasio,2020)couldturntheUnitedStatesintoagreenhydrogenexportchampionandafrontrunnerinfuturegreenhydrogenindustrialapplications.Existinglargeammoniaandsteelapplications,equalto10%and3.9%ofglobalproduction,respectively,havegivenrisetoindustrialclusterswithrelativelyhigh-skilledlaborforces.StakeholderssuchasUSSSteelCorp.areexploringdecarbonizationoptions(Reuters,2021),whilethelargestU.S.ammoniaproducer,CFIndustries,isbuildingitsfirstgreenammoniaplantinLouisiana,whichshouldbeoperationalby2023(Renews,2021).TheU.S.governmenthasmadegreenhydrogenakeypieceofitsindustrialandclimatepolicy.The‘hydrogenprogramplan’supportstechnologicalinnovationandgreenhydrogendeploymentatscale(U.S.DepartmentofEnergy,2020).Onecentralinstrumentisthe‘EnergyEarthshotInitiative,’whichaimstoreducethecostofgreenhydrogenby80%to$1perkgby2030(OfficeofEnergyEfficiencyandRenewableEnergy,2021).Withinvestmentsofabout$400millionin2022alone,theprogramprovidesgrantstohydrogeninnovationanddemonstrationprojectsfocusedspecificallyonchemicalandindustrialprocesses.OneconcreteexampleistheU.S.DepartmentofEnergy’ssupportforprojectsinTexasthatexplorehowtoscaleupproductionandindustrialusesofgreenhydrogen(UT,2020).ThesestrategicindustrialpoliciesgointhedirectionofestablishingtheUnitedStatesasafrontrunnerinfutureglobalhydrogenvaluechains(OfficeofEnergyEfficiencyandRenewableEnergy,2021).21BelferCenterforScienceandInternationalAffairsHarvardKennedySchool5.2.Thailand—aPotentialUpgraderDrivingGreenIndustrializationThailandisdrivinggreenindustrializationpartlyasameanstocreatenewjobopportunities.Itslong-termeconomicdevelopmentplan‘Thailand4.0’isaimedatmovingthecountryfrommiddle-incomepayingjobstohigh-incomeonesinthenext20years.Keymeasuresincludestrengtheningindustrializationandspurringinnovation,especiallyforthechemicalsector,whichisseenasthecountry’s‘growthengine’(RoyalThaiEmbassy,2021).UpgradingThailand’spositioningalonggreenhydrogenvaluechainswouldhighlyresonatewiththeseeconomicdevelopmentgoals.Thailandhasvastrenewableresourceendowmentsforgreenhydrogenproduction,andalreadyleadsintheASEAN11regionwithmorethan60%oftheregionalinstalledsolarcapacity(Hong,2019).Whilebiofuelsstillaccountforthemajorityofrenewableelectricitysupply,governmentpoliciessupporttheincreaseofwindandsolarenergyproduction(Hong,2019;IEA,2021b).Basedonimprovementsinwatermanagementinthepastdecades,Thailand’swaterplanforeseesnoresourcescarcitythatwouldrestrictgreenhydrogenproduction(Sethaputraetal.,2000).Thefirstplantsforgreenhydrogenproductionarealreadybeingbuiltbythelargeststate-ownedenergyutility,EGAT(EGAT,2019),andbytheChinesecompanyWisonEngineering,whichplanstostartproductionin2023(Bailey,2021).Thailandcouldthereforebuildupgreenhydrogen-basedindustrialproduction.Whiledomesticammonia,methanol,andsteelproductionisnotyetestablished,Thaiindustriescurrentlyuseimportedammoniaasafeedstockforfertilizersinthefoodindustryandrefrigerationsystems(Yoshimoto,2017).Relatedindustrialactivitiescontributetoahighleveloftransferableskills;Thailandisaregionalleaderinchemicalsandhasanextensiverefiningbasethathasstartedtoexploretheuseofgreenhydrogentodecarbonizedieselproduction(Bailey,2021).Theserelatedeconomicactivitesandskillscouldbecomevaluableassetsforattractinggreenammoniaandmethanolproductions,butitisyetnotclearwhetherthecountrycouldcompeteatscaleinfuturegreenhydrogenmarketsandapplications.11TheAssociationofSoutheastAsianNations(ASEAN)includesthefollowingcountries:Brunei,Cambodia,Indonesia,Laos,Malaysia,Myanmar,thePhilippines,Singapore,Thailand,andVietnam.22Thailandhasnotyetdevelopedanationalhydrogenplanoutliningthecountry’slong-termvisionandsupportingpolicies.However,nascentinitiativeslikethemulti-stakeholder‘HydrogenThailandGroup’existatanationallevel(PTT,2020).Atacross-borderlevel,ASEANcountriesholdmeetingstocoordinatepoliciesamongmemberstatesandfosterregionalinitiativesforthedeploymentofnewhydrogenplantsandenablinginfrastructure(ASEAN,2021).Theproductionofgreenhydrogenandthebuild-upofgreenhydrogenindustriescouldstrengthenThailand’sroleinregionaltradewithotherASEANcountries.However,moretargetedpolicieswillbeneededtocapitalizeonthefullpotentialofindustrialupgradingopportunities.5.3.Germany—anImport-DependentDecarbonizingIndustrialPowerGermanywillneedtorelyonimportstomeetprojectedgreenhydrogendemandduetoitscomparativelylowsolarandwindpotentialsandlimitedlandavailability(Nuñez-Jimenez&DeBlasio,2022;Prognosetal.,2021).Althoughseveralplantsforgreenhydrogenproductionarebeingdeveloped(BmWi,2021e),recentestimatesforecastthatGermanycould,atmost,produceonlyathirdoftheneededgreenhydrogendemandby2045(SeeFigure6)(Prognosetal.,2021).11931659604410515816905010015020025030020252030203520402045TWhDomesticgreenhydrogengenerationHydrogenimportsFigure6.ProjectedgreenhydrogenproductioninGermanyandimportneeds(Prognosetal.,2021,p.23)WhileGermanyisnotamongtheworld’stopproducersofammonia,methanol,orsteel,itstillaccountsforconsiderablesteelandammoniaproductionmarketshares,2%and1.7%,respectively(BmWi,2021c;Statista,2022).Theseindustriesarewellestablishedandoftenoperateincaptivemarketswithhighlyintegratedinfrastructurenetworks,including400kmofhydrogenpipelines(IEA,2019;Shell,2017).23BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolAsthesesectorsdecarbonize,akeychallengefacingGermanywillbehowtoremaincompetitivedespiteitsimportdependency,achallengealreadyseeninthechemicalsector,whichisunderpressureduetotheincreasingoffshoringofproductionfacilities(Prognosetal.,2021,p.45).Ontheotherhand,highlyspecializedtransferableskills,especiallyintheplasticssector,innovationclusters,andcustomerproximity,couldbecomekeyassets(Prognosetal.,2021,p.45).TheGermangovernmentstronglysupportsagreenhydrogen-baseddecarbonizationofindustrialapplications.Severalconcretesupportpolicieshavealreadybeenintroducedbeyondanationalhydrogenstrategythatprovidesgeneralguidance.Thesepoliciesincludeanationalinnovationprogramprovidingupto1.4billioneurosinpublicfundingand2billioneurosinprivatefundingforhydrogenandfuelcelltechnologies(IEA,2019).Thisprogramaimstobuildtheneededknow-howandskillsthroughdemonstrationprojects,suchasthefirstsyntheticmethaneproductionplantsusinggreenhydrogenasafeedstockbeingbuiltinWerlte(IEA,2019).Ontopofthesenationalinitiatives,GermanyisalsoleveragingEuropeanUnion(EU)initiativesbasedonthe‘hydrogenstrategyforaclimateneutralEurope.’TheEUanditsmemberstatessupportlarge-scaledeploymentofgreenhydrogen,especiallyinthesteelandchemicalindustries,byunitingstakeholdersina‘EuropeanCleanHydrogenAlliance’thatprovidespublicfundingandpromotesresearchandinnovation(EC,2022).PolicymakersatthenationalandEUlevelsarealsofocusingonsecuringstablegreenhydrogenimportsforindustrialapplications.TheEUhydrogenstrategyaimstoaddressthemarketandgeopoliticalimplicationsofgreenhydrogenimportsandtheCommissionprioritizespartnershipswithkeysuppliers(EC,2020),mainlyMiddleEasternandNorthernAfricancountries(EC,2020;IRENA,2021).Atthenationallevel,GermanysupportspublicpartnershipsandprivatesectorcollaborationswithMorocco,SaudiArabia,UAE,andAustralia(BmWi,2021a,2021b,2021d;Ghorfa,2020).Inaddition,resourcepotentialsforhydrogenimportshavebeenassessedincooperationwithWestandsub-SaharanAfricanstates,includingNamibia(BmBF,2021).246.GeopoliticalandMarketImplicationsPreviousresearchonthegeopoliticsofgreenhydrogenhasidentifiedpotentialgreenhydrogenexportchampions,suchasAustralia,Canada,Norway,Namibia,andtheUnitedStates,basedontheirvastresourceendowments(IRENA,2022;Pflugmann&DeBlasio,2020;VandeGraafetal.,2020).Integratingcriticalinsightsfromavaluechainperspectiveallowsustoelucidatethedistributionofpotentialeconomicgainsandlossesandtheassociatedgeopoliticalandmarketimplicationsinmoredetail.Thisstudyarguesthattherolecountrieswillassumeinfuturegreenhydrogenvaluechainsdependsnotonlyontheirresourceendowmentsbutalsoontheircurrentpositioninginhydrogenmarketsandtheeconomicrelatednessoftheirindustrialsectorswithgreenhydrogenapplications.Thisimpliesthatcountrieswithsignificantrenewablehydrogenpotentialcouldprioritizehydrogenexports(‘greenhydrogenexporters’),fostervaluecreationopportunitiesbyupgradingalongvaluechains(‘upgraders’),orboth(‘frontrunners’).Onlyafewcountries,includingChinaandtheUnitedStates,mightemergeasclearfrontrunnersthatintegratenumeroussegmentsofvaluechainsforvariousindustrialgreenhydrogenapplications.Thesecountrieshavevastresourceendowmentsandconsiderablemarketsharesintoday’shydrogenindustrialapplicationsthatenablethemtointegratethegreenhydrogenvaluechainsegmentsofproductionandindustrialapplications.Locatingindustrialfacilitiesclosetolow-costgreenhydrogenproductionwouldcreatevaluebyincreasingacountry’scontroloversupplychainsandminimizinghydrogentransportationcosts.Thesecountriescouldthusreapthemostextensivebenefitsandbecomegeopoliticalandmarketwinners.However,previousstudiesonthegeopoliticsoftheenergytransitionhavewarnedthatthesedynamicscouldspuragreenraceforindustrialleadership,creatingtensionsininternationalrelations(Fankhauseretal.,2013;Goldthauetal.,2019).Today,mostcountrieswithhighlydevelopedammonia,methanol,andsteelindustries,suchasSaudiArabia,Japan,andGermany,areresourceconstrainedandwoulddependongreenhydrogenimportstomeetdemand.Hence,fromageopoliticalperspective,thepast’sdependenciesandsupplydisruptionrisksare25BelferCenterforScienceandInternationalAffairsHarvardKennedySchoollikelytopersistinalow-carbonenergyworld,butwillbedifferentfromtoday’s(Bradshaw,2009;Pflugmann&DeBlasio,2020;Toft,2011).Thesenewgeopoliticaldependencieswillinvolvenewalliancesandwillalsobeafunctionoffuturemarketstructures;likenaturalgasmarkets,hydrogenmarketswillemergeasregionalones,butonlyglobalandmorestructuredmarketswillallowforriskreduction(Pflugmann&DeBlasio,2020).Furthermore,competingdynamicsforgreenhydrogen-basedindustriescouldfosternewgeopoliticalandmarkettensionsandconflictsbetweengreenhydrogenimportersandupgraders.ThecasestudyonGermanyclearlyexemplifiesthesepotentialdynamics.Asdiscussed,Germanywillneedtoimportgreenhydrogentomeetdemand.However,potentialexporters(especiallyinSouthernEuropeandNorthernAfrica)couldhaveasubstantialeconomicinterestinattractingtherespectivegreenhydrogenindustrialapplicationsinsteadofrelyingonlyonhydrogenexports.Countrieswithhighresourcepotentialsandhighlyskilledlaborforces,likeSpain,couldinsteadaimtoupgradetheirvaluechainpositionandexpandindustrialhydrogenapplications.Thesecompetinginterestswouldlikelyresultintradebarriersorconflicts;greenhydrogenimporterswouldprotectinternalmarketswithimporttariffsonindustrialproducts.Atthesametime,upgraderswouldsupportlocalindustrieswithsubsidiesandlocalcontentrequirements.Variousstudiesonthedynamicsofwindandsolarvaluechainsillustratehowcountries,includingChinaandIndia,haveusedtradebarrierstostrengthenthebuildupofdomesticindustries(Bazilianetal.,2020;Chen&Lees,2016;Dai&Xue,2014;Hipp&Binz,2020;Johnson,2015;Kuntze&Moerenhout,2013;Meckling&Hughes,2017;Prud’hommeetal.,2018;Quitzowetal.,2017;Zhang&Gallagher,2016).Furthermore,tensionsbetweenhigher-incomecountriesintheGlobalNorthandlower-incomecountriesoftenlocatedintheGlobalSouthmightintensify.Ouranalysisshowshowthepotentialforthethreeindustrialhydrogenapplications—ammonia,methanol,andsteel—isunevenlydistributedacrosstheglobe.Althoughthereareopportunitiesforeconomicgainsinallworldregions,mostfrontrunnersaremiddle-tohigh-incomecountries.12Ouranalysisshowsthatmanylower-incomecountries,especiallyinAfrica,willbelimitedtogreenhydrogenexportssincetheycannotcompeteinvalue-addedsegmentsofthevaluechains.12Acountry’sincomelevelclassificationisbasedontheWorldBank(2021).Low-incomecountrieshaveagrossnationalincome(GNI)percapitabelow$1,045;lowermiddle-incomecountrieshaveaGNIpercapitabetween$1,046and$4,095;uppermiddle-incomecountriesbetween$4,096and$12,695;high-incomecountriesabove$12,695.26Hencethepromiseof‘sustainabledevelopment’andgreenindustrialization,oftenassociatedwiththeenergytransition(Helgenbergeretal.,2017),as,forexample,inourcasestudycountryThailand,mightnotbereplicableeverywhere.Thisfindingisinlinewithexistingliteratureonthe‘uneventransition,’inwhichthegapbetweencountriesleadingandbenefitingfromtheenergytransitionandthosethatarenotiswidening(Eicke&Goldthau,2021;Goldthauetal.,2020;Quitzowetal.,2021).ThisresultmightintensifypreviousdebatesintheUnitedNationsFrameworkConventiononClimateChange(UNFCCC)ontheneedfortechnologytransferandfinancialsupporttoenablesustainabledevelopmentandgreenindustrializationforall(Glachant&Dechezleprêtre,2016;Hoekmanetal.,2005;Kirchherr&Urban,2018;Lema&Lema,2013;Lema&Lema,2012;McGee&Wenta,2014).Finally,wehaveidentifiedseveraladjacentresearchtopicsinneedoffurtheracademicfocus.Potentialareasincludebutarenotlimitedto:1.Applytheproposedframeworktoothersectorsandapplications.Weexemplarilyanalyzedcountries’potentialforgreenhydrogen-basedammo-nia,methanol,andsteelproduction.Furtherresearchcouldconcentrateonvaluechainsforothergreenhydrogenapplications,includingthetransportandrefiningsectors.2.Expandtheanalyticalframeworktoelucidateandcompareindustrialupgradingandrelocationfromasystemdynamicsperspective,consideringsector-specificandlocalfactorssuchasregulationsandlaborcosts.Whilemanypreviousstudieshighlightedtheimportanceofeconomicrelatednessandskillandtechnologytransfer,thesecomplexprocessesseemtodependonfurtherinterdependentfactors,whichvaryamongcountriesandsectors(Bakeretal.,2014;Gandenbergeretal.,2015;Giulianietal.,2005;Haakonsson&Slepniov,2018;Pipkin&Fuentes,2017;Qiuetal.,2013).Thus,furtherresearchonthespecificdynamicsinthechemicalandsteelsectorscouldhelpclarifytherelativeimportanceofthesefactors,incon-cretecountrycontexts.Previousresearchonrelocationsinwindandsolarvaluechainsmightofferinterestingentrypointsforacomparativeanalysis(Meckling&Hughes,2017;Zhang&Gallagher,2016).3.Modeldifferencesingreenhydrogenproductioncosts,basedonvariousconstraints.Someofthementionedconstraintsinthisstudycouldbeover-come.Limitedresourceavailabilitydoesnotalwaysimplythatacountry27BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolwillentirelydependongreenhydrogenimportssinceitmightstillbeabletoproducesomeofitsdemandinternally,asthecasestudyonGermanyhighlights.Likewise,betterwatermanagementsystemsandtargetedtrain-ingcouldincreasefreshwateravailabilityandlaborskills.Atthesametime,evenifexistingconstraintsweretobeaddressed,thiswouldcomeatacost,whichcouldbemodeledinfutureresearch.287.ConclusionandPolicyRecommendationsThispaperaddressesthepotentialforgreenhydrogenadoptionatscaleinthreekeyindustrialapplications:ammonia,methanol,andsteelproduction.Buildingonexistingliteraturethatassessescountries’potentialforgreenhydrogenproduction(Pflugmann&DeBlasio,2020),weaddcriticalinsightsfromavaluechainperspective.Weproposeananalyticalframeworktoclustercountriesintofivegroupsbasedonresourceendowment,currentindustrialproduction,andeconomicrelatedness.Ourfindingsoffermoregranularinsightsintothedifferentrolescountriescouldassumeinfuturegreenhydrogenmarkets.Thus,theycontributeempiricalevidencetotheongoingdebateonthegeopoliticsofhydrogen,andelucidatethedistributionofpotentialeconomicgainsandlossesandtheassociatedgeopoliticalandmarketimplications.Analyzingacountry’spotentialvaluechainpositioninginfuturegreenhydrogenmarketscanguidepolicymakersindefiningstrategicindustrialpoliciesforeachcountrygroup:Frontrunners.Countrieswithvastresourceendowmentsandconsiderablemarketsharesintoday’shydrogenindustrialapplicationscouldevolveintofrontrunnersbyintegratinggreenhydrogenvaluechainsegmentsofproductionandindustrialapplications.Potentialfrontrunnersshouldfocusonindustrialpoliciesthatfostertheup-scalingofgreenhydrogenproductionandindustrialapplications.Upgraders.Countrieswithadequateresourcesforgreenhydrogenproductionandhighlyrelatedeconomicactivitiescouldpotentiallyupgradetheirvaluechainpositionandattractgreenhydrogen-basedindustries.Potentialupgraderscouldbenefitfromstrategicpartnershipswithfrontrunnerstofostertechnologicalandknow-howtransfer.Policiesshouldfocusonattractingforeigncapital—forexample,byloweringmarketrisk,developingpublic-privatepartnerships,andformingjointventures(Asiedu,2006;Bürer&Wüstenhagen,2009;Busse&Hefeker,2007).Greenhydrogenexporters.Resource-richcountrieswithoutupgradingpotentialshouldprioritizegreenhydrogenexportsandwouldbenefitfrompartnershipswithgreenhydrogenimporterstodeployenablinginfrastructureandreducemarketrisk.Furthercoordinationamonggreenhydrogenexportersoninternationalstandards29BelferCenterforScienceandInternationalAffairsHarvardKennedySchoolforgreenhydrogenproductioncouldavoidconflictandfacilitatetradeatglobalscale.Greenhydrogenimporters.Resource-constrainedcountrieswithindustrialhydrogen-basedproductionwillneedtodevelopstrategicpartnershipstoensuresecureandstablegreenhydrogensupplies.Furthermore,stimulatinginnovationandknowledgecreationthroughtargetedpolicieswillbecriticaltosustaincompetitivenessduringthetransitiontoalow-carboneconomyandavoidindustrialrelocationtofrontrunnersorupgraders.Bystanders.Countrieswithsignificantconstraintsalongallthreecriticalvariablesofresourceendowment,currentpositioninginhydrogenmarkets,andeconomicrelatednessshouldassesswhethersomeoftheseconstraints,suchaslimitedinfrastructureorfreshwateravailability,couldbeovercome.308.LiteratureAQUASTAT.(2020).ConventionalWaterResources:SurfaceWaterandGroundwater.https://www.fao.org/aquastat/en/databases/maindatabase/ASEAN.(2021).HydrogeninASEAN:EconomicProspect,Development&Applications.https://aseanenergy.org/event/hydrogen-in-asean-economic-prospect-development-and-applications/Asiedu,E.(2006).ForeignDirectInvestmentinAfrica:TheRoleofNaturalResources,MarketSize,GovernmentPolicy,InstitutionsandPoliticalInstability.TheWorldEconomy,29(1),63-77.https://doi.org/10.1111/j.1467-9701.2006.00758.xBailey,M.P.(2021).WisonEngineeringawardedEPCCcontractfornewhydrogenplantinThailand.https://www.chemengonline.com/wison-engineering-awarded-epcc-contract-for-new-hydrogen-plant-in-thailand/?printmode=1Baker,L.,Newell,P.,&Phillips,J.(2014).Thepoliticaleconomyofenergytransitions:thecaseofSouthAfrica.NewPoliticalEconomy,19(6),791-818.Bazilian,M.,Cuming,V.,&Kenyon,T.(2020).Local-contentrulesforrenewablesprojectsdon’talwayswork.EnergyStrategyReviews,32,100569.Binz,C.,&Truffer,B.(2017).GlobalInnovationSystems—Aconceptualframeworkforinnovationdynamicsintransnationalcontexts.ResearchPolicy,46(7),1284-1298.Blondeel,M.,Bradshaw,M.J.,Bridge,G.,&Kuzemko,C.(2021).Thegeopoliticsofenergysystemtransformation:Areview.GeographyCompass,15(7).https://doi.org/10.1111/gec3.12580BmBF.(2021).PotenzialatlasWasserstoff:AfrikakönnteEnergieversorgerderWeltwerden.https://www.bmbf.de/bmbf/de/home/_documents/potenzialatlas-wasserstoff-afr-ergieversorger-der-welt-werden.htmlBmWi.(2021a).AltmaierunterzeichnetgemeinsameAbsichtserklärungzurDeutsch-SaudischenWasserstoffzusammenarbeithttps://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2021/03/20210311-altmaier-unterzeichnet-gemeinsame-absichtserkl%C3%A4rung-zur-deutsch-saudischen-wasserstoffzusammenarbeit.htmlBmWi.(2021b).DeutschlandunddieVereinigtenArabischenEmirateverstärkenEnergiepartnerschaftmitneuerWasserstoff-Taskforcehttps://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2021/11/20211102-deutschland-und-die-vereinigten-arabischen-emirate-verstarken-energiepartnerschaft-mit-neuer-wasserstoff-taskforce.htmlBmWi.(2021c).StahlundMetall.https://www.bmwi.de/Redaktion/DE/Textsammlungen/Branchenfokus/Industrie/branchenfokus-stahl-und-metall.htmlBmWi.(2021d).UnterzeichnungeinerAbsichtserklärungzurGründungeinesdeutsch-australischenWasserstoffakkordshttps://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2021/06/20210613-unterzeichnung-einer-absichtserklaerung-zur-gruendung-einer-deutsch-australischen-wasserstoffallianz.htmlBmWi.(2021e).“WirwollenbeiWasserstofftechnologienNummer1inderWeltwerden”:BMWiundBMVIbringen62Wasserstoff-GroßprojekteaufdenWeghttps://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2021/05/20210528-bmwi-und-bmvi-bringen-wasserstoff-grossprojekte-auf-den-weg.htmlBP.(2019).StatisticalReviewofWorldEnergy.https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-report.pdfBradshaw,M.J.(2009).Thegeopoliticsofglobalenergysecurity.GeographyCompass,3(5),1920-1937.Bürer,M.J.,&Wüstenhagen,R.(2009).Whichrenewableenergypolicyisaventurecapitalist’sbestfriend?Empiricalevidencefromasurveyofinternationalcleantechinvestors.EnergyPolicy,37(12),4997-5006.https://doi.org/https://doi.org/10.1016/j.enpol.2009.06.071Busse,M.,&Hefeker,C.(2007).Politicalrisk,institutionsandforeigndirectinvestment.EuropeanJournalofPoliticalEconomy,23(2),397-415.https://doi.org/10.1016/j.ejpoleco.2006.02.003Chen,G.C.,&Lees,C.(2016).GrowingChina’srenewablessector:adevelopmentalstateapproach.NewPoliticalEconomy,21(6),574-586.Chen,S.,Kumar,A.,Wong,W.C.,Chiu,M.-S.,&Wang,X.(2019).Hydrogenvaluechainandfuelcellswithinhybridrenewableenergysystems:Advancedoperationandcontrolstrategies.AppliedEnergy,233,321-337.Coleman,D.,Kopp,M.,Wagner,T.,&Scheppat,B.(2020).Thevaluechainofgreenhydrogenforfuelcellbuses–acasestudyfortheRhine-MainareainGermany.InternationalJournalofHydrogenEnergy,45(8),5122-5133.Dai,Y.,&Xue,L.(2014).China’spolicyinitiativesforthedevelopmentofwindenergytechnology.ClimatePolicy,15(1),30-57.https://doi.org/10.1080/14693062.2014.863549EC.(2020).Ahydrogenstrategyforaclimate-neutralEurope.https://ec.europa.eu/energy/sites/ener/files/hydrogen_strategy.pdfEC.(2022).Supportingcleanhydrogen.https://ec.europa.eu/growth/industry/strategy/hydrogen_en31BelferCenterforS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