The hydrogen economy refers to using hydrogen as a type of energy to work alongside electricity as a long-term way to reduce greenhouse gas emissions. This approach is used in places where cheaper and more efficient clean energy solutions are not available. The hydrogen economy includes making hydrogen and using it in ways that help replace fossil fuels and reduce climate change.
Hydrogen can be made in different ways. Most hydrogen today is gray hydrogen, which is made from natural gas using a process called steam methane reforming (SMR). This process contributed to 1.8 percent of global greenhouse gas emissions in 2021. Low-carbon hydrogen, which is made using SMR with carbon capture and storage (blue hydrogen) or through water splitting using renewable energy (green hydrogen), made up less than 1 percent of hydrogen production. In 2021, 100 million tonnes of hydrogen were produced, with 43 percent used in oil refining and 57 percent used in industry, mainly for making ammonia for fertilizers and methanol.
To reduce global warming, experts expect the future hydrogen economy to replace gray hydrogen with low-carbon hydrogen. However, as of 2024, it is unclear when enough low-carbon hydrogen can be made to fully replace gray hydrogen. Future uses of hydrogen are likely in heavy industries, such as high-temperature processes, producing green ammonia and organic chemicals, and replacing coal-based materials in steelmaking. It may also be used in long-distance transportation, like shipping, and for long-term energy storage. Uses in light vehicles and building heating are no longer part of the future hydrogen economy because of economic and environmental challenges. Hydrogen is hard to store and transport, and it is unsafe due to its high flammability. It is also less efficient than using electricity directly. Since low-carbon hydrogen is limited, it should be used in areas that are hardest to decarbonize.
As of 2023, there are no real alternatives to hydrogen for certain chemical processes, such as making ammonia for fertilizers. The cost of low- and zero-carbon hydrogen will affect how much it is used in chemical production, long-distance aviation, shipping, and energy storage. The cost of producing low- and zero-carbon hydrogen is changing and may be influenced by factors like carbon taxes, energy geography, energy prices, technology choices, and material needs. The U.S. Department of Energy's Hydrogen Hotshot Initiative aims to lower the cost of green hydrogen to $1 per kilogram by 2031. However, the cost of electrolyzers, which are used to make green hydrogen, increased by 50 percent between 2021 and 2024.
History and objectives
In 1923, geneticist J. B. S. Haldane suggested a society that uses hydrogen as the main energy storage method. He thought this could help when Britain's coal supplies ran out. He proposed using wind turbines to create hydrogen and oxygen through a process called electrolysis, which could store energy for long periods and help with the unpredictable nature of renewable power. The term "hydrogen economy" was first used by John Bockris during a speech in 1970. He believed hydrogen, powered by nuclear and solar energy, could help reduce reliance on fossil fuels and address pollution by serving as an energy source in situations where electricity was not practical.
The University of Michigan proposed a hydrogen economy to reduce the harmful effects of burning hydrocarbon fuels, which release carbon dioxide and other pollutants into the air. In 1970, Lawrence W. Jones of the University of Michigan wrote a report that supported Bockris's idea of using hydrogen to improve energy security and reduce environmental harm. Unlike Bockris, Jones focused only on nuclear power as the energy source for hydrogen production and emphasized using hydrogen in transportation, especially for aviation and heavy goods vehicles.
In 1974, the International Energy Agency (IEA) and the International Association for Hydrogen Energy (IAHE) were created. These groups worked to promote national plans that would increase awareness and development of the hydrogen economy.
Interest in hydrogen as an energy source grew in the 2000s, but some critics called this attention "hype," and some investors lost money during this time. Interest returned in the 2010s, especially after the Hydrogen Council was formed in 2017. Companies like Toyota and Hyundai began selling hydrogen fuel cell cars, and some groups in China planned to increase production of these vehicles to hundreds of thousands over the next decade. However, by 2022, only 70,200 hydrogen vehicles had been sold worldwide, compared to 26 million plug-in electric vehicles.
In the early 2020s, the focus shifted to using hydrogen alongside electricity and emphasizing electrolysis as the main way to produce hydrogen. This approach aims to limit global warming to 1.5°C and prioritize green hydrogen for heavy industry, long-haul transport, and long-term energy storage.
Since 2017, many countries and regions have created hydrogen strategies to guide infrastructure development and private investment. The International Renewable Energy Agency suggests national plans as the first step to support green hydrogen.
Japan released its strategy in 2017, aiming to become the first "hydrogen society." Many provinces and cities in China have also developed hydrogen plans. The European Union's strategy, introduced in 2021, includes plans to build large-scale hydrogen infrastructure with help from trade groups. The United States' strategy outlines a 30-year plan to expand hydrogen production and use. Some countries that rely on natural gas exports, like Qatar, may benefit from hydrogen strategies that use existing resources and markets. By 2021, 28 governments had published hydrogen strategies, and by 2024, this number increased to 60. However, many strategies focus on increasing scale first and making hydrogen clean later, rather than requiring the use of green hydrogen. Economic studies show that few countries are likely to meet their 2030 goals.
Current hydrogen market
In 2022, hydrogen production worldwide was worth over US$155 billion and is expected to increase by about 9% each year through 2030. In 2021, 94 million metric tons of molecular hydrogen (H2) was made. About one-sixth of this came as a byproduct of petrochemical industry processes. Most hydrogen is produced at dedicated facilities, over 99% of which comes from fossil fuels. These facilities mainly use steam reforming of natural gas (70%) and coal gasification (30%, mostly in China). Less than 1% of dedicated hydrogen production is low carbon, including steam reforming with carbon capture, green hydrogen from electrolysis, and hydrogen from biomass. CO2 emissions from 2021 production were 915 million metric tons of CO2, which was 2.5% of energy-related CO2 emissions and 1.8% of global greenhouse gas emissions. Almost all hydrogen produced for the current market is used in oil refining (40 million metric tons of H2 in 2021) and industry (54 million metric tons of H2). In oil refining, hydrogen is used in a process called hydrocracking to convert heavy petroleum sources into lighter fractions suitable for use as fuels. Industrial uses mainly include ammonia production for fertilizers (34 million metric tons of H2 in 2021), methanol production (15 million metric tons of H2), and the manufacture of direct reduced iron (5 million metric tons of H2).
Production
Hydrogen gas is made using several industrial processes. Most hydrogen produced today comes from fossil fuels. The majority is called gray hydrogen, which is created through a process called steam methane reforming. In this process, hydrogen is made when steam reacts with methane, a main part of natural gas. Making one tonne of hydrogen this way releases 6.6–9.3 tonnes of carbon dioxide. If carbon capture and storage is used to remove much of this carbon dioxide, the result is called blue hydrogen.
Green hydrogen is typically made by using renewable electricity to split water into hydrogen and oxygen through a process called electrolysis. Sometimes, green hydrogen is also defined as hydrogen made from other low-emission sources like biomass. Producing green hydrogen is more expensive than making gray hydrogen, and the process of converting energy to hydrogen is not very efficient. Other ways to make hydrogen include gasifying biomass, breaking down methane through heat, extracting natural hydrogen from underground, and creating hydrogen where it is needed.
As of 2023, less than 1% of hydrogen made specifically for certain uses is low-carbon. This includes blue hydrogen, green hydrogen, and hydrogen made from biomass.
Green methanol is a liquid fuel made by combining carbon dioxide and hydrogen (CO₂ + 3 H₂ → CH₃OH + H₂O) under high pressure and heat with the help of catalysts. It is a way to reuse captured carbon for recycling. Methanol can store hydrogen more easily at normal outdoor temperatures and pressures compared to liquid hydrogen or ammonia, which require a lot of energy to stay cold. In 2023, the Laura Maersk became the first container ship to use methanol fuel. Ethanol plants in the Midwest, such as those in Iowa, Minnesota, and Illinois, are good places to combine pure carbon capture with hydrogen to make green methanol. These areas have plenty of wind and nuclear energy. Mixing methanol with ethanol could make methanol a safer fuel because methanol does not burn with a visible flame in daylight or produce smoke, while ethanol burns with a visible yellow flame. If green hydrogen is made with 70% efficiency and methanol is produced from that hydrogen with 70% efficiency, the overall energy conversion efficiency would be 49%.
Uses
Hydrogen can be used as a fuel in two ways: in fuel cells that create electricity, and by burning it to produce heat. When hydrogen is used in fuel cells, the only thing released is water vapor. Burning hydrogen can create harmful nitrogen oxides.
To help reduce global warming, low-carbon hydrogen, especially green hydrogen, may be important for making industries less harmful to the environment. Hydrogen fuel can create the intense heat needed for making steel, cement, glass, and chemicals. This helps industries reduce their carbon emissions, along with other technologies like electric furnaces for steel. However, hydrogen may be most useful for producing cleaner ammonia and chemicals. For example, in steelmaking, hydrogen could act as a clean energy source and replace coal-based materials.
Using low-carbon hydrogen to reduce emissions could change where industries are located. Areas that can produce hydrogen efficiently might interact differently with transportation systems, raw materials, and technology.
Much attention on hydrogen focuses on vehicles, such as forklifts, airport vehicles, buses, cars, and trucks. Other uses, like hydrogen-powered planes, are still being explored. Hydrogen vehicles create much less local air pollution than regular vehicles. By 2050, hydrogen and synthetic fuels might provide 20% to 30% of the energy needed for transportation.
Hydrogen used to reduce emissions in transportation is likely to be most useful for shipping, aviation, and heavy trucks. This would involve using hydrogen-based fuels like ammonia and methanol, along with fuel cell technology. Hydrogen has been used in fuel cell buses for many years and also powers spacecraft.
According to the International Energy Agency’s 2022 Net Zero Emissions Scenario, hydrogen might supply 2% of rail energy needs by 2050, while 90% of rail travel is expected to be electrified. Hydrogen would likely be used more on rail lines that are hard to electrify. By 2050, hydrogen might meet about 30% of heavy truck energy needs, mainly for long-distance freight.
Although hydrogen can be used in modified engines, fuel cells are more efficient because they use chemical reactions instead of heat. However, fuel cells are more expensive and require purer hydrogen than engines.
In the car industry, by the end of 2022, 70,200 fuel cell vehicles had been sold worldwide, compared to 26 million plug-in electric vehicles. As electric vehicles and battery technology grow, hydrogen’s role in cars is very small.
Green hydrogen, made by splitting water with electricity, can help balance energy from renewable sources. It produces only water when used in fuel cells. Most hydrogen comes from natural gas, but green hydrogen from renewable energy offers a zero-emission option. Producing green hydrogen can reduce the need to waste renewable energy during high production times and store it for later use.
An alternative to gaseous hydrogen is to combine it with nitrogen from the air to make ammonia. Ammonia is easier to store and transport and can be used as a clean fuel. However, ammonia is highly toxic, and making it is not very efficient. It can also damage fuel cells if not fully converted.
Many groups in the natural gas industry are promoting hydrogen boilers for heating and cooking to reduce emissions in homes and businesses. They suggest that current users of natural gas can wait for hydrogen to be supplied through existing gas networks and then replace their appliances.
A review of 32 studies found that using hydrogen for heating and cooking is generally less economical and less beneficial for the environment than alternatives like district heating, heat pumps, solar thermal energy, and energy efficiency improvements. Using blue hydrogen for heating might require three times as much methane as natural gas, while green hydrogen would need two to three times as much electricity as heat pumps. Hybrid systems that combine heat pumps and hydrogen boilers might help in areas where upgrading electrical networks is expensive.
Widespread use of hydrogen for heating would likely increase energy costs, heating costs, and environmental impacts compared to alternatives. However, it might have a limited role in specific areas. Using hydrogen for heating could also raise costs for hydrogen used in harder-to-decarbonize industries and transportation.
As of 2019, producing synthetic gas from hydrogen and carbon dioxide using bio-energy with carbon capture and storage (BECCS) is limited by the availability of sustainable bioenergy. Any synthetic gas made this way might be used for aviation biofuels.
Synthetic Natural Gas (SNG) can be made from low-quality coal using hydrogen.
Safety
In hydrogen pipelines and steel storage containers, hydrogen can react with metal materials, leading to weakening of the metal and possible leaks. Because hydrogen is lighter than air, it does not easily collect in large amounts to create a flammable gas mixture. However, high-pressure hydrogen leaks may cause hydrogen to catch fire on its own or explode, even without an obvious source of heat.
Hydrogen can burn when mixed with air, even in small amounts. It can ignite when the amount of hydrogen in the air reaches as low as 4%. In about 70% of hydrogen-related fire incidents, the cause of ignition is unknown. Many experts believe that hydrogen can sometimes catch fire without an external source of heat.
Hydrogen fires produce very high heat but are difficult to see, which can lead to serious burns. Like most gases, hydrogen can also cause breathing difficulties if there is not enough fresh air available.
Hydrogen infrastructure
A hydrogen infrastructure includes the systems for making hydrogen, moving it through trucks or pipelines, and the stations where hydrogen fuel is sold. This system is an important step before fuel cell technology can be widely used.
Hydrogen stations not near pipelines receive fuel through compressed hydrogen trailers, liquid hydrogen trucks, or by making hydrogen at the station itself. Pipelines are the most cost-effective way to move hydrogen over long distances, but they must be built to prevent leaks and protect against damage caused by hydrogen. Large oil refineries already use hydrogen gas pipes because hydrogen helps process crude oil into fuel. Experts suggest using existing industrial ports for hydrogen production and natural gas pipelines for transport, along with international teamwork and shipping.
South Korea and Japan, which did not have connections to other countries' electricity systems in 2019, were investing in hydrogen technology. In March 2020, Japan opened the Fukushima Hydrogen Energy Research Field, which claims to be the world’s largest hydrogen production site. The site includes a large solar power system, and electricity from the grid is also used to split water into hydrogen fuel.
Hydrogen can be stored in several ways, such as using high pressure and low temperatures or using chemical compounds that release hydrogen when needed. Although many industries produce large amounts of hydrogen, most of it is used at the place it is made, especially for creating ammonia. For many years, hydrogen has been stored as compressed gas or liquid and moved in containers for industrial use or space missions. A major challenge is hydrogen’s very low boiling point, which is about 20.268 K (−252.882 °C or −423.188 °F). Keeping hydrogen at such low temperatures requires a lot of energy.
Although hydrogen has a high energy content by weight, it has very low energy content by volume when stored as a gas at normal temperatures. To use hydrogen as fuel in vehicles, it must be stored in a highly energy-dense form to provide enough driving range. Because hydrogen is the smallest molecule, it can easily escape from containers. Its estimated global warming effect over 100 years is 11.6 ± 2.8.
Xcel Energy plans to build two power plants in the Midwest that can mix 30% hydrogen with natural gas. The Intermountain Power Plant is being updated to run on a mix of natural gas and hydrogen, and it is expected to operate on pure hydrogen by 2045.
Costs
Using hydrogen more widely in economies requires investment and costs related to its production, storage, distribution, and use. Calculating hydrogen's cost is complicated because it depends on many factors, such as the cost of energy sources (like gas and electricity), the type of production method (such as green or blue hydrogen), the technology used (like alkaline or proton exchange membrane electrolysers), storage and distribution methods, and how these costs might change over time. These factors are used to calculate the levelized cost of hydrogen (LCOH). The following table shows a range of LCOH estimates for gray, blue, and green hydrogen, measured in US dollars per kilogram of hydrogen (H₂). When data is given in other currencies or units, average exchange rates to US dollars from the same year are used. It is assumed that 1 kilogram of hydrogen has a calorific value of 33.3 kilowatt-hours.
The cost range for commercially available hydrogen production methods is wide. As of 2022, gray hydrogen is the cheapest to produce without a tax on its carbon dioxide emissions, followed by blue and green hydrogen. Blue hydrogen production costs are not expected to drop significantly by 2050. These costs may change with natural gas prices and could increase due to carbon taxes for emissions that are not captured.
The cost of electrolysers, which produce hydrogen using electricity, decreased by 60% from 2010 to 2022 but increased by 50% between 2021 and 2024. However, the Oxford Institute for Energy Studies predicts that green hydrogen costs will likely decrease significantly by 2030 and 2050 as renewable power generation becomes cheaper. Green hydrogen is most cost-effective when produced using surplus renewable electricity that would otherwise go unused, which favors electrolysers that can operate with low and variable power supplies.
A 2022 analysis by Goldman Sachs suggests that green hydrogen will reach the same cost as gray hydrogen globally by 2030. This could happen earlier if a global carbon tax is applied to gray hydrogen. In terms of energy cost per unit, blue and gray hydrogen will always be more expensive than the fossil fuels used to produce them, while green hydrogen will always be more expensive than the renewable electricity used to make it.
Subsidies for clean hydrogen production are higher in the United States and European Union compared to India. As of June 2025, the discovered price of green hydrogen in India is US$4.67 (INR 397) per kilogram.
Examples and pilot programs
Hydrogen for transportation is being tested in many places worldwide, including the United States (California, Massachusetts), Canada, Japan, the European Union (Portugal, Norway, the Netherlands, Denmark, Germany), and Iceland. Natural gas vehicles can be converted to use hydrogen as fuel.
Fuel cell micro-CHP units, which produce heat and electricity, are used in Japan and parts of the European Union. These units can run on hydrogen, natural gas, or LPG. Through projects like ene.field and PACE, supported by the Fuel Cells and Hydrogen Joint Undertaking (FCH JU), about 3,646 of these units were installed in the European Union and the UK by 2020.
In Western Australia, the Department of Planning and Infrastructure operated three Daimler Chrysler Citaro fuel cell buses in Perth from 2004 to 2007 as part of a trial.
By November 2020, Australia’s Renewable Energy Agency (ARENA) had invested $55 million in 28 hydrogen projects, ranging from research to early trials. ARENA aims to produce hydrogen by electrolysis at a cost of $2 per kilogram, as stated by Minister Angus Taylor in 2021.
In October 2021, Queensland Premier Annastacia Palaszczuk and investor Andrew Forrest announced plans for the world’s largest hydrogen plant in Queensland. However, the plan was canceled in 2025.
In November 2024, the South Australian Government received federal approval to build a 200MW hydrogen energy plant near Whyalla with a budget of A$593 million. The project, led by the Office of Hydrogen Power SA, ATCO Australia, and BOC, aimed to use renewable energy from wind and solar farms to provide stable power. Construction was scheduled to start in 2025 and finish by 2026, but the plan was also canceled in early 2025.
EU countries with existing natural gas pipelines include Italy, Belgium, Germany, France, and the Netherlands. In 2020, the EU launched the European Clean Hydrogen Alliance (ECHA).
Green hydrogen is growing in France. A €150 million Green Hydrogen Plan was introduced in 2019 to build infrastructure for hydrogen production, storage, and distribution, as well as to power public transportation like buses and trains. Corridor H2, a related initiative, will create hydrogen distribution facilities in Occitania along a route between the Mediterranean and the North Sea. The project will receive a €40 million loan from the European Investment Bank (EIB).
German carmaker BMW has worked with hydrogen for many years. The German government plans to hold tenders for 5.5 GW of new hydrogen-ready gas-fired power plants and 2 GW of upgrades to existing gas power stations by late 2024 or early 2025.
Iceland aims to become the world’s first hydrogen economy by 2050. Despite having large geothermal resources, Iceland still relies on imported petroleum products for transportation and fishing fleets as of 2024–2026. Iceland produces hydrogen by electrolysis, mainly for ammonia (NH3) used in fertilizer. Ammonia is used globally, and most of its cost comes from energy production.
Iceland uses hydrogen in limited ways, such as in a small pilot fleet of hydrogen-powered city buses in Reykjavík and research on using hydrogen for fishing vessels. Some efforts focus on extending imported oil with hydrogen rather than replacing it entirely.
The Reykjavík buses are part of a program called HyFLEET:CUTE, which operates hydrogen buses in eight European cities and has also tested them in Beijing, China, and Perth, Australia. A hydrogen economy pilot project is active on the Norwegian island of Utsira, combining wind power and hydrogen storage. Excess wind energy is used to produce hydrogen, which is stored and used for power when wind is low.
In India, the cost of green hydrogen was US$3.9 per kilogram (INR 328) as of July 2025, and green ammonia cost US$641 per tonne (INR 55,750). India plans to use hydrogen and hydrogen-compressed natural gas (H-CNG) because natural gas networks are expanding and air pollution is a major issue. About 80% of India’s hydrogen is expected to be green due to falling costs and new technologies.
Currently, hydrogen energy is in the Research, Development, and Demonstration (RD&D) stage. Hydrogen stations are limited, but more are expected soon.
In Poland, the Ministry of Climate and Environment plans to hold competitions for 2–3 hydrogen refueling stations, as announced by Deputy Minister Krzysztof Bolesta.
Saudi Arabia’s NEOM project aims to produce 1.2 million tonnes of green ammonia annually, starting in 2025. In Cairo, Egypt, a hydrogen-powered skyscraper project is being developed by Saudi real estate investors.
In South Korea, the Ulsan Green Hydrogen Town project includes 188 km of underground pipelines to transport hydrogen from petrochemical complexes to the city center as of October 2024.
In Turkey, the International Centre for Hydrogen Energy Technologies (UNIDO-ICHET) was established in 2004 and operated until 2012. In 2023, Turkey released a Hydrogen Technologies Strategy and Roadmap.
The UK began a fuel cell pilot program in 2004, testing hydrogen buses in London until 2007. The Hydrogen Expedition is developing a hydrogen-powered ship to sail around the world to demonstrate hydrogen technology.
In 2009, Dr. Graham Cooley became CEO of ITM Power PLC, a company that makes electrolysers for green hydrogen production. He raised nearly £500 million for ITM and opened the world’s largest electrolyser manufacturing facility in Sheffield in 2021. Cooley also served on the UK Government’s Hydrogen Advisory Council.
In August 2021, the UK Government released its first Hydrogen Strategy. At the same time, Chris Jackson resigned as chair of the UK Hydrogen and Fuel Cell Association, claiming UK and Norwegian oil companies inflated blue hydrogen costs to secure government support.
Several U.S. automobile companies have developed vehicles that use hydrogen as fuel.