A Security Policy for the Global Hydrogen Economy

In light of climate change and its potentially catastrophic impact on the planet, decarbonization remains a global imperative of existential importance. The critical goal of climate neutrality by 2050 is only achievable if measures such as efficiency gains and electrification are complemented by green hydrogen technology. Only hydrogen produced from renewable energy will enable the decarbonization of hard-to-abate sectors, such as heavy transport (land, sea, air) or industrial production. Because of Europe’s foreseeable import dependency, green hydrogen will be an important strategic commodity for the continent, as outlined in the new Deloitte publication.  

The strategic context 

Europe needs to secure a stable and affordable supply of green hydrogen, roughly half of it by imports. This situation has challenging geopolitical implications that need to be addressed in order to avoid the disadvantages of strategic energy dependency, as recently experienced with fossil fuels.  

While green hydrogen could in principle be produced anywhere, regions with high availability of solar and wind energy offer more favorable conditions for the efficient and affordable production of green hydrogen. Many of these regions are in the global south. Expertise in the natural gas industry and proximity to high demand markets are additional factors favoring hydrogen exporters. 

On the one hand, some aspects of the future global green hydrogen scenario are reminiscent of the familiar geopolitics of fossil fuels such as oil. These include the high import dependency of many industrialized nations, the potential risks of hydrogen flow disruptions, the continuing north-south divide and its associated political issues, as well as the problematic reliance on authoritarian states that appear to offer short-term advantages such as lower capital costs and perceived stability. On the other hand, many aspects of energy geopolitics will change significantly.  

Geopolitical implications 

Hydrogen production will be less concentrated than fossil fuel production. The broader geographical distribution of hydrogen production is likely to reduce the potential of forming energy cartels such as the Organization of the Petroleum Exporting Countries (OPEC) in the oil space. The process of adaptation may increase the risk of instability and conflict in petrostates such as Venezuela. China will be able to produce much of its green hydrogen domestically, thus reducing its dependency on imported energy. However, it will still require significant imports from regions that are not close allies. Among other BRIC countries, Brazil and South Africa have good prospects for exporting green hydrogen, while India does not. Russia, as a politically isolated state, will not be able to fully exploit its green hydrogen potential, whereas Türkiye and Iran will become important hydrogen players. Japan and South Korea remain dependent on energy imports but may diversify their imports as Australia becomes a major hydrogen exporter. 

The United States, as the world’s leading power, stands to benefit the most, as it will be largely self-sufficient in hydrogen production. North America may even become the second largest exporter by 2050. Like Japan, Europe will need to import hydrogen, but only 43% of its demand in 2050 (Japan: 90%). While this enables Europe’s energy independence from Russia, its dependence on its southern neighbors might increase.  

Hydrogen imports for Europe  

In the hydrogen economy of the future, the self-sufficient United States will be able to extend its power by exporting to allies in regions such as East Asia. In contrast, import dependent Europe faces a strategic dilemma. North African and Middle Eastern regions (MENA) could supply European markets very efficiently through pipelines, while hydrogen from more distant producers would have to be shipped (mainly in the form of ammonia). However, most MENA countries are problematic partners from a political point of view, as they suffer from various deficiencies (democratic practices, quality of governance, market economy). In order to secure hydrogen supply, European policies should aim at creating mutually beneficial partnerships that address local issues in North African regions, such as governance, social cohesion, and economic development.  

At the same time, Europe should diversify by importing from other regions in order to reduce its dependency on the MENA countries. Shipping routes from these other sources tend to be long, and shipping is more expensive than pipeline transport. However, the routes are relatively safe, especially compared to shipping routes from MENA countries to India through choke points such as the Horn of Africa. Generally, transport security will be less of an issue than for oil. Some of the necessary transport capacity could be provided by converting existing gas tanker fleets. As there will be considerable competition among hydrogen importers, Europe will need to address geopolitical challenges related to terms of trade, regulations, and hydrogen flows.  

Considerations for Europe’s energy partnerships 

The new Deloitte publication identifies six countries out of a long list of sixteen as the most viable European hydrogen partners in the MENA region: Tunisia, Morocco, Türkiye, Algeria, Egypt, and Jordan. The publication also identifies suitable candidates for hydrogen import diversification: Namibia, South Africa, Brazil, and Argentina. Because of the political issues with the MENA countries mentioned above, appropriate European investment, cooperation and development policies should be introduced, especially regarding North Africa. The publication lays out a set of options to consider for Europe’s energy partnerships. For example, Europe could: 

• intensify economic, political, and social cooperation across the Mediterranean 

• extend the Green Deal and other climate-related economic policy instruments to North Africa 

• pool European climate and development budgets to secure capital for investments 

• ensure fair development through local ownership 

• try to hedge against price volatility and political disruption  

• establish local national revenue funds  

• ensure added value for local economies and societies

A European security policy for the global hydrogen economy 

The new Deloitte publication details the arguments for these considerations and describes key features of the future global hydrogen economy, such as international trade flows, and considers relevant country-specific issues. Read more about the security policy for the global hydrogen economy.