Today, the world consumes 100 million barrels of oil and 16 million tons of coal per day. Both will have to be drastically reduced within the next 25 years if the world wants to limit global warming to below 1.5 degrees Celsius.
In this light, the production of green hydrogen and ammonia plays a fundamental role as fuel for long-distance ships, trains and trucks, as well as for use in the nearly 15 million new hydrogen-powered cars that the Hydrogen Council estimates can be manufactured in the world within 2030. Additionally, hydrogen can play a major role in the production of fertilisers and the decarbonisation of the steel, cement, glass and ceramics industries, as well as for heating buildings in winter.
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The Energy Transition Commission, a coalition of leaders from across the energy landscape committed to achieving net-zero emissions by mid-century, estimates annual investment in the order of $800bn per year until 2050 for hydrogen production and infrastructure to be able to meet demand.
The big challenge lies in reducing the cost of producing green hydrogen. Today, the average production cost per kilogram of hydrogen ranges from $2.50 for blue hydrogen produced from coal or gas with a carbon-capture component to $4.50/kg for hydrogen produced from renewable energy, solar or wind.
So, how do we reduce the production costs of green hydrogen?
Some of the 7000 free trade zones in the world today are an ideal mechanism for reducing the costs associated with the production of green hydrogen.
Some of the 7000 free trade zones in the world today are an ideal mechanism for reducing the costs associated with the production of green hydrogen for the following three main reasons: they allow the manufacturing of equipment, free of tariffs and value-added taxes; they can combine future ‘green’ or regional development incentives; and they provide world-class infrastructure for the development of these strategic projects.
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In Latin America alone, the three countries with the greatest potential for green hydrogen production in the region — Brazil, Chile and Colombia — already have a robust system of free zones and green incentives.
Just as Henry Ford’s great challenge when he launched the Ford T, of which 15 million units were produced between 1907 and 1928, was to reduce the cost of the vehicle by 60% — and proportionally the cost of gasoline to achieve its popularisation — we must design a similar strategy for the hydrogen industry.
Martín Ibarra Pardo is the chairman of Araújo Ibarra & Asociados, a law firm based in Bogotá. He also serves as vice-president of the World Free Zones Organisation.