How Germany and Brazil are Shaping the Green Hydrogen Market

There is a rising global consensus to develop mitigation measures to decarbonise the global energy supply. However, even though the International Renewable Energy Agency (IRENA) 2024 reports that global renewable power generation capacity has reached approximately 3,870 gigawatts (GW), entire industries — such as steel and chemicals — cannot be decarbonised through direct electrification. Green hydrogen could present a cleaner and more versatile alternative, capable of helping heavy industries reduce their carbon emissions. Here, we look at how two countries — Brazil and Germany — are engaging in early action in the sector and how their strategies could shape the market.

The Production and Environmental Impact of Green Hydrogen

Green hydrogen is produced by splitting water into hydrogen and oxygen using electricity generated by renewable sources. This process is supposed to emit no pollutants, and the product would be easy to store and can be converted into electricity or synthetic gas for various applications. The International Energy Agency (IEA) estimates that to achieve carbon neutrality by 2050, global production of low-carbon hydrogen (including green hydrogen) must reach 520 million tons annually, with clean energy investments needing to reach US $4 trillion by 2030.

Many countries are actively legislating to encourage green hydrogen production, transportation, and use. Here, we will explore how two very different countries — Brazil and Germany — are pioneering the development of an entirely new industry using strategies to incentivise companies in different ways.

Germany’s Framework for Hydrogen Development

The German government released an update to the National Hydrogen Strategy in 2023, drawing a 7-year timeline to develop a framework for achieving its goal of ramping up its hydrogen production and infrastructure. To meet these goals, the federal government submitted the Hydrogen Acceleration Law to the Bundestag and is currently awaiting the Federal Council’s approval with an expectation it will enter into force by the end of 2024. The government also presented its hydrogen import strategy which complements the law.

Germany's Hydrogen Acceleration Law: Key Provisions and Expected Impact

The Hydrogen Acceleration Law simplifies planning and approval procedures for the production, storage, and import of hydrogen and also awards hydrogen infrastructure projects an overriding public interest status. The compliance costs are expected to be reduced by €200,000 annually for businesses due to the streamlined approval process, digital submissions, and lowered administrative burdens across multiple projects. The law also accelerates court proceedings related to the issuance of permits, and it will also digitalise applications. Similarly, to overcome logistical barriers, the law also proposes changes to environmental and procurement laws, and amends the Energy Industry Act and the Highway and Spatial Planning Act.

Germany's Future Hydrogen Demand and Import Strategy

Germany’s forecasted demand is expected to reach 95 to 130 terawatt hours (TWh) by 2030 and since the potential of domestic hydrogen production is limited in Germany, the federal government estimates that around 60 to 70 percent of this total demand for hydrogen will have to be imported through shipment routes.

To implement its ambitions, the federal government adopted a new strategy on 24 July 2024 to import hydrogen and its derivatives into Germany. The strategy aims to expand the country’s fleet of import ships and pipelines and sign agreements with partner countries to encourage cooperation on hydrogen. Germany will strengthen its existing bilateral hydrogen agreements with the United Kingdom, Norway, Denmark, and the Netherlands. Additionally, it aims to build new alliances with southern European countries, particularly Spain and Portugal, as well as North African countries like Algeria, Morocco, and Tunisia, which are major players in the hydrogen market due to their favourable geographical conditions.

The Hydrogen Acceleration Law and the hydrogen import strategy supplement the National Hydrogen Strategy by outlining a legal framework to meet demand by streamlining approval procedures and scaling up imports of hydrogen by 2030.

Brazil’s Legal Approach to Hydrogen Development

On the other side of the Atlantic, in a ceremony in Pecém's Industrial and Portuary Complex (Cipp), President Lula signed law 14948/2024, the country's legal framework for low-carbon hydrogen on 2 August 2024. Lula, historically favourable to measures related to renewable energy, was expected to favour the proposal, although it came from the opposition.

Government-Congress relations are tense, in particular on environmental-related topics. Congress is resistant to measures addressing deforestation, Brazil’s number one environmental issue for the public. In this context, the newly approved hydrogen law effectively gives Lula’s administration an environmental victory to claim over, but it also reflects a compromise between different priorities and constraints. This represents a strong legal framework for an industry with more than US $30 billion announced in projects inside the country's National Program for Hydrogen (PNH2).

Understanding Brazil's Hydrogen Legal Framework

Known in Congress as PL 2308/2023, the new law creates the Brazilian Hydrogen Certification System (SBCH2), a voluntary certification system for national hydrogen producers that would inform about the intensity of emissions related to the production chain of hydrogen and thus its utility for reporting purposes. The bill would also empower the National Agency of Petroleum, Natural Gas and Biofuels (ANP) with authorising the production, processing, import, export, storing, transportation, and commercialisation of low-carbon hydrogen. The proposal would also grant five-year tax breaks for machines and equipment used for hydrogen projects. To be eligible under this tax incentive scheme, companies would need to comply with qualification requirements that reduce environmental impact. Finally, the bill would create the Low Carbon Emission Hydrogen Development Programme (PHBS), tasked with its financing.

Economic Incentives and Flexibility in Brazil's Hydrogen Policy

During its legislative process, the bill changed and became more flexible. For example, to be granted benefits there was a need for local parts in the hydrogen production. In the text's final version, this was not mandatory in case certain parts were not available in the market or their offer was not enough to handle the demand.

Even more important was the change to the definition of low-carbon hydrogen. The final version defined it as ‘hydrogen fuel or industrial input which is collected or obtained from different sources within the production process, with a greenhouse gas emissions initial value less or equal to seven kilograms of carbon dioxide per produced kilogram of hydrogen (7 kgCO2eq/kgH2)’. Initially, this value was of 4kgCO2eq/kgH2. This allows hydrogen to be classed as ‘green’ with a level of carbon output that would be inadmissible in Europe. The limits for greenhouse emissions in the classification of low-carbon hydrogen would need to be set up by regulation in such a manner as to have a list of progressing targets until the final value is achieved in 2030 but set upfront.

Comparing Germany and Brazil's Hydrogen Strategies

While the two countries are moving on hydrogen at a similar time, they are not doing so with equal methods. Even though both approaches privilege the market and try to sway investment into the sector through incentives instead of direct government interference, there are significant divergences.

Brazil is looking to take advantage of its abundance of renewable energy sources in its energy matrix and focus on low-carbon hydrogen (although its definition of it is more permissive). Germany is focusing on infrastructure and on bilateral hydrogen agreements or derived products, like ammonia, to favour trade between countries.

Investment and Job Creation Opportunities in Germany

The expansion of the hydrogen sector in Germany is expected to create around 10,000 direct and 20,000 indirect jobs. Companies in steel, chemical, and other heavy industries will find new avenues to decarbonise their operations using hydrogen. Similarly, companies involved in hydrogen production will benefit from streamlined planning and approval processes as these would enable faster project initiation and completion. Germany’s focus on hydrogen production and storage will benefit companies involved in the production of renewable energy, manufacturers of hydrogen fuel cell vehicles will also benefit from the expansion of hydrogen refuelling infrastructure, and companies involved in the construction of hydrogen pipelines and refuelling stations are expected to witness new business opportunities.

Economic and Employment Impact in Brazil

In Brazil, a total of R$200 billion in investments inside the PNH2 were already announced. In the state of Ceará alone, where the law was signed, the government expects the creation of 80,000 jobs in the sector by 2030. While the law says regulators will establish a maximum percentage of allocation of hydrogen produced for export, one of its principles is to support green hydrogen export. Federal legislation, legislative initiatives at the state level, and substantial private investments all point to the fact that Brazil is seizing an opportunity in international commerce.

Strategic Implications for Companies in the Evolving Hydrogen Market

May it be through infrastructure and importation frameworks or taking advantage of their own energy matrix to focus on green hydrogen, both countries found their strategies to try to act early on in this emerging markets. Companies aware of these trends could be well positioned to profit from the pioneering of both countries in the field. FiscalNote's technology and expert-led insights can help you stay on top of further developments in Germany, Brazil, and around the world to mitigate risk and capitalize on opportunities.