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International financial institutions play a central role in helping to fund activities in developing countries that support sustainable, climate resilient, and low-carbon development. By analyzing their investment portfolios and identifying opportunities for change, we help enable these institutions to shift their investments toward sustainable and climate compatible development. Only about 50 percent of the world’s energy and fuels used for industrial purposes can be supplied by electricity connected to renewable energy or storage systems. Due to the energy intensity of these industries, the remaining energy demand will require other renewable energy sources that are readily available without local constraint. Industries like steel, cement, and fertilizer production and heavy-duty transport such as shipping, long-haul and off-road trucking, and aviation, together account for nearly one-third of global CO2 emissions and are difficult to electrify. Unless a major shift takes place with the adoption of green hydrogen and other emerging clean technologies, their share of emissions is expected to double under some business-as-usual scenarios. The demand for hydrogen is expected to grow to 500-680 million metric tons by 2050. Given this significant growth in demand, the scale of input energy required (22,000 TWh of green electricity to produce 500 million tons of green hydrogen per year), and the parallels of the hydrogen value chain to that of the fossil fuel value chain (with upstream, midstream, and downstream elements), the green hydrogen industry should attract investments. Globally, governments have committed more than USD 37 billion in public funding to hydrogen development, while the private sector has announced investments of around USD 300 billion. However, this is still only a small part of the USD 1.2 trillion of investment in hydrogen supply and use that is needed between now and 2030. The development finance institutions have a critical role to play in catalysing public and private investments for first-mover green hydrogen projects, accelerating the uptake of green hydrogen in developing countries, and supporting the required enabling environment. Amongst actions the development finance community can take, development finance institutions have identified the following priorities

There is an urgent need to support the regulatory, contractual, and policy regime for green hydrogen and to build capacity of governments hosting green hydrogen projects in developing countries. Clear supply and demand targets are needed to incentivize hard-to-abate sectors such as steel, cement, fertilizers, shipping, and aviation to switch to zero-carbon energy sources.
Making renewable energy price competitive with fossil fuel alternatives and mitigating offtake risks are considered the most significant obstacles to getting to bankable green hydrogen projects. It will be necessary to bridge the price gap between green and fossil fuel hydrogen and create a level playing field by reducing fossil fuel subsidies and pricing carbon emissions. An agreed industry price benchmark and standardized pricing mechanisms with a balanced distribution of price uncertainty risks between the seller and the buyer could help market players in reaching offtake agreements faster
Further consistency in standards applied by public, private, and development actors can reduce costs, increase efficiency, and safeguard the positive climate impact of green hydrogen. A common procurement framework and standard set of bidding documents for public sector projects financed by development finance institutions can help reduce the administrative burden for client countries. Good practices and standards for environmental and social procedures would provide clarity to project developers and client countries preparing and assessing green hydrogen project proposals. Globally applicable green hydrogen standards and definitions with clear emissions thresholds and sustainable development requirements will be needed.

Summary: The AfDB has a range of different financing, technical, policy, regulation and knowledge support programs and facilities that can contribute to create an enabling environment for green hydrogen development in African countries.

Regions: AfDB works with 54 African member countries. Initially, AfDB intends to support AGHA member countries, including new and upcoming members: Egypt, Kenya, Namibia, Mauritania, Morocco, South Africa, Ethiopia, and Cameroon

Future plans: The AfDB is looking at a pipeline of green hydrogen projects in the AGHA member countries where it could provide financial solutions to support implementation (concessional finance, blended financing, and partial risk guarantee). The AfDB plans to offer technical, financial, and capacity building support to AGHA member countries to build the necessary regulatory frameworks, consider local procurement requirements, disseminate knowledge of best practices and standards for green hydrogen, and undertake baselines studies for new AGHA countries

Currently ADB is focusing on enabling works in the hydrogen economy including:

  • Knowledge sharing (workshop, handbook and other knowledge products) - Policy makers and industry players awareness of trends and technologies, capacity building and safety.
  • Support government policy development - Strategy, roadmaps and regulatory framework for H2 energy development. y Enhance the hydrogen trading platforms - Promote international H2 supply chain with competitive market/trading hubs.
  • Engage with industry and associations – Engage industry and associations on standards and knowledge sharing.
  • Support pilot - Pilot H2 technologies and business models for demonstration and potential for scaling up.

Summary: Scaling up of piloted activities - This includes Transaction Support Technical Assistance (TRTA). Further developments - Hydrogen energy projects, including production, transportation and distribution infrastructure, as well as market applications are being monitored for potental sovereign and non-soveriegn operations.

Regions: AIIB has 105 approved members in Asia and beyond.18 The Bank’s resources fosters sustainable economic development by investing in infrastructure and other productive sectors in Asia and beyond. Clean hydrogen, being a vital clean energy solution to address climate change, will be considered for support across AIIB’s regional and non-regional members

Future plans: AIIB’s investments for clean hydrogen will be guided by an identified critical pathway for clean hydrogen commercialization, which includes promoting the production, use, and transportation of hydrogen as well as its derivatives (such as green ammonia) with the objective to create a market of scale. In the belief that the development of technologies will also be a key enabler for commercialization and adoption of technologies, in addition to supporting clean hydrogen infrastructure, AIIB will also seek to deploy risk capital with a view to remove technological bottlenecks and reduce costs along the clean hydrogen value chain.

Summary: BNDES is the main financing provider for renewable energy in Brazil and among the top three worldwide according to BloombergNEF. For the last 20 years, BNDES has supported around 70 percent of the expansion of national power generation capacity, with focus on renewables. BNDES financed, for example, around 75 percent of the wind power installed capacity in the country. BNDES is developing advocacy and credit solutions to foster the green hydrogen value chain in Brazil. The country has a great opportunity to become a key player in the green hydrogen industry due to its huge renewable energy generation availability as well as hydrogen low cost projections.

Regions: BNDES finances projects only in Brazil.

Future plans: NDES is already working on studies to develop finance tools for large-scale (GW) green hydrogen projects. The idea is to provide competitive funding, including in foreign currency, for projects directed to export green hydrogen or its derivative products, like green steel.

Summary: British International Investment is the UK’s development finance institution. We have a mandate to back private-sector projects and companies that contribute to economic productivity, sustainability, and inclusion in emerging and developing economies in Africa, South and Southeast Asia, and the Caribbean. We provide patient, long-term capital across the capital structure; on a direct basis via equity, debt, mezzanine finance, and guarantees; and on an indirect basis via funds and partner financial institutions such as local banks in our target markets. Green hydrogen is one of the key themes we are exploring as part of our overall climate finance commitments. Our Infrastructure Equity and Project Finance teams will look to support green hydrogen projects for a variety of use cases, including green ammonia for fertilizer or energy transport; green ammonia or methanol for transport fuel, green hydrogen for energy storage and dispatchable power, and green steel and other hard-to-abate industrial sectors. Via our Manufacturing Equity and Corporate Debt teams, we are open to supporting manufacturers of critical components in the green hydrogen value chain such as electrolysers.

Regions: BII is evaluating green hydrogen opportunities across our primary markets of Africa and South & Southeast Asia, with a specific focus at present on North and Southern Africa and with a view to concluding our first green hydrogen transactions in early 2023.

Summary: Power-to-X (PtX) offers a tremendous potential for developing countries and emerging economies. Due to their favourable conditions for renewable energy, not only can countries accelerate their economic development with PtX and become less dependent on fossil fuel, but they can decrease their CO2 emissions and earn carbon credits at the same time. We at the international PtX Hub work with our partners in the public and private sector to leverage these potentials as a catalyst towards defossilisation of the hard-to-abate industries. Funding and investment for such projects will be supported by our financial experts and our network with the private and public sector. The international PtX Hub is implemented by the GIZ GmbH on behalf of the German Federal Ministry for Economic Affairs and Climate Action (BMWK).

Regions: GIZ support PtX projects around the globe with a particular focus on Africa. Among other countries, the international PtX Hub is active in Algeria, Egypt, Kenya, Morocco, Namibia, South Africa, Tunisia, Argentina, Brazil, Chile, Colombia, and Uruguay

Future plans: Currently working on specific services to accelerate the hydrogen market. This includes, but is not limited to, identifying take off gaps in finance.

Summary: The World Bank Group is actively engaging in supporting low-carbon hydrogen deployment in emerging markets:

  • Through the Energy Sector Management Assistance Program (ESMAP) and the Energy and Extractives Global Practice, the World Bank is already supporting low and middle-income countries to develop their nascent low-carbon hydrogen industry. The World Bank is assisting recipient countries with the identification of near-term and long-term low-carbon hydrogen opportunities. Technical teams are addressing the challenges associated with the deployment of hydrogen projects, including technology risks, capacity building, regulatory needs, economic analyses, and other implementation requirements to make low-carbon hydrogen and fuel cell technologies bankable.
  • IFC – International Financial Corporation – works closely with the World Bank to leverage the private sector’s role in developing a global low-carbon economy, where hydrogen will play a significant role in decarbonizing hard-to-abate sectors alongside other technologies. IFC is actively engaged in a variety of pre-investment studies, pilot projects, and mainstream investments across sectors and regions with both current and prospective clients. IFC is committed to supporting the public and private sector to understand where and when low-carbon hydrogen is the most effective decarbonization solution.

Regions: In the past two years, the geographical footprint of the World Bank Group on hydrogen has extended across Latin America; Europe and Central Asia; Middle East and North Africa; East Asia Pacific and South Asia. Governments from over 20 emerging and developing countries. Support received are in 4 major areas:

  • Strategy and policy development for the hydrogen sector: Developed strategies, pathways, and policies needed for creating low-carbon hydrogen economies.
  • Legal and regulatory framework build-up: Drafted laws and regulations aiming to advance safety standards, secure the industry's sustainability, and promote economic mechanisms to incentivize hydrogen demand
  • Capacity building: Supported governments from low and middle-income countries to improve and enhance their ability to evaluate low-carbon hydrogen projects.
  • Market assessment: The World Bank and IFC are collaborating on a global market study seeking to evaluate the opportunity for low-carbon hydrogen deployment in emerging markets and better understand the contributing factors towards a strong investment opportunity.

Future plans: The World Bank Group will continue providing comprehensive support to emerging and developing countries and private sector partners by targeting investments, policy interventions, and knowledge coordination to accelerate the deployment of low-carbon hydrogen solutions.