EU-Japan Centre for Industrial Cooperation

Building a Resilient Hydrogen Economy:
Securing Clean Hydrogen Together

Tokyo, 03 April 2023
Sven Kevin van LangenCopyright notices:
Copyright: © 2023 EU-Japan Centre for Industrial Cooperation, shared under a CC BY 4.0 license.
Published by: EU-Japan Centre for Industrial Cooperation, Tokyo, 2023
Cover Photo: Copyright: © 2023 HySTRA, Hydrogen Energy Supply Chain Project
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2Preface
This report was written in the context of the EU-Japan Centre for Industrial Cooperation’s
MINERVA fellowship, a 6-month in-house research scheme in Japan funded by the European
Commission’s Directorate General for Internal Market, Industry, Entrepreneurship and SMEs
(DG GROW) with additional support by Japan’s Ministry of Economy, Trade and Industry(METI). The author has conducted his research and prepared this publication with fullacademic freedom, and the funding body has not exerted any influence over the content,
methodology, or conclusions presented herein.
The report is intended for a diverse audience, though it is mostly written with European
industry in mind. The author hopes the report will also be insightful to policymakers andacademia. It explores potential areas for cooperation between European and Japanese firms indeveloping a hydrogen economy. Specific attention is given to where cooperation can lead toincreased energy security and economic resilience for both the EU and Japan as partners.
The report builds on an earlier report published under the Centre’s MINERVA program by
Jonathan Arias, entitled “Hydrogen and Fuel Cells in Japan” 1. In conjuction with this report,
the author monitored Japanese public policy developments related to the research topic, asummary of some of this intelligence, regarding Japan’s hydrogen related foreign policy, isprovided in Annex A.

About the author
Sven Kevin van Langen has an industrial doctorate in the area ofpolitical economy, from the UNESCO chair on ‘Environment,
Resources and Sustainable Development’ in Naples, Italy. He has
several publications on sustainable economic transitions and his
interests lie in the economic resilience of such transitions.
You can contact the author on Linkedin: linkedin.com/in/svenkevin/
To request up-to-date contact details of the author, please send an
email to minerva@eu-japan.or.jp
1

Retrieved from the EU-Japan Centre for Industrial Cooperation on 15-03-2023: https://www.eujapan.eu/sites/default/files/publications/docs/hydrogen_and_fuel_cells_in_japan.pdf

Executive Summary
There are many areas in which the European Union and Japan could cooperate when it comesto establish a resilient hydrogen economy. The European Union and Japan are in a very similar
position as they are both projected to rely heavily on hydrogen imports for their energy securityby 2050.
Five key areas for cooperation can be identified:
1. Research and development: Both the EU and Japan are investing heavily in researchand development of hydrogen technologies, including electrolysers and transport. Joint
research and development projects could accelerate progress and help to overcome
technical challenges.
2. Harmonising regulations and standards: Developing harmonized and interoperable
standards & regulations is essential for the widespread adoption of hydrogentechnologies. The EU and Japan could work together to develop such standards &regulations to ensure compatibility and interoperability between their respectivehydrogen systems. Harmonised standards are relevant both domestically in Japan andthe EU, and in third countries, to develop a more resilient global supply of hydrogen.
3. Infrastructure development: Building the necessary infrastructure for hydrogenproduction, storage, and transportation is a significant challenge. The EU and Japan
could collaborate on developing and implementing infrastructure projects that can
support the growth of the hydrogen economy.
4. Market development: As the hydrogen economy continues to grow, both the EU andJapan could work together to create new markets for hydrogen and encourage theadoption of hydrogen technologies in various sectors. An important market driver might
be in sustainable finance.
5. Supply chain management: Ensuring a stable and secure supply of hydrogen is critical
for the success of the hydrogen economy. The EU and Japan have to collaborate on
managing the global supply chain for hydrogen as the two largest net importers,
including the production, transportation, and storage of hydrogen, as well as thedevelopment of hydrogen trading platforms.
Whilst there is ample opportunity to cooperate directly on a bilateral basis, there are also gains
to be made by working together in third countries. Particularly, Southeast Asia, Australia, theMiddle East, and Africa offer intriguing opportunities for collaboration.
Moreover, it is advisable to promote greater inter-academic and public-private partnerships for
R&D in the area of hydrogen production, storage, and transport. One suggestion is for the EUJapan Centre for Industrial Cooperation to provide more extensive support in this field, beyond
its current role as the national contact point for Horizon Europe. Especially for the scenario
where Japan will join Horizon Europe as an associate country it is expected that there will be
an increased demand for aid in finding R&D partners. However, even in the current situation
where Japan is not an associate member of Horizon Europe there is a strong interest in betterR&D cooperation but a low ability by the EU’s private sector to find suitable academic partners
in Japan and vice versa.

4

Table of Contents
Preface ....................................................................................................................................... 3
About the author............................................................................................................................... 3

Executive Summary .................................................................................................................. 4
1.

2.

Introduction....................................................................................................................... 7
1.1.

Research Objectives ............................................................................................................ 8

1.2.

Methods ................................................................................................................................ 8

Background ....................................................................................................................... 9
2.1.

Hydrogen Economy ............................................................................................................. 9

2.1.1. Current Markets ............................................................................................................................ 10
2.1.1.1.
Hydrogen for Ammonia Fertilizer ....................................................................................... 11
2.1.1.2.
Hydrogen for oil refining .................................................................................................... 14
2.1.2. New Markets ................................................................................................................................. 14
2.1.2.1.
Transportation ..................................................................................................................... 15
2.1.2.2.
Industry ............................................................................................................................... 16
2.1.2.3.
Buildings and Heating ......................................................................................................... 17
2.1.2.4.
Power Generation ................................................................................................................ 17
2.1.2.5.
Hydrogen for Energy Storage.............................................................................................. 18

2.2.
2.2.1.

2.3.

The Various Variations in Hydrogen Origin .................................................................. 19
Ammonia and Hydrogen Carriers ................................................................................................. 21

Global Hydrogen Electrolyser Supply Chains ................................................................ 23

2.3.1. Technological Overview ............................................................................................................... 23
2.3.2. The Core Supply Chain................................................................................................................. 24
2.3.2.1.
Critical Raw Materials ........................................................................................................ 25

2.4.
2.4.1.
2.4.2.
2.4.3.
2.4.4.
2.4.5.
2.4.6.
2.4.7.

3.

Hydrogen Diplomacy......................................................................................................... 26
Japan ............................................................................................................................................. 27
Australia........................................................................................................................................ 28
ASEAN / Southeast Asia .............................................................................................................. 29
Africa ............................................................................................................................................ 30
Arab Peninsula .............................................................................................................................. 30
United States ................................................................................................................................. 30
China ............................................................................................................................................. 31

Recommendations for EU-Japan Cooperation.............................................................. 33
3.1.
3.1.1.
3.1.2.
3.1.3.
3.1.4.
3.1.5.

3.2.

Industrial Cooperation ...................................................................................................... 34
Hydrogen Consumption Industries ............................................................................................... 34(Expiring) Patents ......................................................................................................................... 35
On-Shore Material Processing ...................................................................................................... 35
Recycling ...................................................................................................................................... 37
Renewable Energy ........................................................................................................................ 37

Trilateral & Multilateral Cooperation ............................................................................ 38

3.2.1. ASEAN & Australia, the Asian Zero Emissions Community ...................................................... 38
3.2.1.1.
Harmonisation of Regulations and Standards ..................................................................... 39
3.2.1.2.
Infrastructure Development ................................................................................................. 39
3.2.1.3.
Technology Export .............................................................................................................. 40
3.2.1.4.
Finance ................................................................................................................................ 40
3.2.1.5.
Renewable Energy............................................................................................................... 40
3.2.2. Africa and the Middle East ........................................................................................................... 41
3.2.2.1.
Connectivity ........................................................................................................................ 41
3.2.2.2.
Infrastructure Development ................................................................................................. 43
3.2.2.3.
Other Opportunities ............................................................................................................. 43

3.3.

4.

Academic Cooperation ...................................................................................................... 44

Conclusion....................................................................................................................... 46
4.1.

Recommendations for the EU-Japan Centre .................................................................. 47

Referenced Publications ......................................................................................................... 49
Annex A ................................................................................................................................... 51

Table of Figures
FIGURE 1, PREDICTIONS FOR 2050 ON MAJOR HYDROGEN PRODUCERS, EXPORTERS, AND IMPORTERS IN BCME ACCORDING TO THE
IEA. COPYRIGHT 2022 IEA, SHARED UNDER A COMPATIBLE LICENSE. ........................................................................... 8
FIGURE 2, CURRENT AND PROJECT HYDROGEN DEMAND IN MILLION TONS PER YEAR. STEPS = STATED POLICIES SCENARIO, APS =ANNOUNCED PLEDGES SCENARIO, ROW = REST OF THE WORLD. COPYRIGHT 2022 IEA, SHARED UNDER A COMPATIBLE
LICENCE. ......................................................................................................................................................... 10
FIGURE 3, AMMONIA PRICES TEND TO CLOSE FOLLOW DEVELOPMENTS IN NATURAL GAS PRICES. COPYRIGHT 2021 WORLD BANK,SHARED UNDER A COMPATIBLE LICENSE................................................................................................................. 11
FIGURE 4, SCHEMATIC OVERVIEW OF A TYPICAL AMMONIA PRODUCTION PROCESS FROM NATURAL GAS. COPYRIGHT 2017 CENTER FOR
PROMOTING IDEAS, SHARED WITH OPEN ACCESS. ................................................................................................... 12
FIGURE 5, AMMONIA'S SHARE OF INDUSTRIAL CO2 EMISSIONS AND ITS EMISSIONS INTENSITY. COPYRIGHT 2021 IEA , SHARED UNDER
A COMPATIBLE LICENSE. ..................................................................................................................................... 13
FIGURE 6, THE CHEVROLET ELECTROVAN WAS POWERED BY FUEL CELL TECHNOLOGY SPUN OFF BY NASA'S MOONSHOT PROGRAMME,PHOTO BY JOHN LLOYD (CC-BY 2.0). .................................................................................................................. 15
FIGURE 7, PROJECTED SEABORNE TRADE OF HYDROGEN, AMMONIA, AND OTHER HYDROGEN RELATED SUBSTANCES OVER THE NEXT
DECADES XVIII. COPYRIGHT 2022 THE HYDROGEN COUNCIL, EXPRESSION PERMISSION TO REUSE IMAGES IN THIS PUBLICATIONGRANTED. ....................................................................................................................................................... 22
FIGURE 8, OVERVIEW OF CRITICAL RAW MATERIALS TYPICALLY USED IN ELECTROLYSERS OR FUEL CELLS . COPYRIGHT 2020 EUROPEAN
UNION, SHARED UNDER CC BY 4.0 LICENSE. ......................................................................................................... 25
FIGURE 9, OVERVIEW OF THE SUPPLY RISK FOR A VARIETY OF CRITICAL RAW MATERIALS IN THE EU XX. COPYRIGHT 2020 EUROPEAN
UNION, SHARED UNDER CC BY 4.0 LICENSE. ......................................................................................................... 25
FIGURE 10, PROJECTED AVERAGE ANNUAL PRIMARY DEMAND FROM HYDROGEN PRODUCTION AND CONSUMPTION TO 2050 AS A
PERCENTAGE OF CURRENT PRIMARY PRODUCTION. COPYRIGHT 2022 BY THE HYDROGEN COUNCIL, EXPRESSION PERMISSION TO
REUSE IMAGES IN THIS PUBLICATION GRANTED. ...................................................................................................... 26
FIGURE 11, HYDROGEN PRODUCTION POTENTIAL FOR 2050 IN MILLION TONS PER YEAR, SPLIT BY COST OF PRODUCTION. COPYRIGHT
2022 BY THE HYDROGEN COUNCIL, EXPRESSION PERMISSION TO REUSE IMAGES IN THIS PUBLICATION GRANTED.. ............... 27
FIGURE 12, OVERVIEW OF CURRENT AND PROJECTED ANNUAL ELECTROLYSER MANUFACTURING CAPACITY BY REGION. COPYRIGHT
2022 IEA, SHARED UNDER A CC BY 4.0 LICENSE. .................................................................................................. 31
FIGURE 13, PATENTING TRENDS BY MAIN WORLD REGIONS IN THE AREA OF HYDROGEN TECHNOLOGY. COPYRIGHT 2023 THE
EUROPEAN PATENT OFFICE, ALLOWED TO BE REUSED. ............................................................................................. 35
FIGURE 14, SUSTAINABLE FUNDS AND ASSETS UNDER MANAGEMENT DIVIDED BY REGION (BILLIONS OF DOLLARS AND NUMBERS),COPYRIGHT 2022 BY UNCTAD, SHARED UNDER A COMPATIBLE LICENSE. ................................................................... 40
FIGURE 15, PROJECTED HYDROGEN FLOWS BY 2030. COPYRIGHT 2022 THE HYDROGEN COUNCIL, EXPRESSION PERMISSION TO REUSEIMAGES IN THIS PUBLICATION GRANTED. ............................................................................................................... 42
FIGURE 16, PROJECTED HYDROGEN FLOWS BY 2050. COPYRIGHT 2022 THE HYDROGEN COUNCIL, EXPRESSION PERMISSION TO REUSEIMAGES IN THIS PUBLICATION GRANTED. ............................................................................................................... 43

6

1. Introduction
The introduction to this study begins with a brief background on the topic studied, followed bya statement of the research objective and the methods used. Next, a background section
provides details on the state-of-the-art regarding global hydrogen supply chains and Japan'srole in them.
There is growing interest in hydrogen among major economies worldwide, as it is seen as a
crucial fuel in a decarbonized society. Currently, hydrogen is primarily used as a feedstock in
oil refining and in producing chemical fertilizers (mostly ammonia). However, as more
economies aim to become carbon neutral, hydrogen is expected to fulfil new roles. It is seen as
critical in decarbonizing hard-to-electrify industries and as a potentially important fuel in thetransport sector in a decarbonized society. However, the majority of hydrogen is currently
produced using natural gas, which accounts for a significant share of global greenhouse gas
emissions. As a result, hydrogen production is currently seen as contributing to climate change.
By producing hydrogen through methods that do not emit large amounts of greenhouse gases,
a significant step towards decarbonization can be made, making it more likely to achieve thetargets set out in the 2015 Paris Agreement.
Russia's war of aggression in Ukraine and the subsequent shocks to the natural gas and otherenergy markets have sparked a significant interest in low-carbon hydrogen (including noncarbon hydrogen) worldwide, particularly within the EUi. In addition to being an environmental
matter, hydrogen production methods other than natural gas are seen as crucial for energy
security. As low-carbon and non-carbon hydrogen can be produced by a more diverse range ofsuppliers and is not dependent on a few fossil fuel-rich countries, future hydrogen supply chainsare expected to be less sensitive to geopolitical issues.
According to the International Energy Agency (IEA), the EU and Japan will become the largest
importers of hydrogen by 2050, with Korea in a distant third spot i. Australia, the Middle East,
North Africa, and Latin America are expected to become major hydrogen exporters. China andthe US are anticipated to become the largest producers of hydrogen, but their production would
largely be for domestic consumption. An overview is provided in Figure 1. Both the EU andJapan have a common interest in creating a diversified global supply chain for hydrogen trade
to ensure their energy security and are thus natural partners in establishing new hydrogenmarkets.

Figure 1, predictions for 2050 on major hydrogen producers, exporters, and importers in BCME according to the IEA.
Copyright 2022 IEA, shared under a compatible license.

1.1.

Research Objectives

This policy paper aims to explore the opportunities and threats to cooperation between Japanand the EU in developing resilient green/low-carbon hydrogen supply chains that use
electrolysers for hydrogen production. To develop a comprehensive supply chain, many actors
need to be involved. The paper first provides an overview of the current state of affairs ofhydrogen production and what is needed to develop a global low-carbon hydrogen supply chain.
Then, major areas of potential cooperation between Japan and the EU are highlighted.
Industrial, governmental, and academic cooperation are all considered. Furthermore, important
third parties for trilateral cooperation in the area of hydrogen production, such as the ASEAN
member states, Australia, Africa, and the Middle East, are discussed. To conclude, the reportaims to provide recommendations on how governments can better facilitate cooperation
between actors in Japan and the EU.

1.2.

Methods

This report is built using a combination of desk research and interviews.
The desk research consists of a thorough analysis of mainly government reports and reports
from leading research institutes on hydrogen and renewable energy transitions, among others.
Furthermore, the latest policy developments are monitored and included in this report whereappropriate, e.g., when the EU and Japan signed a Memorandum of Cooperation on Hydrogen
during the ongoing development of this report.
The interviews were held with a diverse range of interviewees, such as policy makers, politicaladvisors, academic researchers, and people from industry. To allow interviewees to speak more
openly, all interviewees will be kept anonymous. Some interviews were conducted
unstructured, while others were conducted semi-structured. For each semi-structured interview,a unique set of questions was tailored to the interviewee.

82. Background
This first section provides background information that is necessary to understand the later
considerations and recommendations. It explains what hydrogen is, what it is used for, how it
is supplied to the EU and Japan and how this is expected to happen in the future, and it
highlights important players in the hydrogen field now and in the future.

2.1.

Hydrogen Economy

The hydrogen economy is a vision of a future in which hydrogen is used as a primary sourceof energy to power our homes, transportation, and industries, alongside electricity. Hydrogenis considered a promising energy source due to its high energy content, versatility, and the factthat it produces only water when burned. This means that it is a clean and renewable source ofenergy that does not produce harmful greenhouse gas emissions or contribute to air pollution.
To achieve a hydrogen economy, several steps must be taken. First, a hydrogen production
infrastructure must be established. This can be done through the use of renewable energy
sources, such as wind and solar power, to produce hydrogen through the process of electrolysis.
Second, a distribution network must be built to transport hydrogen to consumers. Third, thedevelopment of hydrogen storage and fuelling technologies must be advanced to make itpractical and convenient for consumers to use hydrogen as a fuel. Finally, the adoption ofhydrogen-powered vehicles and hydrogen fuel cells must be encouraged.
Despite the potential benefits of a hydrogen economy, there are also some challenges that must
be overcome. One of the main challenges is the cost of producing and distributing hydrogen,which is currently much higher than the cost of producing and distributing fossil fuels.
Additionally, there are concerns about the safety of hydrogen fuel storage and transportation.
These challenges must be addressed through research and development, as well as investment
in new technologies, to bring the costs down and improve the safety of hydrogen as a fuel.
The market for hydrogen is currently growing and is estimated to be worth several billion
dollars globally. However, it is still a relatively small market compared to the fossil fuelindustry. In recent years, there has been increasing interest in hydrogen as an energy source,
and as a result, investment in the development of hydrogen production, storage, and distribution
technologies has increased. This has led to growth in the hydrogen market, with increasing
demand for hydrogen fuel cells, hydrogen-powered vehicles, and other hydrogen-based
technologies.
However, the current typical production of hydrogen from natural gas produces carbon dioxide
as a by-product, which is a potent greenhouse gas and a contributor to climate change.
Additionally, the extraction of natural gas from the ground can have negative impacts on local
communities and ecosystems, as well as releasing methane, a potent greenhouse gas, into theatmosphere. Therefore, there is a growing interest in developing alternative sources ofhydrogen, such as water electrolysis, which produce hydrogen that can be directly inserted
without producing carbon dioxide. These technologies are becoming more cost-competitiveand efficient, and are expected to play an increasingly important role in the production ofhydrogen in the coming years.

Despite its relatively small size, the hydrogen market is expected to continue to grow in the
coming years, as governments, especially in industrialized countries, around the world
implement policies to promote the use of clean energy and reduce greenhouse gas emissions.
The increasing availability of hydrogen production technologies, including the use ofrenewable energy sources to produce hydrogen, is also expected to drive growth in thehydrogen market. However, the growth of the market is likely to be uneven, with some regions
experiencing faster growth than others.

2.1.1. Current Markets
Globally, the Hydrogen market was valued at USD 160 billion in 2021 2, and is expected to
grow at a 10% compounded annual growth rate between 2022 and 2028, reaching over USD
280 billion in 2028. Hydrogen demand increased from ~90 million tons kg in 2020 to ~95
million tons kg in 2021, recovering from a slight dip in 2020 due to the COVID-19 pandemic
and surpassing 2019 demand levels ii. An overview of recent annual hydrogen demand, split
by region, is shown in Figure 2.

Figure 2, current and project hydrogen demand in million tons per year. STEPS = Stated Policies Scenario, APS =Announced Pledges Scenario, RoW = Rest of the World. Copyright 2022 IEAii, shared under a compatible licence.

Currently, hydrogen has many industrial applications, and is used as a raw material in the
production of a variety of chemicals and other products. Some of the most common industrial
applications of hydrogen include:
1. Ammonia production: Hydrogen is used in the production of ammonia, a key ingredientin the manufacture of fertilizers, as well as in the production of various chemicals andplastics.
2. Refining oil: Hydrogen is used in the refining of oil to remove impurities, such as sulfur
and nitrogen. This helps to improve the quality of the refined products and reduce theenvironmental impact of the refining process.
3. Food processing: Food-grade hydrogen is used in the processing of various foodproducts, such as chocolate and margarine.
4. Metallurgical processes: Hydrogen is used in various metallurgical processes, such as
the production of steel and the refining of metals.
5. Hydrogenation: Hydrogen is used in the hydrogenation of oils and fats to produce
products such as margarine and shortening.

2

Retrieved at 15-03-2023: https://finance.yahoo.com/news/hydrogen-generation-market-size-share115900400.html

10

Most of the current hydrogen usage (90%) is for oil refining (50%) and nitrogen-based
chemical fertilizer production (40%), mainly ammonia fertilizer iii. Fuel refining by-products
provides feedstock for sulphur-based and phosphate-based chemical fertilizer. This makes
hydrogen an important product for global food supply chains. Before the Russian invasion of
Ukraine, natural gas as feedstock for hydrogen generation was accountable for around 75% of
the operating cost for ammonia production. The energy crisis caused by Russia's war of
aggression affects global food security by causing higher prices and lower availability ofchemical fertilizers, on which almost half of global food supplies depend 3. There is a direct
relation between natural gas prices and ammonia prices, which were already at a high point
before the Russian invasion iv, an overview is provided in Figure 3.

Figure 3, ammonia prices tend to close follow developments in natural gas prices. Copyright 2021 World Bank, sharedunder a compatible license.

2.1.1.1. Hydrogen for Ammonia Fertilizer
Hydrogen (H2) is a key ingredient in the production of ammonia (NH3) fertilizer, which is oneof the most important industrial uses of hydrogen. The process of producing ammonia fromhydrogen is known as the Haber-Bosch process 4 , which was developed in the early 20th
century.
The process begins by combining hydrogen and nitrogen from the air, which provides therequired nitrogen (N2), to produce ammonia. This reaction takes place under high pressure andhigh temperature, using a catalyst to facilitate the reaction. The ammonia produced in thisreaction is then used as a feedstock in the production of fertilizer, as well as in the productionof various chemicals and plastics.
One of the most common ways to produce hydrogen for this purpose is by using natural gas(typically methane, CH4) as a feedstock. The process involves the steam reforming of naturalgas, which is a process that converts natural gas into hydrogen and carbon dioxide. In the steam
reforming process, natural gas is mixed with steam and heated to high temperatures, usually inthe range of 700-1,000°C. This causes a chemical reaction to occur, in which the methane in3

Retrieved on 15-03-2023: https://www.iea.org/commentaries/how-the-energy-crisis-is-exacerbating-the-foodcrisis
4
The Haber-Bosch process is considered one of the most important chemical processes ever invented and led totwo separate noble prizes: https://www.britannica.com/technology/Haber-Bosch-processthe natural gas reacts with steam to produce hydrogen and carbon monoxide (CO). The carbon
monoxide is then transformed into carbon dioxide (CO2) which is not further used in the
production of ammonia fertilizer. While there are a few variations possible in the exact
production process, a typical process is modelled in Figure 4.
The use of natural gas as a feedstock for hydrogen production was considered attractive for anumber of reasons, including the abundance of natural gas in many parts of the world and therelatively low cost of natural gas compared to other sources of hydrogen. Additionally, thesteam reforming process is well established and has been used for many decades, making it amature and reliable technology.

Figure 4, schematic overview of a typical ammonia production process from natural gas. Copyright 2017 Center for
Promoting Ideasv, shared with open access.

In 2020, ammonia production was responsible for roughly 2% of global energy use and 1.3%
of CO2 emissions. When looking at purely industrial CO2 emissions, ammonia accounts for
5% of emissions and no other chemical is responsible for as much CO2 emissions in its
production as ammonia. Global ammonia production emissions are roughly similar to the CO2
emissions of Australia or South Africa. How ammonia production related emissions compare
to other industrial emissions is shown in Figure 5.
According to Thyssenkrupp, half of the world's food production is reliant on mineral fertilizers,
with ammonia being the most commonly used type vi. As depicted in Table 1, Russia ranks as
one of the largest ammonia exporters, with only Saudi Arabia exporting more. In 2019, Ukraine
was Russia's main export destination for ammonia. On the day of Russia’s large-scale invasionof Ukraine, exports of ammonia from Russia to and through Ukraine were mostly ceased by
Russia, highlighting the world's significant dependence on a few countries with abundantnatural gas resources for food security. By avoiding the prevalent approach of using natural
gas as a feedstock, the production of clean hydrogen would not only contribute to a reduction
in CO2 emissions but also offer an opportunity to broaden the hydrogen supply chain beyond
undependable providers. This would result in an increase in economic resilience and foodsecurity.
12

Figure 5, ammonia's share of industrial CO2 emissions and its emissions intensity. HVC = High Value chemicals. Copyright2021 IEA vii, shared under a compatible license.

Table 1, Major ammonia exporters in 2019, table adapted from data by the World Bank viii.

Country
Saudi Arabia
Russian Federation
Trinidad and Tobago
Indonesia
CanadaNetherlands
Malaysia
United States
Germany
Egypt, Arab Rep.
United Kingdom
Australia
FranceBelgium
Bulgaria
PolandSpain
TurkeyKorea, Rep.
Slovak RepublicHungary
Croatia
UkraineCzech Republic
Japan

Trade Value 1000USD
1,648,032.08
1,114,021.03
880,347.24
443,902.37
377,466.44
143,930.87
130,923.67
96,826.32
93,212.37
90,211.56
74,335.66
73,270.45
37,594.13
28,595.13
25,943.32
22,738.08
22,424.37
15,238.68
12,115.28
9,552.28
7,804.99
7,474.89
5,432.62
4,751.28
2,724.73

Quantity in KG
4,862,760,000
4,647,650,000
4,103,420,000
1,792,830,000
941,813,000
433,537,000
491,989,000
421,371,000
158,599,000
305,504,000
129,376,000
73,475,000
67,113,200
73,849,300
72,135,900
37,011,800
15,225,000
30,759,800
24,253,300
22,384,000
23,289,600
14,982,400

2.1.1.2. Hydrogen for oil refining
Hydrogen is a critical element in the process of oil refining, particularly in the production ofhigh-quality fuels such as gasoline, diesel, and aviation fuel. The use of hydrogen in refining
offers numerous benefits such as higher yields, improved product quality, and a more efficientand sustainable refining process. Hydrogen is used for the removal of impurities such as sulfur,
nitrogen, and metals from crude oil and its distillates. This process produces cleaner and more
efficient fuels that meet increasingly stringent environmental regulations. Hydrogen is also
used as a reactant and a catalyst to promote the chemical reactions that lead to the removal of
impurities and the conversion of heavy fractions to lighter ones.
Hydrogen also allows refiners to increase the yield of valuable products such as gasoline, diesel,
and aviation fuel, thereby enhancing their profitability. With the increasing focus onsustainability and the need to reduce greenhouse gas emissions, the use of hydrogen in oil
refining is expected to become even more critical in the coming years. Reducing the sulphur
content in fuels is crucial in the fight against ecological damage caused by acid rain. The
presence of sulphur in fuels is a significant contributor to acid rain, and the use of hydrogen
treatment in oil refining to remove sulphur is a crucial step in combating this environmental
problem ix.
Sulphur is a common by-product of oil refining with hydrogen. During this process, sulphurcontaining compounds in the crude oil and its distillates are converted into hydrogen sulphide(H2S) gas, which is then removed through a series of treatments. The H2S is then treated torelease the sulphur in the form of elemental sulphur or sulfuric acid. In some cases, the H2S
gas may also be sent to a Claus plant, which uses a series of chemical reactions to convert theH2S gas into elemental sulphur. The resulting sulphur can then be processed and sold as avaluable by-product for use in a variety of industries, including agriculture and chemical
production.
Sulphur for fertilizers
Overall, sulphur fertilizers are a critical component of modern agriculture, providing crops withthe sulphur they need to grow and produce high yields. As agriculture continues to face newchallenges, such as changing soil fertility and environmental pressures, the use of sulphur
fertilizers is likely to become even more important in maintaining healthy plant growth andmaximizing crop yields.
Sulphuric acid, often made from sulphur supplied by oil refineries, is a critical component in
the production of phosphate fertilizers, playing an essential role in converting raw materials
such as rock phosphate into more plant-available forms. Rock phosphate is a naturally
occurring mineral that contains phosphorus, an essential nutrient for plant growth. However,the phosphorus in rock phosphate is not always readily available to plants, as it is often present
in insoluble forms.

2.1.2. New Markets
Hydrogen is expected to have a significant role in various sectors in the future, as countries
around the world aim to decarbonize their economies and reduce greenhouse gas emissions.
Here are some of the big markets for hydrogen in the future:
1. Transportation: Hydrogen fuel cells are increasingly being used to power vehicles,
particularly in the transportation sector. Hydrogen fuel cells are particularly suitable forheavy-duty vehicles such as trucks and buses, as they offer a longer driving range andfaster refuelling times compared to battery-powered electric vehicles.
14

2. Industry: Hydrogen is expected to play a significant role in industrial processes such as
steel production, chemical manufacturing, and refining. In these industries, hydrogencan be used as a feedstock, fuel, or reducing agent, enabling the production of theseproducts with lower emissions.
3. Power generation: Hydrogen can be used in power generation through the use of fuelcells or combustion. In either case, hydrogen offers a clean and efficient alternative tofossil fuels, particularly in remote or off-grid areas where electricity generation can bechallenging.
4. Buildings and heating: Hydrogen can be used in buildings and for heating purposes,
particularly in areas where natural gas is not available. Hydrogen can be blended withnatural gas or used in pure form in appliances such as boilers, furnaces, and water
heaters.
5. Energy storage: Hydrogen is increasingly being considered as a potential energy storage
solution, particularly in conjunction with intermittent renewable energy sources suchas wind and solar. Hydrogen can be produced during periods of excess renewableenergy, stored, and then used to generate electricity during times of high demand.
Furthermore, hydrogen can be shipped over long distances with new technologies.
Overall, hydrogen is expected to have significant applications in various sectors in the future,offering a clean and efficient alternative to fossil fuels and helping to decarbonize economies
around the world.
2.1.2.1. Transportation
Hydrogen is perhaps best known popularly for its potential in transportation. The concept of afuel cell that produces electricity from a reaction between hydrogen and oxygen was first
conceptualised and demonstrated in the first half of the 19th century. However, the first
applications of fuel cells to power vehicles did not materialise until the second half of the 20th
century. One early example is pictured in Figure 6. Though some vehicles successfully
employed hydrogen as a fuel for internal combustion engines in the latter half of the 19th
century x.

Figure 6, the Chevrolet Electrovan was powered by fuel cell technology spun off
by NASA's Moonshot programme, photo by John Lloyd (CC-BY 2.0).

Several hydrogen-fuelled cars have entered the market 5,6 , but most car makers prioritise
Battery Electric Vehicles (BEVs) over Fuel Cell Electric Vehicles (FCEVs). In the short term,
until at least mid-2030s, BEV technology is expected to be more mature and easier tocharge/refuel xi . FCEVs require hydrogen storage and currently have limited refuelling
infrastructure in place. However, FCEVs are more competitive for Heavy-Duty Vehicles andspecialised vehicles with high utilization rates. Commercial fuel cell-powered buses have beensuccessfully trialled in Tokyo and other cities 7,8, and Toyota uses hydrogen fuel cell-powered
forklifts in its European production facilities 9.
In auto racing, Toyota recently made some advances by using hydrogen in Internal Combustion
Engine (ICE) powered racing cars. In 2021, Toyota participated in an endurance race in 202110,
and in rally races in 2022 11. While hydrogen cars, both those powered by fuel cells and thosewith an internal combustion engine, rely on hydrogen as a gas, Toyota plans to test a liquidhydrogen powered car in an endurance race in 2023 12. Liquid hydrogen provides the benefitof having a superior energy density, but requires to be kept at a temperature of -253 to -259
celsius prohibiting its use.
Using hydrogen in ICEs is less efficient than in FCEVs but has advantages. ICEs can run onhydrogen with little modification, either exclusively or in a 'bi-fuel' setup and demonstration
vehicles with bi-fuel technology have existed for some time 13 . Unlike FCEVs and BEVs,
hydrogen fuelled ICE vehicles have a lower reliance on critical raw materials. The catalyser, acomponent found in most modern ICE cars to filter some exhaust fumes, would not be needed
in hydrogen fuelled ICE vehicles. Employing hydrogen fuelled ICEs is considered a potential
market for vehicles that see a low utilisation rate, where the majority of life-time emissions
follow from the production and disposal phases as opposed to the use phase. E.G., for go-kart
racing or small marine engines. For large marine engines, both fuel cell powered, and ICE
powered engines are being developed though developments are far from mature.
2.1.2.2. Industry
Hydrogen fuel holds a great promise for industries that are hard to electrify, in so called hardto-abate sectors xii , xiii . These are industries/sectors that are seen as especially costly todecarbonize, typically because they involve processes for which no (commercially) viable
alternative using electric power is available. Perhaps the most prominent of such industries issteel making. Certain chemical processes and manufacturing of certain building materials canbe counted to this group as well. Typically, though not always, these industries currently rely
on fossil fuels for chemical reactions that require a high heat.

5

Retrieved from Honda on 15-03-2023: https://hondanews.com/en-US/releases/release9801c648f80e400084bf402d89eb091f-honda-fcv-concept-makes-world-debut-in-japan
6
Retrieved from Toyota on 15-03-2023: https://www.toyota.com/mirai/
7
Retrieved from the Tokyo Metropolitan Government on 15-03-2023:
https://www.metro.tokyo.lg.jp/ENGLISH/TOPICS/2017/170224.htm
8Retrieved from the Hydrogen Fuel Cell Bus Council on 15-03-2023: https://www.hfcbuscouncil.com/newsresources
9
Retrieved from Toyota on 15-03-2023: https://toyota-forklifts.eu/solutions/energy-solutions/what-fuel-celltechnology-means-for-your-forklift/
10Retrieved from Toyota Times on 15-03-2023: https://toyotatimes.jp/en/report/hpe_challenge_2021/150.html
11Retrieved from Toyota on 15-03-2023: https://global.toyota/en/newsroom/toyota/37888377.html
12Retrieved from Japan Times on 15-03-2023:
https://www.japantimes.co.jp/news/2023/01/05/business/corporate-business/toyota-hydrogen-fuel-car/
13
Retrieved from Mazda on 15-03-2023:
https://www.mazda.com/contentassets/f1d0da18d8194242874915dda7b612d8/files/2006_no026.pdf

16

The iron and steel industry is a major source of CO2 emissions worldwide. In Europe, theindustry is responsible for 4% of CO2 emissions, while globally, it is responsible for 9% of
CO2 emissions xiv. In Japan, the steel industry is responsible for 13% of the country’s CO2
emissions xv. When looking solely at industrial CO2 emissions, steel making is responsible forroughly 30% of CO2 emissions, as shown in Figure 5. In Japan steel making is responsible forroughly half of industrial CO2 emissions. Much of these emissions come from energy-intensive
processes that are hard to electrify.
The previously discussed chemical industries, fertilizer production and fuel refining, continue
to play an important role in hydrogen demand till at least 2050 iii. The demand for chemicalfertilizer is expected to grow by 30% between 2020 and 2030 alone, driven largely by global
economic and population growth. The demand for hydrogen by the fuel refining industry is
expected to at least grow in the coming years, partially driven by economic and population
growth but also because of stricter environmental regulations. By 2050, it is likely that thefossil fuel refining industry has shrunk significantly though it is expected to still be a significant
market according to the International Energy Agency.
2.1.2.3. Buildings and Heating
The use of hydrogen in residential and commercial buildings, outside of industrial processes,
is not forecast to be a particularly large industry. Small-scale appliances such as heating for
housing and offices or cooking, which currently run on fossil fuels like natural gas, are well
suited for electrification. Nonetheless, governments, including Japan 14 , and firms haveexperimented with supplying hydrogen to homes. Hydrogen in homes can be either combusted
for heat 15, or used in in-house fuel cells that convert hydrogen to electricity 16. Furthermore,
recent advances have also been made in enabling the cooking of food through hydrogen-fuelledstoves 17. One advantage is that some existing natural gas infrastructure, specifically the ‘lastmile’ to homes can be re-used with little modification where electrical grids might require amajor upgrade to handle the heightened load from heating and cooking through electric
appliances. Furthermore, it can be used in regions that lack both electric and natural gas
infrastructure when hydrogen cannisters are used.
2.1.2.4. Power Generation
Burning hydrogen to create electricity is considered a sizeable potential market, thoughvirtually non-existent as of now xvi. Thermal power stations can be designed to operate fully onhydrogen, in co-firing mode with a mixture of hydrogen and another fuel type or switch
between fuels. In some cases, existing thermal power plants can be upgraded to work withhydrogen. Ammonia fuel, made from hydrogen and nitrogen, is often used in testing thermal
power plants instead of pure hydrogen. Ammonia can be more easily transported and stored,
and has a burning temperature more suitable for coal-powered plants. While not as energyefficient as power generation through fuel cells, the existing infrastructure can largely be reused,
and most of the technology is mature. Furthermore, thermal power plants that can switch
between fuels and/or co-fire different fuel increase energy security as you are less reliant on
the (steady) supply of a single fuel type.
14

Retrieved from The National News on 15-03-2023: https://www.thenationalnews.com/business/japans-planto-power-homes-with-hydrogen-faces-hurdles-1.171777
15
Retrieved from Rinnai on 15-03-2023:
https://www.rinnai.co.jp/en/releases/2022/0530/images/releases20220530_en.pdf
16Retrieved from Tokyo Gas on 15-03-2023: https://www.tokyo-gas.co.jp/Press_e/20110209-01e.pdf
17Retrieved from Japan Today on 15-03-2023: https://japantoday.com/category/tech/rinnai-toyota-startexploring-hydrogen-powered-cooking-methods

As with most other uses of hydrogen, besides combustion in a thermal power plant, hydrogencan also provide electricity on a large scale through industrial fuel cells. While this method ismore efficient than through combustion, the technology is not yet mature and relies on criticalraw materials. Furthermore, such fuel cells generally require a high purity of hydrogen, whilethermal power plants are more versatile when it comes to the hydrogen purity.
2.1.2.5. Hydrogen for Energy Storage
Hydrogen storage is a crucial component in the use of hydrogen as an energy carrier, and thedevelopment of efficient, cost-effective, and safe storage technologies is crucial for thewidespread adoption of hydrogen as a low-carbon energy source. While hydrogen storage
technologies have made significant progress, there are still challenges to be addressed, andongoing research and development efforts are necessary to improve the performance, cost, andsafety of hydrogen storage systems.
Compressed gas storage is the most common and well-established method for hydrogen storage.
Hydrogen gas is stored at high pressure, typically between 350 and 700 bar, in high-pressuretanks made of carbon-fibre-reinforced polymer or steel. Compressed gas storage is relatively
simple and cost-effective, but it requires significant energy for compression and can lead tolarge storage volumes.
Liquid hydrogen storage is another option for hydrogen storage. Liquid hydrogen is stored at
extremely low temperatures (-253°C), and it requires cryogenic insulation and handlingsystems. Liquid hydrogen storage offers high energy density and is suitable for long-term
storage, but it requires significant capital investment and energy for liquefaction.
Solid-state hydrogen storage is a newer technology that offers the potential for high storage
densities and low-pressure storage. Solid-state storage materials, such as metal hydrides, canabsorb and release hydrogen through reversible chemical reactions, making them suitable forhydrogen storage. However, solid-state storage materials are still in the early stages ofdevelopment and face challenges such as slow hydrogen uptake and release rates, limited cycle
life, and high cost.
Hydrogen storage can also be integrated with other energy storage systems, such as batteriesor pumped hydro, to provide a more flexible and resilient energy storage solution. Hybrid
systems that combine hydrogen storage with other storage technologies can help to address thechallenges of intermittency and variability in renewable energy systems.
The optimal hydrogen storage method depends on the specific use case. For low-demand, shortterm storage, a pressurised gas tank may be sufficient. For example, it can help a householdwith photovoltaic panels to have a stable electricity supply throughout the day. However, such
low-demand, short-term cases tend to compete with electrochemical battery storage. Whileelectrochemical battery storage tends to require more critical raw materials, hydrogen energy
storage is currently more expensive and less efficient.
For applications with a larger energy demand or a need for long-term storage, electrochemical
batteries may not be as effective. In these applications, a greater adoption of hydrogen forenergy storage is projected. Some experts anticipate that energy-intensive industries, such as
steel making, may invest in their own hydrogen storage as electricity supply increasingly relies
on renewable energy with fluctuating prices and greater fluctuations between peak and low

18

supply. Large energy traders might also invest in stockpiles near industrial parks, mimicking
the current fossil fuel supply chain in this regard.
As an increased uptake in renewable energy might cause strong seasonal fluctuations in energy
supply, it is expected that economies that heavily rely on hydrogen will stockpile national
reserves. Similar to how Europe currently aims to fill its natural gas stockpiles before winterto cope with an increased energy demand for heating and transportation. With the transition
towards both hydrogen and renewable energy, this might create a ‘double whammy’, as one
expert put it, in that winters will see a low supply of renewable energy and a high demand ofenergy for heating and personal transportation. Though the intensity of this double whammy
might be partially mitigated by improvements in the insulation of homes and offices, as wellas through better public transport. Large underground salt caverns are currently studied fortheir ability to store large amounts of hydrogen at a low cost 18,19.

2.2.

The Various Variations in Hydrogen Origin

This section of the background aims to provide a global overview of international hydrogen
supply chains in the near future when Japan and the European Union (EU) begin to importhydrogen, ammonia, and hydrogen carriers.
To start, we will provide an overview of the various classifications of hydrogen. Whilehydrogen is essentially the same, distinctions can be made based on how it is produced,
resulting in different types of classifications. There are several methods for categorisinghydrogen, with one approach being to differentiate based on the production process and energy
source or feedstock used. This method leads to the so-called "rainbow classification," which isshown in Table 2. It should be noted that there is no strict definition for each colour, andsometimes conflicting definitions can exist, Table 2 represents the most common definitions
encountered throughout our research.
Table 2, classification of hydrogen by typical production process and feedstock / energy source. There is no set definition forevery colour and at times conflicting definitions may exist.

Type of
Hydrogen
Brown
Black
Grey

Typicalproduction
process
Methane steam
reforming

Blue
Green /
Electrolysis ofrenewable
water
Purple/Pink
Yellow 1
Yellow 2
18

Description

Produced from lignite (brown) coal.
Produced from bituminous (black) coal.
Produced from natural gas after steam reforming (mostcommon) or other fossil fuels. This definition is also often
used for hydrogen produced from brown or black coal andcan be used for any fossil fuel based hydrogen.
Produced from fossil fuels (including coal or natural gas)
but with carbon capture, utilization and/or storage.
Produced through electrolysis using renewable energy.
Produced through electrolysis using nuclear energy.
Produced through electrolysis using a mixed grid supply.
Produced solely through solar energy.

Retrieved on 15-03-2023: https://innovation.engie.com/en/articles/detail/hydrogen-underground-storage-saltcaverns/25906/general
19
Retrieved on 15-03-2023: https://www.lindehydrogen.com/technology/hydrogen-storage

Turqouise
White

Other

Produced by thermal splitting methane.
Produced as a by-product of other industrial processes.

Another popular method of categorising hydrogen is based on its carbon intensity,
distinguishing between low-carbon and high-carbon hydrogen. This classification uses a life
cycle analysis to examine the total CO2 equivalent greenhouse gas emissions per kilogram ofhydrogen produced. The cut-off point between low-carbon and high-carbon hydrogen is often
determined by policy makers. This categorisation is attractive to policy makers as they canadjust the cut-off point over time and gradually transition to lower carbon emissions. Thismethod is technology-neutral but does favour certain ways of producing hydrogen.
Hydrogen produced using electrolysis, with power coming from renewable (green hydrogen)or nuclear energy (purple hydrogen), often falls below even the stricter cut-off points 20 .
Hydrogen produced via a mixed-grid (yellow hydrogen) or through fossil fuels with carbon
capture and storage technology (blue hydrogen) is not expected to be viable or cost-effectivewith strict cut-off points, but may be a viable and possibly cheaper option with higher cut-off
points. Hydrogen produced from fossil fuel without any form of carbon capture is notcommonly categorised as low-carbon hydrogen.
This classification can be sensitive to how greenhouse gas emissions are allocated to hydrogenproduction, particularly when hydrogen is produced as a by-product. For instance, whenelectrolysis is used to split water into oxygen and hydrogen, without proper regulation, themajority of life-cycle emissions could be allocated to the production of oxygen, resulting in thehydrogen being declared a low-carbon by-product.
The industrialised nations and the EU, who are expected to be the largest consumers ofhydrogen, are still developing green taxonomies to support the decarbonisation of theireconomies as well as how the different types of hydrogen will be included. At present, bluehydrogen is expected to be the cheaper option for low-carbon hydrogen in most cases. However,green hydrogen is projected to become cost-competitive by 2030 and generally cheaper by
2050 as prices for renewable energy and electrolysers decrease over time xvii.
The EU is currently inclined to favour hydrogen produced with electrolysers over bluehydrogen, but is still debating whether to equate green, purple, and mixed-energy grid derived
hydrogen. The EU is open to using blue hydrogen as a transition fuel to improve its energy
security by 2030. Japan tends to be more technology-neutral when it comes to low-carbonhydrogen and prioritises the role that hydrogen can play in its long-term energy security.
Overall, there is ongoing debate and development in the classification and use of low-carbonhydrogen, as different regions and countries have different priorities and approaches toachieving their decarbonisation goals. As the technology and economics of hydrogenproduction and storage continue to evolve, it is expected that the categorisation and use of lowcarbon hydrogen will continue to evolve as well. However, as the transition to a hydrogen
economy requires large investments, companies are increasingly demanding clarity and longterm stability from governments when it comes to classifications.
20

This is not guaranteed, however. Inefficiently produced renewable energy (e.g., using equipment with a low
utilization rate) might have a high-carbon value as life-cycle emissions are considered. As the electrolysis
process requires a lot of clean/pure water with current technology, the energy used to produce this water also has
to be considered. If a water desalination process is used that relies on fossil fuels, you might get high-carbon
green/purple hydrogen.

20

Typical considerations that governments have, in prioritizing which type of hydrogenproduction to pursue are:
• Amount of greenhouse gases emitted.
• Current advantages a country possesses, such as large fossil fuel reserves.
• The potential a country has for renewable energy.
• The availability of excess fresh water.
• Diversifying suppliers to increase resilience.
• Gaining an early competitive advantage in green hydrogen technology, which is
projected to become dominant in the long-term.

2.2.1. Ammonia and Hydrogen Carriers
Although the previous classifications of hydrogen are all identical in their chemicalcomposition, there are alternative compounds that consist mostly of hydrogen atoms and canserve as alternative energy carriers. The most well-known of these compounds is ammonia fuel.
Ammonia fuel is produced via the Haber-Bosch process, which involves reacting nitrogen andhydrogen gases under high pressure and temperature in the presence of a catalyst. The resulting
ammonia is easily stored and transported, making it a potentially attractive alternative to purehydrogen which can be more challenging and expensive to transport and store. Ammonia is aclean-burning fuel that produces no carbon emissions when combusted, and its burning point
is comparable to that of coal. Ammonia is a viable fuel for co-firing with fossil fuels in thermal
power plants, facilitating a transition away from fossil fuels that utilises existing infrastructure.
One major disadvantage of ammonia fuel, when compared to pure hydrogen, is that it requires
more energy to produce. First, hydrogen must be produced, and then additional energy isneeded to conduct the Haber-Bosch process to create ammonia. Furthermore, ammonia is notcompatible with existing fuel cell technologies and must be converted back into pure hydrogen,which is another energy-intensive process.
Despite these limitations, Japan views ammonia as a promising method to import hydrogenover long distances. The Japanese government and firms are actively collaborating withpartners in the Middle East, Africa, and Latin America to establish an ammonia fuel supply
chain to Japan. Projections by the Hydrogen Council, as shown in Figure 7, show that seaborne
ammonia transport will initially grow quicker than pure hydrogen transport xviii.

Figure 7, projected seaborne trade of Hydrogen, Ammonia, and other hydrogen related substances over the next decades xviii.
Copyright 2022 the Hydrogen Council, expression permission to reuse images in this publication granted.

Liquid organic hydrogen carriers (LOHCs) are another method of transporting hydrogen. These
carbon-containing compounds are enriched with hydrogen at the source, and the hydrogen isthen extracted at the destination through a "dehydrogenation" process. The carrier in its
hydrogen-poor state is then transported back to the source. Although there is currently limited
direct use for such carriers, fuel cells that can consume them directly are theoretically possible.
Burning an LOHC would result in greenhouse gas emissions and provide little benefit overburning fossil fuels, if any at all.
Japan has successfully transported LOHC fuel by ship from Brunei to Japan since 2020.
However, Japan appears to be primarily focusing on pure hydrogen and ammonia.
22

2.3.

Global Hydrogen Electrolyser Supply Chains

This section of the policy paper will provide more in-depth information on the supply chain
needed to create the facilities for low-carbon hydrogen production using electrolysis. An oftenoverlooked part of supply chain resilience in a hydrogen economy. The ambitious planscurrently outlined by the world’s leading economies for scaling up hydrogen production will
face severe material constraints. Renewable/green hydrogen production is expected to bemainly produced through the electrolysis of water. The more mature alkaline electrolysers
require the Critical Raw Material (CRM) nickel. The more advanced Proton exchange
membrane (PEM) electrolysers, as well as most hydrogen fuel cells for the transportation sector,
require platinum group metals which are all CRMs, including very rare iridium.

2.3.1. Technological Overview
Electrolysis is the process of using electrical current to cause a chemical reaction in a substance,
typically a liquid solution. Electrolysis can be used to produce hydrogen, a clean andsustainable fuel, from water by splitting water molecules into hydrogen and oxygen gas.
There are two main types of electrolysers currently on the market:
1. Alkaline electrolysers.
2. Proton exchange membrane (PEM) electrolysers.
Alkaline electrolysers are the oldest and most mature type of electrolysers. They use a strong
alkaline solution, typically potassium hydroxide (KOH), as the electrolyte. The electrolyte
conducts the electrical current between the two electrodes, which are usually made of nickel orsteel. When an electrical current is passed through the electrolyte, hydrogen gas is produced at
the cathode and oxygen gas is produced at the anode. The gases are then separated and collected.
One of the advantages of alkaline electrolysers is that they are very efficient at converting
electrical energy into hydrogen gas. They also have a long lifespan, typically around 20 years.
However, they require a high concentration of potassium hydroxide, which can be corrosiveand difficult to handle. Additionally, alkaline electrolysers are sensitive to impurities and can
only use pure water as the feedstock. Alkaline electrolysers also operate at higher temperaturesand have a longer start-up time, making them less useful for intermittent operation, e.g., tocover a sudden peak in renewable energy supply.
PEM electrolysers, on the other hand, use a solid polymer membrane as the electrolyte. The
membrane allows the passage of protons from the anode to the cathode, while preventing themixing of hydrogen and oxygen gases. The electrodes in PEM electrolysers are usually madeof platinum or other noble metals.
PEM electrolysers have several advantages over alkaline electrolysers. They are more efficientat converting electrical energy into hydrogen gas, with efficiency rates of up to 80%. They also
operate at lower temperatures and pressures, which reduces the risk of corrosion and makes
them more flexible in terms of operating conditions. New PEM electrolysers underdevelopment can also use a wide range of water sources as the feedstock, including seawater
and wastewater.
However, PEM electrolysers are more expensive than alkaline electrolysers, mainly due to thecost of the noble metal catalysts used in the electrodes. They also have a shorter lifespan,

typically around 10 years. PEM electrolysers are also more sensitive to impurities and requirea higher level of maintenance to ensure the membrane remains intact.
Overall, both alkaline and PEM electrolysers have their advantages and disadvantages, and the
choice of which type to use depends on the specific application and operating conditions.
Electrolysers and fuel cells are both electrochemical devices that involve the conversion ofchemical energy into electrical energy and vice versa. In fact, the basic design of these devices
is very similar, with both consisting of an anode, a cathode, and an electrolyte.
In an electrolyser, an electrical current is used to split water molecules into hydrogen andoxygen gas at the anode and cathode respectively. In a fuel cell, on the other hand, hydrogengas is supplied to the anode and reacts with oxygen from the air at the cathode to produce
electrical energy and water as a by-product. The main difference between these devices is the
direction of the electrochemical reaction and the source of the reactants.
However, the similarity between electrolysers and fuel cells goes beyond their basic design. In
fact, some electrolysers can also operate as fuel cells by reversing the direction of theelectrochemical reaction. This means that they can use hydrogen gas as a fuel and produce
electrical energy and water as by-products. Similarly, some fuel cells can also operate aselectrolysers by applying an external voltage to the device and splitting water molecules intohydrogen and oxygen gas. This capability is known as reversible operation and is a key featureof some advanced fuel cell technologies, though they tend to be less efficient than electrolysers
or fuel cells build for a single operation.

2.3.2. The Core Supply Chain
The electrolyser supply chain consists of various stages, starting from the production of raw
materials to the deployment of the electrolysis system.
The raw materials for electrolysers include metals, such as steel, and polymers, such as themembrane used in proton exchange membrane (PEM) electrolysers. Electrolysers also
typically rely on critical raw materials. Alkaline electrolysers require nickel and PEM
electrolysers require platinum group metals (PGMs). These raw materials are typically sourced
from mining and chemical companies.
Once the raw materials have been sourced, they are processed and assembled into various
components of the electrolysis system, including the electrodes, membrane, and stack.
Manufacturing can be carried out by specialized electrolyser manufacturers or integrated withother companies that produce related products, such as fuel cell systems.
Once the electrolysis system components have been delivered to the customer, they are
installed and commissioned. This typically involves working with specialized service providers
who are trained in the installation and maintenance of electrolysers.
After the electrolysis system has been installed, it is operated and maintained by the customer
or a specialized service provider. This includes regular maintenance, such as replacing wornout components, monitoring system performance, and optimizing the operation of the system.
At the end of its useful life, the electrolysis system is decommissioned, and the components
are recycled or disposed of. This may involve working with specialized recycling companies
24

that can recover valuable metals and other materials from the system. Especially PEM
electrolysers have a good recycling potential because of the PGMs used for this type ofelectrolysers.
Overall, the electrolyser supply chain is complex and involves multiple stages, including raw
material sourcing & processing, manufacturing, distribution, installation, operation andmaintenance, and end-of-life management.
2.3.2.1. Critical Raw Materials
The largest part of the critical raw materials needed in a decarbonised economy that relies onhydrogen is likely to come from the additional demand for renewable energy needed to producehydrogen, more so than from the required electrolysers xix. If we look at a generic model of anelectrolyser or fuel cell, we see a variety of critical raw materials and other materials with asupply risk, an overview of the most common critical raw materials is shown in Figure 8. The
majority of critical raw materials used are considered to have a medium supply risk according
to the European Union, copper and nickel which are not considered critical raw materials by
the EU do have some limited supply risk, as is shown in Figure 9.

Figure 8, overview of critical raw materials typically used in electrolysers or fuel cells xx. Copyright 2020 European Union,
shared under CC BY 4.0 license.

Figure 9, overview of the supply risk for a variety of critical raw materials in the EU xx. Copyright 2020 European Union,
shared under CC BY 4.0 license.

It is expected that for most (critical) raw materials, the share of primary demand coming fromthe electrolyser market by 2050 will remain low xix, as is shown in Figure 10. Notable
exceptions are the PGMs Iridium and platinum of which the EU has no domestic primaryreserves, only secondary reserves in primarily catalytic converters in exhaust systems andjewellery. Zinc and nickel are much more abundant but might pose some limited supply risks.

About half of the world’s nickel reserves, and a quarter of the world’s zinc reserves can befound in Southeast Asia and Australia. This provides a strong opportunity for especially
Australia to provide a vertically integrated supply chain for (alkaline) electrolysers.

Figure 10, Projected average annual primary demand from hydrogen production and consumption to 2050 as a percentage
of current primary production. Copyright 2022 by the Hydrogen council, expression permission to reuse images in thispublication granted.

2.4.

Hydrogen Diplomacy

Hydrogen diplomacy is a relatively new term used to describe the growing global interest inhydrogen as a clean and sustainable energy source, and the international efforts to promote
cooperation and collaboration on hydrogen-related issues. Hydrogen diplomacy involves arange of activities, including bilateral and multilateral agreements on hydrogen research anddevelopment, technology transfer, and trade. It also involves collaboration on standards andregulations for the production, transport, and use of hydrogen, as well as joint efforts topromote the adoption of hydrogen technologies and infrastructure. The goal of hydrogen
diplomacy is to create a global hydrogen economy that can help to address the urgent
challenges of climate change and sustainable development while supporting a country’s
industrial interests.
In recent years, many countries have developed hydrogen strategies, but the majority lack a
concrete roadmap. Among those that have a plan in place, there are three main groups:• Industrialised countries that expect to require significant hydrogen imports.
• Industrialised countries that aim for self-sufficiency in hydrogen production.
• Countries that expect to become major hydrogen exporters.
The European Union is in a somewhat unique position, as projections indicate it will have asignificant internal production and also rely heavily on imports, as illustrated in Figure 1. When
studying recent diplomatic activity, the EU can be seen as similar to industrial countries such
as Japan and South Korea, which anticipate significant hydrogen imports.

26

Figure 11, Hydrogen production potential for 2050 in million tons per year, split by cost of
production. Copyright 2022 by the Hydrogen Council, expression permission to reuse images
in this publication granted.
Figure 11 shows the hydrogen production potential for 2050 in million tons per year, split bycost of production for each region in the world. Japan’s nearest reliable supplier of cheaphydrogen is Australia, and might face demand competition from South Korea, China, Southeast
Asia, and India. Although it is expected that in time, China and India will increasingly becapable of supplying their own hydrogen needs.

2.4.1. JapanAs shown in Figure 1, Japan is expected to become a significant net importer of hydrogen, withvery little domestic supply. Japan has also been the most active country in hydrogen diplomacy.
The government agencies Japan Organization for Metals and Energy Security (JOGMEC) andthe Japan International Cooperation Agency (JICA), as well as its ministries, notably the
Ministry of Economy, Trade, and Industry (METI), are actively involved in promotinghydrogen diplomacy. Japan also supports its private sector to establish international hydrogen
supply chains. Over the past year, numerous memorandums have been signed with public andprivate sector partners worldwide, including the EU.

Experts believe that in addition to securing a supply of hydrogen for Japan, the country hopes
to export critical hydrogen technologies and strengthen its industrial sector through diplomacy.
This is an essential component of many agreements signed with governments from otherindustrialised nations. Agreements with private sector partners and partners in nonindustrialised regions, particularly in Southeast Asia, typically include a technology export
component, as well as a financing component. Japan leverages its experience as the largest
official development aid provider in Southeast Asia, which has historically focused a lot on
economic and infrastructure projects.
A recent development is the development of the Asia Zero Emissions Community (AZEC),
which was announced in 2022 and saw its first ministerial meeting in March 2023 21. AZEC is
led by Japan and includes the majority of ASEAN nations (excluding Myanmar) and Australia.
The formal purpose of AZEC is to accelerate "a clean, sustainable, just, affordable, andinclusive energy transition towards carbon neutrality/net-zero emissions in the Asian region."
AZEC will serve as a robust platform to develop not only the hydrogen economy among its
participating members, but also to aid in the development of renewable energy. Japan will
provide technologies, financing, and take a leadership role in developing harmonised andinteroperable standards for new decarbonisation technology employed in the region.
The domestic hydrogen market in Japan has been extensively described in the 2019 MINERVA
report ‘Hydrogen and fuel cells in Japan’ by Jonathan Arias 22. For recent hydrogen related
foreign policy developments in Japan, please refer to Annex A.

2.4.2. Australia
Australia is projected to play a significant role in the emerging global hydrogen economy, due
to its abundant renewable energy resources and strategic location in the Asia-Pacific region.
As shown in Figure 1, might well become the world’s largest exporter of hydrogen.
Australia is one of the world's largest exporters of coal and liquefied natural gas (LNG), but it
is also rapidly developing its renewable energy sector. The country has abundant solar andwind resources, particularly in the northern and western regions, which could be used to
produce low-cost renewable hydrogen through electrolysis. Australia also has significant
reserves of natural gas, which can be used as a feedstock for blue hydrogen. In 2022, the firstinternational shipment of liquid hydrogen was performed between Australia and Japan, basedon blue hydrogen produced from brown coal23.
Australia is well positioned to become a major exporter of hydrogen to countries in the AsiaPacific region, particularly Japan, South Korea, and China, which are all investing heavily inhydrogen technologies and infrastructure. These countries are interested in importing lowcarbon hydrogen to help them reduce their greenhouse gas emissions and meet their climate
targets.
To support the growth of its hydrogen industry, Australia has launched a National Hydrogen
Strategy, which sets out a roadmap for developing a domestic hydrogen industry and becoming

21

Retrieved on 15-03-2023: https://www.meti.go.jp/press/2022/03/20230306005/20230306005-24.pdf
Retrieved from the EU-Japan Centre for Industrial Cooperation on 15-03-2023: https://www.eujapan.eu/sites/default/files/publications/docs/hydrogen_and_fuel_cells_in_japan.pdf
23Retrieved from the Hydrogen Energy Supply Chain Project on 15-03-2023:
https://www.hydrogenenergysupplychain.com/supply-chain/latrobe-valley/
2228

a leading hydrogen exporter. The strategy includes measures to support research anddevelopment, demonstration projects, regulatory reform, and international cooperation.
Furthermore, Australia is currently the world's second-largest producer of nickel, with the
majority of its nickel production exported to countries like China, Japan, and South Korea. The
country has significant reserves of high-grade nickel deposits, particularly in Western Australia
and Queensland, which are among the largest in the world.
Australia is a key partner in AZEC and projected to be the largest supplier of hydrogen andcritical raw materials to decarbonize Japan and Southeast Asia.

2.4.3. ASEAN / Southeast Asia
Due to its strategic location, large population, and growing demand for clean energy.
Several countries in Southeast Asia, including Singapore, Indonesia, and Thailand, havealready launched hydrogen initiatives and are investing in hydrogen production, storage, andtransportation infrastructure. The region has abundant renewable energy potential, such as solar
and wind power, as well as hydro, which could be used to produce low-cost renewablehydrogen through electrolysis. They also have growing demand for clean energy to support
economic growth and reduce dependence on fossil fuels. Especially the development of new
typhoon-proof wind turbines might be a game changer for the region.
In addition to its potential in the hydrogen economy, Southeast Asia is also a significant
producer of critical raw materials like nickel, cobalt, and rare earth elements. Indonesia is oneof the world's largest producers of nickel, which is a critical material for alkaline electrolysers,
as well as for batteries. The country also has significant reserves of other critical materials,
such as cobalt and rare earth elements, which are essential for the production of high-tech
products like wind turbines. Indonesia has recently started to deploy policies to develop
domestic nickel ore processing (a market which is currently dominated by China) and battery
production 24,25, but has not yet issued similar plans for electrolysers production. Furthermore,
The Philippines is also amongst the top 5 countries with the largest nickel reserves and might
move to employ similar policies as Indonesia.
Southeast Asia's role in critical raw material mining is expected to grow in the coming years,
as demand for these materials continues to increase in industries that are essential for thetransition to a more sustainable and low-carbon economy. However, it is also important thatmining and production of these materials are carried out in a responsible and sustainable
manner, taking into account environmental and social considerations in order to retain accessto western markets.
Japan sees Southeast Asia’s growing economies as a large market for hydrogen technology andis willing to provide financing towards establishing hydrogen supply chains in the region.
AZEC is Japan’s diplomatic vehicle towards this purpose. While ASEAN nations have a goodpotential for renewable energy, due to their own developing energy requirements it might takea long time before the region will see much hydrogen exports. Though Brunei might be in a

24

Retrieved from the IEA on 15-03-2023: https://www.iea.org/policies/16084-prohibition-of-the-export-ofnickel-ore
25Retrieved from NBR on 15-03-2023: https://www.nbr.org/publication/indonesias-nickel-export-ban-impactson-supply-chains-and-the-energy-transition/

unique position to quickly become an exporter of blue hydrogen, and a hydrogen supply chain
using liquid organic hydrogen carriers has already been established between Brunei and Japan.

2.4.4. Africa
Several countries in Africa, including Namibia, Morocco, Egypt, and South Africa, havealready launched hydrogen initiatives and are investing in hydrogen production, storage, andtransportation infrastructure. These countries have abundant renewable energy potential, suchas solar and wind power, which could be used to produce low-cost renewable hydrogen throughelectrolysis. They also have growing demand for clean energy to support economic growth andreduce dependence on fossil fuels. North African countries like Egypt, Algeria, and Morocco
can use their proximity to Europe to have relatively cheap hydrogen exports through pipelines,
and have recently made plans for upgrading or starting gas pipeline to Europe that can be
upgraded for hydrogen use in the future.
In addition to its potential in the hydrogen economy, Africa is also a significant producer ofcritical raw materials like cobalt and platinum group metals. These materials are essential forthe production of high-tech products like electrolysers and batteries, as well as other advanced
technologies. The Democratic Republic of Congo, for example, is one of the world's largest
producers of cobalt, while South Africa is a major producer of platinum group metals.
As Africa is rather distant from Japan and does not already possess an advanced infrastructure
to export energy to Japan, Japan is not likely to prioritize the development of hydrogen export
infrastructure in Africa. However, Japan has a strong interest in the critical raw material
reserves in Africa and might see Africa as a good market to sell its technology.

2.4.5. Arab Peninsula
Arabic countries also have the potential to become major hydrogen exporters, particularly toAsia, which is expected to be a major market for low-carbon hydrogen. The United ArabEmirates, for example, has already signed agreements to export hydrogen to Japan, while Saudi
Arabia is developing a $5 billion green hydrogen plant to export hydrogen to Europe.
Japan has stable trade relations in the Arab gulf, where Japan sources much of its sizeable LNG
imports. Japan is using these existing relations to develop joint projects for mainly blue
ammonia exports, which is deemed as more suitable than pure hydrogen transport due to thelong distance between the Arab peninsula and Japan.

2.4.6. United States
The United States has recently gained a renewed interest in hydrogen. While for a long time it
was thought that the US would mainly look to build hydrogen production capacity to supply
its domestic requirements, as was projected in Figure 1, since the Inflation Reduction Act was
introduced things are set to change. The IRA is giving a major impetus to the development ofa clean hydrogen economy in the United States. The US has now started developing mayor
hubs for hydrogen exports and is keen to sign up Japan as a large initial client to scale up.
Since the shale gas revolution, the US has become a net energy exporter and has integrated this
into its foreign policy. As the US seeks to establish more robust supply chains and decouple
from China, it has implemented a foreign policy sometimes referred to as "friend-shoring."
Providing energy security to friendly nations in their supply chains is increasingly critical,
particularly in the wake of Russia's aggression, which has disrupted global energy markets.

30

Although the US currently provides energy security primarily in the form of liquefied naturalgas (LNG), it intends to prepare for a future in which hydrogen replaces LNG.
When it comes to key technologies for a hydrogen supply chain, the US seems to be active onmost fronts even though they might not always have the best technology on the market xxi. The
US, like most other major economies, is likely to want to keep critical technologies for thehydrogen economy in-house.

2.4.7. China
China aims to become a leader of the hydrogen economy xxii . China already is the largest
producer of hydrogen, mainly grey hydrogen. As hydrogen is expected to play an increasingly
important role in fuelling industrial processes, China’s demand for hydrogen will grow.
China’s approach to hydrogen is rather unique amongst major economies in that the initial
focus is on increasing industrial hydrogen production capacity before any greening goals.
Though ultimately, also China sees hydrogen as an important factor in decarbonising its
economy. Multiple regions in China have very ambitious plans for becoming important players
in the hydrogen economy, and regional plans can be far more ambitious than national
government plans.
China already produces over half of global electrolyser capacity on an annual basis and is
expected to greatly increase its electrolyser production capacity in the next five years xxii,xxiii,
as is shown in Figure 12. China falls behind western countries and Japan when it comes to howtechnological advanced its electrolysers are. However, China is able to produce alkaline
electrolysers much cheaper than other countries, with some estimates suggestion that the cost
per capacity for Chinese electrolysers is only half of that of competing electrolysers xix,xxii. It is
expected that China might catch up with the technological frontier for hydrogen electrolysers
in about 5 years.

Figure 12, overview of current and projected annual electrolyser manufacturing capacity by region. Copyright 2022 IEA,
shared under a CC BY 4.0 license.

Chinese concern for its energy security plays a leading role in the move to adopt greenhydrogen. While China continues with their shale gas revolution, there is some concern thatgrowth will soon stall 26. However, the large potential for both cheap solar and cheap windenergy on the Tibetan Plateau and Inner Mongolia provides China with an opportunity to
produce a large amount of hydrogen domestically. China shows little interest in becoming ahydrogen exporter and might even be a hydrogen importer during a transitional phase where it
boosts domestic demand in an effort to kickstart hydrogen industries.
China is a significant player in the global supply of critical raw materials needed for thetransition to clean energy, and it boasts one of the largest installed capacities for nickel
processing.

26

Retrieved from Reuters on 15-03-2023: https://www.reuters.com/article/us-china-shalegas-idUSKBN29V0ZE

32

3. Recommendations for EU-Japan Cooperation
There are many areas in which the European Union and Japan could cooperate when it comesto establish a resilient hydrogen economy. Five key areas for cooperation can be identified:
1. Research and development: Both the EU and Japan are investing heavily in researchand development of hydrogen technologies, including electrolysers and transport. Joint
research and development projects could accelerate progress and help to overcome
technical challenges.
2. Connectivity: Developing harmonized and interoperable standards & regulations isessential for the widespread adoption of hydrogen technologies. The EU and Japan
could work together to develop such standards & regulations to ensure compatibility
and interoperability between their respective hydrogen systems. Harmonised standards
are relevant both domestically in Japan and the EU, and in third countries, to develop a
more resilient global supply of hydrogen.
3. Infrastructure development: Building the necessary infrastructure for hydrogenproduction, storage, and transportation is a significant challenge. The EU and Japan
could collaborate on developing and implementing infrastructure projects that can
support the growth of the hydrogen economy.
4. Market development: As the hydrogen economy continues to grow, both the EU andJapan could work together to create new markets for hydrogen and encourage theadoption of hydrogen technologies in various sectors. An important market driver might
be in sustainable finance.
5. Supply chain management: Ensuring a stable and secure supply of hydrogen is critical
for the success of the hydrogen economy. The EU and Japan have to collaborate on
managing the global supply chain for hydrogen as the two largest net importers,
including the production, transportation, and storage of hydrogen, as well as thedevelopment of hydrogen trading platforms.
In December 2022, the European Commission and the Japanese government signed a
Memorandum of cooperation on Hydrogen. The two parties share a recognition that renewable
and low-carbon hydrogen is essential to achieving net-zero emissions. The memorandum aims
to promote a sustainable and affordable production, trade, transport, storage, distribution, anduse of renewable and low-carbon hydrogen, as well as a global rules-based and transparent
hydrogen market. The agreement provides a framework for the development of detailed
proposals for programs of cooperation, encouraging cooperation between governments,
industry, and research agencies. Areas of cooperation include exchanging information andexploring coordination of hydrogen policies, regulations, incentivizing measures, and subsidies,and enhancing secure and rules-based international renewable and low-carbon hydrogen trade.
The memorandum also aims for multilateral cooperation with third countries, in line with the
EU-Japan Partnership on Sustainable Connectivity and Quality Infrastructure. The cooperation
is expected to be implemented through various meetings, workshops, and events held
periodically.
The memorandum is an important and crucial step in establishing a resilient hydrogen supply
chain together. However, one important element that is lacking from the memorandum iscooperation in securing the required (critical) raw materials to establish sustainable hydrogen
supply chains. By working together on both the technical and diplomatic fronts, the EU &Japan can ensure that the production and use of hydrogen is sustainable, environmentally
responsible, and resilient.

A large number of the experts interviewed in making this report indicated how both Japan andthe EU with its member states (Team Europe) consider having an in-house supply chain forhydrogen technology to be of high strategic importance. China already significantly undercuts
Western and Japanese price points for alkaline electrolysers and has started exporting its
products xix,xxii. The EU and Norway have launched two important Projects of Common
European Interest (IPCEIs), enabling about 10 billion euros in state aid, to develop a complete
clean hydrogen value chain. Japan is similarly supporting its industry. While the availability ofsignificant amounts of government funding creates some opportunities, the protective natureof such measures might make it very difficult for European firms to enter the Japanese market,
and vice versa, without possessing a very strong competitive advantage.
Both Team Europe and Japan want to avoid what happened to their solar panel industries. The
European and Japanese solar panel industries suffered significant losses due to Chinese
dumping practices. Chinese manufacturers flooded the global market with cheap solar panels,
selling them at prices below the cost of production, and often receiving government subsidies
to support their operations. This made it difficult for European and Japanese manufacturers tocompete, leading to a significant decline in their market share. The European Union and Japanaccused China of unfair trade practices and imposed anti-dumping duties on Chinese solar
panels to protect their domestic industries. However, these measures were not enough toprevent the collapse of the European and Japanese solar panel industries. Many companies
were forced to shut down or scale back their operations, leading to job losses and a decline in
the development of renewable energy technologies in these regions. The Chinese dominancein the solar panel industry continued to grow, leading to concerns about the concentration of
production in a single country and the impact on global supply chains. The collapse of theJapanese solar panel industry had a significant impact on the country's uptake of renewableenergy.

3.1.

Industrial Cooperation

3.1.1. Hydrogen Consumption Industries
While Team Europe and Japan are expected to be protective of strategic hydrogen production
technology, they are likely to have a more relaxed approach to hydrogen consumption areas.
Almost any technology that runs on fossil fuel can be "hydrogenated". While some products
may be more likely to be electrified than hydrogenated, not all products can be easily electrified.
The shipbuilding industry, including both large and small ships, is a crucial sector in thetransition towards decarbonisation. The EU currently heavily relies on Japan for small boat
engines that run on fossil fuels, with Japan being a global market leader in this area. However,
due to the large weight of batteries required for electrification, hydrogen or hydrogen-derived
fuels are more likely to be used in this industry. Although less energy-efficient than fuel cellpowered electric engines, boats that see low usage may have a lower environmental life-cycle
impact if they run on a hydrogen-fuelled combustion engine. Japanese companies such as
Toyota and Mazda have some experience in developing hydrogen-fuelled combustion engines,
which could be utilised in the marine sector.
The steelmaking industry is a critical sector in decarbonizing both the European and Japanese
economies due to its significant CO2 emissions. Japan is expected to prioritise the developmentof its own technology in this sector because steelmaking is crucial to Japan's economic security.
However, favourable conditions in sustainable finance and carbon pricing mechanisms might34

encourage Japanese steelmaking companies to prioritize hydrogenation in their European
subsidiaries.

3.1.2. (Expiring) Patents
Research into using hydrogen as a fuel has been ongoing for many decades, with many patents
filed. However, as the hydrogen economy has not yet taken off, many patents have already
expired or will expire soon without ever making it to the market. This provides unique
opportunities for SMEs or start-ups that have a limited budget for their own R&D. New
innovative ways, or a better market, might bring new value to old patents and create new
business opportunities. Additive manufacturing saw a similar development, where the market
gained a massive impetus when a few key patents expired after a lagged start of the industry.
Both the EU & Japan are leading in the number of hydrogen-related patents filed 27. The EU &Japan have been consistently amongst the top 3 of patent filing regions since 2001, as shownin Figure 13. According to an expert, many of the older patents that are nearing expiration canbe licensed at a relatively low cost, providing companies with an opportunity to gain a headstart on technology that will soon be publicly available. This can be particularly beneficial forsmall and medium-sized enterprises (SMEs) that are trying to establish themselves in themarket. The expiration of many patents may also serve as an impetus for new start-ups in thehydrogen sector. However, for European SMEs in particular, it might be hard to establish abusiness relation with Japanese paten holders and they made require services such as thoseoffered by the EU-Japan Centre for Industrial Cooperation.

Figure 13, Patenting trends by main world regions in the area of hydrogen technology. Copyright 2023 the European Patent
Office, allowed to be reused.

3.1.3. On-Shore Material Processing
On-shoring material processing capabilities refers to the process of bringing back or developing
domestic production and processing of critical raw materials, rather than relying on overseas
suppliers such as China. For Japan, a nation with limited natural resources and a strong
27

Retrieved from the European Patent Office on 15-03-2023: https://www.epo.org/newsevents/news/2023/20230110.html

dependence on imports, securing critical raw material supply chains is of paramountimportance. The onshoring of material processing capabilities can provide several strategic
benefits for Japan:
1. Enhanced supply chain resilience: By developing domestic processing capabilities,
Japan can reduce its reliance on overseas suppliers and minimise the risk of supply
chain disruptions due to geopolitical tensions, trade disputes, or other unforeseen events.
This resilience is particularly important the hydrogen economy, but also for otherindustries that are vital to Japan's economy, such as automotive, electronics, andrenewable energy.
2. Strengthened national security: Critical raw materials, such as rare earth elements, areessential for the production of advanced technologies used in various industries,
including defence and aerospace. On-shoring material processing capabilities can help
ensure a stable supply of these strategic resources, contributing to Japan's national
security and technological leadership.
3. Economic growth and job creation: Developing domestic processing facilities can leadto economic growth and job creation within Japan. By investing in on-shoring
initiatives, the country can stimulate its industrial sector, create new employment
opportunities, and foster the development of skilled labour in the field of material
processing.
4. Improved environmental and labour standards: On-shoring material processing
capabilities can enable Japan to exert greater control over the environmental and labour
standards associated with the production and processing of critical raw materials. Thiscan help reduce the negative environmental impacts and unethical labour practices often
associated with overseas mining and processing operations.
5. Increased innovation and technological advancement: By fostering a domestic
ecosystem for material processing, Japan can drive innovation and technologicaladvancements in the field. This can lead to the development of new, more efficient, andsustainable methods for processing critical raw materials, ultimately contributing toJapan's global competitiveness.
6. Fostering strategic partnerships and regional cooperation: Although on-shoring aims todevelop domestic capabilities, it can also lead to the establishment of strategic
partnerships and regional cooperation. By working with neighbouring countries thatpossess critical raw materials, Japan can strengthen regional supply chains, promoteresource-sharing, and reduce dependency on distant suppliers.
By developing domestic processing facilities and reducing reliance on overseas suppliers,
Japan can enhance supply chain resilience, strengthen national security, promote economic
growth, and foster innovation. Additionally, on-shoring can help improve environmental andlabour standards associated with material processing, and encourage strategic partnerships andregional cooperation.
Experts suggest that Japan is likely to welcome European companies that can bring theirexpertise and assist in developing Japan’s material processing capabilities. Additionally, Japan
may also welcome joint research and development efforts aimed at enhancing these processing
36

capabilities. Finally, Europe’s growing sustainable finance market may also play a potential
role in this regard. Japan could be more competitive than other nations in the region in many
ESG (Environmental, Social, and corporate Governance) topics, whereas material processing
tends to be an industry with significant adverse environmental and social impacts.

3.1.4. Recycling
Large-scale industrial electrolyzers may contain significant amounts of metals and othermaterials that could be recycled. Recycling of electrolyzers is still in its early stages, and there
are limited facilities for the recycling of these devices. However, as the use of electrolyzers
grows and their lifetimes shorten due to technological advancements, there is an increasingneed for the recycling of these devices. Some companies are already exploring ways to recycle
electrolyzers, and several research projects are underway to develop more efficient and costeffective methods for the recycling of these devices.
The need for recycling is significant for platinum group metals (PGMs), which are mainly usedin PEM electrolysers, as the projected annual production capacity for these metals will notcover the forecasted demand xxiv. Recycling PGMs from old electrolyser stacks for use in new
stacks will be crucial to ensure there are enough of these metals available xxv. While efficient
recycling of electrolysers can provide a valuable solution to a low supply of raw PGMs, thefact that PEM electrolysers have an expected lifetime of 7-20 years (pending forecasted
improvements in the technology) will not make recycling an effective solution in the early
scale-up phase of a green hydrogen economy.
However, steps can be taken to improve the recycling rate of PGMs recovered from otherindustries. Currently, the majority of imported PGMs in Japan are used for the production of
catalytic converters in car exhausts xxvi . The European Union currently leads the world in
employing PGMs in exhaust catalysts, due to the Union’s strict regulations to limit exhaust
fumes, and in the recycling of said catalysts xxvii. When European firms export their know-how,
it would benefit both the EU and Japan, as there would be less competition for primarymaterials. It must be said that the recycling rate in Japan is not far behind that in Europe, andJapanese firms might hold technology that is equally interesting for the EU. Large gains canalso be made worldwide if the EU and Japan cooperate to aid developing nations in setting up
full supply chains for recycling cars. Developing countries often have informal recycling chainsthat lack the sophisticated technology to recover PGMs, despite the profitability of recycling
these metals.
As the sale of cars with internal combustion engines, and thus the need for catalytic converters,
might recede with the advent of battery & fuel cell electric vehicles, the demand for PGMs forexhaust systems will lower and recyclers might look to build new customer relations withelectrolyser & fuel cell producers outside of the traditional automobile industry.

3.1.5. Renewable Energy
As green hydrogen is expected to become an increasingly large part of the hydrogen mix,hydrogen will cause an increased demand for renewable energy. Japan has strong capabilities
for advanced solar power technology and relies on imports from China for its cheaper solar
power. However, European firms can play a significant role in increasing Japan's capacity forwind energy. It is foreseen that there will be an especially large opportunity for floating
offshore wind power. Currently, wind power accounts for less than 1% of Japan's power supply,

even though total renewable energy supplies provide over 20% of Japan's electricity 28. Japanaims to have renewables account for 36-38% of its electricity supply by 2030. It was only as
recent as December 2022 that Japan saw its first large offshore wind farm open, with 20
turbines by Danish Vestas 29. A growth in domestic green hydrogen production will directly
impact the demand for domestic green power.

3.2.

Trilateral & Multilateral Cooperation

Considering that Japan is likely to rely on imports for the majority of its future hydrogen supply,
as shown in Figure 1, there will be ample opportunity for industrial cooperation outside ofJapan when it comes to hydrogen production and infrastructure. As technology leaders andlarge industrialised parties, Japan and the EU can collaborate on hydrogen developments inalmost every corner of the world. However, during our research, we identified two broad
regions that are of special interest to the EU and Japan when it comes to the hydrogen economy.
First, we will highlight opportunities for cooperation in ASEAN and with Australia. Australia
and ASEAN, together with Japan, make up the Asian Zero Emissions Community (AZEC).
Due to its relatively close proximity to Japan, and Japan's strong historic trade and investment
experience with this region, this region is considered one of the most important for Japan'shydrogen economy. Though, due to the greater distance, this region is unlikely to provide alarge share of Europe's hydrogen imports.
Second, we will highlight opportunities for cooperation in Africa and the Middle East. Herethe roles are reversed, and these regions are likely to provide a large share of the EU's hydrogen
imports but will likely provide less of Japan's hydrogen imports. Nonetheless, Japan is also
actively engaged with nations and firms in this part of the world to establish hydrogen supply
chains, although Japan is mainly invested in ammonia trade with this region. Furthermore,
Japan takes a strong interest in Africa for its critical raw material reserves necessary to establish
a hydrogen economy.

3.2.1. ASEAN & Australia, the Asian Zero Emissions Community
As mentioned earlier, the Asian Zero Emissions Community (AZEC) countries are importantpartners for Japan in their shift to a hydrogen economy. Not only do some of these countries
have the potential to export hydrogen to Japan, due to their relative proximity and highrenewable energy potential, but also because Japan has a long history of investing and tradingwith these countries, dating back to the 1950s 30. Japan has invested especially in the areas ofinfrastructure and power generation, providing a wealth of relevant experience for hydrogen
related investments in the region. European firms can use Japan’s extensive knowledge on
doing business in the ASEAN member states to lower the risk of investing in the region.
Australia is quite different from ASEAN states but is nonetheless intrinsically linked to theregion as a close neighbour and one of the region's major energy providers. Japan is Australia’s
largest energy exports destination 31. Japan is looking to build on this existing relationship and
28

Retrieved on 15-03-2023: https://www.japantimes.co.jp/news/2022/11/25/business/renewables-electricityshare-fiscal-2021/
29
Retrieved on 15-03-2023: https://asia.nikkei.com/Business/Energy/Japan-s-first-big-offshore-wind-farmbegins-operation
30
Retrieved on 15-03-2023: https://www.jica.go.jp/english/publications/j-world/c8h0vm000082pnreatt/1309_05.pdf
31
Retrieved on 15-03-2023: https://www.eia.gov/international/analysis/country/AUS38

is invested in Australia becoming one of its chief hydrogen suppliers. It is not likely that
ASEAN nations, outside of Brunei and Malaysia who are already exporting significant amounts
of fossil fuel products, will soon become significant energy exporters, and part of the plansbehind AZEC is to have Australia export hydrogen to the ASEAN participants as well. While
this might seem to go against Japan's interest in securing hydrogen for itself, Japan aims toexport its advanced hydrogen technology to other AZEC nations and to provide the finance,
including with a new green transition bond market.
3.2.1.1. Harmonisation of Regulations and Standards
While hydrogen itself requires little regulation or standard setting outside of perhaps purity,
there is a lot to be done to ensure connectivity in almost every other aspect. Countries need tocollaborate on the development of common technical standards and protocols for hydrogenproduction, distribution, and utilisation. This can help ensure the interoperability of hydrogentechnologies and infrastructure, enabling a more seamless integration of hydrogen into theglobal energy system. This can be initiated by both the public and private sector, but it is crucial
that such standards are in place for the hydrogen economy to take off. Experts indicate that alack of clarity on certain aspects, such as when hydrogen can be classified as renewable or lowcarbon, can impede large private-sector investments in hydrogen.
With Japan's leading role in experimental seaborne hydrogen transport, Japan is in a strong
position to develop international hydrogen-related standards and regulations. Japan is expected
to push its connectivity standards in the AZEC region to both ensure its energy security and toallow its hydrogen industry to scale up. Considering that the European Union and Japan bothhave a strong interest in a resilient and diverse global supply of hydrogen in the future, it isseen as in the interest of both to have compatible standards.
Both physical connectivity and digital connectivity need to be considered. Physicalconnectivity can manifest itself in port infrastructure, pressure used in storage, and purity ofhydrogen. Good physical connectivity between regions will allow for both better economies ofscale and the creation of more diverse and resilient supply chains. Digital connectivity canmanifest itself in issues such as tracking the origins of a hydrogen mix, especially how it was
produced, and the CO2 equivalent emissions and other environmental & social impacts
resulting from the production and transport of hydrogen. How hydrogen is produced andtransported is of increasing importance to parties in Europe due to upcoming regulation on
corporate sustainability reporting, as well as for the upcoming carbon border adjustment
mechanism. A good digital connectivity in these areas will enable more financing options forbuilding global hydrogen supply chains. This affects both direct hydrogen/ammonia exports tothe EU, as well as Japanese exports to the EU of products produced with hydrogen, either
directly or indirectly.
3.2.1.2. Infrastructure Development
There might be good opportunities for European firms to become part of infrastructuredevelopment in AZEC. Especially in areas where the EU has technological superiority, there
is a good chance of success. Japanese investments in third countries are expected to be more
open to foreign firms than within Japan. Outside of direct participation in projects for hydrogenproduction, transportation, and utilisation, there are opportunities in the raw material mining
and processing markets. This region holds about half of the world's nickel reserves xxviii, amaterial that is crucial for alkaline electrolysers, while both Japan and the EU hold very little
nickel reserves. Indonesia (22% of global nickel reserves) has become very protective of its
material processing industry, and the Philippines (6% of global nickel reserves) might follow

a similar path, providing an incentive to invest in nickel processing facilities in these countries.
Australia (22% of global nickel reserves) is more open to exporting unprocessed nickelcontaining ore. Historically, China was dominant in nickel processing, but Indonesia has
successfully challenged China's position in this market in recent years.
3.2.1.3. Technology Export
As mentioned earlier, there will be an opportunity for European technology exports inSoutheast Asia and Australia due to Japanese activity in the region. Europe is especially strong
in the area of high-tech electrolysers and thus might have a good chance at exporting theirelectrolyser technology. Furthermore, Europe can provide some unique solutions for hydrogenstorage and transportation. As shown in Figure 13, Japan and Europe are both leaders in thenumber of hydrogen-related patents filed. To have a highly advanced hydrogen supply chain
will most likely involve both European and Japanese technology. As Europe develops a larger
internal demand for hydrogen, European firms might also acquire economies of scale benefits
earlier than Japanese firms and might be able to capitalise on this more and more as time goeson.
3.2.1.4. FinanceJapanese firms seeking to expand their hydrogen activities into Southeast Asia and/or Australia
might turn towards European financial markets. Especially green hydrogen related investments
could benefit from Europe’s dominant position in the market for sustainable finance xxix, as
shown in Figure 14.

Figure 14, sustainable funds and assets under management divided by region (billions of dollars and numbers), copyright2022 by UNCTAD, shared under a compatible license.

3.2.1.5. Renewable Energy
Wherever a hydrogen export infrastructure is developed, there might be opportunities todevelop renewable energy farms. As Japan is aiming to develop a significant seaborn export
capacity in the region, it might provide opportunities to invest in renewable energy production
40

near hydrogen trading ports. Even if initial investments by Japan are aimed at blue or greyhydrogen production that does not rely on renewable energy, it is likely that ports with a goodpotential to scale up their hydrogen exports will be chosen. Especially South Vietnam, theNorthern Philippines, and much of Australia have significant potential for offshore wind farms
32. However, in some of these regions, new developments in typhoon-proof floating windturbines might need to be further developed in order to tap the full wind power potential.

3.2.2. Africa and the Middle East
Opportunities for trilateral cooperation in Africa and the Middle East are similar to those inSoutheast Asia and Australia, with the distinction that there is likely to be less industrial
demand for hydrogen imports in Africa or the Middle East. These regions will mostly behydrogen export-focused.
All Arab Gulf states are in a good position to export grey and/or blue hydrogen, owing to theirlarge fossil fuel reserves, though only Saudi Arabia and Oman have strong potential for greenhydrogen. While nearby Iraq also has strong potential for (green) hydrogen production basedon its natural resources, the political instability in Iraq impedes investments in the country.
Many countries in the Middle East lack the required freshwater supply for a large greenhydrogen industry. Due to the considerable distance from Japan, Japan is likely to invest in
infrastructure for ammonia exports over pure hydrogen exports.
Africa can be subdivided into several regions, though the largest divide from an EU perspective
is between North Africa and Sub-Saharan Africa. North Africa's close proximity to Europe
enables the opportunity for an international network of hydrogen pipelines, whereas SubSaharan Africa is more likely to export hydrogen to Europe by ship.
3.2.2.1. Connectivity
As with Southeast Asia and Australia, both the EU and Japan are likely to benefit from goodconnectivity. It should be noted that standards used for potential hydrogen pipeline connections
between Europe and North Africa are of little relevance to Japan. However, if there is goodconnectivity for shipping hydrogen, this creates more diverse global supply chains andincreases resilience for Japan and the EU. As shown in Figure 11, Africa and the Middle East
are expected to provide much of the world's cheapest hydrogen by 2050 and are thus stillinteresting for long distance exports to Japan.
In fact, it is expected that the Middle East will export more hydrogen & ammonia to Japan thanto Europe by 2030 and that little hydrogen will be exported from Africa at this point xviii, as
shown in Figure 15. Although by 2030, the Middle East, North Africa, and the south of Africa
might be capable of diverting hydrogen exports to Europe if alternative supplies do not work
as well as expected. By 2050, Europe will likely get much of its supplies from North Africa
and other nearby regions while the Middle East and the south of Africa will provide majorhydrogen exports to Japan xviii, as shown in Figure 16. Thus, it will be advantageous for Europe
to invest in connectivity with Japanese-led hydrogen supply chains.

32

Retrieved from the global Wind Atlas on 15-03-2023: https://globalwindatlas.info/en

Figure 15, projected hydrogen flows by 2030. Copyright 2022 the Hydrogen Council, expression permission to reuse images
in this publication granted.

42

Figure 16, projected hydrogen flows by 2050. Copyright 2022 the Hydrogen Council, expression permission to reuse images
in this publication granted.

3.2.2.2. Infrastructure Development
Although Japan might be more focused on ammonia exports from the Middle East and thesouth of Africa, and the EU on hydrogen itself, EU firms can still benefit from Japan's
involvement beyond the specific shipping infrastructure. Furthermore, Japanese firms may
have valuable hydrogen shipping experience from AZEC states that they can help employ in
Africa or the Middle East.
It might be prudent for EU member states to invest in reserve ammonia import capacity if
sudden changes in the market force the EU to find new suppliers for their clean energy needs.
This could pre-empt a situation such as what was seen when Russia invaded Ukraine, and the
EU had to hastily build new LNG terminals to secure new supply routes.
3.2.2.3. Other Opportunities
Other opportunities for industrial cooperation in the region will be very similar as for Southeast
Asia and Australia. These suggestions can be found in sections 3.2.1.3, 3.2.1.4, and 3.2.1.5
above.

3.3.

Academic Cooperation

Most experts agree that one of the main areas of cooperation between the EU and Japan will
be in the area of R&D. Industrial collaboration might at times be challenging, as both the EU
and Japan see a strong internal hydrogen sector as strategic objectives for their energy security
and economic resilience. However, both sides have a lot to gain from improvements inhydrogen production efficiency, lowering the need for (critical) raw materials, and establishinga resilient global supply chain for hydrogen.
By collaborating in research, education, and innovation, academic institutions from bothregions can contribute to the development of new technologies and strategies that facilitate thetransition to a hydrogen-based energy system. Some potential areas of academic cooperation
include:
1. Joint research projects: Universities and research institutions from the EU and Japan
can collaborate on joint research projects focusing on hydrogen production, storage,
distribution, and utilization technologies. These collaborations can help drive
innovation, improve existing technologies, and develop new solutions for a hydrogenbased energy system. It is expected that major advances in the efficiency and material
use of electrolysers & fuel cells are to originate from universities.
2. Exchange programs: Establishing student and researcher exchange programs between
EU and Japanese academic institutions can facilitate the sharing of knowledge,
expertise, and best practices. These programs can expose participants to newperspectives, techniques, and approaches, fostering innovation and global collaborationin the field of hydrogen energy.
3. Joint academic conferences and workshops: Organising joint academic conferences,
symposiums, and workshops on hydrogen energy can create a platform for researchers,
academics, and industry professionals from the EU and Japan to share their findings,
discuss new developments, and identify potential areas of collaboration.
4. Collaborative degree programs: The EU and Japan can develop joint degree programs,
such as dual or joint master's and Ph.D. programs, focusing on hydrogen energy andrelated fields. These programs can provide students with a comprehensive
understanding of the technical, economic, and policy aspects of the hydrogen economy,
preparing them to contribute to the development of hydrogen-based energy solutions.
5. Sharing of research infrastructure: Academic institutions from the EU and Japan cancollaborate by sharing research infrastructure and facilities, such as state-of-the-art
laboratories, testing centres, and pilot plants. This can help optimize the use ofresources, expand the scope of research, and accelerate the development of newtechnologies and applications.
6. Collaboration on policy and regulation: Academic institutions can collaborate on
research related to policy and regulation for hydrogen energy. By studying bestpractices and successful policy approaches, they can help inform decision-makers andcontribute to the development of supportive policy frameworks that enable the growthof the hydrogen economy in both regions.

44

7. Education and training programs: Developing education and training programs focusedon hydrogen energy can help build a skilled workforce capable of supporting thetransition to a hydrogen economy. The EU and Japan can collaborate on thedevelopment of specialized curricula, training materials, and certification programs for
professionals working in the hydrogen sector.
8. Joint book writing: Researchers from the EU and Japan can write academic books
collaboratively. These can be aimed at other researchers, as well as at students, industry,
and/or policy makers. Collaborative book projects are an excellent way to create a more
inclusive knowledgebase. Japanese academics especially have a large share of
publications available only in the Japanese language, and international bookpublications can bring this knowledge to a broader audience.
9. Public-private partnerships: Encouraging public-private partnerships between
academic institutions, government agencies, and/or industry stakeholders can help alignresearch and development efforts with market needs, foster innovation, and accelerate
the deployment of hydrogen technologies. Universities can also play a key role inestablishing international research consortiums with non-academic partners in both the
EU & Japan.
One major step forward in the area of academic cooperation would be if Japan were to join
Horizon Europe as an associate country. Talks towards this purpose are already underway 33.
Although even without an associated country status, there are many opportunities for academicacademic and academic-industry cooperation between the EU and Japan, both within the
Horizon Europe framework and outside of it. Experts interviewed for this report, from both
Japan and the EU, have indicated that it can be difficult to identify such opportunities.

33

Retrieved on 15-03-2023: https://research-and-innovation.ec.europa.eu/news/all-research-and-innovationnews/eu-and-japan-open-horizon-europe-association-talks-2022-05-12_en

4. Conclusion
This report investigated the potential for cooperation between the European Union (EU) andJapan in developing resilient green/low-carbon hydrogen supply chains that use electrolysers
for hydrogen production. It analyses government reports, academic journal articles, research
institute publications, and the latest policy developments, alongside interviews with policy
makers, political advisors, academic researchers, and industry professionals. The reporthighlights major areas of potential cooperation between Japan and the EU and explores
important third parties for trilateral cooperation, such as the ASEAN, Africa, the Middle East,
and Australia.
As the world moves towards decarbonisation, hydrogen is seen as a critical fuel for hard-toelectrify industries and the transport sector. The EU and Japan, as major importers of hydrogenby 2050, have a common interest in creating diversified global supply chains to ensure energy
security. The International Energy Agency (IEA) predicts that Australia, the Middle East,
North Africa, and Latin America will become major hydrogen exporters, while China and the
US will focus on domestic consumption.
The EU and Japan are expected to collaborate in hydrogen consumption industries such as
shipbuilding and steelmaking with a more relaxed approach than with strategic hydrogenproduction technology. Japan, a market leader in boat engines, can leverage its experience inhydrogen-fuelled combustion engines for the marine sector. In steelmaking, Japanesecompanies may prioritise hydrogenation in their European subsidiaries due to favourable
sustainable finance and carbon pricing mechanisms.
Research into hydrogen fuel has led to many patents, some of which have expired or will soon.
This offers opportunities for SMEs and start-ups, as seen in the additive manufacturing industry.
Both the EU and Japan have filed numerous hydrogen-related patents, and the expiration ofthese patents can serve as an impetus for new hydrogen sector start-ups.
On-shoring material processing capabilities is crucial for Japan to enhance supply chain
resilience, strengthen national security, promote economic growth, and foster innovation. Japanis likely to welcome European companies that can contribute expertise and assist in developing
its material processing capabilities. Europe's growing sustainable finance market may also playa role in this regard.
Recycling of large-scale industrial electrolyzers is still in its early stages, but there is anincreasing need for efficient recycling facilities and methods as electrolyzers' use grows andlifetimes shorten. Improving the recycling rate of platinum group metals (PGMs) recoveredfrom other industries, such as car exhaust catalytic converters, can benefit both the EU andJapan by reducing competition for primary materials.
Renewable energy is vital for green hydrogen production, and European firms can play asignificant role in increasing Japan's wind energy capacity, especially in floating offshore wind
power. Currently, wind power accounts for less than 1% of Japan's power supply. However, as
green hydrogen production grows domestically, the demand for domestic green power will also
increase.
The ASEAN region and Australia offer opportunities for the EU and Japan to cooperate onhydrogen production, transportation, and utilisation. Japan is expected to push connectivity
standards in the AZEC region to ensure its energy security and scale up its hydrogen industry.
46

Compatibility between the EU and Japan standards would be mutually beneficial, as they bothbenefit from diverse and resilient global supply chains. European firms could participate ininfrastructure development in the AZEC region, particularly in areas where the EU hastechnological superiority. Opportunities also exist in raw material mining and processing
markets, such as nickel reserves, which are crucial for alkaline electrolysers. As the EU
develops a larger internal demand for hydrogen, European firms may acquire economies ofscale benefits earlier than Japanese firms, and can increasingly capitalise on this advantage
over time. Japanese firms seeking to expand their hydrogen activities in Southeast Asia and/orAustralia might turn towards European financial markets for green hydrogen-related
investments.
Similar to the ASEAN and Australia regions, Africa and the Middle East offer opportunities
for trilateral cooperation. However, these regions will mostly focus on hydrogen exports rather
than imports and domestic use. Arab Gulf states have a strong potential for grey and/or bluehydrogen exports due to their fossil fuel reserves, while Saudi Arabia and Oman have potential
for green hydrogen as well. The Middle East is expected to export more hydrogen and ammonia
to Japan by 2030, as compared to the EU, with little hydrogen exported from Africa at thatpoint. Though by 2050 it is expected that a lot of hydrogen will be exported from north Africa
to the EU, and from the south of Africa to Japan.
North Africa's proximity to Europe allows for the possibility of an international network ofhydrogen pipelines, while the Middle East and Sub-Saharan Africa is more likely to exporthydrogen to Europe by ship. Also in these regions, good connectivity for shipping hydrogencreates more diverse global supply chains and increases resilience for both Japan and the EU.
The section on multilateral cooperation concludes with recommendations on how governments
can better facilitate cooperation between actors in Japan and the EU. These include investingin reserve ammonia import capacity to pre-empt sudden changes in the market and fosteringcollaboration on hydrogen production, transportation, and utilisation technologies.
Cooperation between the EU and Japan in the hydrogen sector is likely to focus on R&D, asboth regions aim to strengthen their energy security and economic resilience. Collaboration in
research, education, and innovation can help develop new technologies and strategies for ahydrogen-based energy system. Potential areas of academic cooperation include joint research
projects, exchange programs, joint conferences and workshops, collaborative degree programs,
sharing research infrastructure, policy and regulation research, education and training programs,
joint book writing, and public-private partnerships. A significant step forward would be Japanjoining Horizon Europe as an associate country, but even without this status, numerous
opportunities exist for cooperation within and outside the Horizon Europe framework.

4.1.

Recommendations for the EU-Japan Centre

While the EU-Japan Centre for Industrial Cooperation already has many useful facilities inplace, targeting both businesses and innovations & R&D, it might benefit from expanding its
science and technology cooperation department. Currently, the centre serves primarily as anational contact point for Horizon Europe in Japan. However, this role could be broadened toinclude other forms of inter-academic and public-private partnerships in R&D.
Joint R&D is seen as one of the most critical aspects of EU-Japan cooperation, as both regions
will heavily rely on a diverse and affordable supply of foreign-sourced hydrogen. Furthermore,other industries will also benefit from increased collaboration in R&D between the EU andJapan. Positive developments in the talks between Japan and the EU regarding Japan's potential
association with Horizon Europe may soon enhance academic cooperation between the regions.
However, even in the current situation, there appears to be a strong demand for a service thathelps match industry and academics between the EU and Japan, both within the Horizon
Europe framework as it stands and outside of the framework.

48

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Annex A
Japan has been actively engaging with various nations to strengthen its energy security andpromote the use of hydrogen as a clean energy source. This report highlights Japan's efforts
in forging international partnerships and fostering collaboration in the hydrogen sector
through various initiatives, agreements, and forums that happened during the ongoing
research period that produced this report.
Collaborations and Agreements in October 2022 – March 2023 period:
1. Signing of the comprehensive Japan-EU Memorandum of Cooperation on hydrogen.
2. Establishment of the Asian Zero Emissions Community (AZEC) with Australia and the
majority of ASEAN member states.
3. Japan and Singapore signed a Memorandum of Cooperation (MOC) to develop
upstream hydrogen and ammonia production, lowering dependence on LNG supply.
4. Japan and Australia concluded a partnership on critical raw materials, creating a criticalmineral supply chain between the two countries.
5. The Ministry of Economy, Trade, and Industry (METI) issued a Joint Media Release
for Cooperation on Energy Transition towards Carbon Neutrality with Brunei
Darussalam, including hydrogen energy, combine-cycle gas turbine, and carbon captureand storage matters.
6. METI held an online conference with Saudi Arabia's minister of energy, emphasizing
the importance of transitioning to cleaner energy systems, particularly renewable andlow carbon fuels like hydrogen and ammonia.
7. The Japan Oil, Gas and Metals National Corporation (JOGMEC) and Saudi Aramco
signed an MOC to collaborate on the production and storage of hydrogen and fuelammonia, project support, technology development, and human resource development.
8. JERA Asia and IHI signed a memorandum of understanding to jointly develop the useof ammonia in Malaysia, intending to use ammonia as a fuel mixed with other fuelsusing co-firing technology in electricity production.
9. Japan and Indonesia announced the development of the Asia Zero Emission
Community (AZEC), a cooperation framework to support the energy transition process
in the region.
10. JOGMEC and PetroVietnam signed an expanded Memorandum of Understanding(MoU) for joint business opportunities in upstream oil and gas development, as well as
cooperation in hydrogen, ammonia, and Carbon Capture & Storage projects.
11. METI co-hosted the 16th Japan-China Energy Conservation and Environment Forum,with breakout sessions on various topics, including hydrogen.
12. JOGMEC and the Government of Western Australia signed an MOU to strengthen
cooperation in energy resources, including oil, gas, hydrogen, and ammonia, as well
as Carbon Capture Storage (CCS) and Carbon Capture Utilization and Storage(CCUS).
13. Meetings with the United States, discussing energy security, clean energy cooperation,and the importance of clean energy transitions, including hydrogen and ammonia
production.
14. Cooperation with the United Arab Emirates, particularly during the Abu Dhabi
Sustainable Week 2023, focusing on renewable energy and green hydrogen production.
15. Strengthening ties with Canada in the field of energy, including cooperation onhydrogen and ammonia and clean energy initiatives such as renewable energy.
16. The Fifth Japan-Thailand Energy Policy Dialogue, which saw both countries cooperateon concrete collaborative projects and the realization of the AZEC initiative.

17. JERA's MOUs with Yara International and CF Industries for joint project development
and sales & purchase of clean ammonia.
18. Sumitomo Corporation's MOU with Chile's Colbún for green hydrogen and ammonia
production and export businesses.
19. JERA's MOU with the Philippines' Aboitiz Power Corporation for a joint study on
ammonia co-firing in the Philippines.
20. JERA's MOU with Abu Dhabi’s TAQA to establish joint projects in the area of
decarbonization.
International Conferences and Forums
1. METI organized the Tokyo GX Week, an intensive international conference on
realizing a global green transformation. Key meetings included the 5th APEC
Hydrogen Energy Ministerial Meeting and the 2nd International Conference on FuelAmmonia.
2. The 24th Japan-Germany Joint Committee Meeting on Science and Technology
Cooperation, which discussed cooperation in research fields such as hydrogentechnology.
3. The 16th Japan-China Energy Conservation and Environment Forum, which featured a
subcommittee on hydrogen.
Japan's foreign policy on hydrogen and decarbonization efforts in 2023 has beencharacterized by international cooperation, partnerships, and strategic engagements. Throughinitiatives such as AZEC and various MOUs, Japan is positioning itself as a leader in clean
energy and hydrogen technology. This focus on hydrogen and decarbonization aligns withJapan’s goal of being a leader in the global hydrogen economy.

52

EU-Japan Centre for Industrial Cooperation