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Achieving Sustainable EU-LAC Hydrogen Cooperation: Balancing Economy and Ecology


Sep 18, 2023

Since the EU Hydrogen Strategy was published in July 2020, hydrogen has become a prominent topic in European discussions surrounding decarbonisation, infrastructure development, industrial policy, and energy security. The EU aims to not only be a producer and importer of hydrogen but also a global leader in hydrogen regulation and technology development. Furthermore, in light of Russia’s invasion of Ukraine and the update of renewable hydrogen targets by REPowerEU, hydrogen development has been recognized as a central aspect of the Net Zero Industry Act. The EU has created a pan-European hydrogen diplomacy focused on aspects such as imports, technological positioning, and investments, with the goal of promoting global decarbonisation, increasing the competitiveness of European industry, and strengthening the continent’s energy security during times of crisis.

The development of renewable hydrogen is still in its early stages in both Europe and Latin America, but there are positive synergies between the potential and needs of both regions. However, progress in Latin America has been slower and more uneven. Countries in the region are primarily focusing on the early adoption of solar and wind energy, as well as ensuring affordable energy access in complex economic conditions. Chile is leading the way in renewable hydrogen development in Latin America, followed by the Southern Cone and Colombia. The high expectations generated by these initiatives have attracted significant political and business attention over the past two years. However, the renewable hydrogen sector has struggled to integrate large-scale projects due to a lack of local off-takers.

To support the development of the renewable hydrogen industry in Latin American and Caribbean (LAC) countries, the EU plans to invest in production and local consumption of renewable hydrogen, assist in designing public policies and regulations, and potentially become a consumer of renewable hydrogen-derived products. The focus should be on developing hydrogen-related industries such as fertilizers, steel, refining, and petrochemicals to promote exports and compensate for renewable energy shortages in certain EU member states.

To enhance cooperation between the EU and LAC countries in hydrogen development, the EU has introduced two new channels: the Global Gateway and the LAC-Global Green Bond Initiative. These instruments have the potential for significant impact but need further refinement and improvement to achieve their ambitious goals. The European Commission has presented the Global Gateway Investment Agenda on Latin America and the Caribbean to provide a strategic vision for European investments aligned with cooperation and development efforts. The Global Gateway is expected to become a central instrument for coordinating EU-LAC hydrogen cooperation. However, there is a need to strengthen governance mechanisms, demonstrate the impact of projects on beneficiary countries’ development, increase local stakeholder ownership, and improve communication and trust.

It is crucial to present renewable hydrogen as an energy vector with opportunities and limitations, avoiding narratives that may be perceived as neocolonial. The Global Gateway should avoid financing export-led hydrogen production projects in the LAC region that hinder access to decarbonized energy or lead to cannibalization. The Global Green Bond Initiative in Latin America and the Caribbean is another essential tool for mobilizing capital to finance the region’s emerging hydrogen economy and facilitating European investments. The EU’s experience in defining comparable parameters, establishing effective monitoring mechanisms, and providing transparency for investors can contribute to the development of capital markets oriented towards the region’s energy transition.

Projects funded by hydrogen should prioritize regional decarbonization and focus on reducing emissions from industrial activities subject to the EU’s new carbon tariff, the Carbon Border Adjustment Mechanism (CBAM), which will be implemented from 2026. Latin America has the potential to benefit from the reconfiguration of trade flows through decarbonization and the process of deglobalization. The EU should aim to develop new low-carbon industrial value chains in LAC countries and integrate downstream products through trade with the EU. Cooperation should prioritize industrial domestic consumption, which is more socially, economically, and environmentally sustainable than solely exporting hydrogen molecules.

To ensure the sustainability of the EU’s hydrogen diplomacy, it is crucial to incorporate and listen to the demands of Latin American actors. This will contribute to the environmental and social sustainability of hydrogen development within the framework of the European Green Deal, energy transition, and sustainable development in Latin America. Managing expectations in a rational manner and presenting renewable hydrogen as an energy vector with its opportunities and limitations is essential. The EU and Latin America have complementary hydrogen profiles that can foster strategic proximity between the two regions, but this cooperation must consider a broader context and the needs of all stakeholders.

By Editor

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