Issue Breaking the clean hydrogen vicious circle through strategic market intervention

Summary

Policy foundations for a clean hydrogen industry exist, as an amendment to the Hydrogen Economy Act created a legal basis for mandating clean hydrogen use. Korea offers indirect help such as R&D tax credits but lacks the direct production support found in US IRA tax credits, EU Hydrogen Bank subsidies or Japan's contracts for difference. High production costs make demand hard to create, and uncertain demand in turn holds back producers' investment in a persistent vicious circle. The report calls for strategic government intervention to form an early market, including initial investment in hydrogen and ammonia terminals, storage tanks, pipelines and cracking facilities. It also proposes gradually replacing the grey hydrogen of the refining and petrochemical sectors, about 2.01 million tonnes a year, with clean hydrogen to secure a stable demand base.