Latin America: a future clean hydrogen exporter?

In the global decarbonization landscape, clean hydrogen has become a crucial element for the energy transition. Its potential to reduce greenhouse gas (GHG) emissions in hard-to-abate sectors makes it a vital component in achieving a sustainable future. “Latin America, with its abundant renewable resources, has the potential to become a key player in the global clean hydrogen economy. In addition, investment in clean hydrogen infrastructure could help address energy security concerns and drive economic growth across the region,” says Andrés Rebolledo, Executive Director of the Latin American Energy Organization (OLADE). Through targeted strategies and embracing collaboration, the region can harness its potential to produce clean hydrogen at competitive costs, driving both local decarbonization and global exports.

Latin American countries are uniquely positioned to leverage their vast renewable energy resources to produce clean hydrogen. Depending on their regional-specific characteristics and short- and medium-term clean hydrogen strategies, countries in the region may follow one of three potential pathways: net exporters, decarbonizers, and purpose-driven players.

Net exporters, such as Argentina and Chile, prioritize the production of clean hydrogen for trading it on international markets, aiming to become globally competitive through cost-effective production, robust trade infrastructure and transparent certification schemes.

Local decarbonizers, such as Brazil, Colombia and Mexico, initially prioritize the use of clean hydrogen to decarbonize their domestic economies before expanding into exports.

Focused players, such as Panama and Uruguay, adopt a targeted approach, developing clean hydrogen for specific applications, such as shipping, to complement existing fuels and technologies.

Despite its great future potential, the clean hydrogen economy in Latin America currently faces several challenges:

To address these challenges, enabling measures across six key areas have been identified. These measures, while primarily aimed at governments and policy-makers, also require the involvement of players in infrastructure, technology and finance, as well as offtakers.

Collaboration at local, regional and global levels is pivotal in accelerating the clean hydrogen economy. This can distribute required investments and risks, create market stability by aggregating regional supply and demand and accelerate technology and infrastructure R&D. Collaboration across the clean hydrogen ecosystem can help identify common challenges, share best practices and provide a platform to advocate for regional needs and support. In addition, aligning regional regulations with international standards can enable efficiencies and synergies. Pursuing an inclusive clean hydrogen economy approach by convening all relevant stakeholders, including policy-makers, industries, financial institutions, academic organizations, local communities and non-governmental organizations (NGOs) can foster a sustainable transition that benefits all players. Public acceptance is also fundamental, and it is pivotal to learn from adoption of other clean energy technologies in the region and meaningfully engage with local stakeholders as technology and infrastructure is planned and deployed.

A relevant example of regional collaboration in Latin America is CertHiLAC – a joint effort between the Inter-American Development Bank (IDB) and OLADE to create a certification system for clean hydrogen production in Latin America and the Caribbean. It was launched in November 2023, and already more than a dozen countries have signed up. Certification in general is key to promote traceability, environmental and social sustainability. CertHiLAC in particular pays close attention to responsible water management and respecting local communities and indigenous peoples.

The Accelerating the Clean Hydrogen Economy in Latin America report, developed by the World Economic Forum in collaboration with Accenture, analyzes the clean hydrogen economy development journey of selected countries, deep-dives into the ambitions and challenges in the region, and provides perspective on key enabling measures for the region. Latin America’s potential is significant and, by leveraging each country’s characteristics and ambitions, the region can collectively accelerate its journey toward becoming a key player in the global clean hydrogen future. Collaboration among companies and governments located in proximity in industrial clusters together with public and government stakeholders is critical for accelerating clean hydrogen by sharing risk and resources, developing shared infrastructure, aggregating demand, enabling economies of scale and facilitating access to funding. In light of this, the World Economic Forum’s Transitioning Industrial Clusters initiative, in collaboration with Accenture and EPRI, will continue to advance cooperation and shared vision in industrial clusters to drive economic growth, employment and the energy transition.