China ponders subsidies, cheaper technology for its hydrogen roadmap

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Singapore — From considering subsidies on fuel cell vehicles to finding ways to encourage consumption in new sectors, China is pushing ahead with plans to make hydrogen a key component in its energy mix as Asia’s leading energy consumer looks to shed its dependence on fossil fuel imports as well as clean up its skies.

With the country focusing on adoption of hydrogen fuel cell vehicles in a small number of pilot cities, a policy which helped kick-start the widespread use of electric vehicles, analysts said Beijing needs to urgently push cost-effective technologies to effectively produce hydrogen from coal, which is available in plenty in the country.

“China is taking a fast-track route in pursuing hydrogen and fuel cell development. The country is currently focusing mainly on the use of hydrogen in transportation but it has eyes on other applications too, such as heating of buildings,” Edgare Kerkwijk, board member of the Asia Pacific Hydrogen Association, told S&P Global Platts.

The views echoed comments from Roman Kramarchuk, Platts head of Scenarios, Policy and Technology Analytics, who recently said the transportation sector provides ones of the best opportunities in countries, such as South Korea, China and Japan.

Industry sources and analysts said development of reliable and durable carbon capture technology remains at the forefront of hydrogen production in China through coal gasification.

“In countries like China, Carbon Capture, Use and Storage (CCUS) technologies will need to be used if hydrogen from coal is to have a place in the era of energy transition while taking care of the climate change emergency,” said Ravinder Malhotra, regional hydrogen expert and president of the Hydrogen Association of India.

However, CO2 emissions in hydrogen production from coal amounts to 19 mt of CO2 per every 1 mt of hydrogen produced, which is twice the amount of CO2 produced compared with hydrogen produced from natural gas.

“The current CCUS technologies may enable reduction of CO2 emissions to as low as 2 kg of carbon dioxide per kg of hydrogen produced while advanced technologies when developed and deployed may emit only 0.4 kg of CO2 per kg of hydrogen produced,” Malhotra added.


China is the world’s largest hydrogen producer, with more than 20 million mt of the gas produced each year, accounting for about one-third of the world’s production volumes. This means, by comparison, China’s hydrogen supply is about three times that of the entire Europe, the latter at around 7 million mt/year.

Despite heavy reliance on LNG and thermal coal as mainstream supply fuels, China has started to place some emphasis toward cleaner and lower-emission forms of energy.

China is leading the world in coal gasification technology, being a prime builder and operator of this production pathway, said an Australia-based source, adding:

“Producing hydrogen with sub-bituminous coal is off-the-shelf technology today. China also has the syngas clean-up technologies needed for hydrogen production.”

Production costs for hydrogen using mature coal gasification technology remains much lower than that via electrolysis, said analysts.

China is the largest coal producer in the world, with 3.75 billion mt of coal produced in 2019, mainly in the Shanxi, Shaanxi and Inner Mongolia regions. The country is also the largest coal importer, with inflows of about 220 million mt of coal every year.

Considering costs involved and an abundant supply, the coal gasification production pathway is one of the key mainstream hydrogen production method for China’s energy future, said analysts.


Deciding who the offtakers of hydrogen are and how to transport the gas are crucial factors to consider too, added the Australia-based source.

However, he said carbon capture technologies in China have yet to achieve scale. “It’s pertinent to deal with the carbon dioxide emitted from coal gasification. There are a couple of small scale carbon capture projects in progress in China but nothing at scale so far.”

Like most other Asian countries, China’s challenge is not only how to slash the production cost of lower CO2 projects and draw in investors, but also finding ways to diversify usage beyond oil refining, fertilizers and petrochemicals, said analysts.

On the policy side, China’s position on fuel cell vehicle subsidy is gradually becoming clearer, with recent government draft policies and consultation documents giving insights to Beijing’s thinking around how to develop the sector.

A Draft Development Plan for the New Energy Vehicle Industry 2021-2035 was realized at the end of last year. It places a focus on the development of hydrogen vehicle technology and the construction of hydrogen fuel infrastructure and storage.

Building on this, a recent consultation announcement said the government would focus on subsidies for fuel cell vehicles in select cities and regions, with the intention of establishing a hydrogen energy and fuel cell vehicle industry value chain. Together, these documents suggest that achieving breakthroughs in the development of core technologies and a wider adoption of hydrogen vehicles will be at the core of China’s ambitions to develop its hydrogen sector.

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