From ambition to price: How much are firms really willing to pay for clean hydrogen?

Clean hydrogen is attracting growing attention as a way to decarbonize industry. Many emerging markets appear to have favorable conditions for producing it cheaply, especially where renewable resources are strong and imported fossil fuels or fertilizers are costly. Several governments are increasingly framing green hydrogen and ammonia as part of their energy security and food security strategies. But one basic question still sits at the center of the policy debate: when will firms actually find it worth buying?

We research this question in a new paper. Instead of asking only how cheaply hydrogen can be produced, we ask what industrial users would be willing to pay for it under real market conditions. That shift in perspective matters. Much of today’s hydrogen discussion is still framed from the supply side: electrolyzer costs, production subsidies, and technology roadmaps. But even if hydrogen becomes cheaper to make, adoption will remain slow unless firms can use it profitably in the markets where they compete. By focusing on willingness to pay, the paper helps fill an important gap in the evidence base for industrial decarbonization policy.

The paper develops a practical three-step framework to estimate willingness to pay for emerging technologies using market information that is available before large-scale adoption happens.

1. It links prices, production, and consumption to fossil fuel input costs.
   
   
2. It estimates the relevant market parameters using industry data.
   
   
3. It models what happens when a producer using hydrogen enters the market, and works out the hydrogen price at which that producer could still compete.

The framework is applied to ammonia, but its broader value is methodological: it offers a way to think about when low-carbon technologies become commercially viable in real industries, not just in technical simulations.

Several findings stand out

Willingness to pay for hydrogen differs widely across countries and regions. There is no single global benchmark that works everywhere. Firms operating in markets with high fossil fuel costs, tighter carbon constraints, or greater dependence on imports are more likely to value hydrogen highly. Firms with access to cheap natural gas are much less likely to switch, even if hydrogen technologies continue to improve. That cross-country variation is not a detail; it is one of the paper’s core messages. Hydrogen adoption is likely to be uneven and shaped by local market conditions.

The paper identifies a fairly clear threshold for wider uptake. Across markets, large-scale adoption requires hydrogen prices to fall to around $2–$3 per kilogram. Above that range, adoption remains limited and concentrated in specific places. At about $3/kg, for example, Europe could support around 200,000 tons of hydrogen-based ammonia production annually, while North America could support roughly 50,000 tons. In regions where natural gas remains abundant and cheap, uptake would be far smaller. These results line up closely with the price ranges already cited in many hydrogen strategies.

Fossil fuel prices appear to matter more than carbon pricing in driving hydrogen uptake. The paper’s simulations show that a 50 percent increase in natural gas prices shifts willingness to pay upward much more than plausible increases in carbon prices. Even in Europe, where carbon policy is comparatively advanced, carbon pricing by itself appears to have a more modest effect than movements in fossil fuel costs. Border adjustment mechanisms can help, but they do not change the broader picture: hydrogen competitiveness still depends heavily on energy market conditions.

The paper also shows why market structure deserves more attention in hydrogen policy debates. In more concentrated industries, firms may have greater room to sustain markups and absorb the costs of adopting new technology. In more competitive markets, that room is much narrower. The same hydrogen price, in other words, may be viable in one market and unrealistic in another - not because technology changes, but because the economics of competition do. That is an important reminder that industrial decarbonization is shaped not only by engineering and policy targets, but also by how firms compete and how prices are formed.

For development policy, the broader implication is straightforward. Clean hydrogen is unlikely to scale everywhere at the same pace. Early adoption is more likely in places where fossil-based production is already under pressure and where market conditions give low-carbon alternatives room to compete. Broader deployment will depend on further cost reductions, learning-by-doing, and policy frameworks that can help close the competitiveness gap.

That is what makes this paper useful beyond the hydrogen debate itself. It offers a disciplined way to assess when firms are likely to adopt an emerging technology - and when they are not. For policymakers trying to move from ambition to implementation, that is a valuable contribution. It shifts the conversation from abstract potential to commercial reality, and from broad optimism to the more practical question that ultimately determines adoption: how much will firms be willing to pay for clean hydrogen?