Green Hydrogen: A solution for Chile's climate emergency and economic recovery

COVID-19 has plunged the world into the worst recession since World War II, and Chile is not an exception. This year’s economic growth is forecast to rebound to 4.2%, after a contraction of 6.3% in 2020 . It is expected to return to pre-pandemic levels only by the end of 2022.  How do we address the climate change emergency and rebuild better in a post-covid economic recovery context?

Chile aims to do just that in order to achieve both a sustainable economic recovery and carbon neutrality by 2050. A great ally for these goals is green hydrogen, a clean fuel generated from renewable energies such as wind and solar.

Countries such as Germany, France, Belgium, Denmark and Spain –— are already developing public and private green hydrogen projects, to replace the use of fossil fuels in transport, electricity generation, and heating. Chile is one of the first countries in Latin America that is strongly betting on hydrogen.

Chile possesses exceptional conditions for the development of a competitive green hydrogen industry due to its geographical and institutional environments , giving it the potential to become a development pole at the national and regional level.

The country has abundant solar and wind resources at very competitive prices and a proven path for developing innovative technologies in renewable energy. Furthermore, the mining industry could help to scale-up green hydrogen, making it even more competitive in the medium- and long-term. These conditions, coupled with a conducive environment for public-private partnerships and leveraging of private sector resources, are comparative advantages for the development of this industry in Chile.

Chile presented its National Green Hydrogen Strategy to provide clean fuel to the most difficult to decarbonize sectors, such as mining, construction and cargo transportation, and to be among the world's leading producers. The main goals of this Strategy are to reach 5 GW of electrolysis capacity under development by 2025, to produce the world’s cheapest green hydrogen by 2030, and position the country among the top three exporters of the green fuel by 2040.

This national policy offers a strategic opportunity for economic recovery that allows progress towards decarbonization and the creation of green jobs, building back better after COVID-19 pandemic.

Chile can replace a significant amount of its income with renewable resources, showing that decarbonization brings greater prosperity and growth to the country.  As evidenced by a World Bank’s study, led in collaboration with the Chilean Ministry of Finance and Ministry of Environment, if the country reaches its carbon neutrality goal, it can achieve an additional growth of up to 4.4% of its gross domestic product by 2050.

Multilateral collaboration

The World Bank –with support from the Spanish Fund for Latin America and the Caribbean (SFLAC) and the initiative for the development of carbon pricing instruments Partnership for Market Readiness— is supporting the Government of Chile in the implementation of various components of its National Green Hydrogen Strategy.

Through analysis and studies, this support is seeking to promote green hydrogen as a key engine for the recovery and growth of the local economy after the impacts of COVID-19, the profitable decarbonization of the economy and the development of poles of attraction in the country's regions.

This work will help lay the technical and regulatory foundations that will allow Chile to become a leader in this industry, which could create between 100,000 and 500,000 new jobs and mobilize investments of 200 billion dollars over the next 20 years.

The World Bank seeks to be a partner for Chile to support building a route towards achieving competitiveness and generate market and investors’ confidence on a profitable industry; and thus to help the country meet its climate commitments.

Close cooperation between the public and private sectors and multilateral organizations will be key to achieve an on-time industrial scale-up of green hydrogen.  This way, Chile will be able to modernize its productive identity, move towards a renewable economy, and help make a reality the longing desire to have an environmentally friendly country.