The Emerging International Trade in Hydrogen and the Role of Environmental, Innovation, and Trade Policies

46 Pages Posted: 12 Apr 2023

See all articles by Werner Antweiler

Werner Antweiler

University of British Columbia (UBC) - Sauder School of Business

David Schlund

University of Cologne

Date Written: April 12, 2023

Abstract

Hydrogen produced from renewable energy and other carbon-neutral sources has the potential of becoming an important medium for storing and transporting energy, partially taking on the role that fossil fuels play to date. We develop a novel theoretical and empirical model of sequential trade based on long-term contracts with one or more fixed-capacity projects entering each period in a modified Nash-Cournot competition. We simulate the emerging international trade in hydrogen using calibrated demand, supply, transportation, and policy data, exploring a set of scenarios to determine which factors have significant influence—in particular environmental, innovation, and trade policies. Our findings suggest that hydrogen trade exhibits significant price dispersion and two way trade as vintages of contracts overlap in a market defined by endogenous innovation and policy interventions. Trade costs and the mode of transportation (pipelines or ammonia conversion) play a pivotal role and influence the relative share of hydrogen production types (green, blue, or turquoise). Trade policies emerge as a more essential determinant of hydrogen trade than carbon and innovation policies.

Keywords: international trade, hydrogen economics, long-term contracts, carbon policy, endogenous innovation, sequential markets, computational economics

Suggested Citation

Antweiler, Werner and Schlund, David, The Emerging International Trade in Hydrogen and the Role of Environmental, Innovation, and Trade Policies (April 12, 2023). USAEE Working Paper No. 23-589, Available at SSRN: https://ssrn.com/abstract=4417163 or http://dx.doi.org/10.2139/ssrn.4417163

Werner Antweiler (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

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David Schlund

University of Cologne

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