BLOG | Building a Global Hydrogen Economy: The Role of Emerging Markets

By Dolf Gielen, Senior Energy Economist, ESMAP and Hiroaki Machii Senior Program Officer, World Bank Energy and Extractives Global Practice (on secondment from Government of Japan’s Ministry of Economy, Trade and Industry in 2025)

For emerging markets and developing countries (EMDCs), hydrogen produced from renewable energy and other low- or zero-emission sources represents a transformative opportunity. Beyond decarbonizing hard-to-abate sectors, renewable hydrogen can strengthen energy security, generate export revenues and create jobs in an industry of the future. 

Many EMDCs possess competitive advantages that position them as future leaders in hydrogen production. Abundant renewable resources – solar, wind and hydropower – combine with fast-growing industrial bases and competitive production costs to create ideal conditions for producing affordable, renewable hydrogen and derivatives at scale.

The Strategic Synergy: EMDC Supply and Global Demand
For EMDCs, strategics partnerships with demand-side hydrogen-importing countries offers multiple benefits. Nations including India, Chile, Colombia, Egypt, Namibia, South Africa, and Morocco are already advancing projects with strong export potential. Exporting green hydrogen and derivatives, including ammonia and green steel, can generate new revenue streams, create high-quality jobs, and attract foreign investment.

Japan exemplifies this strategic synergy. The country has emerged as a critical demand-side market with clear cost and deployment targets. Japan is investing heavily in enabling policies to accelerate clean hydrogen uptake and diversify supply chains, creating a strong pull for bankable exports from EMDCs.  Japan’s technical expertise, financing instruments, and policy leadership can help fast-track these efforts as a strategic partner to these nations.

These ambitions reflect a broader recognition that international collaboration is essential for enhancing energy security through supply diversification.

Emerging Markets’ Competitive Advantages
The world’s most affordable clean hydrogen projects are expected to emerge in developing countries, where abundant renewable resources can power electrolysis at costs that may be difficult to achieve in resource-constrained markets. Countries across Latin America, Africa, the Middle East, and Asia are already advancing hydrogen projects with strong export potential.

This cost advantage is critical for market development. As a growing producer and importer of hydrogen, Japan aims to reduce hydrogen costs from 100 to 30 yen/Nm³ by 2030. Many EMDC projects are targeting even lower production costs, making their exports increasingly competitive. In October 2025, Japan approved its first two projects under a US $20 billion hydrogen Contracts for Difference (CfD) scheme. This model helps provide price certainty for investors and creates a stable demand signal to de-risk early investment._LB1

Beyond Molecules: Moving Up the Value Chains
Rather than simply exporting hydrogen as a commodity, EMDCs have opportunities to capture substantially greater value – and create more jobs – by developing hydrogen-based industries domestically.

Direct Reduced Iron (DRI) production using hydrogen instead of coal presents a major opportunity. Countries like Brazil and South Africa, with substantial iron ore reserves and renewable energy potential, could become major exporters of green DRI to Japan's steel industry, one of its largest emitters. This approach creates more domestic jobs and captures higher margins than raw hydrogen exports. DRI supply chains are often complex. For example, Toyota manufactures cars in South Africa using steel produced from hydrogen-based DRI imported from Namibia.

Similarly, green ammonia production for fertilizers, power generation, and transport fuels offers opportunities to develop integrated value chains. With global ammonia demand projected to triple from approximately 200 million tons in 2020 to more than 600 million tons by 2050, EMDCs can position themselves not just as producers but as processors and manufacturers.

Overcoming the Finance Gap
Access to affordable financing remains the biggest hurdle for EMDC projects, where perceived country risks elevate the cost of capital, stalling projects. 

Blended finance approaches combining concessional finance, early-stage equity, and commercial debt can reduce capital costs and improve project economics. Instruments such as partial risk guarantees and liquidity support facilities, offered by the World Bank Group, export credit agencies, and development finance institutions, can bridge the gap between project potential and Financial Investment Decision (FID).

Building Projects on Strong Foundations
One of the key challenges facing the hydrogen sector globally is the need to stimulate demand and develop enabling regulatory frameworks. 

To attract long-term international investment, our hydrogen projects must align with international environmental and social standards, including the IFC Performance Standards and the World Bank Environmental and Social Framework (ESF). Securing a Social License to Operate (SLO) through meaningful community engagement and benefit-sharing arrangements is not merely a compliance exercise, it's essential for project sustainability and success.

Development finance institutions can play a crucial role in supporting capacity building and technical assistance helping developers meet these standards while ensuring projects deliver tangible local benefits including job creation, skills development, and infrastructure improvements.

Flexibility in Supply Chain Development
The hydrogen market is evolving, and multiple hydrogen carriers – including liquid hydrogen, liquid ammonia, and liquid organic hydrogen carriers (LOHCs) – are being explored globally. For EMDCs, this uncertainty creates both challenges and opportunities.

By maintaining flexibility in carrier selection and infrastructure development, EMDCs can adapt to market signals and avoid locking into technologies that may not achieve commercial scale. 

Ammonia's versatility as a feedstock, fuel, and hydrogen carrier makes it particularly attractive for early-stage projects. Real-world examples demonstrate the viability of this approach: JERA's Blue Point plant in Louisiana, USA, developed in partnership with CF Industries and Mitsui, is set to produce 1.4 million tons of low-carbon ammonia annually using carbon capture and storage (CCS) technology. Expected to begin commercial operations in 2029, the project serves as a test case for the commercial structures and partnership models that could be replicated around the world.

Turning Potential into Progress through Collaboration
Scaling hydrogen deployment in EMDCs will require coordinated action by governments, financiers, and the private sector—backed by credible standards and effective de‑risking tools.

The fourth Hydrogen for Development (H4D) Partners’ Meeting in Tokyo marked an important milestone for emerging markets, underscoring the benefits of global collaboration in building this emerging industry. Representatives from over 14 countries—including India, Chile, Colombia, Egypt, Namibia, South Africa, and Morocco—joined hydrogen experts and officials to shape the industry’s future trajectory.

Co-organized by the World Bank Group’s Energy Sector Management Assistance Program (ESMAP), the Clean Fuel Ammonia Association (CFAA), Japan Bank for International Cooperation (JBIC), Japan Hydrogen Association (JH2A), and The Japan Gas Association, the platform demonstrated growing recognition that EMDCs are not merely suppliers but strategic partners in building a sustainable and inclusive global hydrogen economy.

Conclusion: EMDCs as Strategic Leaders
EMDCs are positioned to lead the next wave of the hydrogen economy—not just as suppliers of molecules, but as strategic partners producing value-added materials and fuels with substantial domestic benefits.

Realizing this potential requires coordinated action among international finance institutions, governments, and the private sector.  Multilateral platforms like H4D and the 10GW Lighthouse Initiative are ready to play a vital role to harmonize standards, mobilize resources, and accelerate project development.

With the right partnerships, financing structures, and policy frameworks in place, EMDCs can transform their natural advantages into lasting economic prosperity while contributing to global decarbonization goals.

For more insights, download the H4D fourth partners meeting in Japan outcomes paper here: https://www.esmap.org/H4D_Partners_Meetings