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Will hydrogen be competitive in Europe without tax favours?

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  • Hansen, Anders Chr.

Abstract

Hydrogen is one of the alternative transport fuels expected to replace conventional oil based fuels. The paper finds that it is possible for non-fossil-based hydrogen to become the lowest cost fuel without favourable tax treatment. The order of per kilometre cost depends on performance in hydrogen production, the international oil price, and fuel taxes. At low oil prices, the highest per kilometre costs were found for non-fossil power-based hydrogen, the second highest for natural gas-based hydrogen, and the lowest for conventional fuels. At high oil prices, this ranking is reversed and non-fossil power-based hydrogen becomes the most cost competitive fuel. General fuel taxes lower the threshold at which the international oil price reverses this competitiveness order. The highest fuel tax rates applied in Europe lowers this threshold oil price considerably, whereas the lowest fuel taxes may be insufficient to make hydrogen competitive without tax favours. Alternative adjustments of the EU minimum fuel tax rates with a view to energy efficiency and CO2-emissions are discussed.

Suggested Citation

  • Hansen, Anders Chr., 2010. "Will hydrogen be competitive in Europe without tax favours?," Energy Policy, Elsevier, vol. 38(10), pages 5346-5358, October.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:10:p:5346-5358
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    1. Anders Chr. Hansen, 2010. "The Contributions of the Hydrogen Transition to the Goals of the EU Energy and Climate Policy," Chapters, in: François Lévêque & Jean-Michel Glachant & Julián Barquín & Christian von Hirschhausen & Franziska Ho (ed.), Security of Energy Supply in Europe, chapter 12, Edward Elgar Publishing.

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    Keywords

    Hydrogen Competitiveness Fuel taxes;

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