Government incentives play a crucial role in accelerating hydrogen adoption in hard-to-abate sectors such as steel, shipping, and aviation. These industries face unique decarbonization challenges due to their reliance on fossil fuels for high-temperature heat, long-distance propulsion, and energy-dense fuel requirements. Sector-specific policies, including financial mechanisms, regulatory frameworks, and market-based instruments, are being deployed to overcome economic and technical barriers to hydrogen integration.

The steel industry is a prime target for hydrogen incentives due to its carbon-intensive production processes. Traditional blast furnaces rely on coking coal as both a reductant and energy source, but hydrogen-based direct reduction iron (DRI) offers a pathway to near-zero emissions. The European Union’s Carbon Border Adjustment Mechanism (CBAM) is a key policy lever designed to level the playing field between domestic producers and imports by pricing embedded carbon in steel. CBAM discourages carbon leakage—where production shifts to regions with weaker climate policies—while incentivizing investment in hydrogen-based steelmaking. National strategies complement this approach. Germany’s H2Global initiative, for example, uses double-auction mechanisms to bridge the cost gap between conventional and green hydrogen, ensuring offtake agreements for steel producers transitioning to low-emission technologies. Success metrics for these policies include the share of hydrogen-based steel in total production, reductions in scope 1 emissions per ton of steel, and the scalability of DRI plants.

Shipping presents another critical sector where hydrogen and its derivatives, such as ammonia and methanol, are gaining traction as zero-emission fuels. The International Maritime Organization’s (IMO) revised greenhouse gas strategy sets increasingly stringent targets, including a 20% emissions reduction by 2030 and 70% by 2040. To meet these goals, governments are rolling out port-based incentives. Norway’s NOx Fund provides subsidies for vessels using hydrogen fuel cells, while the UK’s Clean Maritime Demonstration Competition funds pilot projects for ammonia-fueled ships. The EU’s FuelEU Maritime initiative imposes progressively stricter limits on the carbon intensity of marine fuels, effectively mandating the adoption of hydrogen-derived alternatives. However, leakage risks persist, particularly if incentives disproportionately favor incumbent fossil fuel players through loopholes or delayed compliance timelines. Metrics for success in shipping include the number of hydrogen or ammonia-fueled vessels in operation, bunkering infrastructure development, and the carbon intensity of maritime fuels consumed annually.

Aviation faces perhaps the steepest technical hurdles in adopting hydrogen due to the need for lightweight, high-energy-density solutions. Liquid hydrogen (LH2) and synthetic electrofuels (e-fuels) derived from hydrogen are the most promising pathways. The EU’s ReFuelEU Aviation proposal mandates that 2% of aviation fuel be synthetic by 2025, rising to 63% by 2050. National programs like France’s Hydrogen Plan allocate funding for hydrogen-powered aircraft development, with Airbus targeting a zero-emission commercial aircraft by 2035. The US Inflation Reduction Act includes tax credits for sustainable aviation fuel (SAF) producers, indirectly supporting hydrogen-based e-fuels. However, the risk of policy misalignment exists if incentives focus solely on drop-in biofuels rather than scalable hydrogen solutions. Success in aviation can be measured by the percentage of hydrogen-derived fuels in the aviation energy mix, the number of hydrogen-compatible airports, and R&D breakthroughs in cryogenic aircraft storage systems.

A common challenge across all three sectors is ensuring that incentives do not entrench existing inequalities or create market distortions. For instance, large steel corporations may benefit disproportionately from subsidies if eligibility criteria favor established players over smaller innovators. Similarly, shipping incentives must avoid creating regional disparities where only certain trade routes or ports benefit from hydrogen infrastructure. In aviation, the high capital costs of hydrogen-compatible aircraft could lead to a two-tier market where only wealthy airlines or nations can afford the transition. Policymakers must design mechanisms that prioritize equitable access, such as tiered subsidy structures or technology-neutral performance standards.

Quantitative benchmarks are essential for assessing policy effectiveness. In steel, a successful hydrogen transition would see at least 10% of EU production using DRI by 2030, coupled with a 30% reduction in emissions per ton. For shipping, the deployment of 200 hydrogen or ammonia-fueled vessels by 2030 would signal meaningful progress. Aviation’s trajectory should aim for 5% of fuel demand met by hydrogen-derived e-fuels by 2035. These targets must be underpinned by transparent monitoring frameworks to prevent greenwashing and ensure accountability.

The interplay between international and national policies is critical. While CBAM and IMO regulations provide top-down pressure, bottom-up initiatives like national hydrogen strategies and port-specific incentives drive localized action. The risk of fragmentation remains if regional policies diverge significantly, creating compliance burdens for multinational operators. Harmonizing standards, such as the certification of green hydrogen or ammonia, will be vital to fostering a cohesive global market.

In summary, hydrogen incentives for steel, shipping, and aviation must be carefully calibrated to address sector-specific barriers while mitigating leakage risks. Policies should combine regulatory mandates, financial support, and infrastructure investments to create a viable ecosystem for hydrogen adoption. Success hinges on measurable outcomes, equitable access, and international coordination to ensure that these hard-to-abate sectors contribute meaningfully to global decarbonization goals.