CBAM and Hydrogen: South Africa's Green Hydrogen Export Opportunity

Hydrogen is covered by CBAM, but green hydrogen has near-zero embedded carbon. South Africa's renewable energy resources position it as a potential major green hydrogen exporter to the EU.

CBAM and Hydrogen: South Africa's Green Hydrogen Export Opportunity

Hydrogen is the only CBAM-covered sector where South Africa has a potential competitive advantage rather than a liability. The reason is straightforward: green hydrogen — produced from renewable electricity — has near-zero embedded carbon, making CBAM certificates virtually free for green hydrogen exporters.

Hydrogen's Place in CBAM

Hydrogen (CN 2804.10) is covered by CBAM from January 1, 2026. The EU default embedded carbon factor depends on the production method:

| Hydrogen Type | Production Method | Embedded Carbon | CBAM Liability | |---------------|------------------|-----------------|----------------| | Grey hydrogen | Steam methane reforming (no CCS) | ~10.9 tCO₂/t | High | | Blue hydrogen | Steam methane reforming + CCS | ~2–4 tCO₂/t | Medium | | Green hydrogen | Electrolysis (renewable electricity) | ~0.3–0.5 tCO₂/t | Very low |

South Africa's Green Hydrogen Potential

South Africa has world-class renewable energy resources that position it as a potential major green hydrogen exporter:

▸Solar irradiance — The Northern Cape receives some of the highest solar irradiance in the world (>2,500 kWh/m²/year)
▸Wind resources — The Western Cape and Eastern Cape have excellent wind resources for offshore and onshore wind
▸Land availability — Vast areas of semi-arid land suitable for large-scale renewable energy development
▸Port infrastructure — Existing port infrastructure at Saldanha Bay, Coega (Port Elizabeth), and Richards Bay

Key Green Hydrogen Projects

Several large-scale green hydrogen projects are in development in South Africa:

▸Boegoebaai Green Hydrogen Hub (Northern Cape) — 3 GW electrolyser capacity, targeting green ammonia export
▸Coega IDZ Green Hydrogen (Eastern Cape) — Multiple projects targeting EU export markets
▸HySA (Hydrogen South Africa) — Government-backed research and development programme
▸Sasol's Green Hydrogen Programme — Transitioning existing ammonia production to green hydrogen

The CBAM Advantage for SA Green Hydrogen

Under CBAM, a green hydrogen exporter with 0.4 tCO₂/tonne embedded carbon faces a CBAM liability of:

0.4 tCO₂/t × EUR 65.42/tCO₂ = EUR 26.17/tonne

Compared to grey hydrogen at 10.9 tCO₂/tonne:

10.9 tCO₂/t × EUR 65.42/tCO₂ = EUR 713.08/tonne

This EUR 687/tonne CBAM advantage makes SA green hydrogen highly competitive in EU markets, particularly as EU ETS prices are expected to rise to EUR 100–150/tCO₂ by 2030.

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Frequently Asked Questions

Is hydrogen covered by CBAM?

Yes. Hydrogen (CN 2804.10) is one of the six sectors covered by CBAM from January 1, 2026. The EU default embedded carbon factor for hydrogen is 10.9 tCO₂/tonne for grey hydrogen (produced from natural gas) and near-zero for green hydrogen.

What is the difference between grey, blue, and green hydrogen for CBAM?

Grey hydrogen (from fossil fuels, no carbon capture) has high embedded carbon (~10.9 tCO₂/tonne). Blue hydrogen (from fossil fuels with carbon capture) has lower embedded carbon (~2–4 tCO₂/tonne). Green hydrogen (from renewable electricity electrolysis) has near-zero embedded carbon and minimal CBAM liability.

Why is South Africa positioned as a green hydrogen exporter?

South Africa has world-class solar and wind resources, particularly in the Northern Cape and Western Cape. The Hydrogen Society Roadmap identifies green hydrogen and green ammonia as key export opportunities, with the EU as a primary target market.

What CBAM advantage does green hydrogen have?

Green hydrogen has near-zero embedded carbon, meaning CBAM certificates cost virtually nothing. This is a significant competitive advantage over grey hydrogen from fossil fuel-dependent producers, and positions SA green hydrogen as highly competitive in EU markets.

When will SA green hydrogen exports to the EU begin?

The first commercial-scale SA green hydrogen projects are expected to begin production in 2026–2028. Projects include the Boegoebaai Green Hydrogen Hub (Northern Cape) and several Coega IDZ projects in the Eastern Cape.

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