Policy-driven pathways to cost-competitive green hydrogen: an LCOH-based simulation

This study comparatively analyzes the effects of carbon pricing and incentive policies on the economic feasibility, quantified using the levelized cost of hydrogen (LCOH) of green hydrogen investments. A MATLAB-based simulation model was developed using a dataset based on 2025 projections for six countries/regions (the US, the EU, China, Japan/South Korea, Russia, and Türkiye). Model outputs show that carbon pricing alone is insufficient to increase the competitiveness of green hydrogen; however, when combined with production and investment incentives, it leads to a significant reduction in LCOH. The production incentive of up to USD 3/kg provided under the U.S. Inflation Reduction Act (IRA) stands out as the most effective policy tool for accelerating investments by reducing LCOH to USD 2/kg. In contrast, the EU’s high carbon pricing mechanism increases gray hydrogen costs but does not directly reduce costs. Scenarios conducted for Türkiye indicate that a combination of a USD 1/kg production incentive and a USD 25–30/tCO2 carbon price could reduce LCOH from USD 5–6/kg to USD 2.5–3/kg. The study emphasizes that the future of the green hydrogen economy will be shaped not only by technological progress but also by predictable and integrated policy design.