Acute trade disputes can be resolved if the US and the EU make concessions on hydrogen. Washington’s IRA includes subsidies that could reduce the cost of a sustainably produced green version of the element by 2030. being able to negotiate better access to America’s supply chain while attractively managing its future import needs could help defuse the wider transatlantic dispute.

EU leaders. on Friday they promised to take action, but that does not mean they are any closer to a strong IRA response. Either way, both the United States and the EU want to start producing green hydrogen domestically, cut future emissions, and prevent China from dominating an increasingly important global market like solar panels. Currently, 99% of the nearly 100 million tons of commercial hydrogen production per year comes from obsolete fossil fuel energy sources. By 2030, the International Energy Agency predicts more than 175 million tons of global production, of which 35% is green hydrogen. It uses zero-carbon renewable electricity to separate water through electrolysis, producing the same element but without harmful emissions.

Both Europe and the United States understand the role that green hydrogen can play in challenging areas such as heavy industry and steelmaking. That’s why Europe has made it the centerpiece of a new series of “big projects” grants. But Europe needs to reimport the same amount as the 10 million tons it intends to produce domestically by 2030. This opens the door to a deal: if the United States helps EU manufacturers bring a wider range of parts and equipment into the supply chain, then Europe could reciprocate by providing a ready market for finished products. Europe needs a solution to prevent its big companies from moving factories and capital across the Atlantic to take full advantage of America. The future market for electrolysis devices and other environmentally friendly tools will be huge given the expected demand.