Demystifying decarbonisation: Green and blue hydrogen
The energy transition and drive to net zero affects every person and every business. Our cross-practice international team of lawyers at Stephenson Harwood can help you both navigate through these challenges and help your business make the most of the opportunities no matter where you are on your journey.
Part of the journey is understanding the constantly evolving jargon that often surrounds the topic of climate change and energy transition. Our demystifying decarbonisation series breaks down the key terms, policies, regulations and drivers that businesses need to know.
Hydrogen as a fuel
Hydrogen is a hot topic in the journey to net zero. In its recent Clean Energy Industries Sector Plan, the UK government championed hydrogen as a resilient, low-carbon energy source that will be vital in decarbonising industrial sectors and heavy transport, which are notoriously hard to electrify. To build its hydrogen economy and supply chain, the UK has launched several government-backed funding initiatives, including the Net Zero Hydrogen Fund and the Hydrogen Allocation Rounds.
When hydrogen is burned as a fuel to generate heat and electricity, its only by-product is water. This makes it a potentially cleaner alternative to carbon-emitting fossil fuels for a wide range of applications, including in cars, buses, houses, and notably in industrial processes, such as refining, glass production, chemical manufacturing and ceramics.
Hydrogen is often described using a colour spectrum, indicating how it was produced. Green and blue are two of the most frequently discussed colours in the context of low-carbon hydrogen, but what do these terms actually mean, and what are the key differences between green and blue hydrogen?
This article provides a high-level overview of green and blue hydrogen, outlining their key differences and the current challenges in developing the hydrogen industry more generally. For a more in-depth look at recent hydrogen developments in the UK, see our briefing here. For further information about Stephenson Harwood's renewables and hydrogen expertise, and links to additional insights, see here.
Green hydrogen
Green hydrogen is produced through a process of electrolysis that utilises renewable energy sources, such as wind or solar power. These renewable energy sources create the electricity used to electrolyse water, i.e., split it into its components of hydrogen and oxygen. Green hydrogen can also be produced using biogas, by using renewable energy to power a steam reforming process that separates hydrogen from methane.
Green hydrogen is considered the cleanest (i.e. lowest emission) form of hydrogen production. If the electricity used to produce the hydrogen is renewable, then the entire process is virtually emissions-free.
On a large scale, green hydrogen production could therefore complement the growth of other renewable energy sources, cutting emissions across even more sectors. However, currently hardly any hydrogen is produced in this way, and demand is still principally met by hydrogen produced from unabated fossil fuels.
Blue hydrogen
Hydrogen is considered blue whenever the carbon emitted during its production is captured, transported and then stored underground in a process known as carbon capture and storage (CCS). This makes blue hydrogen low carbon, rather than emissions-free. CCS is an emerging technology itself, which requires storage capacity and, ideally, a success rate of 95% or more of carbon captured in each case (although current reported capture rates from existing CCS systems are generally lower than this).
Blue hydrogen can come from any origin, but is most commonly produced from natural gas using a process called steam methane reforming. This involves mixing natural gas with very hot steam, which produces a chemical reaction creating hydrogen and carbon dioxide.
Grey hydrogen is produced using this same method, but the carbon dioxide is not captured and is instead released into the atmosphere – making it a very carbon intensive method of production.
Key differences
The primary difference between green and blue hydrogen is the method of production. The key input into green hydrogen is electricity from a renewable energy source, whereas blue hydrogen requires the key step of CCS to capture the carbon emissions from production.
This means green and blue hydrogen have varying levels of emissions. As green hydrogen is produced using electricity from energy sources which are already clean, the process doesn’t produce further unwanted by-products. As blue hydrogen requires the additional CCS step in order to capture the carbon emitted during production, it is considered to be low carbon rather than entirely “clean”.
Green and blue hydrogen are also strategically quite different methods of hydrogen production. Blue hydrogen is produced mainly using natural gas, meaning it is dependent on the extraction of such gas from the earth. This in itself is limited by both location and quantity of supply. Green hydrogen on the other hand can be produced using electricity from renewable energy sources wherever they are located. The amount of available renewable energy infrastructure is for now a limiting factor, but should increase (and reduce in cost) over time as such infrastructure continues to develop.
Current challenges
The biggest challenge we face is harnessing hydrogen on a scale large enough to use it as a fuel. In order to increase hydrogen's presence in the energy mix and reduce fossil fuel use, the world needs to be capable of producing significant quantities of hydrogen. Large-scale hydrogen production requires large-scale infrastructure for transportation, storage and distribution.
Cost is a significant issue in this. According to the International Energy Agency's Global Hydrogen Review 2024, producing low emissions hydrogen – especially using electrolysis powered by renewable energy – remains significantly more expensive than making hydrogen from fossil fuels without carbon capture. High costs for renewable electricity, electrolyser equipment and project financing all contribute to this price gap.
Finally, from a technical perspective, hydrogen is difficult to move and store due to its low volumetric energy density. It is also extremely flammable, meaning it must be handled with care. Safety must be a key consideration in the development of hydrogen infrastructure, which comes with the added pressure of gaining public trust in a relatively new market.
Having said this, the outlook for developing the hydrogen market looks promising, largely due to strong government support. In the Autumn Budget 2024, the government pledged over £2bn in revenue support to 11 projects from its first Hydrogen Allocation Round (HAR1), totalling 124 MW of production capacity. The second round of funding (HAR2) is underway, with projects shortlisted in April 2025. Third and fourth funding rounds have already been confirmed and are expected to launch in 2026 and 2028 respectively. By 2030, it is projected that up to 2.5GW of green hydrogen projects will benefit from UK government funding.
Many hydrogen developers are already making positive progress with their projects, including Stephenson Harwood client Protium Green Solutions, which began construction of its second green hydrogen production facility in South Wales in early November 2025. Read more here.
Our energy transition team
At Stephenson Harwood, we have market-leading expertise in three sectors that will be the key pillars in the energy transition:
- energy,
- transportation and trade, and
- the built and natural environment.
Our energy transition team is international, with specialists spread across eight offices in Europe, Asia and the Middle East. When coupled with our strategic relationships with other key independent law firms, this means we can support our clients wherever their business interests are based.
Authored by Georgina Shenton, Associate.
