Ramping up Power-to-X production and developing a market will require massive investments from both the public and private sector. Given the current cost structures and market uncertainties, major private investment will only be undertaken if adequate public support is provided. This can take many different forms, including investment grants and loans, contracts for difference (CfDs) to bridge the price gap between supply and demand, guarantees, quotas, blending mandates and public procurement measures.
Public support mechanisms should be made conditional upon compliance with standards and safeguards ensuring that the Power-to-X projects and investments comply with basic sustainability requirements. This applies to the entire Power-to-X value chain, and all investments should be subject to environmental and social impact assessments.
Any scaling up of Power-to-X operations will have major public finance implications. In the initial phases, public expenditure will most likely exceed revenues. Funds will also be required for public procurement measures to develop markets for Power-to-X.
The Power-to-X market ramp up would also benefit from carbon pricing mechanisms, such as carbon taxes or the European Union’s Carbon Border Adjustment Mechanism (CBAM). All economic incentives and market regulations will have to rely on clearly defined and enforced sustainability criteria, standards and certification.
