China's National Development and Reform Commission announced a target to produce up to 200,000 tonnes per year of carbon-free green hydrogen by 2025 while envisioning a more widespread industry over the longer term

China's top economic planner on Wednesday announced a target to produce up to 200,000 tonnes per year of carbon-free green hydrogen by 2025 while envisioning a more widespread industry over the longer term.

China aims to produce 100,000 to 200,000 tonnes of green hydrogen a year and have about 50,000 hydrogen-fuelled vehicles by 2025, the National Development and Reform Commission (NDRC) said in a statement.

The world's largest emitter of greenhouse gases, China has been striving to balance energy security and its climate change goals, and is looking to hydrogen to help reduce carbon emissions from transportation and industry.

Green hydrogen is produced by breaking down water using electrolysis powered by renewable energy sources.

Producing hydrogen using natural gas or coal releases carbon emissions while using renewables such as solar and wind power does not."Development of hydrogen is an important move for energy transition and a great support for China's carbon peak and carbon neutrality goals," said Wang Xiang, the deputy director of the High Technology Department at the NDRC, at a media briefing.

China currently produces 33 million tonnes of hydrogen a year, about 80% of it generated using coal and natural gas, and the rest mainly a by-product from industrial sectors, according to the government.The official data did not disclose China's green hydrogen output.

Chinese Clean Power Policy & Market Insights (Energy Iceberg), a consultancy, estimates the country's current green hydrogen production stands at just under 27,000 tonnes per annum.

The NDRC's Wang said that even though most of China's hydrogen is produced from fossil fuels, the potential of green hydrogen is huge since the country has the world's largest renewable power capacity.

"Many in the hydrogen industry seem to agree that the green hydrogen production target is slightly conservative," said Yuki Yu, founder of Energy Iceberg, but added that the plan sends a positive signal to the market and outlined the commercial potential of green hydrogen.

The NDRC statement said that China aims to establish a comprehensive hydrogen industry spanning transportation, energy storage and industrial sectors and "significantly improve" the portion of green hydrogen in China's energy consumption by 2035.

The China Hydrogen Alliance has estimated China's hydrogen demand will reach 35 million tonnes per year by 2030, from 20 million tonnes now, and reach 60 million tonnes by 2050.

Hydrogen can be used in fuel cells and in internal combustion engines.

But high production costs pose a major obstacle to its use. Analysts estimate that hydrogen prices would need to halve in order to compete with gasoline and diesel.

The NDRC called for a rational laying out of hydrogen projects based on resources and market demand to avoid disorderly competition.

"Local government will be strictly forbidden from blindly follow the trend of hydrogen project construction and will be prevented from building low-end projects in order to avoid a waste of resources," said Wang.

Almost all provinces and regions in China have included hydrogen into their development plans, andmore than 120 green hydrogen projects are under development.

Some major firms such as Sinopec, Baosteel and GCL have also expanded into hydrogen production, using natural gas and renewable energy, building hydrogen filling stations and using hydrogen in steelmaking and transportation.