The government has selected clean hydrogen as the first industry to benefit from the Korean-style Inflation Reduction Act (IRA). This policy is designed to provide various tax reductions, including corporate tax, for companies that build advanced industrial facilities for future growth sectors within the country.
According to related ministries on June 26, the Ministry of Trade, Industry and Energy is reviewing optimal corporate tax rates and various incentive measures to encourage domestic production of clean hydrogen, assuming the implementation of the Korean-style IRA. Hydrogen energy is often called dream energy because it does not emit carbon dioxide during combustion, but the process of producing hydrogen itself generates greenhouse gases. Clean hydrogen minimizes even the greenhouse gases produced during its creation. According to Deloitte, the global clean hydrogen market is projected to grow to $1.408 trillion (approximately 1,910 trillion won) by 2050.
Accordingly, the government plans to take the lead in the global clean hydrogen market by utilizing the domestic production promotion tax incentive, a key presidential pledge. This system provides tax benefits, such as tax credits, in proportion to the production volume of national strategic industries. Just as the United States, under the Joe Biden administration, attracted production plants from major corporations like Samsung and SK with its IRA, South Korea intends to offer significant benefits to companies that build and produce in Korea. In relation to this, the ruling party has also proposed a relevant bill amendment that would grant up to a 30% corporate tax deduction to companies that produce and sell products using national strategic technologies.
Furthermore, major countries such as Japan, the European Union (EU), and the United States are already competitively pursuing policies to foster the clean hydrogen industry, including providing production subsidies and tax credits. According to the Korea H2 Alliance, the EU is currently implementing a subsidy policy worth 3 billion euros (approximately 4.76 trillion won) that provides contract for difference (CfD) subsidies to hydrogen production companies for 10 years through the European Hydrogen Bank and the Innovation Fund.
Japan has established a structure where the government fully compensates for the difference against a reference price for 15 years and has secured a budget of about 300 billion yen (approximately 2.82 trillion won) to implement this system. The United States is also applying tax credits proportional to clean hydrogen production based on its IRA law. The U.S. clean hydrogen production tax credit, which was set to benefit facilities starting construction by 2033, faced a potential reduction to facilities starting before 2026 after President Donald Trump’s tax cut bill passed the U.S. House of Representatives on the 22nd of last month. However, large-scale support is still being provided.
A government official stated, “Clean hydrogen is a key means to achieve carbon neutrality and energy security. We will compare and analyze the government support policies of major countries aimed at promoting domestic clean hydrogen production, such as tax credits and price difference support, to derive the optimal support plan tailored to our domestic situation.” The Ministry of Trade, Industry and Energy plans to formulate a detailed plan, propose it to the Ministry of Economy and Finance, and then consult on the government’s proposal.
In addition, the government has decided to actively support not only the production of clean hydrogen but also its application in various industries. Notably, the Ministry of Trade, Industry and Energy held a meeting of the National R&D Project Evaluation Committee on this day and approved the preliminary feasibility study for the “Korean-style Hydrogen-based Steelmaking Demonstration Technology Development Project,” which will receive a total project cost of 814.6 billion won (308.8 billion won from the national budget) over five years from 2026 to 2030. Hydrogen-based steelmaking is a technology that replaces the coal used in steel production with hydrogen. As it emits water vapor instead of carbon, it can reduce carbon emissions by more than 95% compared to the conventional blast furnace process.
The government also plans to designate at least five new hydrogen-specialized complexes within the year. Previously, the government held a meeting of the Hydrogen Economy Committee last year and designated Donghae-Samcheok and Pohang as hydrogen-specialized complexes. A total of 500 billion won, including national and local funds, will be invested in these specialized complexes, which will feature occupancy space for hydrogen companies and essential infrastructure for corporate support, such as testing and evaluation centers and demonstration testbeds. A Ministry of Trade, Industry and Energy official said, “The Donghae-Samcheok liquefied hydrogen storage and transportation specialized complex is scheduled to begin construction next March. We will also designate at least five more hydrogen-specialized complexes this year and actively strive to create an industrial ecosystem for the entire hydrogen industry value chain, from production to storage, transportation, and utilization.”
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