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As the Middle East’s largest economy, equipped with world-class natural gas and renewable resources, established energy infrastructure, strong fiscal capacity and political commitment, Saudi Arabia could lead the region’s ambitions for low-carbon hydrogen fuels.
But the Kingdom should redesign its policies to realise substantial domestic demand for low-carbon hydrogen in key industrial sectors, thereby significantly supporting domestic decarbonisation.
With a strong domestic market for clean hydrogen in place, Saudi Arabia will be well poised to seize export opportunities in Europe and Asia in future years. For now, the logic of building domestic demand needs to be clear.
Drawing upon recent publications from leading Saudi research organisations, we suggest three key policies to make this happen.
Export markets not there (yet)
The basic problem facing the Gulf region’s potential exporters of clean hydrogen is that a global market does not yet exist and won’t exist for some years to come.
Gulf countries are confronting this reality.
Masdar, the UAE’s flagship clean-energy company, had planned to deploy 6 gigawatts (GW) of renewable power to produce approximately 350,000 metric tonnes of green ammonia per year. Now funds will be redirected toward renewable power that supports data centres [1].
Meanwhile, the world’s largest green hydrogen project at NEOM in Saudi Arabia faces demand risk [2] as it struggles to find international buyers for its product. To date, it has secured off-take for only around one-third of its planned production of up to 1.2 million tonnes/year of green ammonia.
The overarching reliance on export markets is actually at odds with some official plans. For example, the UAE’s National Hydrogen Strategy [3] states that substantial domestic demand for low-carbon hydrogen means the country can accelerate ahead of the competition in developing projects without need to rely on exports.
This essential goal should guide Gulf countries now. In fact, Saudi Arabia has ample domestic demand to spur a viable market for low-carbon hydrogen.
Domestic demand potential
Demand for gray hydrogen in Saudi industries [4] stood at about 2.5 million tonnes in 2023, dominated by ammonia, methanol and refining production. Low-carbon hydrogen is anticipated to play a significant role in decarbonising heavy industries such as cement and steel.
As the kingdom continues to embrace cleaner energy solutions, domestic demand is expected to surge. A moderate-growth forecast [5] sees the Saudi market reaching nearly 3.2 million tonnes/year by 2034. An earlier forecast from the International Renewable Energy Agency [6] — more aligned with meeting the 1.5°C climate goal (and its own national net-zero target for 2060) — sees Saudi Arabia becoming the world’s sixth-largest low-carbon hydrogen demand market by 2050.
Building this market requires targeted policies in support of the government’s net-zero emissions by 2060 target and its objectives under the Saudi Green Initiative [7].
Three policies
Inspired by recent findings from leading Saudi research organisations, we propose three essential policies to get clean hydrogen going in Saudi Arabia.
Carbon pricing
First, local demand for low-carbon hydrogen needs a carbon pricing mechanism.
Recent research [8] by scholars at the King Abdullah Petroleum Studies and Research Centre considers hypothetical domestic carbon prices of $20 and $50 per tonne of CO2 emitted. The analysis shows that carbon pricing could be effective in reducing emissions and that future research should explore its integration with large-scale renewable energy investments and carbon capture and storage (CCS) for hard-to-abate sectors (particularly petrochemicals and oil refining).
Another recent study [9] co-authored by scholars from the King Abdullah University of Science and Technology (KAUST) expands the analysis by arguing that carbon pricing and energy-subsidy reform are fundamental to making low-carbon steel technologies cost-competitive with conventional natural-gas-based routes in the Middle East.
The same study shows that low subsidised natural gas prices keep fossil-based steel dominant and undermine the competitiveness of low-carbon hydrogen in Saudi Arabia and other Gulf countries.
Public procurement
Second, the kingdom’s industries (petrochemicals, cement, ammonia and steel) provide a solid foundation for domestic demand for low-carbon hydrogen. Mandating its use through public procurement could drive demand and support industry scale-up.
Riyadh’s Saudi Vision 2030 includes major construction and infrastructure projects aimed at economic diversification and urban development. As a result, Saudi Arabia’s construction sector is witnessing unprecedented growth, with a project pipeline [10] valued at more than $1.7 trillion.
The International Energy Agency (IEA) notes [11] that the public sector worldwide accounts for about 25 percent of global steel demand but governments are not yet using this opportunity to its full potential. Green materials like steel are only slightly more expensive than traditional versions (this extra cost is called the “green premium”).
By making materials such as ‘green steel’ mandatory in construction, the Saudi government could create demand that supports local producers. Pushing this purchasing power behind end-use steel products that require low-emissions hydrogen in major Saudi projects could significantly boost domestic demand and support industry scale-up in the near term.
Local innovation
Thirdly, strengthening initiatives to accelerate hydrogen technology transfer and local innovation is essential for positioning the kingdom as a globally competitive market.
The collaboration [12] between Stargate Hydrogen, a European deep-tech company specialising in green hydrogen technologies, and the Research, Development, and Innovation Authority of Saudi Arabia is a prime example. It focuses on localising Stargate’s technologies for hydrogen innovation and deployment in the Kingdom, including building partnerships with leading academic institutions such as KAUST to generate domestic intellectual property and collaboration with Saudi manufacturers to develop local production capacity for electrolysers.
A Saudi national hydrogen market that produces high-quality, cost-competitive and innovative hydrogen equipment and components could drive intellectual property generation and support local talent, attracting international capital investment.
Getting started
Refocusing policies to establish a national hydrogen market in Saudi Arabia will not be easy. But implementing the demand measures outlined here will be a game-changer, unlocking substantial domestic demand in the near term and laying the groundwork for future exports.
It will also demonstrate the reliability of long-term investment opportunities to foreign investors, reinforce the Kingdom’s Vision 2030, and solidify its leadership in the Middle East.
We acknowledge the delicate socioeconomic balancing act involved, including managing potential energy price spikes for domestic businesses and consumers, likely necessary to ensure uptake and investment in low-carbon hydrogen.
Frank Herbert’s Dune (1965) states that “a beginning is the time for taking the most delicate care the balances are correct.”
The difficulty of the low-carbon hydrogen balancing act will require Saudi Arabia to take the long view, but the opportunity is there for Riyadh to begin implementing a delicately balanced, Saudi-led strategy that builds domestic demand in the Middle East now, while preparing to seize export opportunities when they eventually arise.
References
- UAE’s green champion shifts hydrogen billions to data boom (Bloomberg, 20 August 2025)
- Saudi Arabia’s Mega Neom Hydrogen Project Faces Demand Risk (Bloomberg, 11 May 2025)
- National Hydrogen Strategy of the United Arab Emirates (Fraunhofer ISE, November 2023)
- Saudi Arabia Hydrogen Market Analysis (Chemanalyst, January 2024)
- Saudi Arabia Hydrogen Market Analysis (Chemanalyst, January 2024)
- Global Hydrogen Trade to Meet the 1.5°C Climate Goal: Trade Outlook for 2050 and Way Forward (IRENA, July 2022)
- Saudi Green Inititaive (Vision 2030)
- Evaluating hypothetical carbon pricing for Saudi Arabia using a macroeconometric modeling framework (Energy Economics, Volume 145, May 2025, 108437, Elsevier)
- Prospective environmental and economic assessment of green steel production in the Middle East (Resources, Conservation and Recycling, Volume 219, 1 June 2025, 108277, Elsevier)
- KSA market intelligence: navigating opportunity (Turner & Townsend, 15 September 2025)
- Global Hydrogen Review 2025 (IEA, 12 September 2025)
- Stargate Hydrogen signs landmark MoU with Saudi Arabia’s Research, Development, and Innovation Authority (RDI) to accelerate green hydrogen innovation in the Kingdom (Baltic Times, 11 September 2025)
(Jan Haizmann is CEO of the Zero Emissions Traders Alliance (ZETA) in Abu Dhabi. Jan Frederik Braun is Senior Expert Hydrogen Economy at the Fraunhofer Institute for Solar Energy Systems ISE in Freiburg, Germany. Any opinions expressed in this article are the authors’ own)
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