ASEAN’s path to low-carbon hydrogen future March 22, 2025
PHOTO: ENVATO
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As nations worldwide race to decarbonise, ASEAN member countries are also crafting their hydrogen strategies to reach carbon neutrality by mid-century. While much of the focus has been on transportation and power generation, a largely untapped yet strategic opportunity lies in the industrial sector – specifically, ammonia production for fertilisers.
This existing demand presents ASEAN’s gateway to a low-carbon hydrogen economy, argued energy economist at the Economic Research Institute for ASEAN and East Asia (ERIA) Alloysius Joko Purwanto.
According to ERIA, ASEAN consumed approximately 3.7 million metric tonnes of hydrogen in 2020, a figure expected to rise to 4.4 million metric tonnes by 2025.
“This hydrogen use is entirely confined as feedstock to the industrial sectors,” said Purwanto.
The ammonia industry alone absorbs nearly half of this demand, followed by oil refining, methanol production, and other industrial applications. However, the hydrogen currently used is produced via emission-intensive methods such as steam methane reforming and coal gasification.
“ERIA estimates that ASEAN’s hydrogen production in 2025 will generate at least 36.5 million tonnes of carbon dioxide – comparable to Myanmar’s total annual carbon dioxide emissions from energy use as of now.”
A NECESSARY SHIFT
Ammonia’s importance is twofold. Traditionally, it plays a crucial role in food security, with 80 per cent of its global demand tied to fertiliser production.
“With Asia’s agricultural sector as the primary driver, global ammonia demand is expected to increase by eight per cent per year from 2022 to 2031 – double the annual growth rate during the period spanning 2016 to 2022,” said Purwanto.
ASEAN, particularly Indonesia and Malaysia, are significant players in the ammonia market. Indonesia, for instance, is the largest ammonia exporter in the region and ranks among the world’s top urea exporters.
Beyond agriculture, ammonia is also emerging as a crucial component in global decarbonisation efforts. It is being explored as a hydrogen carrier in international trade and as a low-emission fuel in the maritime sector.
ERIA’s projections suggest that ammonia demand in ASEAN will increase 3.7 times by 2050 due to decarbonisation initiatives. Without such efforts, growth would be limited to just 1.9 times.
Energy economist at the Economic Research Institute for ASEAN and East Asia Alloysius Joko Purwanto. PHOTO: ERIA
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UNLOCKING FINANCIAL SUPPORT
One of the main barriers to a large-scale hydrogen transition is financing. Many financial institutions remain cautious about backing hydrogen-powered vehicles, gas stations, and power plants due to the lack of a structured hydrogen trading market and the need for extensive infrastructure development.
However, Purwanto believes ammonia production offers a more immediate investment opportunity.
“Financial institutions – especially early movers with deeper understanding of project risks, key value chain relationships, and stakeholder roles – are likely to back renewable energy-powered electrolysers for green hydrogen production or carbon capture and storage (CCS) facilities to produce blue hydrogen at ammonia plants,” he said.
The certainty of demand and the relatively limited infrastructure requirements make this a more attractive investment than other hydrogen applications.
A CATALYST FOR RENEWABLE ENERGY EXPANSION
Integrating low-carbon hydrogen into ammonia production would also accelerate the development of supporting industries such as renewable power generation, electrolysers, and CCS.
As production scales up, costs will inevitably decline, making low-carbon hydrogen more competitive.
This, in turn, could pave the way for wider adoption in sectors such as oil refining, methanol production, and steel manufacturing.
STRATEGIC PRIORITIES FOR ASEAN
To facilitate this transition, Purwanto outlined three key policy directions for ASEAN member states (AMS):
Prioritising export markets – Given the high costs of low-carbon hydrogen production in ASEAN, targeting overseas buyers, particularly in Japan, would be an effective strategy in the early commercialisation phase.
“Producing blue ammonia in Indonesia, for instance, would add 24 per cent to costs, while green ammonia production would incur a fourfold cost increase compared to the current conventional pathway,” he noted.
Developed economies with decarbonisation commitments are more willing to pay a premium for low-carbon commodities.
Developing green hydrogen in resource-rich areas – ASEAN should focus on areas with abundant renewable energy potential but low electricity demand to produce green hydrogen cost-effectively.
Since hydrogen’s transport and storage costs are high, it makes more sense to convert it into ammonia at the production site before shipping it to buyers.
Strengthening cross-industry and regional coordination – Governments must formulate comprehensive plans to ensure the timely development of renewable electricity capacities and CCS infrastructure.
Carbon pricing mechanisms should be introduced, with revenues channelled towards maintaining industry competitiveness.
Additionally, ASEAN member countries should collaborate to optimise hydrogen capacities and supply chains, ensuring both economic efficiency and sustainability.
A LOW-CARBON FUTURE WITHIN REACH
ASEAN’s transition to a low-carbon hydrogen economy will not happen overnight, but ammonia and fertiliser production offer a practical and economically viable starting point.
By leveraging existing demand, securing financial backing, and fostering regional cooperation, ASEAN can position itself as a leader in the global hydrogen landscape.
“Regional coordination and cooperation across ASEAN must find the optimal mix of hydrogen capacities and supply chains, maximising both economies of scale and scope,” Purwanto emphasised. With strategic action, ASEAN can pave the way for a cleaner, more sustainable future while ensuring energy security and economic resilience. – Izah Azahari
