Lack of regulation holding back hydrogen investment in Mexico, while Brazil consults on new green hydrogen regulations

Political uncertainty and investor caution around the lack of specific regulation mean Mexico’s hydrogen sector is currently reliant on US projects. Meanwhile, Brazil is preparing regulations for a green hydrogen market

Mexico’s border with the US is likely to provide the biggest short-term boost to developing its domestic hydrogen industry, as US producers look to Mexican ports to expand shipping capacity.

Despite clear appetite for investment in Mexico’s hydrogen industry, the current administration is firmly focused on the oil and gas sector, and incentives for private investment across all energy sectors have been lacking.

Investors are therefore reluctant to commit to hydrogen projects, until there is greater certainty around the likely political, and regulatory, outcomes of the general election in June 2024.

While Mexico’s existing oil and gas regulations, environmental laws, and ports and terminals regulations can, in theory, be adapted for the hydrogen sector, the lack of a specific regulatory framework for hydrogen is also proving off-putting for some potential investors.

Meanwhile, Brazil’s Ministry of Mines and Energy is prioritising the creation of a green hydrogen regulatory framework, having launched a three-year work plan within the National Hydrogen Program in late August 2023.

Different draft bills on the subject are currently being analysed by the Brazilian Congress and it is expected that green hydrogen initiatives will require further joint public-private discussions.

The plan aims to consolidate low-carbon hydrogen hubs in Brazil by 2035, with the Port of Pecém established as the country’s first such hub.

In 2024, we anticipate investment in Mexico will largely come from the US, as producers there look to develop port infrastructure in northern Mexico. With US West Coast ports currently over-subscribed, Mexico’s ports offer an attractive alternative for shipping hydrogen to foreign markets, particularly in Asia.

In the near term, we expect some interesting developments in adapting Mexican ports for hydrogen transportation, as well as the creation of coastal and inland storage terminals.

In Brazil, the medium-term focus will be on continued regulatory development, participation in international discussions regarding certification criteria, and the qualification and training of talent and investors.