Industry Location Drivers in a Green Hydrogen Economy: Reorganization or Transformation?

Abstract

While a growing body of literature has argued that the rise of a global green hydrogen economy can reshape global value chains and trade patterns, significant uncertainty remains about how transformative such reorganization would be. The economic geography literature has examined drivers of industry location and the potential benefits of different spatial organizations of industries, but a comprehensive application of these findings to a green hydrogen economy has so far been missing. This paper bridges the economic geography literature with research on green hydrogen value chains to identify how different drivers can influence the location of activities across the green hydrogen value chain, and the implications thereof for development opportunities across regions. The analysis concludes that most findings about the renewables‑pull effect draw on cost‑optimization perspectives rooted in classical and neoclassical location theory, overlooking many insights from post‑1990s economic geography. Incorporating this broader perspective suggests that the transformational potential of green hydrogen is more limited than often assumed. Places with only factor input and transport cost advantages may attract simple, mature, activities, in industries where process innovation is incremental and led by large incumbents with the ability to exclude rivals, resulting in limited potential for knowledge-spillovers and self-sustained competitiveness. Meanwhile, regions with complex capabilities but limited renewable energy resources may retain high value added activities related to equipment manufacturing and knowledge development. This would mean that even if industry relocation leads to a reorganization of value chains, it would unlikely fundamentally transform prevailing uneven patterns of specialization and diversification.