Egypt’s green hydrogen subsidy law signed into law by president

Egyptian President Abdel Fattah El-Sisi has enacted a set of tax incentives for green hydrogen projects, aiming to accelerate development in the sector. The new legislation grants developers a tax credit ranging from 33% to 55% off the project's tax liability. Additionally, the law offers Value-Added Tax (VAT) exemptions on various items such as equipment, tools, machines, raw materials, and transport (excluding passenger cars) used in project development. Exports of renewable hydrogen and its derivatives are also eligible for VAT exemptions.

Green hydrogen producers now have the privilege to export products and import materials without requiring a license or registration, facilitating smoother trade operations. The legislation further provides developers with discounts of 30% on fees for seaports, maritime transport, and ship servicing, 25% on the value of industrial land rights for green hydrogen production, and 20% on the value of land rights for storage at ports. These discounts are applicable for up to ten years after signing project agreements with the government.

Project incentives approval falls under the responsibility of the Egyptian prime minister, subject to specific conditions. Developers are required to secure 70% of the project's investment cost from financial institutions outside Egypt and initiate operations within five years of agreement conclusion. Furthermore, companies must commit to using locally-made components when available domestically and meet a minimum 20% local-content requirement.

While foreign workers can be employed by green hydrogen producers for up to ten years after project approval, the workforce's foreign component is capped at 30% of the total. Egypt has outlined an ambitious pipeline of 32 projects valued at a combined 5.4 trillion Egyptian pounds ($175 billion), targeting the production of 3.2 million tonnes of hydrogen annually by 2030 and 9.2 million tonnes by 2040.

The ongoing disruption to shipping through the Suez Canal, a vital location for numerous hydrogen projects, poses additional challenges. Since mid-December, the canal has experienced disruptions due to security concerns related to potential attacks from Yemen's Houthi militant group on vessels transiting the Red Sea. The extent of the impact on final investment decisions and the import of equipment and materials to project sites remains uncertain.