IDB loans $400m for green hydrogen projects in Chile

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The Inter-American Development Bank has approved a loan to support the development of the green hydrogen industry and its derivatives in Chile.

The Inter-American development Bank (IDB) has made $400m available to Chile for green hydrogen projects spanning domestic demand development, human capital formation, creation of intermediate goods and services that facilitate the development of industry, applied research financing, development and technological innovation and promotion of entrepreneurship in the sector.

According to the International Energy Agency, by 2050 around 300 million tons of hydrogen will be produced annually, more than four times the current demand. Nearly half is expected to be in the form of green hydrogen, which is produced from renewable energies. Given Chile’s natural advantages in producing renewable energy at low cost, the growing global demand for green hydrogen presents an opportunity both in terms of productivity and sustainability.

Chile is the country with the highest per capita carbon dioxide emission in Latin America and the Caribbean. Its emissions are double those of Brazil, Uruguay and Peru and similar to those of industrialised countries such as the United Kingdom. By strengthening the green hydrogen industry it is hoped Chile will still be able to cut emissions by half by 2030 and reach net zero emissions before 2050.

However, investment in Chile’s green hydrogen industry is still incipient and faces a limited history of projects in this energy sector, high costs of the technology and uncertainty about its long-term performance.

María Florencia Attademo-Hirt, IDB representative in Chile, explained: “The IDB loan helps increase investment in green hydrogen in Chile and allows the country to advance in the development of a high-potential sector that, in addition to boosting the economy, will contribute to promote environmental sustainability and address climate change with an inclusive approach.”

The $400m loan approved by the IDB’s board of executive directors is the second credit operation under the $1bn Conditional Credit Line for Investment Projects for productivity and sustainable development in Chile. It has a repayment term of 24 years, a 6.5-year grace period and an interest rate based on the Secured Overnight Financing Rate.