One step closer to the long-awaited green hydrogen incentives: The House Energy and Environment Committee approved a cabinet-drafted decision putting forward a package of incentives for Egypt’s green hydrogen industry. The decision would extend a series of tax breaks and non-tax incentives to companies implementing green hydrogen projects within five years and deriving a certain percentage of their financing from foreign lenders. The incentives were greenlit by the cabinet in May, and many players in the market had expected to see them in full early in 2023, when excitement about the technology was at its peak after COP27.

The tax breaks on the table: Under the decision, companies operating in the sector could be eligible to receive tax breaks of between 33-50% on income earned from the plants. They will also be exempted from VAT on raw materials and machinery purchased for the projects and customs on materials imported for the project and exempt from paying real estate taxes, stamp taxes, and a number of other administrative fees.

Non-tax incentives: If passed, the decision will see green hydrogen projects receiving a number of licensing facilities, extended grace periods on payments, and will be able to import and export without being on either of the registers. Eligible companies will also receive a 25% markdown on usufruct fees collected on plots housing green hydrogen factories and a 20% markdown on fees on plots housing green hydrogen storage units, as well as a 30% reduction on port charges.

To be eligible: Companies will need to have their projects up and running within five years and obtain at least 70% of their financing from foreign lenders. They will also be expected to source at least 20% of their inputs from local suppliers as part of the government’s push to increase localization and reduce reliance on imports. Companies will also have to provide a plan to train Egyptians who are working on the project, and provide a program for local community development.

Egypt is big on green hydrogen: Egypt aims to provide 5-8% of the world’s hydrogen and reduce annual carbon emissions by 40 mn tons by 2040, creating some 100k jobs and adding USD 10-18 bn to GDP in the process. The government has also signed MoUs with 23 developers and framework agreements with nine international power companies to develop green hydrogen projects.

It’s a global competition:Egypt is racing countries around the world to provide green hydrogen incentives as a means of attracting investors.The US is among the biggest players in this global competition, with the Biden administration’s Inflation Reduction Act offering US green hydrogen producers a USD 3 tax credit per kilo of hydrogen for their first 10 years of operation, pushing green hydrogen production costs in the US into sub-zero territory in the short term.

What’s next? The decision will be up for a final discussion and vote when the House reconvenes on 2 January. We are also waiting for the government to unveil its green hydrogen strategy — currently in its final stages — after it received approval from the National Green Hydrogen Council.

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