The Inter-American Development Bank (IDB) has approved a loan to support the development of the green hydrogen industry and its derivatives in Chile. This operation seeks to help decarbonize the economy and generate new opportunities for the country’s productive development.

The resources will be used to finance new projects in green hydrogen, 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 this sector.

The institutions, companies and enterprises that are part of this value chain, as well as workers in the industry, will benefit from the operation.

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 —, and 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 a great opportunity both in terms of productivity and sustainability.

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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 industrialized European countries such as the United Kingdom, France and Spain. In this scenario, strengthening the green hydrogen industry will be crucial for Chile to advance in the global objectives set by the Intergovernmental Panel on Climate Change (IPCC) 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 the typical challenges of nascent industries: a limited history of projects in this energy vector, high costs of the technology, and uncertainty about its long-term performance.

“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,” said María Florencia Attademo-Hirt, IDB Representative in Chile.

The $400 million loan approved by the IDB’s Board of Executive Directors is the second credit operation under the $1 billion Conditional Credit Line for Investment Projects (CCLIP) 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 (SOFR).