Green hydrogen from the Middle East and North Africa.
Apparently, all that is required is a magic wand.
Wave it over the technology, and production costs somehow fall far enough for the market to carry the product without massive subsidies. Wave it again, and European consumers happily pay whatever price is necessary to make the business case work.
That is not an investment thesis.
It is a political assumption.
And the entire MENA green-hydrogen proposition depends on it.
These projects will only fly as long as European countries remain willing to pay top dollar—indeed, far more than top dollar—for the resulting products, whether hydrogen itself, ammonia, methanol or fertiliser.
The question is therefore not whether enormous solar and wind resources exist in North Africa or the Middle East.
They do.
The question is who will pay for converting those resources into an industrial product that can compete with alternatives produced under considerably less expensive conditions.
For years, the answer was supposed to be Europe.
Europe would impose increasingly ambitious climate targets, create increasingly expensive regulatory obligations, subsidise the transition and ultimately make low-carbon products sufficiently valuable for projects in distant countries to become commercially viable.
It was a reasonable political bet while the political consensus held.
But that consensus is beginning to move.
Not dramatically. Not everywhere. And certainly not overnight.
But it is moving.
People are increasingly looking at climate policy and asking a rather uncomfortable question:
How much is this actually costing us?
The suspicion is growing that at least part of the climate apparatus has become a mechanism for transferring enormous amounts of money from consumers and taxpayers into industries, projects and institutions that would struggle to survive under ordinary market conditions.
Politicians are beginning to notice this as well.
They have a peculiar weakness for electoral mathematics. Winning elections still matters to them.
So positions change.
Slowly.
Sometimes reluctantly.
But they change.
This is a tectonic shift rather than a sudden revolution. It has been developing for some time and will probably take years to reveal its full consequences.
That is actually the dangerous part for the green-hydrogen industry.
Tectonic shifts are slow.
But they are also remarkably difficult to reverse.
Once voters begin questioning the cost of a policy, governments become increasingly reluctant to sign new commitments that can later be presented as expensive political vanity. Every new subsidy becomes another potential liability.
Under those conditions, anything that requires permanent political support simply to remain commercially viable becomes increasingly vulnerable.
And that is the problem with much of the green-hydrogen proposition.
If the product cannot survive at something approaching strict market prices, then it is not really a market product.
It is a policy product.
And policy products are only as durable as the political willingness to pay for them.
The MENA countries developing these projects are therefore making a rather large assumption: that Europe will continue paying the premium indefinitely.
I don’t believe that assumption is safe.
In fact, I think the entire model has always contained an uncomfortable resemblance to a Ponzi scheme. The economics depend on a continuing flow of political money and willingness to pay. As long as that flow continues, more projects can be announced, more investment can be attracted and the underlying weakness can remain concealed.
But eventually the flow has to stop.
When it does, somebody is left holding the asset that cannot compete without the subsidy.
The MENA producers are betting that it will not be them.
Perhaps they are right.
But if Europe’s political tectonic plates continue moving in the direction they have been moving, somebody will eventually discover what happens when a product designed around permanent subsidy meets a market that has lost its appetite for paying the premium.
And that is when the green-hydrogen dream could become a very expensive white elephant.
With somebody else holding the bag.
And the bag, unfortunately, may contain rather more than hydrogen.