European politicians worry that the generous subsidies for green-energy technologies in Washington’s climate bill will lure investment to America. Governments in both regions hope that low-carbon hydrogen can help to decarbonize industries such as steel manufacturing and shipping. Ramping up domestic production would also help Europe to lower its reliance on imported fossil fuels.

But companies find it harder to figure out what help is available in Europe. “The real charm of the IRA is its simplicity. To sum up the overall amount of available funding in Europe is very difficult,” says Leif Christian Kröger, business development manager at electrolyzer maker Thyssenkrupp Nucera.

There are subsidies but the cash is spread all over the place. Funding of up to €5.2 billion, equivalent to $5.60 billion, for hydrogen projects was approved last September and close to €270 billion of unused EU Covid-19 recovery funds can also now be redirected to clean energy projects. Grants worth €1.5 billion are available for companies building infrastructure such as hydrogen fueling stations. That’s not to mention support that is available from the European Union’s 27 national governments. 

One important job for the new hydrogen bank will be to gather information about funding across the EU in a single place. If it can become a one-stop shop, companies would have less complexity to wade through.

Understanding U.S. subsidies is simpler. The IRA offers a production tax credit of up to $3 a kilo of clean hydrogen, depending on the carbon intensity. This means green hydrogen could be competitive with gray hydrogen by around 2025, according to

Bank of America

estimates. Without subsidies, this would happen five years later in the EU. 

If the IRA helps the U.S. to attract more investment, it would be double-edged for Europe. The EU would benefit from a strong clean-hydrogen export market in the U.S., as it plans to import around half its future needs. But Brussels also needs to unlock a flood of private investment if it is to hit a target to produce 10 million metric tons of green hydrogen domestically by 2030. 

The new hydrogen bank is funded with €800 million for now. If it offers a €3-a-kilo subsidy, roughly matching the IRA tax credit, the bank will have capacity to subsidize a very modest 26,000 tons of production, according to Matthew Hodgkinson, hydrogen analyst at S&P Global Commodity Insights.

The region’s higher energy costs are also a disadvantage. At a recent industry conference in Germany, producers said the EU might need to subsidize higher operating costs to be on a truly equal footing with the U.S., according to Bank of America analysts who attended. 

This may make it harder for domestic manufacturers of equipment used in green-hydrogen production to know how soon they need to increase output to meet demand. These include independent electrolyzer makers such as

ITM Power

and

Nel,

whose stocks soared in 2020 and have struggled to make headway since. Until policies are clearer, their customers will take longer to commit to projects in Europe than in the U.S.—and the roller coaster for investors may continue.

Write to Carol Ryan at carol.ryan@wsj.com