Most hydrogen comes from natural gas. In 2023, global hydrogen production hit 100 million tonnes, and 98% of it was made from fossil fuels: 60% from natural gas and 38% from coal. Only about 2% came from low-emission sources like renewable-powered electrolysis. But the landscape is shifting, and hydrogen can actually be pulled from water, biomass, and even underground geological deposits.
Natural Gas: The Dominant Source
The workhorse of hydrogen production is a process called steam methane reforming, or SMR. A facility takes natural gas (which is mostly methane) and blasts it with steam heated to 700°C to 1,000°C. That reaction strips hydrogen atoms away from both the methane and the water, producing hydrogen gas and carbon monoxide. A second step reacts the carbon monoxide with more steam to squeeze out additional hydrogen. The end result: every molecule of methane yields roughly four molecules of hydrogen, along with carbon dioxide as a byproduct.
This method is cheap, at roughly $1.50 to $2.50 per kilogram, which is why it dominates. The tradeoff is carbon emissions. Conventional methods generate 9 to 20 kilograms of CO₂ for every kilogram of hydrogen produced. That’s a significant climate cost, and it’s the main reason the industry labels this product “grey hydrogen.”
“Blue hydrogen” uses the same natural gas process but captures the CO₂ before it enters the atmosphere, storing it underground. It costs $2.00 to $3.50 per kilogram. Coal gasification works on a similar principle, heating coal with steam and oxygen to break it down into hydrogen and other gases. China relies heavily on coal-based hydrogen, which accounts for most of the 38% global coal share.
Water: Splitting H₂O With Electricity
Water is the cleanest possible hydrogen source. An electrolyzer runs electric current through water to separate it into hydrogen and oxygen, with no carbon byproducts at all. When that electricity comes from wind, solar, or hydropower, the result is “green hydrogen.”
Two main types of electrolyzers are in commercial use today. Alkaline electrolyzers are the older, more established technology. They use non-precious metal catalysts and run at about 70% efficiency, meaning 70% of the electrical energy input ends up stored in the hydrogen. They’re stable, proven, and available at large scale. PEM (proton exchange membrane) electrolyzers are newer and more compact, capable of higher current densities and faster response to fluctuating power from solar and wind. They require expensive noble metal catalysts like platinum and iridium, which drives up cost.
A third type, solid oxide electrolyzers, operates at very high temperatures and could theoretically be more efficient by using waste heat from industrial processes. But this technology still faces serious challenges in scaling up to commercial size.
Green hydrogen currently costs $3.50 to $6.00 per kilogram, roughly two to three times more than grey hydrogen. That gap is narrowing as renewable electricity gets cheaper and electrolyzer manufacturing scales up. Government incentives are accelerating this. In the U.S., the Inflation Reduction Act offers tax credits of up to $3.00 per kilogram for clean hydrogen production, which could make green hydrogen cost-competitive with fossil-fuel-based alternatives within the next several years.
Biomass and Organic Waste
Plant matter, agricultural residues, and municipal solid waste can all be converted into hydrogen through gasification. The process is similar in concept to what happens with natural gas: biomass is heated with steam at high temperatures, breaking down the organic material into a gas mixture that includes hydrogen and carbon monoxide. A follow-up water-gas shift reaction then converts more of that mixture into hydrogen.
Yields depend on the feedstock and conditions. Steam gasification of dry biomass combined with a downstream shift reaction can convert 10 to 14% of the feedstock weight into hydrogen, at costs around $1.50 per kilogram. That’s competitive with natural gas reforming on price, though the supply chains for collecting and processing biomass are more complex. The carbon math is also more favorable, since the CO₂ released during gasification was recently absorbed from the atmosphere by the plants themselves.
Underground: Natural Hydrogen Deposits
Perhaps the most surprising source is the Earth itself. Hydrogen gas forms naturally underground through chemical reactions between water and iron-rich minerals, radioactive decay in rocks, and other geological processes. This “white hydrogen” or “geologic hydrogen” has been known about for decades but was long dismissed as too rare or too diffuse to matter.
That view is changing. The U.S. Geological Survey released its first-ever map of potential geologic hydrogen accumulations in the United States, identifying several promising regions: a mid-continent zone covering Kansas, Iowa, Minnesota, and Michigan; the Four Corners states of Arizona, Colorado, New Mexico, and Utah; the California coast; and areas along the Eastern Seaboard. These regions have the right geological conditions, including hydrogen-generating source rocks, porous reservoir rocks to collect the gas, and cap rocks to trap it in place.
The catch is that much of this hydrogen is likely too deep, too far offshore, or in accumulations too small to extract economically. No one has commercially produced geologic hydrogen at scale yet. But if even a fraction of these deposits prove accessible, they could provide a source of hydrogen with virtually zero production emissions.
How Hydrogen Gets to Where It’s Used
Producing hydrogen is only half the challenge. Getting it to refineries, chemical plants, fuel stations, and factories requires specialized infrastructure because hydrogen is an extremely light gas that’s difficult to contain and transport.
Pipelines are the cheapest option for large volumes, but the U.S. has only about 1,600 miles of hydrogen pipeline, concentrated near petroleum refineries and chemical plants in Illinois, California, and the Gulf Coast. For shorter distances (typically under 200 miles), compressed hydrogen travels by truck in high-pressure tube trailers. For longer hauls, hydrogen can be cooled to extremely low temperatures and liquefied, then shipped in cryogenic tankers by truck, rail, or barge. Liquid hydrogen is more efficient to transport per trip, but the cooling process is energy-intensive, and the hydrogen slowly boils off if it isn’t consumed fast enough at the destination.
For vehicles powered by hydrogen fuel cells, the gas needs to be extremely pure. The international standard requires a minimum purity of 99.97%, because even tiny contaminants can damage the delicate membranes inside a fuel cell. Industrial uses like oil refining and ammonia production are more forgiving on purity but consume far greater volumes.
Why the Source Matters
The hydrogen molecule is identical no matter where it comes from. What differs dramatically is the environmental and economic cost of producing it. The color-coded labeling system the industry uses reflects this. Grey hydrogen (unabated natural gas) is cheap but carbon-heavy. Blue hydrogen (natural gas with carbon capture) is a middle ground. Green hydrogen (renewable electrolysis) is the cleanest but most expensive. Pink hydrogen refers to electrolysis powered by nuclear energy, which is also carbon-free during operation.
Right now, the global hydrogen economy runs almost entirely on fossil fuels. Renewable electrolysis accounts for roughly 1% of production. The transition toward cleaner sources depends on continued cost reductions in electrolyzers and renewable power, expansion of pipeline and delivery infrastructure, and policy incentives that shift the economics. The fundamental chemistry is well understood. The remaining challenge is scaling clean production fast enough to make a dent in the 100 million tonnes the world already consumes each year.