Q1 2026 Analysis Report on the Commercialization Prospects of Hydrogen-Carbon Coproduction Technology

The team led by Yu Qingkai, a researcher at the Shanghai Institute of Microsystem and Information Technology, Chinese Academy of Sciences, and Chairman of Shanghai Hydrogen Field New Materials Technology Co., Ltd., has made a major breakthrough in the field of hydrogen-carbon coproduction technology[1]. The team’s natural gas cracking hydrogen-carbon coproduction technology has received support from the National Key R&D Program, becoming an important path for green hydrogen and carbon production. Its core technological advantage lies in its ability to simultaneously produce high-purity hydrogen and graphite under nearly zero-pollution working conditions, realizing the green and high-value utilization of methane resources[1].

Compared to traditional high-pollution hydrogen and carbon production processes, this technology has significant competitive advantages. First, in terms of environmental performance, it completely avoids greenhouse gas emissions, complying with the stringent requirements of the “Double Carbon” strategy. Second, in terms of economic efficiency, it has greater cost and efficiency advantages in distributed scenarios such as chemical industry and hydrogen refueling stations[1]. Researcher Yu Qingkai pointed out that China’s innovative capital is invested evenly and booming in frontier fields such as new materials and chemical engineering, providing a high-quality environment for technology transformation[1].

Currently, the team is focusing on overcoming technical bottlenecks such as continuous system operation, with a focus on increasing the stable continuous operation time of cracking reactors. The technical team’s goal is to increase the stable continuous operation time from the current level to one month[1]. This technical breakthrough is decisive for commercialization, as continuous operation time is a key indicator for measuring the economic efficiency and feasibility of industrial equipment.

In 2021, Yu Qingkai founded Shanghai Hydrogen Field New Materials Technology Co., Ltd., dedicated to promoting the large-scale preparation of clean hydrogen and high-purity carbon materials[1]. The establishment of the company marks a key step in the transformation of the technology from laboratory research to industrialization, laying an organizational foundation for subsequent commercial promotion.

The team led by Li Can at the Dalian Institute of Chemical Physics, Chinese Academy of Sciences, has also made important progress in hydrogen energy-related technologies. After more than a decade of research and development, the team has successfully solved the problem of engineering scale-up for large-scale hydrogen sulfide decomposition, and developed the “off-site electrocatalytic full decomposition of hydrogen sulfide for hydrogen and sulfur production technology” with independent intellectual property rights in China[2].

This technology passed scientific and technological achievement evaluation on January 6, 2026, reaching an international leading level in technology. The core design innovation lies in decoupling chemical reactions and charge transfer in reaction space, using electron mediation to move the electrode surface reaction away from the electrode, and completing the two processes of hydrogen sulfide oxidation for sulfur production and proton reduction for hydrogen production separately in the reactor outside the electrode[2]. This design avoids the problem of sulfur deposition on the electrode surface and contamination of the battery diaphragm, eliminates the impact of bubble adhesion on the catalyst surface on the hydrogen evolution reaction, and creates a new reaction mode for electrocatalytic chemical production[2].

In terms of industrial demonstration, Li Can’s team has built an industrial demonstration device for hydrogen sulfide elimination and resource utilization with an annual capacity of 100,000 cubic meters in the coal chemical industry. Adopting a skid-mounted module design, it consists of three main units: hydrogen sulfide oxidation for sulfur production, proton reduction for hydrogen production, and electrochemical cells[2]. The device has operated continuously for more than 1,000 hours, with complete conversion of hydrogen sulfide, hydrogen sulfide content in tail gas below 1ppm, product sulfur purity exceeding 99.95%, and hydrogen purity exceeding 99.999%[2]. This technology provides a key green transformation solution for industries such as natural gas, petrochemicals, and coal chemical engineering, and also provides solid support for the development of high hydrogen sulfide-containing resources and industrial green and low-carbon development[2].

According to Researcher Yu Qingkai, the team expects to promote the industrialization of the technology within the next six months to two years[1]. Specifically, it is planned to implement demonstration applications in Sichuan, a province rich in natural gas resources, in 2026[1]. As a major natural gas resource province, Sichuan has favorable conditions for large-scale demonstration applications, including abundant raw material supply, complete infrastructure, and policy support from local governments.

From the perspective of technology maturity, the current stage is a critical transition from laboratory verification to pilot scale-up. The technical breakthrough in the continuous operation time of cracking reactors is the core variable determining the commercialization process. Once the continuous operation time reaches one month and remains stable, it will mark that the technology maturity meets commercial requirements.

In terms of market layout, the team has formulated a clear hierarchical promotion strategy. First, carry out large-scale production in natural gas production areas, utilizing the raw material advantages of the producing areas to reduce transportation costs and form scale effects[1]. Second, promote national distributed hydrogen production in chemical industry and hydrogen refueling stations with high hydrogen demand, realizing a distributed supply model of “hydrogen production nearby, use nearby”[1].

The business logic of the distributed hydrogen production model is as follows: First, it avoids the safety risks and cost pressures of long-distance transportation of high-pressure hydrogen; second, it can make full use of existing chemical and hydrogen refueling station infrastructure; third, it can quickly respond to changes in market demand and flexibly adjust production capacity layout. This model is particularly suitable for the characteristics of hydrogen-carbon coproduction technology, as the technology has obvious cost and efficiency advantages in distributed scenarios[1].

The hydrogen energy industry has received strong policy guidance and strategic support. Since the “Medium- and Long-Term Plan for the Development of the Hydrogen Energy Industry (2021–2035)” first clarified the energy attribute and strategic positioning of hydrogen energy, the national-level policy system has been improving at an accelerated pace[3]. According to incomplete statistics, as of the end of 2024, a total of over 560 hydrogen energy-related policies have been issued at the national and local levels, with 122 new policies added in 2024 alone[3].

The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China included hydrogen energy in the national forward-looking future industries, providing strong strategic guidance for the development of the hydrogen energy industry[3]. The “Energy Law of the People’s Republic of China (2024)” formally included hydrogen energy in the energy category, laying a foundation for the legalized and standardized development of the industry[3]. Policies such as the “2025 Energy Work Guidance Opinions” and the “Clean Low-Carbon Hydrogen Energy Evaluation Standard (Draft for Comments)” provide support from multiple dimensions including technological innovation, infrastructure construction, standard system, and demonstration applications[3].

Many local governments have successively formulated hydrogen energy industry-related plans, forming a good situation of central-local linkage and competitive development[3]. The top 10 hydrogen energy hot projects in 2025 show three significant characteristics: First, large-scale pilot projects led by the state have become the core driving force, with 41 pilot projects and 9 regional pilots forming a national industrial layout; second, whole-industry chain collaboration has become the mainstream, covering the entire process from wind-solar hydrogen production to storage, transportation and utilization, especially with an increasing proportion of coupling projects between green hydrogen and ammonia, alcohol, refining and chemical industries; third, technological innovation focuses on cost reduction and safety, with key technologies such as off-grid hydrogen production without energy storage, deep underground hydrogen storage, and non-metallic hydrogen transmission pipelines achieving breakthroughs[4].

On December 18, 2025, the alloy solid-state hydrogen storage material production project in the Ganqimaodu Port Processing Park, Bayannur City, Inner Mongolia, was approved for filing, with a total investment of 3.534 billion yuan. It plans to build 96 standardized production lines with an annual output of 15,000 tons of alloy solid-state hydrogen storage materials, and is scheduled to start construction in March 2026 and be completed in May 2027[4]. Similar large-scale hydrogen energy projects are being launched across the country, creating a favorable industrial ecology for the commercialization of hydrogen-carbon coproduction technology.

The release of the “Clean Low-Carbon Hydrogen Energy Evaluation Standard (Draft for Comments)” marks the accelerated progress of the standardization system construction for the hydrogen energy industry[3]. This standard will provide a clear technical evaluation basis for the industrialization of hydrogen-carbon coproduction technology, helping to standardize market order, guide investment directions, and ensure product quality. The improvement of technical standards is crucial for the commercial promotion of emerging technologies, as it can reduce market transaction costs, enhance user confidence, and promote industry chain collaboration.

China’s hydrogen energy industry is in a critical market-driven stage, with the market scale continuing to expand. China’s annual hydrogen output exceeded 36.5 million tons in 2024, ranking first in the world, but most of it comes from fossil energy (about 20.7 million tons from coal-to-hydrogen, about 7.6 million tons from natural gas-to-hydrogen) and industrial by-product hydrogen (about 7.7 million tons)[3]. The output of green hydrogen (hydrogen production via water electrolysis) is about 320,000 tons, with a small base but fast growth, increasing by about 3.6% year-on-year in 2024[3].

From a global market perspective, data from Wind Info shows that the global hydrogen energy battery (fuel cell) market scale is expected to exceed USD 11 billion in 2026, and the domestic market scale in China is expected to maintain a high growth rate, mainly benefiting from the rapid release of demand in non-power sectors such as heavy-duty trucks, cold chain logistics, and green alcohols[5]. Batch deliveries and large-value contracts have frequently emerged in the domestic commercial vehicle sector, with core technologies continuing to break through; international giants are accelerating their layout in the Chinese market, and the global competitive pattern has initially emerged[5].

Compared with traditional hydrogen production technologies, hydrogen-carbon coproduction technology has unique competitive advantages. In terms of environmental performance, the technology achieves zero carbon emissions, avoiding the greenhouse gas emission problem in traditional fossil energy-based hydrogen production processes[1]. In terms of economic efficiency, the technology has more obvious cost and efficiency advantages in distributed application scenarios[1]. In terms of product value, the technology simultaneously produces two high-value products: high-purity hydrogen and high-purity graphite, improving comprehensive economic benefits[1].

From the perspective of the industry chain, hydrogen-carbon coproduction technology fills the technical gap between green hydrogen and traditional gray hydrogen. At a stage when the cost of green hydrogen has not yet fully dropped to be competitive with traditional hydrogen production methods, hydrogen-carbon coproduction technology, as a transitional solution, has important market value. Especially for regions with natural gas resources but without conditions for renewable energy-based hydrogen production, this technology provides an option that balances economic efficiency and environmental protection.

The application scenarios of hydrogen-carbon coproduction technology are continuously expanding. In the transportation sector, after a period of rapid growth, the production and sales of hydrogen fuel cell vehicles have entered a plateau, with approximately 5,500 units produced and sold in 2024, with commercial vehicles (buses, heavy-duty trucks) as the main force[3]. Applications in ships, aviation, and other fields have begun to be explored, and under the guidance of the target of 1 million units in 2035, it remains a key area for breakthrough in the near term[3].

In the industrial sector, process industries such as synthetic ammonia, oil refining, and metallurgy are the main battlefields for green hydrogen to replace gray hydrogen and achieve deep decarbonization[3]. The demonstration of hydrogen metallurgy projects by enterprises such as Baowu and Angang indicates huge hydrogen demand[3]. The high-purity hydrogen produced by hydrogen-carbon coproduction technology can meet the needs of these high-end industrial applications, while the by-product graphite can be used as a carbon material in fields such as new energy batteries and composite materials.

Despite broad prospects, the commercialization of hydrogen-carbon coproduction technology still faces some challenges. First, challenges in technology maturity: the continuous operation time of cracking reactors needs to be further improved to meet the continuity requirements of industrial production[1]. Second, challenges in cost competition: production costs need to be further reduced through scale effects and technological progress. Third, challenges in infrastructure: the cost of storage and transportation accounts for 30% to 40% of the total hydrogen cost, which is a key constraint to industrial scale-up[3].

In response to these challenges, the industry is adopting various response strategies. In terms of technological research, increase R&D investment to break through key technical bottlenecks such as continuous operation and system integration. In terms of cost control, reduce costs through multiple approaches such as large-scale production, material optimization, and process improvement. In terms of infrastructure, accelerate the construction of infrastructure such as pipeline hydrogen transmission and liquid hydrogen storage and transportation to reduce storage and transportation costs[3].

As a cutting-edge technology in the hydrogen energy field, hydrogen-carbon coproduction technology has significant investment value. From the policy perspective, hydrogen energy is included in the national forward-looking future industries and enjoys multi-level policy support. From the market perspective, the global and Chinese hydrogen energy market scales continue to expand, providing a broad market space for new technologies. From the technical perspective, the technology has unique advantages such as zero carbon emissions, high product value, and strong scenario adaptability.

For investors, the following investment opportunities should be focused on: First, the industrialization process of the hydrogen-carbon coproduction technology itself, especially the progress of technical breakthroughs in the continuous operation time of cracking reactors; second, industry chain collaboration opportunities, including links such as equipment manufacturing, engineering construction, and operation services; third, regional demonstration project opportunities, with demonstration application projects in natural gas-rich regions such as Sichuan having high investment value.

Investors also need to pay attention to relevant risk factors. In terms of technical risks: the technology maturity has not yet met commercial requirements, and technical indicators such as continuous operation time need further verification. In terms of market competition risks: green hydrogen technology continues to progress, which may form competitive pressure on hydrogen-carbon coproduction technology. In terms of policy risks: the hydrogen energy industry policy system is still being improved, and policy adjustments may affect the pace of industrial development. In terms of economic risks: the speed of cost reduction may fall short of expectations, affecting the profitability of commercialization.

Based on the above analysis, the commercialization prospects of hydrogen-carbon coproduction technology in Q1 2026 present the following characteristics:

First, technological breakthroughs have entered a critical stage. The team of the Shanghai Institute of Microsystem and Information Technology, CAS, is working to solve the problem of continuous operation of cracking reactors, with the goal of stable continuous operation for one month, which will be an important milestone in improving technology maturity[1]. The technology of Li Can’s team at the Dalian Institute of Chemical Physics, CAS, has verified a continuous operation capacity of over 1,000 hours in industrial demonstration devices[2].

Second, the commercialization path is increasingly clear. It is planned to implement demonstration applications in Sichuan in 2026, and the team expects to promote the industrialization of the technology within the next six months to two years[1]. In terms of market layout, a dual-track strategy of “large-scale production in natural gas production areas + distributed hydrogen production” will be adopted[1].

Third, the policy environment continues to optimize. The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China included hydrogen energy in the national forward-looking future industries, and the “Energy Law of the People’s Republic of China” included hydrogen energy in the energy category, providing strong legal guarantees for industrial development[3].

Fourth, the market prospects are broad. China’s annual hydrogen output ranks first in the world, green hydrogen demand is growing rapidly, and the global hydrogen energy battery market scale is expected to exceed USD 11 billion in 2026[3][5].

Looking ahead, the commercialization process of hydrogen-carbon coproduction technology is expected to make important progress in the following aspects:

In terms of technology, it is expected that the continuous operation time of cracking reactors will achieve a breakthrough in 2026, meeting commercial operation requirements. The technology of the Dalian Institute of Chemical Physics, CAS, has higher maturity and may take the lead in realizing commercial promotion.

In terms of industry, the launch of the Sichuan demonstration project in 2026 will accumulate experience for the large-scale application of the technology. With the successful operation of the demonstration project, it will gradually be promoted to other regions in the country.

In terms of policy, it is expected that more policies supporting the development of the hydrogen energy industry will be introduced, including support measures in technical standards, financial subsidies, and tax incentives.

In terms of market, with the improvement of technology maturity and cost reduction, hydrogen-carbon coproduction technology will be widely used in fields such as distributed hydrogen production, chemical engineering, and hydrogen refueling stations, with its market share gradually expanding.

Overall, as an important path for green hydrogen and carbon production, hydrogen-carbon coproduction technology has broad development prospects under the background of the “Double Carbon” strategy. 2026 will be a key year in the commercialization process of this technology, worthy of focused attention from the industry and investors.

[1] China News Service - Chinese Scientists Break Through Hydrogen-Carbon Coproduction Technology, Zero-Pollution Hydrogen Production Helps Energy Transition (https://www.chinanews.com.cn/gn/2026/01-18/10554059.shtml)

[2] Chinese Academy of Sciences - “Hydrogen Production + Sulfur”, New Technology Supports Industrial Green and Low-Carbon Development (https://www.cas.cn/cg/zh/202601/t20260107_5095421.shtml)

[3] Energy New Media - Hydrogen Energy Faces 5 Major Bottlenecks, How Can China’s Industry Break Through? (https://www.nationalee.com/newsinfo/8932991.html)

[4] China International Hydrogen Energy Exhibition - “Hydrogen” Observation | Panoramic Interpretation of 2025 Hydrogen Energy Policies: From Top-Level Design to Industrial Support (https://www.heieexpo.com/shouye/1112.html)

[5] Securities Times - Commercialization Prospects of Hydrogen Energy Vehicles Are Broad (https://www.stcn.com/article/detail/3585434.html)