Methane pyrolysis, also known as methane thermal decomposition, may theoretically appear to be one of the less complex pathways for producing low-emissions hydrogen because it separates methane using heat rather than combustion. The result is hydrogen and solid carbon instead of hydrogen and a concentrated stream of carbon dioxide. However, Michael Barnard’s analysis, published on August 29, 2026, concludes that the greatest challenge in industrial scaling is not proving the chemical process viable, but finding a sustained market for the large quantity of carbon produced.
The absence of a carbon dioxide stream from the process could eliminate the need for the capture, compression, transport, and geological storage chain associated with blue hydrogen proposals. Hazer Group has also advanced its catalytic application from laboratory chemistry to an operating pilot plant and commercial-scale engineering work in cooperation with KBR. However, process improvements do not eliminate the fundamental relationship between the two products: each tonne of hydrogen generates approximately three tonnes of solid carbon.
Carbon Is Not a Small By-Product
This mass balance means that a plant producing 300,000 tonnes of hydrogen annually would generate approximately 900,000 tonnes of solid carbon, or nearly 2,500 tonnes per day. Hazer is working to develop uses for graphitic carbon in steel, batteries, asphalt, concrete, and other applications. But the existence of these uses does not automatically mean they can absorb production in the required quantity, specifications, location, and price.
Barnard examines a case that appears to be among the best scenarios: a steel plant using hydrogen for the direct reduction of iron while also being able to use some of the graphitic carbon in electric arc furnaces. This could include adjusting the final composition, reducing ferrous oxide, forming slag foam, and supplying part of the process energy.
However, when comparing the mass balance with a steel plant on Stegra’s scale, the hydrogen production required for a plant producing 2.5 million tonnes of steel annually would generate approximately 340,000 to 365,000 tonnes of graphite. By contrast, the plant might consume only 45,000 to 63,000 tonnes of carbon. Even this relatively favorable pairing of hydrogen and carbon leaves around 80 to 90% of the graphite in need of other buyers.
Why Does This News Matter?
The problem is not the absence of markets for carbon, but the mismatch between how supply arises and how demand is formed. Traditional carbon producers increase or decrease their output in response to demand for carbon, whereas demand for hydrogen in methane pyrolysis determines the quantity of carbon produced. As a result, large quantities of carbon may be produced even when the market does not need it at that moment.
Hydrogen is also expensive to transport, which encourages production near the consumer. This means that the location of hydrogen demand may also determine where the carbon emerges, not just how much is produced. The facility must then store, process, and qualify the carbon for specific uses and transport it to a sufficient number of customers on a continuous basis. In practice, the hydrogen facility is no longer merely a gas plant; it also becomes a carbon-materials and logistics company.
Commercial Constraints and Conditions for Success
New carbon materials compete with petroleum coke, anthracite, natural graphite, and synthetic graphite, as well as biochar. The battery industry requires graphite with precise levels of purity, particle size, structure, and electrochemical performance. Asphalt and concrete can use carbon additives, but carbon is not a fundamental component of either material in quantities approaching the assumed production volume.
The analysis does not necessarily view methane pyrolysis as a bad idea. Specific cases could succeed by combining a suitable biogas source, stable industrial demand for hydrogen, and nearby consumers for high-value carbon. Viability could increase if the producer can displace synthetic graphite, coke, or other more emissions-intensive fossil carbon types.
However, the practical message for investors and policymakers is not to count the carbon stream as an automatic revenue source accompanying hydrogen. It should be modeled as an independent market, with testing of grade and specifications, qualification processes, competition with existing materials, storage, transport, substitution value, and the possibility of market saturation. When the co-product is three times heavier than the main product, its market becomes part of the viability of the process itself.