Germany will put 900 million euros ($1 billion) into a funding scheme to support green hydrogen, the economy ministry said, as the new government seeks to boost investment in climate protection.

The H2Global project is designed to speed up the global market ramp-up of green hydrogen by using a "double auction". Under the scheme, hydrogen or hydrogen derivatives are bought cheaply on the world market and sold to the EU's highest bidder.

As Germany's new government seeks to decarbonise Europe's biggest economy, renewable hydrogen will play a crucial role, said Economy and Climate Protection Minister Robert Habeck.

"We will in future have high demand for green hydrogen and need imports as well as production in Germany," he said in a statement.

"So we are starting to ramp up the international hydrogen economy and to build long-term value and supply chains through the H2Global instrument," he added.

Renewable hydrogen can be produced through the electrolysis of water with electricity from renewable sources. The process emits almost no greenhouse gases.

The scheme, which will be managed and implemented by a special-purpose entity named HINT.CO, will initially result in losses as the production cost of green hydrogen is still high.

The German government's funds will be used to offset those losses for a maximum of 10 years.

"Over time, the losses will shrink as the willingness to pay for sustainable energy sources rises," the ministry said.