We used the TIMER energy model to explore the potential role of hydrogen in the energy systems of India and Western Europe, looking at the impacts on its main incentives: climate policy, energy security and urban air pollution. We found that hydrogen will not play a major role in both regions without considerable cost reductions, mainly in fuel cell technology. Also, energy taxation policy is essential for hydrogen penetration and India's lower energy taxes limit India's capacity to favour hydrogen. Once available to the (European) energy system, hydrogen can decrease the cost of CO2 emission reduction by increasing the potential for carbon capture technology. However, climate policy alone is insufficient to speed up the transition. Hydrogen diversifies energy imports; especially for Europe it decreases oil imports, while increasing imports of coal and natural gas. For India, it provides an opportunity to decrease oil imports and use indigenous coal resources in the transport sector. Hydrogen improves urban air quality by shifting emissions from urban transport to hydrogen production facilities. However, for total net emissions we found a sensitive trade-off between lower emissions at end-use (in transport) and higher emissions from hydrogen production, depending on local policy for hydrogen production facilities. (C) 2008 Elsevier Ltd. All rights reserved.