A $1.1bn plan announced by Labor to build up Australia’s hydrogen industry has been welcomed by environmental groups, so long as it is backed by renewable power.

Labor said on Tuesday its national hydrogen plan would “supercharge” Australia’s renewable energy industry and create thousands of regional blue-collar jobs, particularly in Queensland.

Under the proposal, a Labor government would allocate $1bn in funding from the Clean Energy Finance Corporation for clean hydrogen development and invest up to $90m from the Australian Renewable Energy Agency for research, demonstration and pre-commercial deployment of hydrogen technologies.

It would also establish a $10m Arena funding round for hydrogen refuelling infrastructure and set up a hydrogen “innovation hub” in Gladstone with an initial investment of $3m.

Labor said that the direct investment from the policy was focused on the production of hydrogen gas using renewable energy, but the platform did include regulatory reforms and infrastructure investment that could assist hydrogen production from non-renewable sources.

Arena is restricted from supporting non-renewables technology and the legislation for the CEFC prevents it from investing in carbon capture and storage.

“Developing a hydrogen industry will deliver new opportunities for manufacturing, transport and electricity generation,” Shorten said in a joint statement with other Labor ministers. “As the global demand for hydrogen surges to an expected $215bn market by 2022, Australia is uniquely placed to benefit from the development of this new, job-generating industry.”

Hydrogen gas can be made from water, coal or natural gas.

While the definitions vary, generally “green” or clean hydrogen is made from water through electrolysis using electricity from renewable energy.

“Blue” hydrogen is made from natural gas and “brown” hydrogen is made from coal.

Both blue and brown hydrogen production usually uses electricity from fossil fuels and, for this to be zero-carbon, the process must use carbon capture and storage to offset the resulting greenhouse gases.

Some of the proposed regulatory reforms from Labor would support the use of existing gas pipelines for hydrogen, support the shipping of hydrogen, and the storage of CO2 from blue and brown hydrogen production.

Richie Merzian, the climate and energy program director at the Australia Institute, said the CEFC was well placed to support clean hydrogen development and that hydrogen made using water and renewable energy was “a rare and opportune industry for Australia to transition its energy exports”.

But he said it would “be disappointing if any proposed support for the new industry would go to hydrogen made using gas or coal, on the basis of businesses making dubious promises to capture and bury resulting greenhouse gases”.

“Australia Institute research has shown the federal government has committed over $1.3bn to carbon capture and storage and has nothing to show for it, with most projects failing,” he said. “Solar, wind and hydro energy should be powering the hydrogen industry and we see no role for coal with carbon capture and storage.”

The Australian Conservation Foundation said a $1.1bn commitment to the industry was “a win for the environment, regional communities and job creation so long as it backed by renewable power”.

“Australia has an enormous opportunity to export our virtually limitless wind and solar energy to power-hungry neighbours, particularly across the Asia-Pacific region, through green hydrogen,” said Suzanne Harter, the ACF’s climate change campaigner.

She said Australia had some of the best clean energy sources in the world and the cost of producing hydrogen with renewables had fallen dramatically in recent years.

“But in a world where we must urgently stop climate pollution to limit the damage from global warming, only hydrogen produced from clean energy sources, not polluting coal and gas, is acceptable,” Harter said.