The Institute of Public Policy Research has also called for the abolition of fuel duty and VED for the ultra-clean transport.
It says a Hydrogen Task Force should be introduced to launch a 10-year strategy to develop demand for the fuel.
Hydrogen can power electric fuel cells, which use the fuel to generate electricity, or internal combustion engines, such as the BMW 7-series which will be touring the UK.
According to a report from the IPPR, bus fleets will be the first to convert in large numbers, joined by vans, particularly in the public sector. However, it could be 25 years before the market for hydrogen-powered cars takes off.
Report author Julie Foley said: 'The UK is lagging behind countries such as the US, Germany and Japan on Government-led research and development into hydrogen.
'The Government should send representatives to participate in the development of standards within Europe and internationally. Hydrogen should have zero fuel duty for the lifetime of a Parliament.
'Pilot schemes should be placed where they will get a lot of use, such as taxis, buses and airport transfer vehicles.'
Westminster City Council has already made the first step as it has a fuel cell-powered vehicle on its fleet.
For a copy of H2: Driving the Future, contact the Institute of Public Policy Research at obtained at www.ippr.org.uk