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Hydrogen and Decarbonised Gas Market Package
As part of the European Green Deal and the Fit for 55 package, the Commission released in December 2021 its Hydrogen and Decarbonised Gas Market package, consisting of revisions of the Gas Directive and Gas Regulation, which set the common rules for the internal market in natural gas, and with the proposed revision also for renewable gases and hydrogen. The Package aligns the existing legislation with the Clean Energy Package provisions on incentives for clean energy solutions, prosumer behaviour, easier switching of providers and gives mandate to the Commission to define low carbon hydrogen. The role of low-carbon hydrogen as an enabler of decarbonisation in the short and medium term is foreseen, with the intent to support the uptake of renewable fuels such as renewable hydrogen. The Package has been officially adopted in August 2024, and Member States have now until August 2026 to implement it.
In general, the enshrined internal market rules for hydrogen are similar to the existing ones for the natural gas and electricity sectors. Yet, they also establish a degree of flexibility to ramp-up the development of the hydrogen market.
Networks
The two legislative files lay down the common rules for the transport, supply, and storage of hydrogen. Furthermore, the rules on the organisation and functioning of the sector, including market design, main regulatory principles, such as unbundling and third-party access are also defined.
Moreover, the regulation enshrines the establishment of an independent body for hydrogen networks - the European Network for Network Operators of Hydrogen (ENNOH). Its tasks will include writing the relevant non-binding ten-year network development plans for hydrogen, cooperating with ENTSO-E and ENTSO-G, and developing recommendations for technical cooperation, amongst others. ENNOH is expected to be operational by the end of 2025.
The Package distinguishes between hydrogen transmission and distribution networks to enable efficient unbundling of new infrastructure. It also introduces measures to accelerate the hydrogen network, such as extending exemptions from unbundling and third-party access for existing networks and factoring heating and cooling plans into distribution network development.
Low-carbon fuels definition
The Gas Directive includes a first outline of a definition for ‘low-carbon fuels’, ‘low-carbon hydrogen’ and ‘low-carbon gases’. Concerning low-carbon hydrogen, a 70% GHG emission reduction threshold is defined in the Directive. However, the final Package left the definition of the exact content of the methodology used to count the threshold to be defined in a delegated act by the Commission, which entered into force in November 2025.
According to the delegated act, the production of the hydrogen molecule needs to achieve a 70% greenhouse gas emissions reduction against a fossil fuel comparator set at 94gCO2e/MJ. Low-carbon hydrogen would therefore result in no more than 28.2gCO2e/MJ across full lifecycle of production process, measured on a monthly basis (with certain metrics based on annual data). The act also accounts for a wide range of fuels and feedstocks to produce low-carbon hydrogen. Importantly, the DA allows for natural gas with CCS and grid-sourced power, while it opens a consultation on nuclear power-purchase agreements by June 2026 and will review the impact by 2028. The rules apply both to domestic hydrogen production and internationally produced hydrogen for EU import.
Markets
There are no industry offtake targets or direct funding for hydrogen, only entry-exit tariff discounts for renewable and low-carbon gases. A five-year pilot project will link supply and demand through an online platform run by the European Hydrogen Bank, enabling producers and buyers to match offers and requests. Calls for infrastructure projects will also be held, with the mechanism set to launch in September 2025.
The regulation sets a 2% hydrogen blending limit by volume in natural gas at interconnection points. TSOs can reject gas above this ratio but must accept blends at or below 2%. This prevents market restrictions and protects end-users in areas with slower hydrogen adoption.
On the question of cross-subsidisation, the regulation emphasises the incompatibility of cross-subsidies with the principle of cost-reflective tariffs. In exceptional cases, the benefits of the former are acknowledged in terms of societal benefits and predictable tariffs for early network users. The final decision on this topic lies with the Member States.
Consumers
On the consumer side, the package includes several provisions related to consumer protection, which already exist in the electricity sector. These include faster switching of providers, access to comparison tools for households, billing information and facilitation of smart meters for natural gas and hydrogen. In addition, the Package also includes a provision stipulating that long-term contracts for unabated fossil gas should not last beyond 2049.
What’s in it for hydrogen?
The Package clearly recognises the importance of hydrogen as a key vector for the decarbonisation of the natural gas sector. Nevertheless, the development of the hydrogen market is taken a step further. This is done through creating a clear regulatory framework which is applicable for the next regulatory cycle. This set of common European rules will bring clarity to the sector and create legal certainty for investors along the entire hydrogen value-chain. It is expected that the provisions of the Package will in effect lower the administrative costs relevant to hydrogen development.
Links to Legislation and additional information:
Hydrogen and decarbonised gas market package
Directive on common rules for the internal markets in renewable and natural gases and in hydrogen
Regulation on the internal markets for renewable and natural gases and for hydrogen
Regulation on the internal markets for renewable and natural gases and for hydrogen
