Understanding the EU regulatory landscape
The EU has developed a comprehensive framework to support the uptake of clean hydrogen through its Hydrogen Strategy (2020), the Fit-for-55 policy package (2021) and the REPowerEU plan (2022).
This framework sets targets that the EU must achieve:
- 10 million tonnes of renewable hydrogen produced in the EU by 2030
- 10 million tonnes of renewable hydrogen imported by 2030
- 40 GW of renewable hydrogen electrolysers to be installed by 2030
- Reducing GHG emissions in the EU by 55% by 2030 compared to 1990, with the development of an European clean hydrogen market playing a key role.
This framework is supported by a number of regulatory and policy measures that aim to boost supply and demand and develop the required infrastructure and assets. Examples of key measures are described below.
Supply-focused measures
European Hydrogen Bank
The European Hydrogen bank aims to create investment security and business opportunities for European and global renewable hydrogen production by:
- Boosting domestic renewable hydrogen production through auctions – starting with the first auction in Autumn 2023 which has been allocated €800 million.
- Supporting international renewable hydrogen production through measures such as offering a green premium for renewable hydrogen imports. These measures will be supported by clean hydrogen partnerships.
Other investment measures
- Important Projects of Common European Interest (IPCEI) on hydrogen provide investment support for innovative projects across the supply chain.
- EU funds have been mobilised to support investment measures, including from the following programmes and institutions: Horizon Europe, ETS Innovation Fund, Connecting Europe Facility for Energy (CEF-E), Connecting Europe Facility for Transport (CEF-T), InvestEU, Life Programme, European Global Hydrogen Facility, Recovery and Resilience Facility (RRF), State Aid and the European Investment Bank (EIB), as well as the European Hydrogen Bank and IPCEI.
- Hydrogen valley roadmap aims at enhancing knowledge, research, and development hubs across the EU and outlines the strategic priorities and actions needed to reach the REPowerEU objectives.
Import corridors: The RePowerEU plan commits to developing import corridors via the Mediterranean, North Sea and ultimately Ukraine.
Further supply measures
- Net Zero Industry Act, which includes measures aimed at promoting investments in the production capacity of products that are key for meeting net zero, including electrolysers and fuel cells;
- The Offshore Renewable Energy Strategy, which supports indirect electrification through renewable hydrogen and other decarbonised gases.
Demand-focused measures
Technology targets
- Renewable Energy Directive: The revised directive (RED III) aims to boost demand through the technology-based targets for 2030:
- Industry must procure at least 42% of its hydrogen from renewable fuels of non-biological origin (RFNBOs) by 2030, though countries that can achieve a fossil-free hydrogen mix of at least 77% by 2030 can see that target reduced by 20%.
- In transport, at least 5.5% of the fuel mix of fuel suppliers must be composed of advanced biofuels and RFNBOs (combined binding target). Even though fuel suppliers are free to choose their preferred fuel, they must guarantee at least 1% is sourced from RFNBOs.
- Alternative Fuel Infrastructure Regulation: The revised AFIR regulation sets several mandatory infrastructure targets, including a requirement for Member States to ensure the construction of at least one gaseous hydrogen refuelling station (HRS) every 200 km along the TEN-T core network and in every urban node.
Carbon pricing and levies
- EU Emission Trading System (ETS), which makes renewable hydrogen production facilities eligible for free allowances, and ensures carbon is fairly priced for fossil-based hydrogen production facilities.
- Recast Energy Taxation Directive, granting minimum tax rates to renewable hydrogen and derivatives fuels.
- EU Carbon Border Adjustment Mechanism (CBAM), which will ensure the cost of imported hydrogen includes a carbon price equivalent to the ETS.
Further demand-focused legislative initiatives include:
- Delegated regulations setting requirements for RFNBOs to be considered fully renewable and establishing a methodology to assess GHG emission savings;
- ReFuelEU Aviation and FuelEU Maritime initiatives setting minimum obligations and standards that will increase the use of hydrogen-based fuels in the aviation and maritime sectors;
- Recast Regulation and Directive on the internal markets for renewable and natural gases and for hydrogen, creating an EU legislative framework for hydrogen networks;
- Recast Regulation on CO2 emission standards for heavy-duty vehicles, setting targets on emissions reductions.
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