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ETS and Electrification Plan carry significant hydrogen implications
EU ETS
The ETS is the main scheme underpinning Europe’s carbon market. The proposal aims to ensure that the revenues from carbon costs provide tangible results for Europe’s decarbonising industry.
The revision introduces a conditional allowance scheme that ties part of the free allocation to investment in clean processes rather than granting it unconditionally; helping decarbonisation technologies like hydrogen reach final investment decisions faster. The proposal also tightens rules to ensure more revenues go to industrial decarbonisation on the Member State level.
Industrial Decarbonisation Bank (IDB)
As part of the ETS revision, the Commission also proposed the legal basis for a €100 billion Industrial Decarbonisation Bank. The IDB will focus on energy intensive industries, addressing the funding gap linked to commercial risks of mature projects to enable large-scale deployment and market uptake of decarbonisation solutions.
The proposal now moves to co-decision between the European Parliament and Council, with negotiations expected through 2026 and 2027 and implementation targeted for 2028. For investment certainty and for a predictable and robust carbon price, a swift legislative process is advised.
Electrification Action Plan
On 17 July the European Commission also published its Electrification Action Plan, which aims to accelerate the shift from fossil fuels to electricity across end-use sectors: industry, transport and buildings.
The Plan proposes a new electrification target for final energy consumption by 2040 of 46%, subject to an impact assessment by the Commission as part of the Energy Union Package.
The Plan also recognises the need to bring a lot more flexibility into a renewables-dominated system; setting targets to develop storage, and industrial demand flexibility, where hydrogen is identified as key contributor. The EC commits to a revision of the EU Hydrogen Strategy in 2026/2027 to reflect this role. The EAP is accompanied by a new Proposal for a Regulation amending Regulation (EU/2019/943) for future-proof network charges.
