Hydrogen is quickly rising as a crucial power supply within the battle towards local weather change, because it produces no greenhouse gasoline (GHG) emissions and generates minimal air pollution when utilised. Furthermore, hydrogen holds substantial potential for widespread utility throughout numerous industries, particularly in sectors which are difficult to decarbonise, akin to transport and development.
Nonetheless, not all strategies of hydrogen manufacturing are environmentally helpful. Gray hydrogen, at the moment the most typical manufacturing technique, is derived from fossil fuels with out capturing the GHGs emitted in the course of the course of. Blue hydrogen represents an enchancment, as it’s produced utilizing pure gasoline as an enter, mixed with carbon seize and storage to scale back carbon emissions.
The one technique that absolutely aligns with the purpose of zero GHG emissions throughout manufacturing is renewable hydrogen, sometimes called ‘inexperienced’ or ‘clear’ hydrogen. This technique depends on renewable electrical energy to extract hydrogen from water (H₂O) by means of a course of generally known as electrolysis.
Regardless of the clear environmental benefits of renewable hydrogen, it nonetheless constitutes solely a small fraction of worldwide hydrogen manufacturing. Based on the Worldwide Power Company (IEA), in 2023, 99% of hydrogen manufacturing globally was derived from fossil fuels – both gray or blue hydrogen – with lower than 1% categorized as renewable hydrogen.
In response to this, the European Union (EU) has established a coverage and authorized framework geared toward accelerating the expansion of the renewable hydrogen sector, each inside the EU and internationally. The overarching goal of this framework is to advertise the manufacturing and consumption of low-carbon and renewable hydrogen throughout the EU.
This submit first supplies an outline of the regulatory framework for renewable hydrogen within the EU. It then explores the first regulatory limitations which are hindering the sector’s progress and have led to the inclusion of low-carbon hydrogen as a key expertise. Lastly, it discusses potential authorized measures that would assist overcome these limitations and stimulate the event of the renewable hydrogen business.
The European Fee’s Insurance policies to Foster Renewable Hydrogen
The 2019 European Inexperienced Deal was the primary EU instrument to recognise hydrogen as important to the EU’s local weather neutrality targets. On this bold plan to scale back GHG emissions, the Fee recognized growing a renewable hydrogen market as essential for supplying clear, reasonably priced and safe power.
In 2020, the Fee launched the Hydrogen Technique. Though a soft-law instrument, it laid the muse for hydrogen regulation within the EU. The technique supplied a roadmap to speed up renewable hydrogen adoption and decarbonise numerous sectors by 2050, with twenty key actions organised into three phases (2020–2050).
The Hydrogen Technique launched the primary official definition of renewable hydrogen as “hydrogen produced by means of the electrolysis of water (in an electrolyser, powered by electrical energy), and with the electrical energy stemming from renewable sources. The complete life-cycle greenhouse gasoline emissions of the manufacturing of renewable hydrogen are near zero.”
Additionally in 2020, the Fee expressed curiosity in growing low-carbon hydrogen applied sciences in its Technique for Power System Integration. It acknowledged that low-carbon hydrogen would initially be wanted to interchange current hydrogen and obtain economies of scale for renewable hydrogen.
The Russian-Ukrainian battle additional influenced EU renewable hydrogen coverage. In response to power provide issues, the Fee launched the REPowerEU Plan in 2022, aiming to considerably speed up renewable hydrogen improvement. This plan set an bold 2030 goal: to domestically produce 10 million tonnes of renewable hydrogen and import an extra 10 million tonnes. By the use of comparability, Europe produced solely 20 thousand tonnes in 2022.
In 2023, the Fee already recognized regulatory limitations to renewable hydrogen improvement in its Inexperienced Deal Industrial Plan for the Web-Zero Age. This plan seeks to simplify laws and stimulate funding in renewable hydrogen by means of the InvestEU Programme and the Innovation Fund, whereas additionally introducing measures to advertise state help.
Most not too long ago, in 2025, the Fee unveiled the Clear Industrial Deal, prioritising EU competitiveness amidst geopolitical tensions, gradual financial progress, and technological competitors. The Fee reaffirmed its help for low-carbon hydrogen applied sciences, whereas additionally proposing a evaluation of renewable hydrogen laws and a research to evaluate the effectiveness of the present framework.
The Fee’s coverage devices illustrate how factual circumstances and political priorities have formed momentum for each renewable and low-carbon hydrogen markets. Over a span of six years, the sector has been addressed in eight distinct coverage paperwork, every reflecting evolving challenges that complicate compliance with numerous tips and goals.
Early devices primarily promoted the emergence of the renewable hydrogen market. They recognised the difficulties in scaling up this nascent business and introduced authorized and monetary measures improve manufacturing each inside the EU and in third nations. More moderen communications have highlighted the function of low-carbon hydrogen, largely in response to commerce tensions and pushed by the EU deal with competitiveness. The Fee has expressed that low-carbon hydrogen is critical to upscale renewable hydrogen manufacturing, whereas exhibiting concern over the sector’s gradual progress. For that reason, the Fee is now open to reviewing the renewable hydrogen regulatory framework.
EU Authorized Foundations for Renewable Hydrogen
The EU legally regulates renewable hydrogen as a Renewable Gasoline of Non-Organic Origin (RFNBO), outlined in Article 26(3) of the Directive (EU) No. 2018/2001 (Renewable Power Directive, RED). Primarily, RFNBOs check with liquid or gaseous fuels produced from renewable hydrogen.
The primary EU-level legislative motion to advertise the emergence of a renewable hydrogen business was the Fee’s adoption of two delegated laws in June 2023, below Articles 27(6) and 29a(3) of the RED.
Fee Delegated Regulation (EU) No. 2023/1184 establishes a technique for recognising electrical energy as absolutely renewable when utilized in RFNBO manufacturing. Beneath EU regulation, the electrical energy supply determines whether or not hydrogen manufacturing – and finally RFNBOs – qualifies as renewable.
To make sure hydrogen manufacturing is assessed as renewable, three cumulative standards have to be met:
Additionality: Hydrogen manufacturing have to be accompanied by new renewable electrical energy era capability.
Temporal correlation: Hydrogen have to be produced throughout the identical interval as renewable power era.
Geographical correlation: Renewable electrical energy installations have to be both in the identical bidding zone because the hydrogen facility, or in a neighbouring bidding zone the place electrical energy costs are equal or larger.
Moreover, electrolyzers – gadgets that cut up water into hydrogen and oxygen – have to be equipped with renewable electrical energy by way of one in every of three pathways:
Direct bodily connection to a renewable electrical energy supply, e.g. photo voltaic or wind farms.
Grid reference to a Energy Buy Settlement from a non-subsidised renewable power plant.
Grid connection in a bidding zone with low emissions depth.
The defining standards for RFNBO manufacturing are tough and technical, arising from the need of making certain that the power used is sourced from further renewable electrical energy capability. In any other case, the usage of non-additional renewable electrical energy would not directly result in a rise in fossil-based electrical energy use in different market segments.
To facilitate compliance, Article 9 of Delegated Regulation 2023/1184 permits renewable hydrogen producers to exhibit adherence to those standards by means of nationwide or worldwide voluntary certification schemes recognised by the Fee.
Fee Delegated Regulation (EU) No. 2023/1185 supplies an in depth methodology for calculating life-cycle GHG emissions of renewable hydrogen. The regulation ensures that GHG emissions financial savings in hydrogen manufacturing have to be no less than 70% in comparison with the fossil gasoline alternate options. The methodology contains upstream emissions, emissions from grid electrical energy, these related to the conversion course of, and emissions from transporting the ultimate product to end-users.
The EU’s second legislative motion was the third modification to the RED, printed in October 2023. The modification raised the EU’s binding renewable power goal for 2030 to no less than 42.5%.
Relating to renewable hydrogen, Article 7 contains it within the calculation of every Member State’s share of renewable power. Furthermore, particular sub-targets for renewable and low-carbon hydrogen had been launched in each the business and transport sectors. Based on Article 22a, the business sector should be certain that no less than 42% of its hydrogen comes from RNFBOs by 2030, and 60% by 2035. Article 25 establishes that the transport sector should be certain that no less than 5.5% of its gasoline combine consists of superior biofuels and renewable hydrogen by 2030. This can be a mixed binding goal, with a minimal of 1% particularly from hydrogen.
The third EU legislative improvement was the adoption of the Hydrogen and Decarbonised Gasoline Market Bundle in Might 2024, comprising Directive (EU) No. 2024/1788 and Regulation (EU) No. 2024/1789. These legislative information revised and up to date gasoline market guidelines, introducing a brand new regulatory framework for devoted hydrogen infrastructure, modelled on the present gasoline community.
Directive (EU) No. 2024/1788, in Preamble 13, states: “Renewable hydrogen is probably the most suitable with the Union’s local weather neutrality and 0 air pollution targets”. Nonetheless, it acknowledges that renewable hydrogen alone might not scale quick sufficient to fulfill rising demand. Accordingly, the Directive formally recognises low-carbon hydrogen, outlined in Article 2(11) as hydrogen derived from non-renewable sources that achieves 70 % GHG emissions financial savings relative to the fossil gasoline comparator.
The next is a basic overview of the EU Hydrogen Regulatory Framework:
Regardless of the Guidelines Already Being in Place, the Market Has Developed Slowly
For the reason that launch of the European Inexperienced Deal six years in the past, the EU has established a posh and mature regulatory framework to help renewable hydrogen’s progress. This framework has supplied regulatory certainty to market contributors, as it’s each detailed and partially builds on gasoline market laws. Contemplating its extent, established guidelines elaborated technical and complete standards for hydrogen manufacturing to be thought of renewable. Relating to its alignment with the gasoline market, it applies comparable gasoline community guidelines to hydrogen networks, notably when it comes to non-discriminatory entry, similar use of permits and the creation of a Hydrogen Community Operators analogous to the Gasoline Community Operators.
The EU has positioned itself among the many world leaders – alongside the US, China and Japan – of the renewable hydrogen business, performing swiftly to manage its inside market. Moreover, it goals to determine manufacturing requirements for the worldwide enterprise. Article 1 of Delegated Regulation 2023/1184 affirms this ambition, stating that its guidelines “shall apply no matter whether or not renewable hydrogen is produced inside or exterior the territory of the Union.”
Regardless of the regulatory efforts, renewable hydrogen sector inside the EU and globally is having problem taking off. As proven by the IEA, hydrogen demand has solely elevated barely during the last 5 years, and present projections of renewable hydrogen manufacturing counsel that we’re removed from reaching the 2030 targets established within the REPowerEU Plan.
Moreover, demand stays concentrated in conventional purposes, with most hydrogen nonetheless produced from fossil fuels. Furthermore, demand in hard-to-decarbonise sectors akin to transportation and development remains to be in a nascent stage. The low demand in these sectors is hindered by numerous elements, together with the absence of a longtime market and the dearth of infrastructure. Within the transportation sector, the adoption of hydrogen relies upon, along with numerous technological elements akin to automobile measurement and driving profile, on the worth ranges of the completely different power carriers.
© IEA, World Hydrogen Evaluate 2024.
Geopolitical tensions have additionally contributed to gradual market improvement. Commerce disputes with the US, Russia, and China have led the EU to shift its focus towards competitiveness, at instances sacrificing sustainability priorities. The current Clear Industrial Deal displays strain from EU hydrogen stakeholders to combine low-carbon hydrogen as a legitimate expertise choice to develop. Beforehand seen as a complementary resolution to RFNBOs, low-carbon hydrogen has gained prominence on account of commerce issues.
Accordingly, in September 2024, the Fee launched a session on a draft methodology for low-carbon hydrogen. Though the delegated regulation has but to be adopted, the Fee dedicated to conclude this course of inside the 12 months. EU’s method is now on de-risking and accelerating the uptake of each renewable and low-carbon hydrogen, even when this will gradual progress towards full carbon neutrality within the power sector. This emphasis carries inherent dangers: low-carbon hydrogen – whether or not produced from fossil fuels with carbon seize or by way of electrical energy – nonetheless emits GHGs, providing 70 % financial savings in contrast with gray hydrogen.
Whereas not very best for long-term local weather neutrality, the Fee more and more sees low-carbon hydrogen as essential to speed up renewable hydrogen market improvement because it may assist technological innovation and scale back prices. The upcoming low-carbon hydrogen regulation needs to be just like the renewable hydrogen framework, being pragmatic, technology-neutral and honest throughout the worth chain.
A Actuality Evaluation – Time for Change?
With the context of a gradual market improvement and the Fee’s openness to low-carbon hydrogen, consideration has more and more turned to the elements hindering renewable hydrogen progress. EU hydrogen stakeholders now query excessive funding prices, technological innovation gaps, early-stages of economies of scale and regulatory complexity.
Whereas it has been acknowledged that the Fee established a sturdy regulatory framework for a future mature hydrogen market, issues have arisen relating to the untimely implementation of such an elaborate regime in an business that is still in its early levels. The complexity of the factors could also be one motive why few EU tasks are in operational section, with builders struggling to interpret and implement the framework.
As an example, as recognized all through the evaluation, the factors for classifying hydrogen as renewable – a part of the RFNBO regulation – are complicated each theoretically and in utility. Renewable hydrogen tasks have confronted difficulties in deciphering and assembly the requirements established within the Delegated Regulation 2023/1184, and to use the Delegated Regulation 2023/1185 methodology for GHG accounting throughout the hydrogen life-cycle.
One main problem is making certain that EU guidelines don’t discourage hydrogen producers exterior the EU. Overly stringent and sophisticated necessities may make them promote hydrogen – and its derivatives – in much less regulated markets, bypassing the Union on account of difficulties in understanding and making use of EU requirements. Balancing stringent EU laws with a aggressive world hydrogen market is essential, particularly given the REPowerEU Plan’s recognition that imports will probably be important for the EU to attain GHG emissions discount targets and carbon neutrality by 2050.
Equally, regardless of the institution of hydrogen infrastructure laws within the Hydrogen and Decarbonised Gasoline Market Bundle, the bodily infrastructure itself stays underdeveloped. Analysis signifies that we’re nonetheless within the experimental section regarding the usage of hydrogen in pipelines, the creation of import routes, and intra-EU corridors.
Consequently, European hydrogen stakeholders have more and more known as for a ‘actuality test’ on the EU’s regulatory framework for renewable hydrogen. They argue that its complexity and extensiveness have made it tough for a lot of tasks to achieve the operational section, contributing to the sector’s gradual market improvement.
Drawing on Mario Draghi’s report and the EU Aggressive Compass, stakeholders issued a joint assertion urging a reassessment of renewable hydrogen laws. They advocate for creating cost-competitive manufacturing circumstances and have requested the Fee to conduct an affect evaluation of present renewable hydrogen classification standards, evaluating their impact on prices, GHG emission financial savings, and the broader power system. Based mostly on these findings, stakeholders are calling for fast motion to deal with regulatory limitations recognized.
Nonetheless, regulatory change carries threat. Important long-term investments have already been made by pioneers within the sector, and altering the foundations at this stage may jeopardise market improvement, rising regulatory uncertainty amongst early buyers who took preliminary dangers. Nonetheless, if the laws’ affect evaluation result in focused regulatory revisions that don’t undermine current tasks, it may encourage new investments whereas supporting ongoing initiatives.
According to this attitude, Article 22b of the RED permits Member States to scale back their renewable hydrogen sub-target within the business sector by 20% in 2030 – as a substitute of 42% –, supplied they’re on monitor to fulfill their general renewable power targets and keep a low share of hydrogen manufacturing from fossil fuels: beneath 23% in 2030. Due to this fact, if there are some particular obstacles with this power supply, an exemption is contemplated in present hydrogen guidelines. Whereas this exemption mechanism supplies flexibility, the power of Member States to navigate this path stays unsure, given their ongoing struggles to fulfill their renewable power targets.
In conclusion, the EU has developed a complete and superior regulatory framework to foster the expansion of a renewable hydrogen market. Nonetheless, regulatory flexibility might now be essential to deal with the gradual tempo of market improvement. A proper affect evaluation of the present laws could be a constructive subsequent step, making certain that essential changes are made to enhance market viability.
Lastly, whereas selling low-carbon hydrogen is changing into more and more necessary, it ought to solely progress if it clearly contributes to the overarching purpose: the institution and long-term success of the renewable hydrogen sector, enabling the EU to fulfill its carbon neutrality targets.
Stefan Goecke is an LL.M. scholar in Regulation and Sustainability at Utrecht College. He has stable expertise in regulated markets and public regulation, having labored as a lawyer in Chile. His analysis has targeted on sustainability issues, exploring intersections with financial fields.
