This is an extract from a recent report “2024 State of the European Hydrogen Market Report” by the Oxford Institute for Energy Studies. It identifies and provides an overview of the policies containing provisions on hydrogen, specifying which aspects of hydrogen they address, and how they impact the components (supply, demand, infrastructure) of the EU hydrogen market. Then it offers an insight into the financing of the EU hydrogen framework, categorising the instruments available according to the type of support they provide, their deployment stage, the technologies they cover, and whether they are open to applications from all EU Member States.

Overview: The Table below classifies the policies which contain provisions on hydrogen according to whether they are impacting the supply, demand and/or infrastructure. 

EU Hydrogen Strategy

The Hydrogen Strategy serves as an initial long-term policy declaration by proposing a strategic roadmap for hydrogen uptake in the EU economy. As such, it elaborates on the technological deployment phases, supporting policy framework, market and infrastructure development, research and innovation opportunities, and international dimension. It set an intermediate 2030 objective of up to 10 million tonnes of renewable hydrogen produced in the EU to reach carbon neutrality in 2050.

Low-carbon hydrogen is considered as a transitional energy source. On hydrogen demand, the Strategy envisages the need for dedicated demand-side policies for industrial demand to gradually include new applications, including steelmaking, refineries, chemical applications and transport applications. On the supply side, the importance of developing and scaling up the hydrogen supply chain is mentioned. Finally, the Strategy recognized the need for an EU-wide logistical infrastructure which is key to transport hydrogen from the areas where it is produced to the areas where it is needed, linking producers and consumers.

EU Taxonomy

The objective of the EU Taxonomy is to establish a classification system that identifies which economic activities can be considered environmentally sustainable, within the framework of the European Green Deal. In particular, the EU Taxonomy aims to help companies in making informed sustainable investment decisions, be eligible for green bonds, and limit the risk of “greenwashing”. This is in contrast to a market-based approach that would be focused on emissions intensity only. 

The production of hydrogen and other hydrogen-based fuels can be considered sustainable under the EU Taxonomy even if the energy used is not renewable, as long as the product achieves a 70 per cent reduction in life cycle GHG emissions compared to the fossil fuel comparator of 94 g CO2e/MJ 14(28.2 g CO2e/MJ). By providing a list of environmentally sustainable economic activities, the EU taxonomy will have an impact on investments, redirecting them to those activities that are included in the scope of the regulation.

Fit for 55 package

The Fit for 55 package does not have a specific directive/regulation on hydrogen. The EU hydrogen regulatory framework is scattered across the building blocks of the Fit for 55. The regulations that directly concern hydrogen are:

a) Hydrogen and Decarbonised Gas Market package revision: Enabling the market to decarbonise gas consumption, ensuring energy security, facilitating the establishment of optimal and specialised infrastructure for hydrogen to ensure a more integrated network planning between electricity, gas, and hydrogen networks. 

The Hydrogen and Decarbonised Gas Market package establishes a system of terminology and certification of low-carbon hydrogen and low-carbon fuels. To be deemed as such, low-carbon hydrogen shall meet a GHG emission reduction threshold of 70 per cent vs the fossil fuel comparator. However, this definition is incomplete until the Delegated Act (DA) that will specify the methodology to assess the GHG emissions savings from low-carbon fuels is published. When it is published, producers will have to comply with the emissions thresholds stated in the Hydrogen and Decarbonised Gas Market package. 

b) Renewable Energy Directive: Setting a legal framework for the development of clean energy across all sectors of the EU economy.

  1. RED II delegated Acts: The first Delegated Act defines under which conditions hydrogen, hydrogen-based fuels or other energy carriers can be considered as Renewable Liquid and Gaseous Fuels of Non-Biological Origin (RFNBOs). In particular, the rules aim to ensure that RNFBOs are only sourced from “additional” renewable electricity and comply with temporal and geographical correlation criteria. The second Delegated Act provides a methodology for calculating lifecycle GHG emissions for RFNBOs. This methodology considers the whole lifecycle of the fuels to calculate the emissions and the associated savings. In particular, using recycled-carbon fuels should lead to a minimum 70 per cent decrease in GHG emissions compared to the fuels they replace.
  2. Recast Renewable Energy Directive (RED III): The Directive mandates that the EU’s energy mix be composed of at least 42.5 per cent renewable energy by 2030, with an indicative goal of 45 per cent renewable energy. The obligation is on Member States. 

c) EU Emissions Trading System (EU ETS) Revision: Reducing greenhouse gas emissions by establishing a cap-and-trade system that incentivizes emission reductions and the adoption of clean technologies. Under the revised EU ETS Directive, eligibility for free allocation of EU Allowances (EUAs) has expanded to encompass hydrogen production processes beyond fossil fuels, including through electrolysis. This expansion aims at incentivizing the adoption of cleaner practices, such as clean hydrogen. A full phase out of free allocation for CBAM covered goods is set into the EU ETS Directive to take place by 2034. 

d) Carbon Border Adjustment Mechanism (CBAM): CBAM is a tool that aims to put a price on the carbon emitted during the production of carbon intensive goods imported from abroad where they do not have to comply with EU environmental standards and are not covered by the EU ETS. CBAM also aims to limit the risk of industrial production relocating outside the EU as a consequence of the reduction of free allocations under the EU ETS. CBAM covers imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. CBAM covers hydrogen as a good but does not include the indirect emissions (electricity used for electrolysis) caused by hydrogen production. Therefore, CBAM will have an impact on non-renewable demand of hydrogen, raising the costs of importing it from abroad. This will support the purchase of EU renewable hydrogen.

e) Alternative fuels infrastructure regulation (AFIR): Promotes the development of the EU infrastructure for alternative fuels for road vehicles, trains, vessels and aircrafts, standardising the development of the charging infrastructure across the EU. AFIR establishes mandatory deployment targets for hydrogen refuelling infrastructure for road vehicles. By 2030, publicly accessible hydrogen refuelling stations need to be deployed along the Trans-European Network – Transport. AFIR deployment targets will bolster the development of the hydrogen infrastructure as more refuelling stations will be built. 

f) FuelEU maritime: Boosting the demand for renewable and low-carbon fuels in the shipping sector to reduce its GHG emissions, while avoiding distortions in the internal market. The legislation applies to ships of above 5000 gross tonnages arriving at or departing from ports under the jurisdiction of EU Member States and European Economic Area (EEA) countries. FuelEU maritime supports the adoption of RFNBOs in the maritime sector. Despite this provision, FuelEU Maritime will encourage LNG more than RFNBO in the first 10 years.

g) RefuelEU aviation: Increasing both demand and supply of sustainable aviation fuels (SAF). The regulation sets SAF volumes, rules about the blending of fuels, and aims to ensure a level playing field across the EU air transport market. RNFBO hydrogen is included in the definition of SAFs, whose consumption in the aviation sector should rise and match certain shares over the years. Specific shares for renewable hydrogen in aviation are set as well. RefuelEU aviation establishes obligations for both supply and demand.

REPowerEU Plan

The objective of the REPowerEU Plan is to reduce Europe’s dependence on Russian fossil fuels and accelerating the energy transition.

REPowerEU recognizes hydrogen as an important fuel to reduce energy dependency. Ambitious targets for renewable hydrogen are set: 10 million tonnes (Mt) to be imported and another 10 Mt produced within the EU by 2030, totalling 20 Mt of overall consumption. REPowerEU impacts both the supply and the demand of renewable hydrogen, setting targets that will be implemented at Member State level.

Green Deal Industrial Plan

a) Net Zero Industry Act: Strengthening and scaling up EU manufacturing of ‘net zero technologies’, setting a 2030 benchmark of 40 per cent domestic production of these technologies. To achieve this, the proposal strives to create better conditions for net zero technology manufacturing projects streamlining bureaucratic procedures in the EU.

Regarding the hydrogen market, electrolysers and fuel cells have been identified as net-zero technologies. This means that projects are eligible for administrative support and faster permitting procedures.

b) Critical Raw Materials Act: Ensuring resilience, diversification, and sustainability of the EU critical raw materials supply chain. Benchmarks for domestic extraction, processing and recycling are established.

The scope of the regulation encompasses raw materials such as nickel and platinum that are used to produce electrolysers, fuel cells and hydrogen storage technologies. Ensuring the reliability of the supply chain of those materials and boosting their circularity should enhance critical raw material security of supply.

EU Financing Mechanisms

Each fund is analysed based on the following criteria: 

• Support specifics: What kind of financing instrument does the fund use? 

• Deployment stage: Which phase of development is targeted? Early stage (ES – R&D and innovation), mid-stream (MS – technology and infrastructure manufacturing), and downstream (DS – large-scale consumption and production) (NA – not applicable). 

• Technological neutrality: Does the fund target diverse technologies and decarbonisation strategies? 

• EU wide: Are projects open to applications from every Member State? 

• MFF Financing: Are the funds financed by the Multiannual Financial Framework (MFF)?

Progress in 2023 

Access the complete report here