The EU in the Global Hydrogen Race: Bringing Together Climate Ambition, Energy Security, and Industrial Competitiveness
The European Union has identified clean hydrogen as essential to its climate targets, technology leadership and energy security in the decarbonizing world. The bloc is developing a comprehensive regulatory framework for a hydrogen economy, complete with supply-side policies and binding demand-side targets. In addition to boosting domestic production, the EU is planning to import large volumes of hydrogen and derivatives from third countries. Hydrogen is thus beginning to play a more prominent role in the EU’s bilateral partnerships.
The EU is also actively participating in multilateral hydrogen governance with the goal of creating a functioning international hydrogen market featuring strong sustainability standards. At the same time, aligning the diverging interests of Member States and various hydrogen stakeholders has been a challenge. As the global hydrogen race accelerates, the bloc has struggled to keep up with powerful players like the United States, which are offering massive subsidies to the hydrogen industry.
This article examines the domestic and external dimensions of the EU’s hydrogen vision, situating it within the bloc’s wider climate and energy policy and recent geopolitical developments. It discusses key policies, regulations, and funding schemes for hydrogen in Europe, highlighting existing points of contention and the interplay between the EU and Member State level. The article then goes on to analyze the EU’s evolving international engagement on hydrogen and the challenges of fostering mutually beneficial green industrial partnerships that go beyond securing hydrogen supplies.
Climate Ambition
With its pioneering hydrogen strategy adopted in July 2020, the European Union has sent a clear message that it views hydrogen as essential to reaching its climate goals and maintaining technology leadership. Following Russia’s 2022 invasion of Ukraine, hydrogen development has acquired an additional energy security dimension: the hope is that hydrogen can, in the future, make the EU less dependent on natural gas imports, in particular from Russia.
This is expected to happen through both massively ramping up domestic production and sourcing large amounts of clean hydrogen from abroad. This, in turn, requires a solid regulatory framework, including internationally harmonized standards and certification schemes, a cross-border infrastructure within Europe and beyond, large amounts of public and private investment, and strong relations with prospective hydrogen exporters.
Energy Security
The EU has many advantages to draw on in the emerging international hydrogen economy. With a combined population of 447 million, it boasts a large and attractive single market and highly qualified human resources. Europe is home to the world’s most innovative electrolyzer manufacturers and has a long history of funding public–private partnerships to promote R&D on hydrogen. It has the world’s most developed natural gas pipeline infrastructure that could be repurposed to carry hydrogen, and its key ports such as Rotterdam and Hamburg are actively seeking to position themselves as hubs for handling clean fuels.
The EU was the first global player to set ambitious—and legally binding—climate targets. As a result, Europe has emerged as an attractive location for hydrogen projects: as of October 2023, it was the world’s leader in announced hydrogen projects, with total investment equaling 193billion USD, or 34% of the world’s total.
Industrial Competitiveness
Yet Europe’s lead on hydrogen is not uncontested. Other major players—notably the United States—are raising the stakes by offering massive public subsidies to hydrogen producers. However, this is precisely the area where the EU finds itself at a strategic disadvantage. With its origins steeped in economic liberalism and free trade, the EU has traditionally been uneasy with the idea of allowing state subsidies due to their potential to distort the single market.
Given that the EU lacks the powers to directly collect taxes and has been, until recently, reluctant to borrow externally, it does not have significant resources of its own to undertake large strategic investments. This role falls mainly to the Member States, whose economic and geopolitical interests, as well as fiscal resources, vary significantly.
In this regard, the EU functions rather as a forum for Member States to hash out their positions and disagreements on just how important hydrogen should be, how much and what kind of support is required and whether subsidies should come from national budgets or from a European-level facility—all of which slows down the legislative process.
Regulatory Frameworks
The EU has garnered a reputation as a global regulatory power and has been a pioneer in creating a regulatory framework for the transition to carbon neutrality. Its vision of using hydrogen to decarbonize hard-to-abate sectors is rooted in the steadily expanding scope and ambition of its climate policy.
Among EU institutions, the European Commission in particular has emerged as the strongest advocate of the transition to net zero, including a clean hydrogen economy. In December 2019, the Commission proposed the European Green Deal, a strategy aimed at making the EU climate-neutral by 2050 while promoting sustainable economic growth. This was followed by the “Fit for 55” package in 2021, which contains legislative proposals and amendments to achieve a 55% reduction in greenhouse gas emissions in the EU by 2030.
The EU’s approach to climate policy features a strong emphasis on timelines and numerical targets, and the bloc has also consciously positioned itself as a “policy laboratory” of sorts, developing and testing innovative policies and instruments that are often adopted by other jurisdictions as well.
Domestic Policies and Funding
The EU has been developing a mix of policy instruments to support a hydrogen economy. It has a strong track record of funding R&D on hydrogen and has also launched a dedicated industrial alliance to promote hydrogen projects along the entire value chain. While seeking to strengthen carbon pricing as a key market mechanism, the EU is in parallel designing a dedicated regulatory framework for hydrogen and other renewable gases.
This includes both supply-side and demand-side measures as well as infrastructure regulations. While there is a consensus in the EU on the importance of the green transition and the need to position Europe better in the global net-zero economy, the three EU institutions involved in the legislative procedure—the European Commission, the European Parliament, and the Council of Ministers—often hold differing views on the design of relevant policies.
Aware of the intensifying global cleantech race, the EU and Member States have made billions of EUR available for the transition to net zero and for hydrogen specifically. However, navigating the EU’s complex and fragmented funding landscape is a serious challenge for businesses. Permitting and licensing delays are another problematic issue for hydrogen investors, which the European Commission is currently trying to address.
International Cooperation
International cooperation is one of the cornerstones of the EU’s vision of a future hydrogen economy. The EU and the European Commission (as well as individual Member States) have sought to shape the rules of engagement in the future international hydrogen market and have actively participated in various multilateral governance fora.
In the REPowerEU package of proposals, the EU explicitly acknowledged the need for future large-scale imports of clean hydrogen, both for decarbonization and energy security purposes. It also put in place a (non-binding) import target of up to 10 million tons of hydrogen annually by 2030.
In this vein, the EU has begun to develop clean hydrogen partnerships with a range of third countries; this includes not only those countries that are well-positioned to emerge as early exporters but also those with a high renewable energy potential and export ambitions but which find themselves at a very early stage of hydrogen development.
At the global level, the European Union and the European Commission have sought to actively participate in a number of international bodies and fora promoting a hydrogen economy, including Mission Innovation, the G7 Hydrogen Action Pact, the G20’s International Hydrogen Economy Initiative, the IEA’s Hydrogen Technology Collaboration Programme, and the Clean Energy Ministerial Hydrogen Initiative.
Challenges and Opportunities
As the global hydrogen race accelerates, the EU has struggled to keep up with powerful players like the United States, which are offering massive subsidies to the hydrogen industry. The bloc’s origins steeped in economic liberalism and free trade have made it uneasy with the idea of allowing state subsidies, and its limited ability to directly collect taxes or borrow externally has constrained its capacity for large strategic investments.
Aligning the diverging interests of Member States and various hydrogen stakeholders has also been a challenge for the EU. While there is a consensus on the importance of the green transition, the three main EU institutions often hold differing views on the design of relevant policies.
Yet the EU’s hydrogen vision also presents significant opportunities. With its large single market, innovative industrial base, and pioneering role in climate regulation, the bloc can leverage its early mover advantage and potential synergies to remain an attractive investment destination and build resilient clean hydrogen supply chains. Navigating the complex landscape of international hydrogen diplomacy and fostering mutually beneficial green industrial partnerships will be crucial as the EU seeks to assert its position in the global hydrogen race.