The European Union (EU) has identified clean hydrogen as essential to its climate targets, technology leadership, and energy security in the decarbonizing world. With a pioneering hydrogen strategy adopted in 2020, 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 hydrogen production, the EU is planning to import large volumes from third countries.
Hydrogen is thus beginning to play a more prominent role in the EU’s bilateral partnerships and multilateral governance initiatives. 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. The EU must navigate a complex web of diverging interests among Member States and various industry stakeholders to maintain its position as an attractive investment destination and build resilient clean hydrogen supply chains.
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. It 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.
Hydrogen Production Pathways
Renewable hydrogen, produced via water electrolysis powered by renewable electricity, is the EU’s priority. The bloc is also willing to accept other low-carbon hydrogen pathways, such as production from natural gas with carbon capture and storage (blue hydrogen) or nuclear energy (pink hydrogen), provided they achieve at least a 70% reduction in greenhouse gas (GHG) emissions compared to unabated fossil-based hydrogen.
Fossil-fuel derived hydrogen (grey hydrogen), on the other hand, is not eligible for the EU’s renewable energy targets or financial incentives. The EU has set out strict sustainability requirements for renewable hydrogen to ensure its positive climate impact, including mandatory additionality, temporal correlation, and geographic correlation with renewable electricity sources.
Hydrogen Storage and Transportation
Storing and transporting hydrogen poses significant technical challenges. Compressed hydrogen storage, while relatively simple, has limited volumetric energy density, requiring large storage facilities. Liquid hydrogen storage provides higher energy density but is more complex and energy-intensive. Hydrogen pipeline infrastructure is expected to play a crucial role in connecting production sites with demand centers, especially in the EU’s efforts to create a single European market for hydrogen.
Hydrogen Applications in the Energy Sector
The EU sees hydrogen as vital for decarbonizing hard-to-abate sectors, such as steel, chemicals, and long-haul transportation. In the power sector, hydrogen could serve as a storage medium to provide grid balancing and seasonal energy storage. For mobility, hydrogen-powered fuel cell electric vehicles (FCEVs) are viewed as a complement to battery electric vehicles (BEVs), especially for heavier duty applications.
EU Hydrogen Policy and Regulations
The EU’s vision for a hydrogen economy is underpinned by a growing body of policies and regulations. The European Hydrogen Strategy, adopted in 2020, sets ambitious targets for electrolyzer capacity and domestic hydrogen production. The Renewable Energy Directive and the upcoming Hydrogen and Decarbonised Gas Market Package will provide the regulatory framework, including sustainability criteria, blending obligations, and infrastructure rules.
To drive investment, the EU utilizes a mix of funding instruments, such as the Innovation Fund, the Modernization Fund, Important Projects of Common European Interest (IPCEI), and Carbon Contracts for Difference (CCfDs). Member States also play a crucial role, providing national subsidies and integrating hydrogen measures into their National Energy and Climate Plans (NECPs).
Challenges and Barriers to Hydrogen Deployment
Despite the EU’s policy efforts, several barriers remain. Technical challenges, such as low energy efficiency of electrolysis and the need for large-scale storage and distribution infrastructure, continue to hinder the widespread adoption of hydrogen. Economic barriers, including high production costs and a lack of economies of scale, make hydrogen less competitive compared to fossil fuels. Regulatory and infrastructural barriers, such as the need for harmonized standards and certification schemes, as well as the repurposing of existing gas networks, also pose significant hurdles.
Hydrogen’s Role in the EU’s Climate Agenda
Hydrogen is a key pillar of the EU’s European Green Deal and its legally binding 2050 net-zero emissions target. By facilitating sector coupling and system integration, hydrogen can help the EU achieve a cost-effective, reliable, and resilient energy transition. The EU also views hydrogen as crucial for maintaining its technology leadership and global competitiveness in the emerging clean energy economy.
International Hydrogen Cooperation and Competition
As the EU seeks to secure large volumes of hydrogen imports, it is actively participating in multilateral hydrogen governance initiatives, such as the Mission Innovation Clean Hydrogen Mission and the G20 Hydrogen Initiative. The bloc is also developing bilateral hydrogen partnerships with potential exporter countries, including in North Africa, the Middle East, and Latin America.
At the same time, the EU faces intensifying global competition, particularly from the United States, which has introduced generous production tax credits and other incentives for the hydrogen industry. This has prompted the EU to adopt a more assertive industrial policy, including the Green Deal Industrial Plan and the Net-Zero Industry Act, to retain its position as an attractive investment destination for the hydrogen economy.
The EU’s Hydrogen Competitiveness Strategy
To maintain its leading role in the global hydrogen race, the EU is pursuing a multi-pronged strategy. This includes strengthening the EU hydrogen value chain through targeted funding, regulations, and public-private partnerships; supporting the rapid deployment of hydrogen technologies through measures like Carbon Contracts for Difference; and enhancing the EU’s global leadership in hydrogen by shaping international standards and fostering mutually beneficial partnerships with key producer countries.
As the world accelerates its shift towards a decarbonized future, the EU’s ability to harness the potential of clean hydrogen will be crucial for achieving its climate goals, securing its energy supply, and preserving its industrial competitiveness. By navigating the complex web of domestic and international dynamics, the EU aims to position itself as a global hub for hydrogen innovation and deployment in the years to come.