Hydrogen Act: Towards the Creation of the European Hydrogen Economy

Hydrogen has seen an unprecedented development in the year 2020. From an
innovative niche technology, it is fast becoming a systemic element in the European
Union’s (EU) efforts to transition to a climate neutral society in 2050. It will become a
crucial energy vector and the other leg of the energy transition – alongside renewable
electricity – by replacing coal, oil and gas across different segments of the economy.
The rapid development of hydrogen is not only important for meeting the EU’s
climate objectives but also for preserving and enhancing the EU’s industrial and
economic competitiveness.

The European Hydrogen Strategy has set ambitious targets with a view to developing
a hydrogen economy. The strategy represents the first step towards success. Now, the
EU needs to “act” to turn ambition into reality. The current hydrogen policy and
regulatory elements of hydrogen are distributed over gas, electricity, fuels, emissions
and industrial frameworks, with limited overarching coordination. It is time that
hydrogen moves from an afterthought to a central pillar of the energy system and its
key role in delivering climate neutrality means it merits a dedicated framework. The
proposed “Hydrogen Act” is not a single piece of legislation, it is intended to be a
vision for an umbrella framework aimed at harmonising and integrating all separate
hydrogen related actions and legislations. The Hydrogen Act focuses on infrastructure
and market aspects, describing three phases of development: the kick-start phase, the
ramp-up phase and the market-growth phase.

To meet the 2024 and 2030 targets of the EU’s Hydrogen Strategy, the kick-start
phase will require, for a limited period of time, exceptions and derogations from
existing EU rules, such as relaxation and/or reform of EU state aid rules. Considering
the challenges the hydrogen sector is confronted with in the context of the EU Green
Deal, the European economy recovery post COVID19 and the Hydrogen Strategy,
dedicated guidelines on state aid for hydrogen technologies should be promoted.
Moving forward, the Hydrogen Act describes different methods to incentivise market
functioning on the production and the demand side, including quotas targeted at the
promotion of among others clean steel and ammonia. On the infrastructure side, the
regulation of hydrogen networks requires a gradual approach in line with market and
infrastructure developments. This ramp-up phase should start at the earliest as of
2025 to contain the funding via taxpayers’ money to a minimum. The final phase
describes the period where hydrogen will have achieved market growth.

Clear science-based definitions for the different production methods of hydrogen are
required. To establish a robust system of carbon reduction, the CO2 content of energy
carriers and vectors will become the “new currency” of the energy system and the EU
economic recovery. This needs to be supported by the adoption of a methodology for
the calculation of the life-cycle greenhouse gas (GHG) emissions from renewable and
low carbon hydrogen, as well as transparent and robust sustainability criteria in line
with the principles of the circular economy. This methodology should be the basis for
relevant EU funding programs and financial support for all energy carriers, including
hydrogen projects, as well as for hydrogen trade with third countries. To support this,
a traceable, trackable, tradable, transparent, and trustworthy certification scheme is
needed to enhance the credibility and tradability of hydrogen as a global commodity.
The Hydrogen Act is a vision paper contributing to the implementation of the EU’s
Hydrogen Strategy. More elaborate positions on key upcoming EU legislative
initiatives will follow in separate position papers. The final goal of the Hydrogen Act is
to contribute to the establishment of a proper functioning and liquid market for clean
hydrogen as a new commodity in Europe, building up the backbone of a global clean
hydrogen market.

The following graph contains an overview of the Hydrogen Act components and an
implementation roadmap.