Policy Analysis: How EU Regulations Are Driving Green Hydrogen Production

‘Green’ hydrogen is expected to play a major role in the energy transition as Europe looks to decarbonise and become climate-neutral by 2050. The short-term goal is the Fit-for-55 package, under which the EU is committed to reduce net GHG emissions by at least 55% from 1990 levels, by 2030 [1].

A key pillar of the Fit-for-55 package is the Renewable Energy Directive, which is targeted for hard-to-abate sectors such as Industry and Transport and serves as the legal framework for the development of clean energy. This Directive revised in 2023, it now requires that 42.5% of EU energy come from renewable sources by 2030, up from the previous target of 32%. This shift aims to accelerate the adoption of renewable energy.

So, what makes a hydrogen process ‘Green’?

Whilst most activities utilising Hydrogen as a fuel do not emit any greenhouse gases (GHGs), Hydrogen’s environmental impact depends largely on its production method:

A common way to describe production methods is through its categorical colour [3]:

• ‘Grey’ hydrogen: CO₂ is produced as a by-product and released into the atmosphere. Nowadays, this is the most common method where steam methane reforming (SMR) of natural gas and coal gasification are included.
• ‘Blue’ hydrogen: the set of processes in ‘Grey’ hydrogen but prevents the emission of CO₂ into the atmosphere using carbon capture and storage (CCS) technologies.
• ‘Green’ hydrogen: the production method is through electrolysis, powered by electricity derived from renewable sources such as wind and solar.

To enhance clarity and standardisation, the European Commission and Parliament now emphasises “Renewable Hydrogen” (based on renewable energy sources) and “Low-Carbon Hydrogen” (defined by low GHG emissions), moving away from the traditional colour-coding system.

Renewable hydrogen, is defined by the European Commission to be hydrogen produced either through:

• the electrolysis of water powered by electricity from renewable resources
• the reforming of biogas
• the biochemical conversion of biomass

Currently, neither renewable nor low-carbon hydrogen are cost-competitive against ‘Grey’ hydrogen despite significant reductions in electrolyser costs following advancements in scaling up their performance. Hence, a framework is required to ensure that the global hydrogen supply becomes renewable and sustainable in the long term [4].

The European hydrogen strategy

As part of the REPowerEU plan [5], the Europe Union hydrogen strategy envisions hydrogen as a pillar of its integrated energy system. Key milestones include:

• Producing up to 10 million tonnes of renewable hydrogen annually by 2030.
• Deploying at least 40 GW of renewable hydrogen electrolysers between 2025 and 2030.
• Achieving large-scale deployment of mature hydrogen technologies between 2030 and 2050.

To meet these targets, the EU has outlined actions across five key areas investments, boosting demand and production, creating supportive frameworks, and fostering international collaboration [6]. Key initiatives include:

• Sustainable and Smart Mobility Strategy: Promotes hydrogen use in transport.
• Infrastructure Directives: Supports hydrogen networks and alternative fuels.
• European Hydrogen Bank: Provides financing to spur investments and ensure market transparency.
• Directive and Regulation on the Internal Hydrogen Market: Aim to integrate renewable and low-carbon hydrogen into the energy system. [7]
• Trans-European Energy (8) and Alternative Fuels (9) Infrastructure: promote the creation of a robust network for renewable energy and alternative fuels, including hydrogen, across the EU.
• Hydrogen Funding Initiatives: The Clean Hydrogen Partnership, Horizon 2020, and the Innovation Fund are pivotal in advancing hydrogen technologies, since they provide financial support.

To drive decarbonisation in energy-intensive industries like steelmaking—a sector directly relevant to H2Steel—the EU has implemented mechanisms such as:

• Emissions Trading Scheme (ETS): Caps emissions and allows trading of allowances, rewarding low-carbon producers.
• Carbon Border Adjustment Mechanism (CBAM): Ensures imported goods face similar carbon costs, preventing carbon leakage.

Key takeaways

Achieving these ambitious goals requires collaboration between policymakers, industries, and researchers. The H2Steel project is an example of how cross-sector partnerships can advance the adoption of green hydrogen technologies, enabling the decarbonisation of critical sectors like steelmaking for a Greener Future.