Policies for a sustainable hydrogen economy in Europe

While green hydrogen will play a vital role in decarbonising our economy, it is not the primary solution for emissions reduction. Instead, energy efficiency and savings, renewable electricity expansion, and direct electrification are the top three approaches for reducing emissions. However, green hydrogen becomes essential in certain applications such as steelmaking and other industrial processes, as well as for long-distance aviation and shipping, and it can be beneficial in seasonal energy storage.

This policy brief spells out principles that should guide the development of a regulatory framework to advance a green hydrogen economy in Europe. These key principles entail a strong emphasis on green hydrogen production and imports, sectoral prioritisation of hydrogen use, and the integration of sustainability criteria in international hydrogen markets. Furthermore, the European hydrogen strategy needs to support inclusive social and economic development in any hydrogen-exporting country inside and outside the EU, and also act as a unifying agent for the EU Member States.

To this end, these Policy Guidelines should be considered for Europe's green hydrogen economy:

1. Prioritise Financial Support for Green Hydrogen: Direct investment aid should exclusively support green hydrogen projects and focus on priority sectors on the application side.
2. Prioritise Green Hydrogen in Carbon Contracts for Difference: Implement strict criteria to ensure that Carbon Contracts for Difference (CCfDs) for emission-intensive industries prioritise green over blue hydrogen as soon as it is available.
3. Promote Sustainable Hydrogen through the European Hydrogen Bank: Use the European Hydrogen Bank (EHB) to support green hydrogen production, ensuring adherence to high sustainability standards and prioritising hard-to-abate application sectors in the auction schemes.
4. Coordinate Infrastructure Development: Develop hydrogen infrastructure while adhering to sectoral prioritisation, incorporating strict hydrogen readiness criteria as well as close interlinkage with power grid planning, and encouraging local production and consumption, instead of excessively relying on long-distance hydrogen transport.
5. Set Quotas for Green Hydrogen Usage: Establish binding quotas for green hydrogen use in priority sectors, coupled with certification schemes to drive its adoption.