The EU may only secure half its 10mn t of domestic hydrogen production goal by 2030, but lead markets and legally mandated demand mechanisms — including via made-in-Europe obligations — can promote uptake alongside the bloc's aspirational goals, Hydrogen Europe's Director for transport, industrial policy and sustainability Laurent Donceel told Argus.
How important do you see lead markets legislation for hydrogen?
This is a whole new political priority — creating demand for made-in-Europe sustainable products. The upcoming Industrial Accelerator Act focuses on creating lead markets through public procurement and subsidies. But mechanisms like revision of car and van CO2 standards may be equally important, providing captive demand for projects like Stegra in Sweden, Salzgitter in Germany and Hydnum Steel in Portugal.
The new CO2 car standards introduce 10pc compliance options including up to 3pc sustainable fuels and e-fuels and 7pc credits for clean steel. If manufacturers utilize 7pc for clean steel credits, under the forthcoming legislation, this could drive demand for 6mn t of green steel by 2035, requiring roughly 500,000t of green hydrogen on top of RED III targets. This is why the revised CO2 standards are so interesting.
How will policy discussions in the European Parliament and among EU states impact uptake?
European Commission analysis shows hydrogen would cover 10pc of energy end-use in Europe by 2050 as oil and gas decline. E-fuels would cover an extra 7pc — it's massive. Building on shortfalls in the Renewable Energy Directive (RED), many sectors could rely on e-fuels to comply with the maritime renewable fuel mandate, aviation and CO2 standards for cars.
On revision of the emissions trading system (ETS), this should be the tool to cover the price gap between sustainable fuels, e-fuels, and fossil fuels for maritime, aviation, and other sectors. Free allowances must be conditional, tied to clean fuel uptake and decarbonization investments rather than granted unconditionally. Carbon prices are reaching €90/t — the highest since 2023.
We understand sectors are concerned about competitiveness. But free allowances need to be linked to clear carbon leakage analysis and decarbonization investments.
Will reform of the EU's carbon border threaten investments?
The newly proposed article 27a in the reform of the carbon border adjustment mechanism (CBAM) creates a really bad signal. This clause allows the European Commission to consider exempting sectors from CBAM if there's proven market impact. We've already seen some big projects put on hold because of this concern.
What do you want then?
We're asking for article 27a to be scrapped entirely. The terms are pretty vague. It could happen retroactively. And there's no clarity as to how such a decision would be taken by the European Commission.
This is a sword of Damocles hanging over all projects, including blue hydrogen [produced from natural gas] with carbon capture and storage. In the European Parliament there's good awareness of the dangers across parties. We hope member states do not only look from the side of agricultural policy and farmers, but for all clean industries pursuing decarbonization.
Our assessment shows fertilizer price increases from CBAM in 2026 would be minimal, despite certain agricultural ministers' claims.
Are EU states struggling to implement EU renewable goals for hydrogen?
Targets are going to be hard to reach, with much of the demand coming through the refinery route. The 42.5pc renewable hydrogen target for industrial consumption faces significant headwinds due to cost issues in fertilizers, steel and ammonia. High energy costs and low willingness to pay make industrial decarbonization challenging.
Together with developments in e-fuels, aviation and maritime, you'll get roughly 60pc of all regulatory mandated demand for hydrogen. Projects need captive demand. When we have harmonized regulation and strong penalties, you know that it is going to create the demand.
The biggest is aviation. A full 1.2pc of fuel delivered at European airports in 2030 has to be synthetic sustainable aviation fuel (e-SAF). With 10pc aviation growth, you're at 49mn t of kerosene in 2030. Take 1.2pc of that — it's actually quite a big future market for e-fuels.
Of the 2.8mn t of green hydrogen required by 2030 under RED III, data suggest we'll reach 1.7mn t through projects currently in the pipeline, refinery routes, aviation and maritime. That means some 85pc from domestic production and 15pc from imports based on binding agreements. That leaves roughly 40pc uncovered.
Despite the EU likely falling short of the original aspiration of 10mn t domestic and 10mn t imports, the increase remains substantial. Between 2024 and 2030, we're seeing almost fivefold growth in hydrogen production from projects under construction or with final investment decisions.
Are you having difficulties with the Union Database (UDB)?
The UDB is a big issue. We are very concerned it's not going as fast as we want. It's important for end-users to show sustainability. But the whole framework of the mechanism is still not functioning, which slows down contracts between off-takers and producers.
Originally designed for biofuels, it's now extending to sustainable aviation fuels, maritime fuels, and additional end-users. As you create new targets for end-users like maritime and aviation, they also need access to the UDB. It's turning into quite a monster of a tool, but in the end it should be the main point of reference.
