Fit for 55: Green hydrogen to get targets, free carbon credits in EU

The importance of hydrogen to get Europe to net-zero greenhouse gas emissions by 2050 shone through in the European Commission’s ‘Fit for 55’ climate and energy package.

Hydrogen advocates were enthusiastic.

She cited how “fossil-based” hydrogen was excluded from certification under the EU renewable energy directive, but given support through continued free EU carbon credits for producers, tax breaks for consumers, and a green light for it as a sustainable fuel in shipping.

Policymakers see great promise for it to help decarbonise heavy industry and long-distance transport – aviation, shipping and possibly trucks, also through hydrogen-based liquid fuels – and to store wind and solar power to help balance the grid.

However, many, including the Commission, also see a transition role for blue or low-carbon hydrogen made from a natural gas with carbon capture and storage .

In practice, however, whether green hydrogen counts as a green fuel will depend on the details laid out in a so-called delegated act, which should be agreed by the Commission on consultation with national experts by the end of the year.

Campaigners want strict rules to ensure the renewable energy used to produce green hydrogen and any derivative fuels is additional to existing plans and projects.

Chatzimarkakis singles out a 50% target for renewable hydrogen consumption in industry as the top win, realising this will likely depend on a carbon border adjustment mechanism, to keep industries like fertilisers globally competitive.

A ReFuelEU Aviation Initiative would require fuel suppliers to blend in sustainable fuels at EU airports, with a specific share for efuels rising from 0.7% in 2050.

For shipping, the FuelEU Maritime Initiative sets a maximum limit on the greenhouse gas intensity of energy used by ships calling at European ports in a bid to drive the take-up of “renewable and low-carbon fuels”.

Complementary to these targets, the Commission proposes to lift tax exemptions for aviation and maritime fuels used in intra-EU traffic, in a new energy taxation directive.

On the infrastructure side, the Commission wants to see one hydrogen refuelling station for light and heavy duty vehicles every 150km along Europe’s main motorways by 2030, and at “urban nodes”, where motorways intersect or connect up with local and regional traffic.

For all the new targets and tax rebates, fuel suppliers were deeply critical of the Commission’s decision not to recognise efuels in EU car CO2 standards.

In effect, carmakers are being forced to choose between battery electric and fuel cell hydrogen cars.

The cost of renewable and sustainable fuels will go down with economies of scale and lessons learned, when innovative fuels are allowed to supply the road market.” Efuel investors say the road transport market has a much higher ability to pay than energy-intensive industries and is essential to get a hydrogen economy up and running.

Instead of fining carmakers for failing to meet the latest EU car CO2 standards, the eFuel Alliance would like the money to go to developing fuels.

The Commission argues that mixing up policies for fuels and vehicles could blur responsibilities for decarbonisation, undermine the effectiveness of car CO2 standards and increase administrative burden.

At present, the latter, like other industrial installations, get free allowances to protect them from the potential risk of carbon leakage, or leaving Europe for regions with weaker carbon constraints.

If installations are efficient, however, they can sell some of these allowances and make a profit.

The Commission expects a “rather limited” effect from this scope extension, also because it expects low-carbon technologies to replace, not complement, those that already exist.

Brussels-based NGO Sandbag criticised the extension of free allowances to electrolysers, underlining they will have to wait until 2026 for their quotas to kick in, and even then “most electrolysers will not be eligible , ruling out any electrolysers under 100MW”.

Hydrogen is also likely to benefit from a plan in the EU ETS reform to extend the remit of an ETS-fed Innovation Fund to carbon contracts for difference, whereby the Fund would pay for the difference between a project’s implied carbon price and the current ETS price.

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