EU Promotes Carbon-Neutral Business and Ramping up of the Hydrogen Industry

Market Trends

The most important step toward achieving carbon neutrality is the development of a comprehensive supply chain, extending from regional renewable power generation to electrolyzer manufacture and operation to the on-site use of hydrogen in industry and mobility. To make this work, the EU and its member states are not only enticing potential investors with financial subsidies, they are also promising advantageous and in particular stable framework conditions.

There are plenty of EU funding pools for green hydrogen and the expansion of renewable energies, and some of them have been generously supplemented as part of the European Green Deal and COVID-19 pandemic crisis management measures. For instance, the investEU program has doubled resources for Sustainable Infrastructure, and the program itself has been expanded to include a Strategic European Investments segment. Both of these changes represent opportunities for hydrogen projects. The investment fund of the EU Emissions Trading System (EU ETS) has set aside 10 billion euros for technologies for reducing carbon emissions. With an additional 47.5 billion euros, the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU) initiative is intended to provide aid to regions which have been particularly afflicted by the coronavirus pandemic. These funds may also be expressly used for Green Deal measures. Traditional coal-mining regions can ultimately benefit from the 40-billion-euro Just Transition Mechanism, which should make the path to carbon neutrality easier to traverse.

But the EU does not only intend to distribute money. There are also plans to gradually adjust the framework conditions to make room for an environmentally friendly economy. In order to motivate industry to use green hydrogen, which is generated from renewable sources of energy, the EU also seeks to adapt emissions trading – in combination with a carbon border tax on imported goods, if necessary. But a gap will remain between the carbon emission reduction costs and the carbon price. The EU suggests that member states conclude Contracts for Difference to close these gaps. In Germany, an analogous pilot program for the steel and chemicals industry is already in the works.

Where the market-driven extension of the value chain is lacking, the member states could pick up the slack with up to 100-percent subsidies as long as they are offered as part of Important Projects of Common European Interest (IPCEIs). Such IPCEIs are also included in Germany’s National Hydrogen Strategy, and Thyssenkrupp, BASF and BMW were among the first companies to publicly express their interest.