Hydrogen is rapidly emerging as a critical energy source in the fight against climate change, as it produces no greenhouse gas (GHG) emissions and generates minimal pollution when utilised. Moreover, hydrogen holds substantial potential for widespread application across diverse industries, especially in sectors that are challenging to decarbonise, such as transport and construction.
However, not all methods of hydrogen production are environmentally beneficial. Grey hydrogen, currently the most common production method, is derived from fossil fuels without capturing the GHGs emitted during the process. Blue hydrogen represents an improvement, as it is produced using natural gas as an input, combined with carbon capture and storage to reduce carbon emissions.
The only method that fully aligns with the goal of zero GHG emissions during production is renewable hydrogen, often referred to as ‘green’ or ‘clean’ hydrogen. This method relies on renewable electricity to extract hydrogen from water (H₂O) through a process known as electrolysis.
Despite the clear environmental advantages of renewable hydrogen, it still constitutes only a small fraction of global hydrogen production. According to the International Energy Agency (IEA), in 2023, 99% of hydrogen production globally was derived from fossil fuels – either grey or blue hydrogen – with less than 1% classified as renewable hydrogen.
In response to this, the European Union (EU) has established a policy and legal framework aimed at accelerating the growth of the renewable hydrogen sector, both within the EU and internationally. The overarching objective of this framework is to promote the production and consumption of low-carbon and renewable hydrogen across the EU.
This post first provides an overview of the regulatory framework for renewable hydrogen in the EU. It then explores the primary regulatory barriers that are hindering the sector’s growth and have led to the inclusion of low-carbon hydrogen as a key technology. Finally, it discusses potential legal measures that could help overcome these barriers and stimulate the development of the renewable hydrogen industry.
The European Commission’s Policies to Foster Renewable Hydrogen
The 2019 European Green Deal was the first EU instrument to recognise hydrogen as essential to the EU’s climate neutrality goals. In this ambitious plan to reduce GHG emissions, the Commission identified developing a renewable hydrogen market as necessary for supplying clean, affordable and secure energy.
In 2020, the Commission launched the Hydrogen Strategy. Although a soft-law instrument, it laid the foundation for hydrogen regulation in the EU. The strategy provided a roadmap to accelerate renewable hydrogen adoption and decarbonise various sectors by 2050, with twenty key actions organised into three phases (2020–2050).
The Hydrogen Strategy introduced the first official definition of renewable hydrogen as “hydrogen produced through the electrolysis of water (in an electrolyser, powered by electricity), and with the electricity stemming from renewable sources. The full life-cycle greenhouse gas emissions of the production of renewable hydrogen are close to zero.”
Also in 2020, the Commission expressed interest in developing low-carbon hydrogen technologies in its Strategy for Energy System Integration. It acknowledged that low-carbon hydrogen would initially be needed to replace existing hydrogen and achieve economies of scale for renewable hydrogen.
The Russian-Ukrainian war further influenced EU renewable hydrogen policy. In response to energy supply problems, the Commission introduced the REPowerEU Plan in 2022, aiming to significantly accelerate renewable hydrogen development. This plan set an ambitious 2030 target: to domestically produce 10 million tonnes of renewable hydrogen and import an additional 10 million tonnes. By way of comparison, Europe produced only 20 thousand tonnes in 2022.
In 2023, the Commission already identified regulatory barriers to renewable hydrogen development in its Green Deal Industrial Plan for the Net-Zero Age. This plan seeks to simplify regulations and stimulate investment in renewable hydrogen through the InvestEU Programme and the Innovation Fund, while also introducing measures to promote state aid.
Most recently, in 2025, the Commission unveiled the Clean Industrial Deal, prioritising EU competitiveness amidst geopolitical tensions, slow economic growth, and technological competition. The Commission reaffirmed its support for low-carbon hydrogen technologies, while also proposing a review of renewable hydrogen regulations and a study to assess the effectiveness of the existing framework.
The Commission’s policy instruments illustrate how factual circumstances and political priorities have shaped momentum for both renewable and low-carbon hydrogen markets. Over a span of six years, the sector has been addressed in eight distinct policy documents, each reflecting evolving challenges that complicate compliance with diverse guidelines and objectives.
Early instruments primarily promoted the emergence of the renewable hydrogen market. They recognised the difficulties in scaling up this nascent industry and announced legal and financial measures increase production both within the EU and in third countries. More recent communications have highlighted the role of low-carbon hydrogen, largely in response to trade tensions and driven by the EU focus on competitiveness. The Commission has expressed that low-carbon hydrogen is necessary to upscale renewable hydrogen production, while showing concern over the sector’s slow progress. For this reason, the Commission is now open to reviewing the renewable hydrogen regulatory framework.
EU Legal Foundations for Renewable Hydrogen
The EU legally regulates renewable hydrogen as a Renewable Fuel of Non-Biological Origin (RFNBO), defined in Article 26(3) of the Directive (EU) No. 2018/2001 (Renewable Energy Directive, RED). Essentially, RFNBOs refer to liquid or gaseous fuels produced from renewable hydrogen.
The first EU-level legislative action to promote the emergence of a renewable hydrogen industry was the Commission’s adoption of two delegated regulations in June 2023, under Articles 27(6) and 29a(3) of the RED.
Commission Delegated Regulation (EU) No. 2023/1184 establishes a methodology for recognising electricity as fully renewable when used in RFNBO production. Under EU law, the electricity source determines whether hydrogen production – and ultimately RFNBOs – qualifies as renewable.
To ensure hydrogen production is classified as renewable, three cumulative criteria must be met:
Additionality: Hydrogen production must be accompanied by new renewable electricity generation capacity.
Temporal correlation: Hydrogen must be produced during the same period as renewable energy generation.
Geographical correlation: Renewable electricity installations must be either in the same bidding zone as the hydrogen facility, or in a neighbouring bidding zone where electricity prices are equal or higher.
Additionally, electrolyzers – devices that split water into hydrogen and oxygen – must be supplied with renewable electricity via one of three pathways:
Direct physical connection to a renewable electricity source, e.g. solar or wind farms.
Grid connection with a Power Purchase Agreement from a non-subsidised renewable energy plant.
Grid connection in a bidding zone with low emissions intensity.
The defining criteria for RFNBO production are difficult and technical, arising from the necessity of ensuring that the energy used is sourced from additional renewable electricity capacity. Otherwise, the use of non-additional renewable electricity would indirectly lead to an increase in fossil-based electricity use in other market segments.
To facilitate compliance, Article 9 of Delegated Regulation 2023/1184 allows renewable hydrogen producers to demonstrate adherence to these criteria through national or international voluntary certification schemes recognised by the Commission.
Commission Delegated Regulation (EU) No. 2023/1185 provides a detailed methodology for calculating life-cycle GHG emissions of renewable hydrogen. The regulation ensures that GHG emissions savings in hydrogen production must be at least 70% compared to the fossil fuel alternatives. The methodology includes upstream emissions, emissions from grid electricity, those associated with the conversion process, and emissions from transporting the final product to end-users.
The EU’s second legislative action was the third amendment to the RED, published in October 2023. The amendment raised the EU’s binding renewable energy target for 2030 to at least 42.5%.
Regarding renewable hydrogen, Article 7 includes it in the calculation of each Member State’s share of renewable energy. Moreover, specific sub-targets for renewable and low-carbon hydrogen were introduced in both the industry and transport sectors. According to Article 22a, the industry sector must ensure that at least 42% of its hydrogen comes from RNFBOs by 2030, and 60% by 2035. Article 25 establishes that the transport sector must ensure that at least 5.5% of its fuel mix consists of advanced biofuels and renewable hydrogen by 2030. This is a combined binding target, with a minimum of 1% specifically from hydrogen.
The third EU legislative development was the adoption of the Hydrogen and Decarbonised Gas Market Package in May 2024, comprising Directive (EU) No. 2024/1788 and Regulation (EU) No. 2024/1789. These legislative files revised and updated gas market rules, introducing a new regulatory framework for dedicated hydrogen infrastructure, modelled on the existing gas network.
Directive (EU) No. 2024/1788, in Preamble 13, states: “Renewable hydrogen is the most compatible with the Union’s climate neutrality and zero pollution goals”. However, it acknowledges that renewable hydrogen alone may not scale fast enough to meet growing demand. Accordingly, the Directive formally recognises low-carbon hydrogen, defined in Article 2(11) as hydrogen derived from non-renewable sources that achieves 70 % GHG emissions savings relative to the fossil fuel comparator.
The following is a general overview of the EU Hydrogen Regulatory Framework:
Despite the Rules Already Being in Place, the Market Has Developed Slowly
Since the launch of the European Green Deal six years ago, the EU has established a complex and mature regulatory framework to support renewable hydrogen’s growth. This framework has provided regulatory certainty to market participants, as it is both detailed and partially builds on gas market regulations. Considering its extent, established rules elaborated technical and comprehensive criteria for hydrogen production to be considered renewable. Regarding its alignment with the gas market, it applies similar gas network rules to hydrogen networks, particularly in terms of non-discriminatory access, same use of permits and the creation of a Hydrogen Network Operators analogous to the Gas Network Operators.
The EU has positioned itself among the global leaders – alongside the United States, China and Japan – of the renewable hydrogen industry, acting swiftly to regulate its internal market. Furthermore, it aims to establish production standards for the global business. Article 1 of Delegated Regulation 2023/1184 affirms this ambition, stating that its rules “shall apply regardless of whether renewable hydrogen is produced inside or outside the territory of the Union.”
Despite the regulatory efforts, renewable hydrogen sector within the EU and globally is having difficulty taking off. As shown by the IEA, hydrogen demand has only increased slightly over the last five years, and current projections of renewable hydrogen production suggest that we are far from reaching the 2030 targets established in the REPowerEU Plan.
Additionally, demand remains concentrated in traditional applications, with most hydrogen still produced from fossil fuels. Moreover, demand in hard-to-decarbonise sectors such as transportation and construction is still in a nascent stage. The low demand in these sectors is hindered by various factors, including the absence of an established market and the lack of infrastructure. In the transportation sector, the adoption of hydrogen depends, in addition to various technological factors such as vehicle size and driving profile, on the price levels of the different energy carriers.
© IEA, Global Hydrogen Review 2024.
Geopolitical tensions have also contributed to slow market development. Trade disputes with the United States, Russia, and China have led the EU to shift its focus toward competitiveness, at times sacrificing sustainability priorities. The recent Clean Industrial Deal reflects pressure from EU hydrogen stakeholders to integrate low-carbon hydrogen as a valid technology option to develop. Previously seen as a complementary solution to RFNBOs, low-carbon hydrogen has gained prominence due to trade concerns.
Accordingly, in September 2024, the Commission launched a consultation on a draft methodology for low-carbon hydrogen. Although the delegated regulation has yet to be adopted, the Commission committed to conclude this process within the year. EU’s approach is now on de-risking and accelerating the uptake of both renewable and low-carbon hydrogen, even if this may slow progress toward full carbon neutrality in the energy sector. This emphasis carries inherent risks: low-carbon hydrogen – whether produced from fossil fuels with carbon capture or via electricity – still emits GHGs, offering 70 % savings compared with grey hydrogen.
While not ideal for long-term climate neutrality, the Commission increasingly sees low-carbon hydrogen as necessary to accelerate renewable hydrogen market development as it could help technological innovation and reduce costs. The upcoming low-carbon hydrogen regulation should be similar to the renewable hydrogen framework, being pragmatic, technology-neutral and fair across the value chain.
A Reality Assessment – Time for Change?
With the context of a slow market development and the Commission’s openness to low-carbon hydrogen, attention has increasingly turned to the factors hindering renewable hydrogen progress. EU hydrogen stakeholders now question high investment costs, technological innovation gaps, early-stages of economies of scale and regulatory complexity.
While it has been acknowledged that the Commission established a robust regulatory framework for a future mature hydrogen market, concerns have arisen regarding the premature implementation of such an elaborate regime in an industry that remains in its early stages. The complexity of the criteria may be one reason why few EU projects are in operational phase, with developers struggling to interpret and implement the framework.
For instance, as identified throughout the analysis, the criteria for classifying hydrogen as renewable – part of the RFNBO regulation – are complex both theoretically and in application. Renewable hydrogen projects have faced difficulties in interpreting and meeting the standards established in the Delegated Regulation 2023/1184, and to apply the Delegated Regulation 2023/1185 methodology for GHG accounting across the hydrogen life-cycle.
One major challenge is ensuring that EU rules do not discourage hydrogen producers outside the EU. Overly stringent and complex requirements could lead them to sell hydrogen – and its derivatives – in less regulated markets, bypassing the Union due to difficulties in understanding and applying EU standards. Balancing stringent EU regulations with a competitive global hydrogen market is crucial, especially given the REPowerEU Plan’s recognition that imports will be essential for the EU to achieve GHG emissions reduction goals and carbon neutrality by 2050.
Similarly, despite the establishment of hydrogen infrastructure regulations in the Hydrogen and Decarbonised Gas Market Package, the physical infrastructure itself remains underdeveloped. Research indicates that we are still in the experimental phase concerning the use of hydrogen in pipelines, the creation of import routes, and intra-EU corridors.
Consequently, European hydrogen stakeholders have increasingly called for a ‘reality check’ on the EU’s regulatory framework for renewable hydrogen. They argue that its complexity and extensiveness have made it difficult for many projects to reach the operational phase, contributing to the sector’s slow market development.
Drawing on Mario Draghi’s report and the EU Competitive Compass, stakeholders issued a joint statement urging a reassessment of renewable hydrogen regulations. They advocate for creating cost-competitive production conditions and have requested the Commission to conduct an impact assessment of current renewable hydrogen classification criteria, evaluating their effect on costs, GHG emission savings, and the broader energy system. Based on these findings, stakeholders are calling for rapid action to address regulatory barriers identified.
However, regulatory change carries risk. Significant long-term investments have already been made by pioneers in the sector, and altering the rules at this stage could jeopardise market development, increasing regulatory uncertainty among early investors who took initial risks. Nonetheless, if the regulations’ impact assessment lead to targeted regulatory revisions that do not undermine existing projects, it could encourage new investments while supporting ongoing initiatives.
In line with this perspective, Article 22b of the RED allows Member States to reduce their renewable hydrogen sub-target in the industry sector by 20% in 2030 – instead of 42% –, provided they are on track to meet their overall renewable energy targets and maintain a low share of hydrogen production from fossil fuels: below 23% in 2030. Therefore, if there are some specific obstacles with this energy source, an exemption is contemplated in current hydrogen rules. While this exemption mechanism provides flexibility, the ability of Member States to navigate this path remains uncertain, given their ongoing struggles to meet their renewable energy targets.
In conclusion, the EU has developed a comprehensive and advanced regulatory framework to foster the growth of a renewable hydrogen market. However, regulatory flexibility may now be crucial to address the slow pace of market development. A formal impact assessment of the current regulations would be a constructive next step, ensuring that necessary adjustments are made to improve market viability.
Finally, while promoting low-carbon hydrogen is becoming increasingly important, it should only progress if it clearly contributes to the overarching goal: the establishment and long-term success of the renewable hydrogen sector, enabling the EU to meet its carbon neutrality targets.
Stefan Goecke is an LL.M. student in Law and Sustainability at Utrecht University. He has solid experience in regulated markets and public law, having worked as a lawyer in Chile. His research has focused on sustainability matters, exploring intersections with economic fields.