Regulation and opportunity

By Dr. Nicolas Brahy, General counsel, public affairs and ESG Director

Everyone agrees that regulation is essential to scale-up the hydrogen sector quickly. Deciding which areas most require policymakers’ attention is the next critical step.

Hydrogen passed its first great hurdle when its absolute necessity in humanity’s effort to decarbonise was widely accepted. Adoption in July 2020 of the European Commission’s Hydrogen Strategy for a Climate-Neutral Europe was a symbolic marker of that major achievement. Despite the progress achieved with the legislative proposals forming the Fit-for-55 package, we still have a very, very long way to go, and not a lot of time. We need to regulate fast, at EU and at National level, to create a platform to achieve the Strategy.

Phase I of the EU strategy called for 6 GW of hydrogen electrolysers in the EU by 2024, producing up to 1 million tonnes of renewable hydrogen. That, the EC declares, will “start in priority with decarbonising existing hydrogen production.” Phase II, from 2025 to 2030, is even more ambitious. Hydrogen will become “an intrinsic part of an integrated energy system”. Renewable electrolyser capacity within the EU will rise to 40 GW, producing up to 10 million tonnes of renewable H2. 

The Commission’s concurrent formation of the European Clean Hydrogen Alliance showed the parallel recognition that Europe requires an industrial policy, and that it should include European investment and leadership in hydrogen’s industrial value chain. 

 Since 2020, the 40GW / 10 Mt target set by the EU Hydrogen Strategy has been augmented with an additional 10 Mt of imported renewable Hydrogen, quantities seen as necessary in the context of RePowerEU, Europe’s action plan to reduce dependence on Russian fossil fuels presented in May 2022.

 Together, these initiatives place hydrogen at the center of key European energy security, industrial and climate policies. 

 Creating enabling frameworks of rules and standards is hydrogen’s next big hurdle.

Regulatory priorities

Neither the ambitious objectives set for Europe nor similar H2 policies recently established by many member states and elsewhere in the world will be reachable without regulation. That too is relatively widely understood, but from there the consensus begins to fracture. For example, some sectors are better suited to adopt hydrogen earlier than others, and could be targeted for fast-track rules, but we’ve yet to agree which parts of the H2 value chain demand urgent regulatory attention.

The need can be divided into four areas:

  • production of renewable hydrogen 
  • its use in industry (to replace gray hydrogen and later in new uses)
  • its use in transportation, and
  • storage and distribution through a transformed gas grid

Choosing where to regulate first is an important next step for policymakers. Low-hanging fruit in the first area is generation of green hydrogen to replace gray, particularly in refineries and ammonia plants. The next sensible step is to replace fossil fuels used in industrial processes, especially the coal used to make steel, but in many others too.

Such is the urgency that we must also look to rapid regulation in transportation. The hydrogen-fuelled systems required to power planes, ships, and trucks are all different, and require individual approaches. Synthetic kerosene made from H2 and captured CO2 demands negligible changes to aviation engines, and could be a quick win, but to power road haulage we need not only new trucks, but also new or vastly renewed refueling infrastructure, and therefore a more complex set of rules and standards.

Finally, a significant regulatory package to make Europe’s existing gas grid into a ‘hydrogen highway’ is expected before year-end.

The state of play

European H2 refineries are already governed by helpful regulation under the Renewable Energy Directive (RED 2). European trucks are already subject to CO2 standards that will lead to bringing hydrogen trucks on the road in a couple of years. Those rules adopted in 2018 are the first major entry point into moving significantly in massive green hydrogen use typically in Refineries.  

Now, Europe wants to revisit them to increase the level of ambition and to extend them to other hydrogen applications. H2 use in the steel sector is part of the discussion on a carbon border-adjustment mechanism. For aviation fuel, a synthetic kerosene mandate is under consideration. Production of ammonia would be covered by a proposed target for industrial hydrogen consumption. Measures to lower the CO2 emissions of fuels used in the maritime sector are also on the way. Consensus is growing that hydrogen – plus ammonia / methanol made from renewable hydrogen – are shipping’s clean fuels of the future.

I am unaware of discussions regarding ammonia. Meanwhile in shipping, discussions are less advanced following the global adoption of significant low-sulfur fuel regulations. Consensus is growing that hydrogen – plus ammonia made from hydrogen – are shipping’s clean fuels of the future, and the European Commission is preparing a regulation that would impose a share of sustainable fuel among all fuels consumed, although this quick-fix may not be practical.

Next steps

Globally, the easiest win is to replace gray hydrogen in areas such as refining and ammonia for fertilizer production with green H2. That will provide a foundation for fast extension of H2 use. Ambitious legislative proposals have been made by the Commission in the context of the Fit-for-55 package and in particular in the proposed revision of the Renewable Energy Directive (RED). Proposals to introduce sustainable fuels in aviation and maritime are also promising for hydrogen. 

Are policy makers going to enact regulations to support progressive phase out of gray hydrogen solutions? Are they going to agree, within Europe, on supporting measures for carbon capture solutions to accompany those in the interim time? Will they push for European wide supporting mechanisms to help develop massive use of electrolysis solutions? Huge debates ahead, but critical choices for the Net Zero Horizon.

The use of hydrogen in road transport is certainly practical in theory, especially for high-use fleets of vehicles like buses, taxis, and vans, but deployment to individual coaches, trucks, and cars requires a comprehensive network of refueling stations, as the electric-vehicle roll-out showed. That may begin under the revision of the EU’s 2014 Alternative Fuel Infrastructure Directive, which looks set to include refueling-station targets, but we lack a model to finance this infrastructure.

It is coming. Following the realization that hydrogen is essential to decarbonisation, the world’s regulators are already taking the steps necessary for this essential Net Zero tool to pass its next great hurdle. They are creating local and international frameworks to underpin the scaling-up of Europe’s hydrogen-fuelled future.

Targets in Europe’s Hydrogen Strategy for a Climate-Neutral Europe

PHASE I: 2024

  • 6 GW of renewable hydrogen electrolyser capacity
  • Annual production of 1 million tonnes of green hydrogen

PHASE II: 2025 TO 2030

  • 40 GW of renewable hydrogen electrolyser capacity within Europe + 40 GW for renewable hydrogen outside Europe
  • Annual production of 10 million tonnes of renewable hydrogen in the EU + 10 Mt of renewable hydrogen imported.

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