The EU wants to become “climate neutral” (i.e. have net zero greenhouse gas emissions) by 2050. To achieve this goal, all sectors that emit these gases need to “decarbonise”, or in other words, phase out their dependence on carbon–based fossil fuels. Using renewable hydrogen is one way to do this, especially in hard-to-electrify sectors such as steel production, petrochemicals, cement, and fertilisers. Renewable hydrogen has become even more important in the wake of Russia’s war of aggression against Ukraine, as it can contribute to reducing the import of fossil fuels from Russia, thus improving the EU’s strategic independence. The ECA’s auditors have examined the European Commission’s effectiveness in creating the right conditions for the emerging renewable and low-carbon hydrogen markets, given the significant implications for the future of key EU industries.
Hydrogen is a chemical element, which is a gas under standard conditions. It can be produced in a number of different ways, for example, from water (using electrolysis) or from natural gas. Renewable hydrogen produced using renewable (“green”) electricity or biomass is one of the tools for decarbonisation. The production process causes minimal carbon emissions, it enables the energy from large quantities of green electricity to be stored, and there are zero carbon emissions from using the hydrogen produced in this way. Low-carbon hydrogen (i.e. produced from non-renewable sources) is another means of reducing carbon emissions, particularly during the transition towards climate neutrality.
The use of renewable hydrogen comes with its own set of problems, including current efficiency issues linked to electrolysis, the cost of production, and the need for renewable electricity and water. Industries in the EU are already facing a number of additional challenges. These include volatile energy prices, especially since Russia’s war of aggression against Ukraine which exposed the EU’s dependence on energy imports, and disruptions to and dependence on supply chains for certain raw materials. EU policy-makers therefore need to create the right conditions for decarbonisation while ensuring that the EU’s industries stay put but remain competitive.
The European Commission laid the groundwork for a renewable hydrogen market in the EU by setting targets for hydrogen production and imports. It also recognised that low-carbon hydrogen could play a role in the transition towards climate neutrality. Total EU funding for hydrogen-related projects for the 2021-2027 budgetary period is currently estimated at €18.8 billion. Other major economies, such as the United States, Canada, Japan, China, and India, already provide significant subsidies to support decarbonisation, including for the production of renewable hydrogen.
In their report, the ECA’s auditors assessed whether the EU:
- was on track to achieve its targets for hydrogen;
- had adopted the necessary legal acts to provide support for the hydrogen market effectively and in a timely manner;
- had a comprehensive set of funding programmes to allow the hydrogen value chain to develop across the EU; and
- if the Commission had appropriately coordinated the creation of a market for hydrogen with member states and industry.
They looked in particular at the situation in four EU member states: Germany, Spain, Netherlands, and Poland.
Does hydrogen have a future in making the EU climate neutral? If so, is the EU doing all it can to make this a reality? Stay tuned for our special report on the EU’s industrial policy on renewable hydrogen, which will be published on our website at 00.01 on 17 July 2024.
Source – ECA