Europe needs to boost incentives for renewable hydrogen development
The EU Emissions Trading System (EU ETS) has undergone a significant overhaul, with the aim of improving the internal consistency of CO pricing across all types of hydrogen production. This reform, implemented in 2023, has far-reaching implications for the hydrogen sector, particularly for the production of green hydrogen.
Produced with power from renewable sources, green hydrogen is set to benefit from the reform in numerous ways. From 2025, producers of hydrogen will receive the same amount of free certificates regardless of the production method. This equal treatment fosters a level playing field, allowing green hydrogen to compete more effectively with fossil alternatives.
Moreover, the reform strengthens price stability and long-term predictability for industrial consumers, a crucial factor for decarbonization. This increased certainty encourages investment in green hydrogen, accelerating its scaling and competitiveness.
The reformed EU ETS also prevents carbon leakage and encourages lower CO2 emissions across supply chains. This is achieved through the Carbon Border Adjustment Mechanism (CBAM), which comes into effect in 2026.
Researchers involved in the Kopernikus Project Ariadne, based in Potsdam, have conducted extensive research on hydrogen in the context of the reformed EU ETS. Their findings suggest that the inclusion of upstream emissions, including methane emissions, could have a significant impact on supporting renewable hydrogen.
However, the researchers also highlight the need for additional political measures to support the growth of renewable hydrogen at the necessary pace and scale. They propose a stepwise tighter standard for low-carbon hydrogen as an effective option, alongside other measures beyond the existing targeted support programs.
The EU Framework for the upscaling of hydrogen, produced with power from renewable sources, is aimed at making hard-to-electrify sectors like chemistry and steel industry CO-free. This ambitious goal underscores the EU's commitment to a greener future.
In contrast, conventional hydrogen production from natural gas releases a significant amount of CO. To meet the EU's climate goals, technology-specific instruments for low-carbon hydrogen are necessary.
In conclusion, the reform of the EU Emissions Trading System is a crucial step towards making green hydrogen more economically viable and competitive. However, additional political measures and regulatory adjustments are required to ensure the rapid and sustainable growth of renewable hydrogen.
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