The European Union’s adoption of the Low-Carbon Fuels Delegated Act (DA) marks the formal completion of the regulatory framework governing renewable fuels of non-biological origin (RFNBOs) and low-carbon hydrogen.
While the worst-case scenario of overly lenient default values has been avoided, the final rules still expose significant flaws in how emissions are accounted for, with direct consequences for market competitiveness and climate credibility.
The DA’s methodology excludes key lifecycle emissions from its default values for natural gas, particularly liquefaction, shipping, and regasification in the liquefied natural gas (LNG) supply chain. These segments must instead be calculated separately, creating a fragmented system that risks underestimating the full climate footprint of blue hydrogen projects. Analysts have repeatedly warned that LNG shipping and regasification alone can add several grams of CO₂-equivalent per megajoule, undermining the premise of “low-carbon” hydrogen when not fully integrated into lifecycle assessments.
Methane emissions present an even greater blind spot. The DA relies on outdated leakage rates that do not reflect the higher fugitive methane releases documented in recent scientific studies. Furthermore, the regulation does not adequately capture methane’s short-term climate impact, which is more than 80 times stronger than CO₂ over a 20-year horizon. By undercounting these emissions, the framework effectively lowers the reported carbon intensity of blue hydrogen, leaving midstream gaps that weaken overall environmental safeguards.
In parallel, the treatment of electrolysis-based low-carbon hydrogen introduces another imbalance. Unlike RFNBO hydrogen, which faces strict rules on additionality, temporal correlation, and geographic matching of renewable electricity, low-carbon electrolysis enjoys comparatively looser requirements. This asymmetry risks distorting market incentives, making fossil-linked hydrogen more competitive despite its higher real-world emissions profile. The uneven playing field raises questions over whether EU climate legislation is unintentionally locking in high-emission pathways under the label of “low-carbon.”
For investors, the immediate challenge is regulatory clarity. With both RFNBO and low-carbon methodologies now defined, reopening or weakening the rules for RFNBO projects would jeopardize long-term certainty. The sector is already grappling with high capital costs, volatile power prices, and uncertain offtake structures. Any erosion of the greenhouse gas accounting framework could stall final investment decisions (FIDs), particularly in electrolysis projects aiming to serve aviation and shipping sectors bound by FuelEU Maritime and ReFuelEU Aviation mandates.
Policy advocates argue that the priority should shift to enabling first-of-a-kind RFNBO projects, ensuring financial mechanisms such as the European Hydrogen Bank and the Hydrogen Clearing House can bridge the gap between production costs and offtake prices. Airlines and shipping operators, facing binding targets for renewable fuels, depend on regulatory stability and reliable supply of RFNBOs. Without targeted support, the risk is not only stranded assets in electrolysis but also a backslide into high-emission “low-carbon” hydrogen justified by incomplete accounting.
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