Europe faces a critical juncture in its industrial future as it seeks to meet stringent CO2 reduction targets and integrate green hydrogen into its energy mix.
A recent report by Belgium’s Commission for Electricity and Gas Regulation (CREG) highlights the risk of industries relocating to regions where renewable energy, particularly green hydrogen, is more affordable unless a competitive market for these molecules is developed soon.
The European Emissions Trading System (ETS) exerts significant pressure on industries to lower their carbon footprints. While this system has been effective in incentivizing reductions in CO2 emissions, the added requirement for certain sectors to use a 42% share of green hydrogen by 2030 under the updated Renewable Energy Directive (RED) presents additional challenges. Meeting these targets requires substantial investments in green hydrogen production and infrastructure, which many industries may find economically unviable without government support or market adjustments.
One of the critical issues identified in the CREG report is the slow transposition of the updated RED into national law by many EU member states. The directive’s full implementation is essential to set clear interim targets for renewable hydrogen use, ensuring that industries can plan and invest accordingly. The delay in national legislation not only hampers the growth of the green hydrogen market but also risks creating an uneven playing field across Europe, with some countries advancing more rapidly than others in renewable hydrogen adoption.
The potential relocation of industries to regions with cheaper renewable energy sources is a significant concern. This shift could undermine the EU’s climate goals by merely displacing emissions rather than reducing them globally. Moreover, the economic impact of losing industrial operations could be substantial for member states that fail to establish a competitive green hydrogen market. The CREG report underscores the need for coordinated policy efforts to prevent such relocations and ensure that Europe remains an attractive location for industrial activity.
Developing an affordable and competitive green hydrogen market is paramount for the EU to meet its renewable energy targets and maintain industrial competitiveness. This requires significant investments in green hydrogen production technologies, infrastructure, and market mechanisms to ensure supply and demand dynamics are favorable. Additionally, policy measures such as subsidies, tax incentives, and public-private partnerships could play a crucial role in accelerating the market’s growth.
