The most important piece of EU climate law you’ve never heard of
The delegated act that will define renewable hydrogen and e-fuels
Delegated acts are supposed to be technical pieces of legislation. To write detailed rules that would be difficult to negotiate between 751 European Parliament members and 27 countries the European Parliament and the Council can delegate some powers to the European Commission to come up with.
But of course, as the expression goes, the devil is in the detail! Delegated acts are often an opportunity for industry lobbyists to hollow out the broad principles that elected European lawmakers agreed on.
And we are seeing this again with hydrogen, or in the jargon of the EU’s green fuels law, Renewable Fuels of Non-Biological Origin (aka RFNBOs).
Whether or not renewable hydrogen or e-fuels like e-ammonia can qualify as a RFNBO is a world of difference. The Commission has proposed targets that will require scaling up the production of these RFNBOs, setting targets for their use in the transport sector. For example, to decarbonise the aviation sector, the Commission has proposed to mandate the use of e-kerosene by airlines. If the e-kerosene qualifies as a RFNBO, producers can be sure that there will be a demand for their product. Without that seal of approval, it is unlikely that a project will ever be able to get off the ground. Excuse the pun.
The Renewable Energy Directive is reasonably clear that hydrogen or efuels can only qualify as RFNBOs, if they are produced with additional renewables. In other words, fuel producers cannot rely on existing renewables; they need to deploy or finance new wind and solar capacity (e.g. by concluding a Power Purchase Agreement).
This is relatively straightforward to check. If an electrolyser is directly connected to a new solar or wind farm we can clearly see if increased demand is being met with renewables. However, things get a lot more complicated when the renewable electricity is sourced from the grid, where coal and gas as well as nuclear also produce electricity. The European Commission has proposed a set of rules to ensure that RFNBOs are only produced when the contracted wind or solar is actually generating electricity.
Unfortunately, the hydrogen and e-fuels industry have been successful in undermining how the delegated act applies this additionality principle as enshrined in the Renewable Energy Directive. Following a last-minute change of heart, the Commission decided to exempt all hydrogen and e-fuels production that starts before 2027 from having to contribute more renewables to the grid. And this exemption lasts for as long as these units keep operating!
This would be bad enough, but the Commission adds insult to injury. It not only relaxed the sustainability criteria for these RFNBOs, but also more than doubled its 2030 target for hydrogen and e-fuels, following the Russian invasion of Ukraine. The 10 million tonnes of green hydrogen to be produced in the EU will require more than all onshore and offshore wind power in the EU. This is equivalent to the electricity consumption of France.
Where did we see this before? Biofuels! High targets were set in the early 2010s and for the better part of a decade, the EU did its utmost best to ignore ‘the inconvenient truth’ that biofuels caused large-scale rainforest destruction.
One would think that the Commission would remember the lessons learnt, when starting to promote another type of renewable fuel. Especially in the context of record-high electricity prices, where households and businesses struggle to pay their energy bills.
Diverting a lot of existing wind and solar away from their most efficient use in electric vehicles and instead producing hydrogen and e-fuels with them is not sound policy-making. The shortfall that renewables can no longer cover will largely be met with mostly gas-fired power plants.
T&E’s demands are clear. As the nascent hydrogen industry estrablishes itself, some flexibility will be needed during an initial ramp-up phase. However, by completely exempting the early movers from additionality, the Commission is giving away the store. In this proposal, the nascent hydrogen and efuels industry gets high targets and ample subsidies, but only has to deliver greenwashed rather than green hydrogen and efuels. Just like with biofuels, we say clearly #notinmytank!