EU Delegated Act on Low Carbon Hydrogen

Background on the Low Carbon Hydrogen Delegated Act

In December 2021, the European Commission introduced the Hydrogen and Decarbonised Gas Market Package (Gas Package), a review of the EU’s policy framework for regulating the gas market. The Commission’s Inception Impact Assessment communicated the need to progressively phase out unabated fossil gas via electrification and facilitate the uptake of renewable and low-carbon gases. Amongst other measures, the review included rules for defining low carbon hydrogen (produced using fossil gas with carbon capture and storage or biomass).

In March 2024, the EU reached an agreement on the Gas Package, which was officially adopted in June, defining what qualifies as low-carbon hydrogen. According to the agreement, low-carbon hydrogen must produce 70% fewer greenhouse gas emissions than fossil fuels and hydrogen made from unabated fossil gas (referred to as the GHG emissions threshold rule). To measure this, the EU uses a standard value of 94 grams of CO2 for every unit of energy produced by fossil fuels. This value acts as a baseline, representing the typical emissions from fossil fuels. Supplementary legislation in the form of a Delegated Act will be introduced to clarify how this threshold will be met, addressing key issues such as:

• Inclusion of life-cycle greenhouse gas emissions, including indirect emissions (caused if new fossil gas production is added to meet demand for low carbon hydrogen, thus increasing overall GHG emissions);
• Hydrogen and methane leakage, which if not accounted for could undermine GHG emissions savings, due to their increased warming effect when compared with CO2;
• Performance of carbon capture and storage, including carbon capture rates, which, if low, would result in high GHG emissions from hydrogen production.

The inclusion of the above measures in the definition, as proposed by the EU Commission, will be critical to ensure low carbon hydrogen contributes to the energy transition. Previous InfluenceMap research indicates that, based on prior policy engagement, actors in the energy, utilities and heavy industry sectors will push for a definition of low carbon hydrogen with weaker rules on indirect emissions, methane and hydrogen leakage monitoring and the performance of carbon capture and storage. Such a definition could increase the risk that low-carbon hydrogen production leads to higher GHG emissions, due to resulting new fossil gas infrastructure, hydrogen and methane leakage, and poor carbon capture rates.

Timeline

The European Commission indicated that it intends to adopt the Delegated Act before the end of its mandate, which ends in November 2024. The Commission must precede the formal adoption of the Delegated Act with a four-week consultation in which stakeholders can provide feedback. This consultation is currently available on the ‘Have Your Say’ website, and will be closing on 25 October 2024.

Current Corporate Engagement on the Delegated Act

InfluenceMap’s tracking of corporate advocacy on the Gas Package and the Low Carbon Hydrogen Delegated Act has shown consistent efforts to weaken the definition of low carbon hydrogen from sections of the energy, utilities and heavy industry sectors:

• Entities in these sectors have called for greater flexibility in meeting the 70% GHG emissions threshold, while also advocating for delaying the inclusion of leakage detection in the definition. This includes industry associations such as Gas Infrastructure Europe (GIE), Eurogas, European Steel Association (Eurofer), FuelsEurope, International Association of Oil and Gas Producers and Hydrogen Europe, which a range of companies including Engie, RWE, Fortum, Uniper, Snam, Enagás, Air Liquide, thyssenkrupp and Polish Oil and Gas Company (PGNiG) retain membership of.
• Some entities, including Polish Oil and Gas Company (PGNiG) and the association European Chemical Industry Council (Cefic), appear to reject any GHG emissions threshold at all in the definition of low-carbon hydrogen, instead advocating for a technology neutral approach to the production of hydrogen.
• Companies such as Snam and industry association Eurogas advocated for an extensive role for fossil gas in producing hydrogen, in opposition to the Commission’s ambition of avoiding locking-in demand for fossil gas.
• Conversely, industry association WindEurope, which includes members such as Enel, Iberdrola, and EDF, has supported a robust definition that takes into account full lifecycle emissions, excludes carbon offsets and introduces leakage monitoring.

Corporate Engagement on other relevant Hydrogen Policy

InfluenceMap has detected a similar pattern of corporate engagement on the EU’s Renewable Hydrogen Delegated Act, which was finalized in June 2023 and forms part of the Renewable Energy Directive:

• Entities in the energy, utilities and heavy industry sectors opposed stringent rules that would ensure renewable hydrogen (produced using renewable electricity) contributes to reducing GHG emissions, including Enagás, RWE, Engie, and associations Eurogas, Hydrogen Europe, EUROFER, Cefic and FuelsEurope.
• In contrast, electric utilities and renewable energy entities were supportive of the Renewable Hydrogen Delegated Act, including Enel, Iberdrola, EDP and association SolarPower Europe.

Similarities between EU and US corporate advocacy on hydrogen policy were also observed by InfluenceMap. For example, opposition to the US Clean Hydrogen Tax Credit has been detected in 2024, with many companies in the heavy industry and energy sectors, such as Air Liquide, LyondellBasell, BP, TC Energy, Shell and National Grid, stating that the proposed requirements in the Tax Credit are too stringent and costly.

Next Steps for Science-aligned Companies and Investors

It is likely that without intervention from investors and science-aligned companies, sections of the energy and heavy industry sectors will succeed in pushing for a weak definition of low carbon hydrogen. A weak definition that does not take into account full lifecycle emissions, the potential for methane and hydrogen leakage, and carbon capture rates could risk locking-in demand for fossil gas and lead to an increase in overall GHG emissions, jeopardizing the EU’s ability to meet its climate goals, which are outlined in the European Green Deal.

InfluenceMap has identified several leverage points that companies may deploy to intervene and support an ambitious definition:

• Engage with the Commission when the Delegated Act is published for consultation on the ‘Have Your Say’ website or directly through their own contacts;
• Increase public advocacy, for instance by publishing position papers on their website or through joint letters (similar to this position paper from WindEurope); and
• Commit to working inside oppositional industry associations to improve their position, or where this is unsuccessful, publicly disclose misalignment with the positions of such industry associations.

In turn, investors and other stakeholders could engage with companies to encourage them to take the above steps, or where this concerns negative actors, pressure them to cease negative influencing.

InfluenceMap would be happy to engage with interested investors and other parties around this content - please contact rodolfos.maslias@influencemap.org.