PVTIME – Draft documentation seen by Argus suggests that the European Commission may remove binding national-level renewable hydrogen targets from the upcoming revision of the Renewable Energy Directive, RED IV. Instead, the Commission’s preferred policy option is to set a non-mandatory EU-wide consumption objective of eight million tonnes per annum by 2040 for renewable hydrogen, covering both energy-related and industrial-refinery applications. Low-carbon electrolytic hydrogen produced from nuclear generation would qualify under this draft proposal.
Under this option, EU-wide and national-level finance mechanisms and incentives would support the delivery of the indicative target. Producers of renewable or low-carbon electrolytic hydrogen would be permitted to trade credits with obligated parties under national transport-fuel-supplier quota regimes, despite the absence of dedicated hydrogen sub-quotas after 2030. Credits could also be generated from hydrogen supplied to industrial end users, which is a departure from existing arrangements. This would effectively offset higher costs in industry, alleviating the pressures seen in the Danish offshore wind market. Denmark’s follow-up tender to the 1 GW Thor wind project failed in 2024, and a rerun was not completed until last month. According to the impact assessment, this policy pathway delivers the most efficient rollout of renewable hydrogen when weighed against system cost and power system integration considerations. Focusing on domestic renewable hydrogen consumption, with hydrogen derivatives excluded from target metrics, would encourage derivative manufacturing capacity to locate within the EU.
The draft measures will not affect existing RED II obligations. Member states must still ensure that 1% of fuels used in transport come from renewable non-biological sources by 2030. There are also requirements for 42% of industrial hydrogen to come from renewable sources by 2030 and 60% by 2035.
The commission’s impact assessment features two alternative policy approaches. The first approach retains binding national renewable hydrogen targets for industry and transport up to 2040 and continues elements of the RED III framework. However, the draft text lacks concrete target values. Adjustments to compliance pathways would allow for statistical transfers between Member States, the cross-counting of industrial target over-delivery against transport sector obligations, and the acceptance of low-carbon electrolytic hydrogen as a valid compliance material. While this option could develop hydrogen-economy capacity across all member states, it could lead to the deployment of renewable electricity to hydrogen in locations with poor operational efficiency.
A third option would see the discontinuation of RED III hydrogen targets and the removal of the 2035 industrial hydrogen requirement, with progress monitoring being the only activity introduced. This option would not introduce any new objectives or financial support instruments. Evaluators judge this scenario to result in sub-optimal deployment of renewable hydrogen, creating policy uncertainty, diminishing investment incentives, and imposing a substantial disadvantage on early-market participants.
The draft estimates that baseline electrolytic hydrogen consumption across the EU could reach 18 million tonnes per annum by 2040 under prevailing market and legislative trends. Analysts note that reductions in hydrogen costs have fallen short of prior projections, which may constrain adoption rates.
The material in the impact assessment partly draws on stakeholder consultation responses collected earlier this year. Work on the post-2030 renewable energy framework is still in the early stages of development. The final RED III provisions on hydrogen targets only emerged after multi-year negotiations between the European Commission, the European Parliament, and the European Council.
