Permanent but voluntary joint purchases. EU strikes deal to decarbonize gas market

Brussels – Decarbonize existing gas networks to bring hydrogen to market, facilitate access to renewables (such as biomethane, hydrogen, or synthetic methane) and low-carbon gases, and improve security of supply in the EU, which has become necessary given the price crisis that has concerned the EU in recent months.

After reaching an agreement on the directive, the EU Parliament and Council on Friday (Dec. 8) signed a deal on the regulation of access to transmission networks, thus concluding negotiations on the package to decarbonize the gas and hydrogen market, proposed by the European Commission in December 2021, with a revision of the current internal gas market legislation dating back to 2009 (Directive 2009/73 / EC and Regulation on access to transmission networks).

The package “will ensure Europe’s energy security by phasing out Russian gas and promoting biomethane,” said EU Energy Commissioner Kadri Simson, calling it “a cornerstone for achieving our decarbonization goals by 2030.”

A central part of the political agreement concerns the creation of a market model for hydrogen in Europe, with rules to be applied before and after 2033 regarding access to hydrogen infrastructure, unbundling of hydrogen production and transport activities, and tariff setting. The agreement calls to create a new independent European entity that will bring together hydrogen network operators, Ennoh, alongside the other two existing structures for gas (Entsog) and electricity (Entsoe). In 2024, the new European hydrogen planning network will be established, but it will become fully operational in January 2027.

The co-legislators confirmed 2049 as the deadline to ban long-term contracts for unabated fossil gas, whose greenhouse gas emissions have not been processed so as to be eliminated through carbon capture and storage (CCS) technologies. The 2049 date is to meet the mid-century sustainability goals of achieving zero net emissions in the EU. The possibility of short-term supply contracts (less than one year) remains because the EU considers them as important for the security of supply and market liquidity. In line with the goal of reducing dependence on Russian fossil fuels, a mechanism will be introduced to allow member states to limit advance bids for network access capacity and LNG terminals for natural gas and LNG from Russia and Belarus.

As expected, the gas market decarbonization package is also the regulatory anchor by which the European Union intends to make  the joint gas purchases mechanism, introduced during the energy crisis, permanent. The co-legislators decided to extend the pooling mechanism for gas, but on a voluntarily. Hydrogen will be included in this mechanism in the form of a five-year pilot project to bring together hydrogen supply and demand and create market transparency under the European Hydrogen Bank.