EU Court of Auditors warning: Unlikely to meet hydrogen targets

Brussels – Italy, like Spain, France, Sweden, Finland, Poland, and Greece, has “high or good potential for creating a renewable energy surplus. This can be used to produce renewable hydrogen. At the same time, the majority of hard-to-decarbonize industrial sites are situated in Germany, Italy, France, Spain (but not necessarily in the regions of these countries which have good potential for producing hydrogen from renewable energies), Poland, and the Netherlands. Not all of these countries have good potential to produce renewable hydrogen.” This is the finding of the European Court of Auditors report entitled ‘EU Industrial Policy on Renewable Hydrogen. Legal framework has been mostly adopted – time for a reality check.

According to the Court, the EU has only partially succeeded in laying the groundwork for the emerging renewable hydrogen market, and “despite the various positive actions taken by the European Commission, problems remain throughout the hydrogen value chain” such that “it is unlikely that the EU will meet its 2030 targets for renewable hydrogen production and imports.” In this context, the Court urges that we take stock to ensure that the goals pursued by the EU “are realistic and policy choices do not undermine the competitiveness of key industries or create new dependencies.” According to Stef Blok, the Court member in charge of the analysis, “the EU should decide on a strategy to move forward on the path to decarbonization without altering the competitive situation of key EU industries or creating new strategic dependencies.”

The auditors of the Luxembourg court recalled that, under RePoweEu, the Commission, to begin with, set “overly ambitious” targets for renewable hydrogen production and imports: 10 million tons each (20 million tons in total) by 2030. However, these targets were “the result of political assessments” and “not based on thorough analysis.” Moreover, their achievement was undermined because Member States’ ambitions were divergent and not aligned with EU targets. Also, in coordinating action by Member States and industry, the Commission did not get all parties to push in the same direction. On the other hand, the Court gives the EU executive credit for proposing most of the legal acts in such a short time frame that “the regulatory framework is almost complete and has provided the certainty that is indispensable for creating a new market.”

According to the Court, creating an EU hydrogen industry requires massive public and private investment. However, “the Commission does not have a complete picture of the needs or the available public funding.” With just over 3 billion euros, Italy is the country in the EU that has allocated the most funds for hydrogen projects through its national recovery and resilience plan, including RePowerEu. Germany, France, and Spain follow. At the same time, EU funding, which the auditors estimate at €18.8 billion for 2021-2027, is scattered among multiple programs. As a result, “it is difficult for companies to choose the type of funding best suited to a specific project” and “the bulk of EU funding is used by member states with a large share of hard-to-decarbonize industries that have more advanced projects” such as Germany, Spain, France, and the Netherlands.

For all these reasons, the Court recommends that the Commission update the hydrogen strategy based on a thorough assessment of “how to calibrate market incentives for the production and use of renewable hydrogen; how to prioritize scarce EU funding and decide which parts of the value chain to focus on; and to consider which industries the EU wants to retain and at what price, given the geopolitical implications of domestic EU production versus imports from third countries.”