The European Commission is drawing up rules to complement the Gas Directive on calculation methodologies for low-carbon hydrogen produced by gas with CCS or nuclear power.

But a leaked document outlining the draft rules—known as a ‘delegated act’—has drawn the ire from stakeholders in the gas industry and MEPs alike, who say the framework is overly rigid and complex and that it discriminates against low-carbon hydrogen producers.

The gas industry says the default values for lifecycle CO₂ emissions set out in the delegated act are too conservative and that it is difficult for companies to demonstrate they can outperform them.

Under EU rules, specifically the EU Hydrogen and Decarbonized Gas Market Package, low-carbon hydrogen is defined as a fuel generating 70% greenhouse gas (GHG) emissions savings compared with a fossil fuel comparator. Hence the methodology for calculating the emissions is of high importance.

“The draft we have seen so far would stop most projects in their tracks by forcing them to use default values” Terzian, IAOG

“Under the current draft rules, it will be difficult for companies to demonstrate that they meet or outperform the 70% threshold for lifecycle emissions reductions. If they are restricted to purely relying on default values, it will be extremely challenging to meet this threshold,” Andreas Guth, secretary general at Eurogas, the European gas industry association, told Hydrogen Economist.

“The main point is that the rules need to allow companies to deviate from the default values in order to show that they are able to perform better,” Guth said.

He added: “The draft rules seem inconsistent with the European Commission’s own rhetoric regarding technology neutrality and the value they see in scaling up the hydrogen economy, including low-carbon hydrogen. We need consistency between ambition and what is actually delivered in terms of technical rules.”

Stopped in their tracks?

The final draft of the delegated act is expected to be released by the European Commission in August. The European Parliament and Council of the EU will then have two months to scrutinise it before it is passed into law.

“The draft we have seen so far would stop most projects in their tracks by forcing them to use default values. This runs entirely against the purpose of the delegated act, which is to enable projects to take FID and supply hydrogen to sectors that need it,” Nareg Terzian, a spokesperson for industry forum the International Association of Oil & Gas Producers (IOGP), told Hydrogen Economist.

IOGP’s main concern is not that the default values are too high—though they believe they are. The real issue is the requirement to use default values at all, Terzian said.

“This artificially inflates emissions reported for low-carbon hydrogen production. Developers should have the possibility to demonstrate real emission performance, not just generic assumptions,” he said.

Solid fuels

But the default values are not the only element the gas industry is concerned about.

Another concern is the treatment of solid carbon such as methane pyrolysis. Methane pyrolysis is a potential low-emission hydrogen production method accomplished by splitting methane from gas or biogas into hydrogen and solid carbon. But the delegated act does not take such technologies sufficiently into account, Guth said

“There is no possibility to attribute any credit to the capture of solid carbon in the draft methodology. Methane pyrolysis, as a production pathway is, therefore, disincentivised. This is simply not accounted for in the draft rules.”

CO₂ storage and hydrogen production in third countries, for example in the UK or Norway, is another point of uncertainty for industry.

“It is still unclear how CO₂ emissions from [CCS] will be counted for hydrogen produced outside the EU. Without a common framework, it is hard to see how these projects can prove they meet EU standards,” said Terzian.

“If the rules in a country where the project is based are not aligned with the CCS Directive, developers should be allowed to prove they store CO₂ safely by using international standards like ISO 27914, just as the EU Taxonomy already allows,” he added.

MEPs voice concern

During the two-month scrutiny period, the Parliament and Council can only reject or approve the delegated act, not amend it.

However, a number of MEPs have voiced concerns about the draft rules.

A recent letter sent by the European People’s Party—the largest political group in the Parliament—and addressed to EU Energy Commissioner Dan Jorgensen voiced concern that the default values for upstream CO₂ emissions set out in the delegated act were too high and would lead to unjustified penalties on hydrogen producers. Moreover, the absence of exemptions or a ‘grandfathering clause’ for projects for which FIDs had been taken before 2028 could disrupt projects currently under development, the letter said.

“There is still an opportunity to make changes to the text if there is political desire to do so. I understand that many members of the Parliament share our concerns that the current draft rules would further delay the development of the hydrogen economy,” Guth said.

70% – Required CO₂ saving

During a recent event hosted by trade association Energy Traders Europe at the Brussels Press Club, MEP Jens Geier, who represents the Socialist & Democrats, the second-largest political group in the Parliament, said the message to the Commission is that “this is not working”.

“If you want to have a ramp of hydrogen then please do not [do it] that way,” Geier said, referring to rules for both renewable and blue hydrogen.

But an official from the Commission told the event the new rules would not be set in stone and that the framework would be reviewed further down the line.

Lukasz Kolinski, director for Green Transition and Energy System Integration at the Commission, said: “The important thing is that we all agree that the [hydrogen market] is not where we would like it to be. The uptake is too slow. The cost is high.”

He added: “I am not excluding that the rules are overly complex. We are ready to look into monitoring the market, monitor[ing] the rules and, indeed, we will simplify. But let us allow the system to start working.”

Low-carbon hydrogen, as well as renewable hydrogen, is seen as key to decarbonise hard-to-abate sectors such as heavy industry and transport. However, high costs and a lack of commitment from offtakers have seen projects stall.

In a joint letter with a number of other industry associations, Hans Gruenfeld, president of the International Federation of Industrial Energy Consumers Europe, wrote: “Without a regulatory framework that recognises all low-carbon technologies and fosters complementarity rather than competition between them, European industrial consumers face increasing difficulties to build viable business cases which allow them to carry out their decarbonisation. With the right amendments to this draft regulation, the EU could gain a competitive advantage in the energy transition and strengthen its industrial base.”

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Author: Andreas Walstad