The Case for Recalibrating Europe’s Hydrogen Strategy

The report argues that the European Union's 2020 hydrogen strategy was overly ambitious and requires recalibration to align with market realities. It advocates for a pragmatic, implementation-focused approach that prioritizes 'hard-to-electrify' sectors—such as steel, maritime, and fertilizers—while utilizing a combination of mandates ('sticks') and targeted funding ('carrots') to bridge the cost gap between renewable hydrogen and fossil-based alternatives.

• There is a significant gap between the EU's original hydrogen consumption targets and current reality. While the EU Hydrogen Strategy targeted 20 Mtpa by 2030, current production is only 0.02 Mtpa. Regulated demand from existing policy measures is projected to be between 2.2 and 2.8 Mtpa by 2030, though an 'Accelerated Transition Scenario' could see demand reach up to 7.0 Mtpa.
• The report recommends focusing renewable hydrogen exclusively on 'hard-to-electrify' sectors to maximize emissions reductions and efficient use of public funds. Priority applications include steelmaking, e-fuels, fertilizers, and refining. Conversely, it argues against using hydrogen for building heating, power generation, or light-duty vehicle refueling, which should instead be addressed via direct electrification or energy efficiency.
• To drive adoption, the EU should employ a 'carrots and sticks' approach. 'Sticks' include RED III mandates, sector-specific penalties (such as ReFuelEU), and rising EU Emissions Trading System (ETS) costs to increase the willingness-to-pay for renewable hydrogen. 'Carrots' involve targeted funding through mechanisms like the European Hydrogen Bank and the proposed Industrial Decarbonisation Bank.
• Current public funding is insufficient and poorly distributed. Approximately €13.9 billion is needed to implement RED III mandates, and €45.6 billion total to achieve the Accelerated Transition Scenario. While €21.4 billion has been committed, only €3 billion has been disbursed. Funding is currently heavily concentrated in Germany, France, and the Netherlands, leaving 55% of European production without similar support.
• Strategic imports of hydrogen derivatives (such as e-ammonia, e-methanol, and green iron) are necessary to bridge short-to-medium term supply gaps. The projected supply-demand gap for 2030 under the Accelerated Transition Scenario is estimated between 1.9 Mtpa and 4.3 Mtpa. Infrastructure investments should be prioritized in Northwest Europe (Germany, Netherlands, France, and Belgium) and linked to production hubs in the Nordic regions and the Iberian Peninsula.

APA

RMI (2025). The Case for Recalibrating Europe’s Hydrogen Strategy. https://rmi.org/resources/the-case-for-re-calibrating-europes-hydrogen-strategy/

Chicago

RMI. The Case for Recalibrating Europe’s Hydrogen Strategy. 2025. https://rmi.org/resources/the-case-for-re-calibrating-europes-hydrogen-strategy/.

Wikipedia

{{cite report |author=RMI |title=The Case for Recalibrating Europe’s Hydrogen Strategy |date=10 March 2025 |url=https://rmi.org/resources/the-case-for-re-calibrating-europes-hydrogen-strategy/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2025case, author = {{RMI}}, title = {{The Case for Recalibrating Europe’s Hydrogen Strategy}}, institution = {RMI}, year = {2025}, month = mar, url = {https://rmi.org/resources/the-case-for-re-calibrating-europes-hydrogen-strategy/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }