The European Commission has published its revision of the EU Emissions Trading System (EU ETS) and the Electrification Action Plan (EAP). According to the industry association Hydrogen Europe, both initiatives contain important guidelines for the hydrogen sector.
Conditional allocation to promote investments in clean processes
The ETS revision introduces a so-called "conditional allowance" scheme. This links parts of the free allocation of emission certificates to investments in climate-friendly processes, instead of granting them unconditionally. According to Hydrogen Europe, this is intended to accelerate final investment decisions for decarbonisation technologies such as hydrogen. Additionally, more revenues at the member state level should flow into industrial decarbonisation.
According to the association, the conditional allocation also extends to aviation and shipping. This creates a market for sustainable aviation fuels (SAF) and e-SAF produced in Europe. A comparable mechanism (SMAP) is planned for the maritime sector.
Hydrogen Europe is critical of the fact that the overall ambition of the EU ETS is being weakened by an adjustment of the linear reduction factor. A robust CO2 price is essential for financially viable industrial decarbonisation in Europe, according to the association.
Jorgo Chatzimarkakis, CEO of Hydrogen Europe, commented: "This is a clear signal that Europe is moving from climate ambitions to implementation. Hydrogen Europe welcomes the introduction of investment allowances and the new SMAP mechanism for shipping, which reflects our long-standing proposal to accelerate the introduction of sustainable shipping fuels through targeted support within the Emissions Trading System (ETS). The proposal also rightly reaffirms the principle that revenues from the Emissions Trading System should be reinvested in Europe's industrial transformation to maintain competitiveness, strengthen resilience, and secure high-quality jobs."
€100 billion for "Industrial Decarbonisation Bank"
As part of the ETS revision, the Commission has also proposed the legal basis for an Industrial Decarbonisation Bank (IDB) with a volume of €100 billion. The bank is to focus on energy-intensive industries and close the financing gap for the commercial risks of mature projects. Hydrogen Europe welcomes the focus on mature projects and the new financing for commercial rather than technological risks.
The proposal now goes into co-decision between the European Parliament and the Council. According to the Commission, negotiations are expected to extend over 2026 and 2027, with implementation planned for 2028.
"Electrification Action Plan" with 46 percent target by 2040
The Electrification Action Plan, presented simultaneously, aims to accelerate the shift from fossil fuels to electricity in industry, transport, and buildings. The plan proposes a new electrification target for final energy consumption of 46 percent by 2040. This target is to be subjected to an impact assessment within the framework of the "Energy Union Package".
According to the association, the plan also recognises the need to make a system dominated by renewable energies more flexible. Hydrogen is identified as an important contribution to storage and industrial demand flexibility. The Commission announces a revision of the EU Hydrogen Strategy for 2026/2027 to reflect this role. Additionally, the Commission presented a draft regulation to amend Regulation (EU) 2019/943, which is intended to address future-proof grid charges.
Daniel Fraile, Chief Market & Regulation Officer at Hydrogen Europe, added: "The European Electrification Action Plan rightly recognises that moving away from dependence on fossil fuels is the path to competitiveness, security of supply, and lower energy prices. Hydrogen and Power-to-X are part of this concept and not a retrofit proposal. Grid-connected electrolysis is both a consumer of electricity and an enabler of electrification through flexibility and long-term energy storage."
