Hydrogen as a Renewable Fuel of Non-Biological Origins in the European Union—The Emerging Market and Regulatory Framework

Abstract

The European Union continues to lead global efforts toward climate neutrality by developing a cohesive regulatory and market framework for alternative fuels, including renewable hydrogen. This review article critically examines the recent evolution of the EU’s policy landscape specifically for hydrogen as a renewable fuel of non-biological origin (RFNBO), highlighting its growing importance in hard-to-abate sectors such as industry and transportation. We assess the interplay of market-based mechanisms (e.g., EU ETS II), direct mandates (e.g., FuelEU Maritime, RED III), and support auction-based measures (e.g., the European Hydrogen Bank) that collectively shape both the demand and the supply of hydrogen as RFNBO fuel. The article also addresses emerging cost, capacity, and technical barriers—ranging from constrained electrolyzer deployment to complex certification requirements—that hinder large-scale adoption and market rollout. The article aims to discuss advancing and changing regulatory and market environment for the development of infrastructure and market for hydrogen as RFNBO fuel in the EU in 2019–2024. Synthesizing current research and policy developments, we propose targeted recommendations, including enhanced cross-border coordination and capacity-based incentives, to accelerate investment and infrastructure development. This review informs policymakers, industry stakeholders, and researchers on critical success factors for integrating hydrogen as a cornerstone of the EU’s climate neutrality efforts.

1. Introduction

The development of the global economy requires the provision of energy produced in a manner that is neutral for the environment and the climate. Global energy demand will continue to rise, even as technologies for more efficient energy use emerge and become widespread. The energy transition will increase the share of renewable energy sources in the overall energy mix. Currently, hydrogen has the most significant potential for replacing fossil fuels. It has a high calorific value of 119.9 MJ/kg, compared to 36 MJ/kg for natural gas and 25 MJ/kg for coal. Its combustion process is environmentally neutral (if produced using low-carbon-intensive methods, such as water electrolysis). It can also serve as a safeguard for energy supplies that increasingly come from intermittent sources reliant on solar radiation intensity or wind strength. Moreover, it may be a catalyst for thdecarbonization of transportation. However, numerous socioeconomic and technological barriers limit the development of low-carbon hydrogen supply chains, including its physical properties causing hydrogen embrittlement, high production, storage, and transportation costs, slow infrastructure roll-out, and marginal utilization in hard-to-abate sectors (e.g., transportation, steel-making, and petrochemical) [1,2,3,4].

Transforming the economy to make broader use of hydrogen is the subject of numerous studies conducted by international organizations, both those focused on the global economy—e.g., Global Hydrogen Review 2024 [5] and International cooperation to accelerate green hydrogen deployment [6]—and those addressing specific countries, such as A Quality Infrastructure Roadmap for Green Hydrogen [7]. All of these studies point to the substantial potential for increasing hydrogen’s role in the energy transition. In the value chain for the industrial use of hydrogen technologies, institutional issues (regulations and public support) and the development of economic and market factors play a key role [8]. This applies to technological advancement at the global level, within the European Union [9,10], and in individual countries (e.g., [11]). The European Union has had the Hydrogen strategy for a climate-neutral Europe in place for several years [12]. It is, therefore, appropriate to analyze and evaluate existing research and publications related to achievements and experiences in creating and developing one of the key areas of the hydrogen economy, focusing primarily on the demand and supply side advancements.

The aim of this article is to discuss the evolving regulatory and market environment in the context of developing the market and infrastructure for hydrogen as a renewable fuel of non-biological origins (RFNBO) in the European Union from 2019 to 2024 (not omitting a crucial overview of socioeconomic and technological barriers that those policies target). The article is of a review nature and is divided into three sections. The first section identifies socio-economic and technological barriers associated with hydrogen economy development to position our further policy and market analysis in this context. It is broadened with the overview of the global context of hydrogen policies to distinguish the EU approach from other jurisdictions initially.

Section 2 defines hydrogen as RFNBO fuel and assesses its role in the energy transition, with particular attention to infrastructure development. Section 3 addresses the following research question: Which legal acts (regulations and directives) have been adopted in the European Union to accelerate the development of the market demand for renewable hydrogen as RFNBO fuel? Essentially, it aims to determine the demand-side potential for hydrogen as RFNBO fuel. Section 4 covers the supply-side policies and market constraints, emphasizing the costs of hydrogen production and the extent of public support needed for its development, as evidenced by the example of the EU. Identifying which EU institutions and other entities are responsible for implementing policies that advance the market and infrastructure for hydrogen as RFNBO fuel is of special importance.

2. Socio-Economic, Technological, and Political Determinants Associated with Hydrogen Economy Development

2.1. Overview of the Key Socio-Economic and Technological Barriers to Hydrogen Economy Development

Recent decades have seen repeated surges of interest in hydrogen as a clean and versatile energy carrier, yet many of these “hydrogen booms” were later followed by slowdowns in investment and deployment [13]. Yet, it is still perceived as a potentially dominant energy carrier after overcoming well-recognized barriers [14]. Scholars have pointed to several factors that shape hydrogen’s future prospects, ranging from technology cost and safety to social acceptance and supportive policy mechanisms [15,16,17,18]. To achieve a robust (and low-carbon) hydrogen economy—one capable of delivering on climate goals, energy security, and industrial competitiveness—stakeholders must overcome multiple barriers across technical, political, socio-economic, and market dimensions. Before discussing the EU market and regulatory frameworks for hydrogen produced as RFNBO fuel, it is essential to overview how these barriers generally intersect for hydrogen, drawing together evidence from diverse contexts and illustrating how the interplay of techno-economic constraints and socio-political dynamics shapes the likelihood of successful hydrogen deployment in the EU.

A central challenge for hydrogen scale-up is controlling the expense and complexity of its production. Currently, roughly 95% of hydrogen is generated from fossil fuels (often via steam methane reforming, SMR), with a corresponding carbon footprint that must be mitigated [17,19,20,21]. Figure A1 presents an overview of the production methods (with or without CCS, considering the renewable or non-renewable feedstock). SMR is a primary hydrogen production route due to its high efficiency (70–85%), lower operational costs, and feedstock availability. In oil refining, hydrogen is often produced and used continuously on-site, reducing storage requirements. In 2021, 62% of global hydrogen output came from SMR, 19% from coal gasification, and 18% from refinery processes, with only 1% from SMR + CCS or other low-carbon methods [22]. Electrolysis, powered by grid or renewable electricity, splits purified water into hydrogen and oxygen. Hydrogen’s carbon footprint depends on its production pathway. In 2021, the average emissions intensity was 12–13 kgCO₂-eq/kgH₂, though CCS can capture up to 98% of carbon from fossil-based routes. Many CCS-related methods remain at low Technology Readiness Levels. Median emissions for SMR average 15 kgCO₂-eq/kgH₂ (4 with CCS), coal gasification 23 (3 with CCS), and electrolysis under 1 when powered by solar, wind, or nuclear—though it can exceed 23 using the current global energy mix. Biomass processes, when coupled with CCS, may achieve −22 kgCO₂-eq/kgH₂ [23]. Among thermochemical routes, the SMR of natural gas remains highly cost-competitive (roughly 1.25–3.50 USD/kg H₂ as of 2021), but feedstock expenses can represent over half of the total production cost. In contrast, biomass gasification or pyrolysis can offer comparable or even lower H₂ costs (1.25–2.20 USD/kgH₂), although fluctuating feedstock prices and tar formation pose technical and economic challenges. Biochemical approaches, particularly dark fermentation, can leverage low-cost waste substrates, yet their achievable yields and capital requirements (especially for large-scale bioreactors) must be optimized to make these methods commercially viable [24].

Therefore, only RES-powered electrolysis and biomass processing are worth considering alternative hydrogen production methods to achieve sustainability objectives. Noteworthy, SMR can be coupled with CCS, but industrial-scale CCS remains commercially unproven beyond a handful of pilot projects [25,26]. Even when CCS is technically feasible, its associated infrastructure requirements and risk profiles can inflate total costs [27]. Meanwhile, renewable hydrogen, produced primarily by water electrolysis using RES, faces its own difficulties: high capital expenditure for electrolyzers, variable electricity costs, and competition for renewable resources from direct electrification of other sectors [7,28,29]. Achieving meaningful cost reductions in either pathway—SMR + CCS or renewable—requires government-supported financing mechanisms, policy certainty, and enough market “pull” to unlock economies of scale and competitive position as compared to fossil fuel-based production methods or even natural gas [30,31].

Hydrogen distribution infrastructure is severely underdeveloped, particularly at the long-distance scale [32]. Hydrogen pipelines can be costlier than natural gas in material and labor due to potential embrittlement, tighter sealing requirements, and the need for larger diameters to handle similar energy throughput [33]. Retrofitting existing natural gas networks can lower investment costs, but questions remain over pipeline integrity and safe blending percentages [34,35]. Beyond pipelines, large-scale hydrogen storage also faces uncertainties [2]. Salt caverns have emerged as a promising near-term solution—owing to their favorable geomechanical properties and relatively low leakage risk—yet geographic limitations mean that large parts of countries with only limited suitable geology cannot readily rely on cavern storage [36,37,38,39]. The broader challenge, then, is to ensure a secure and cost-effective matching of hydrogen supply and demand, underpinned by sufficiently reliable and voluminous storage to buffer seasonal or intermittent requirements [40,41]. Industrial demand consistently emerged as the strongest catalyst for establishing large-scale hydrogen value chains. Comparative modeling across the Netherlands, Germany, Norway, the UK, and Switzerland demonstrates that significant government coordination and policy support are indispensable in bridging investment risks, aligning cross-border infrastructure, and boosting stakeholder confidence [42].

Despite its status as a zero-carbon energy carrier at the point of use, hydrogen’s low volumetric energy density, rapid diffusivity, wide flammability range, and high flame speed pose new engineering and operational demands [43,44]. Handling and controlling hydrogen in household contexts raise specific safety concerns, which differ from historically industrial applications that typically operate under more rigorously controlled conditions [45]. Laboratory experiments suggest that blends up to approximately 15–20% hydrogen by volume in natural gas can be tolerated in many burner designs, but flashback risk increases, and specialized burners or flame arrestors may be necessary if mixtures approach higher concentration levels [46,47]. The performance and durability of domestic boilers, cooktops, and metering equipment also play a pivotal role in hydrogen acceptance. Natural gas appliances are not readily interchangeable with hydrogen systems; burners, seals, gaskets, and pressure regulators must often be redesigned for hydrogen’s combustion profile and molecular weight [48,49]. On the network side, pipeline monitoring and leak detection are critical, as hydrogen is approximately 2–3 times more prone to leakage than methane [50,51]. These technical considerations mean that systematic large-scale rollouts require in-depth testing, standardization of hardware, and significant workforce training to ensure safe operations in everyday residential and commercial use.

An emerging consensus holds that policy frameworks lag behind technological developments in the hydrogen sector [4,52]. With few exceptions, no harmonized, international set of codes governs hydrogen production, distribution, and consumption [23,53]. Differentiating rules for blending thresholds and pipeline operations in Europe and North America have stymied cross-border projects. This fragmentation complicates efforts to create robust business models, as uncertainties in permissible hydrogen volumes, responsibilities for network upgrades, and carbon accounting hamper investors [54,55]. Meanwhile, the lack of unifying standards for hydrogen certification complicates market signals—particularly around claims of zero or low carbon intensities—and weakens incentives for more sustainable production routes.

The high upfront cost and multi-year payback period of hydrogen infrastructure necessitate stable, credible public policies. Without strategic policy direction, private investments remain tentative. Complex planning requirements for storage sites—whether depleted gas fields or salt caverns—add layers of administrative difficulty, especially if local authorities lack established permitting frameworks that distinguish, for instance, between minor and major hydrogen projects [38]. Studies from the UK, Germany, and Australia point to a further complication: public trust in government-led energy projects is often fragile, making transparent policymaking and equitable engagement essential to avoid local opposition [56,57].

One hallmark of the so-called “hydrogen economy” is its multi-sectoral reach—transport, power, industry, heating—but such cross-sector potential can hamper near-term scaling. Investors often deem large-scale hydrogen production or storage risky without clarity on end-user demand or guaranteed offtake. While industrial “anchor” customers (e.g., refineries, steelmakers) exist [5], widespread use in homes remains contingent on cost competitiveness against natural gas or electrification [58,59]. Therefore, developing a reliable supply chain, from electrolyzers or reformation units to pipes, compressors, valves, specialized burners, and meters, is no trivial undertaking. Skilled labor shortages affect the construction, operation, and maintenance of hydrogen technologies. In domestic scenarios, an additional complexity emerges around metering and billing—hydrogen’s lower calorific value complicates typical volumetric billing methods. Novel solutions require integrated hardware-software systems that measure and charge based on actual energy delivered rather than inherited standard billing from the legacy natural gas system. Until these issues are resolved, manufacturers and retailers of hydrogen appliances face an uncertain commercial environment.

Public perceptions frequently hinge on hydrogen’s perceived explosiveness and unfamiliar hazards, shaped by cultural narratives dating back to events like the 1937 Hindenburg disaster. While many experts assert that safety risks are comparable to other fuels if well managed, misperceptions or knowledge gaps can easily undermine trust [50,57,60]. This makes public information campaigns crucial, especially for domestic use, where any hazard feels personal. In the residential domain, consumers worry about paying more for hydrogen infrastructure or higher energy bills [61]. Fairness and equity emerge as persistent concerns, as lower-income or off-grid households might be excluded from hydrogen’s purported benefits or, conversely, forced into transitions that disrupt established heating or cooking practices [62]. Building widespread acceptance likely hinges on inclusive demonstration projects, consumer protection policies, and clear evidence that hydrogen can deliver reliable, comparably priced energy services.

Crucially, each of these barriers is not isolated but intertwined across scales and sectors. For example, robust policy (as a political dimension) can diminish techno-economic uncertainties by offering stable subsidies or revised carbon pricing schemes, helping attract investors, and spurring supply-chain development (as a market dimension). In parallel, more explicit regulations around blending or 100% hydrogen distribution reduce technical friction and enhance consumer confidence (as a technical dimension), influencing social acceptance through enhanced perceptions of safety and affordability (as a social dimension). Thus, a successful transition depends on a well-coordinated approach: harmonizing codes and standards across jurisdictions, underwriting large-scale projects with guaranteed offtakes, supporting workforce development to scale expertise, and communicating transparently with communities about costs, risks, and benefits. Given the inherent complexity, researchers often recommend a “whole-systems” lens, in which pilot projects in industry or heavy-duty transport might help reduce unit costs and dispel safety anxieties before hydrogen penetrates the residential domain [63]. Whether through SMR with CCS or renewable pathways, accelerating low-carbon hydrogen scale-up must integrate technical, policy, and social considerations, ensuring that perceived trade-offs—cost, safety, and sustainability—are addressed in tandem. Ultimately, hydrogen’s potential as a zero-carbon energy carrier rests on concerted efforts to overcome these interlocked socio-technical barriers, transforming aspirational “visions” into an operational, inclusive, and well-regarded hydrogen economy. Besides, progress in advanced electrolysis, novel hydrogen carriers, and synergies with emerging power-conversion systems (e.g., fuel cells and hydrogen-fueled turbines) underscores the growing feasibility of a comprehensive hydrogen economy for the 2035–2050 climate targets [64].

2.2. Hydrogen as RFNBO Fuel in the European Union’s Energy Transition

As indicated by the authors of the IPCC Report [65], reducing CO₂ and other greenhouse gas emissions in national energy systems requires rapid and profound changes in how energy is generated, stored, distributed, and used. This includes a substantial increase in RES use, improvements in energy efficiency, and the application of renewable (low-carbon) hydrogen and other low-emission alternative fuels, supported by appropriate regulations and investments. A report by the IEA [23] on diverse approaches to defining hydrogen based on greenhouse gas emission intensity presents ways of using these data in developing regulations and certification systems. The authors point out that the former color-based definitions (e.g., gray, blue, green hydrogen) should be replaced with a more transparent and uniform approach. This shift is intended to enhance transparency, facilitate interoperability, reduce market fragmentation, and support investments in international hydrogen supply chains by focusing on carbon emission intensity.

In response to these requirements, the EU introduced a new taxonomy for hydrogen. The definition of hydrogen as RFNBO fuel is now contained in the new Renewable Energy Directive III (RED III, Art. 2.36 [66]) and is extensively discussed in Commission Delegated Regulation (EU) 2023/1184 of 10 February 2023, supplementing Directive (EU) 2018/2001 of the European Parliament and of the Council by establishing an EU methodology that sets out detailed rules for producing renewable liquid and gaseous transport fuels of non-biological origin [67]. T. Capurso et al. [68] emphasize the key role of hydrogen—especially that produced from RES and supported by carbon capture and storage (CCS) technologies—in the global energy transition toward climate neutrality. Their work provides detailed information on methods and costs of production, possibilities for hydrogen storage and distribution, and its applications in industry, transport, and power generation. They also discuss new directions for developing and implementing innovative hydrogen technologies in other sectors. A. Kovač et al. [69] highlight that (1) hydrogen is a crucial element of the low-carbon energy transition; (2) national policies and directives focus on promoting a CO₂-neutral, hydrogen-based society; (3) progress in using hydrogen is evident in the expansion of hydrogen infrastructure; (4) social acceptance of hydrogen technology continues to grow; and (5) the hydrogen economy is expected to develop further through the realization of current national and international strategies. The EU’s integrated energy transition strategy identifies hydrogen as RFNBO fuel as a critical and definitive element for achieving climate neutrality by 2050. According to Z. Ziobrowski and A. Rotkegel [70], the development of the hydrogen economy must be supported by substantial investments in infrastructure for production, storage, and distribution, appropriate regulatory frameworks, and the advancement of research and innovation.

The potential of renewable hydrogen for achieving the EU’s energy security is also worth noting. M. Knodt et al. [71] suggest that, in response to Russia’s aggression against Ukraine, European energy policy in the short term has prioritized energy security, potentially at the expense of climate goals. However, in the long run, this crisis may reinforce the alignment between energy security and the energy transition, mainly through the development of hydrogen as RFNBO fuel—while also underscoring the need for stronger pan-European governance and more effective legislation. M. Kalis [72] notes that hydrogen, promoted as a key element of the energy transition and sustainable sectoral integration, is increasingly regarded as a vital alternative fuel in the Baltic Sea Region. Nevertheless, this perception is accompanied by growing tension between prioritizing rapid development (“scale first”) and meeting environmental requirements (“green later”). Within the broader “energy trilemma”, this tension can be characterized as the “hydrogen trilemma”, exposing a trend toward the securitization of hydrogen policies and divergent narratives regarding hydrogen’s origin and purity. These issues are particularly pronounced in countries seeking a swift move away from Russian hydrocarbons.

Based on selected studies, it can be observed that developing infrastructure for hydrogen as RFNBO fuel plays a strategic role in establishing value chains for this energy carrier. According to P. T. Cheilas et al. [73], hydrogen produced from offshore wind energy and used in all key economic sectors constitutes the central component of a financially viable, sustainable energy transition. However, this scenario requires rapid infrastructure development and research on the safe storage and distribution of hydrogen. In a comparable manner, S. Lipiäinen et al. [74] indicate that existing infrastructure (e.g., gas networks) can be adapted to support the market and infrastructure for renewable hydrogen in the EU. Finally, I. Kountouris et al. [75] demonstrate that to rapidly and coherently construct European hydrogen infrastructure, avoid long-term dependency on methane, and move toward a predominantly renewable hydrogen scenario by 2050, swift measures are required to increase electrolyzer capacity, expand hydrogen grids and storage, and synchronize investments in renewable energy sources. Equally important is close cooperation among European countries in this domain.

2.3. The Global Perspective on Policy and Regulatory Framework for Hydrogen Economy Development

Initial comparison of the EU and other national policy approaches, especially the one adopted in the United States as part of the U.S. National Clean Hydrogen Strategy and Roadmap [11], can bring insightful observations for further analysis, as they equally prioritize developing hydrogen economy to decarbonize hard-to-abate sectors, but they employ different strategies [76]. The EU emphasizes renewable hydrogen (focusing primarily on hydrogen as RFNBO fuel), while the US adopts a broader approach that includes a portfolio of clean and low-carbon hydrogen production methods such as SMR with CCS and nuclear-powered water electrolysis. Legislative actions indicate a trend towards greater alignment between the US and EU hydrogen policies, with both jurisdictions implementing measures to support hydrogen market uptake. The EU’s Hydrogen and Decarbonized Gas Market Package aims to integrate hydrogen into its gas markets and enhance competitiveness against the US’s Inflation Reduction Act (IRA), which provides hydrogen production and investment tax credits for eligible low-carbon production methods by providing efficient regulatory frameworks and financial incentives for clean and low-carbon hydrogen investments. Hydrogen is recognized for its potential to store, transport, and deliver energy, thereby addressing limitations of direct electrification and contributing significantly to their decarbonization efforts. Both the US and EU are leveraging government funding, regulatory frameworks, and strategic projects to develop hydrogen infrastructure and investments, underscoring hydrogen’s critical role in achieving net-zero GHG targets and reshaping global energy trade dynamics. However, D. Kleimann et al. [77] underline that the US IRA significantly advances US climate goals and impacts global trade by introducing local (or domestic) content requirement (LCR) subsidies that violate WTO rules, posing challenges for international cooperation on climate change. In response, the EU must strengthen its green industrial policies, renegotiate trade agreements to mitigate IRA’s distortive effects and pursue multilateral standards for environmental subsidies to maintain competitiveness and support global climate efforts in cooperation with the US. Considering the current and potential transatlantic trade in renewable hydrogen, the EU’s stringent (electrolysis-oriented only) RFNBO regulatory framework, including strict requirements for guarantees of origin and prohibitions on state aid, creates significant barriers for third-country producers like the United States, thereby complicating the EU’s ambition to import over 10 million tons of hydrogen by 2030. This complexity is enhanced by the Carbon Border Adjustment Mechanism, which imposes additional administrative burdens and unequal treatment of imported hydrogen and its derivatives, distinguishing them from EU-produced counterparts and potentially distorting international hydrogen trade by favoring certain hydrogen carriers over others. To achieve its hydrogen import targets and support the energy transition, the EU must revise its regulatory policies to reduce unnecessary trade barriers, enhance mutual recognition of certification systems, and harmonize subsidy rules with major hydrogen-producing countries, thereby developing a more seamless and competitive global hydrogen market [78]. In this context, some researchers, such as S. Paleari [79], recognize the need for the EU to balance self-reliance with multilateral cooperation, carefully assessing strategic autonomy measures on a case-by-case basis to ensure an effective and inclusive green transition while maintaining CBAM and the EU internal market regulations. Besides, intra-EU divisions, fragmented funding mechanisms, infrastructure gaps for imports, and competitive pressures from global players like the US and China present significant challenges to meeting the EU’s ambitious hydrogen targets by 2030 [80]. Some researchers, such as P. Cazzola et al. [81], emphasize the crucial differences between the US and EU approaches toward decarbonizing air and maritime transportation. The US policies, such as The Infrastructure Investment and Jobs Act (IIJA), aka Bipartisan Infrastructure Law (BIL) and IRA, have driven significant low-carbon energy investments through substantial, albeit time-limited, financial incentives but fall short in supporting long-term low-carbon fuel demand for aviation and shipping due to limited demand-side measures. In contrast, the EU’s comprehensive framework, featuring mandates and strong regulatory mechanisms like ReFuelEU Aviation and FuelEU Maritime, provides greater predictability and effectively mobilizes demand for low-carbon fuels, though it may also slow project development through stringent planning requirements. The study by J. Moura and I. Soares [82] reveals that the EU emphasizes hydrogen as RFNBO fuel with stringent regulations, the UK targets both SMR-based and low-carbon hydrogen with a focus on transportation, and the USA adopts a mixed approach incorporating nuclear and CCS technologies with greater emphasis on hydrogen production and energy sectors. These distinct policy approaches, aligned with each bloc’s institutional and economic frameworks, highlight varying strategies for decarbonization through hydrogen promotion. Consequently, the EU and UK are progressing more effectively toward sustainable hydrogen deployment, whereas the US lags in establishing long-term low-carbon hydrogen pathways essential for comprehensive decarbonization.

Table 1 demonstrates the national hydrogen strategies to emphasize the crucial differences between the approaches adopted to achieve the renewable hydrogen market rollout. Each of these nations and international organizations, such as the EU, has unique motivations for establishing and developing a hydrogen economy. The analysis reveals that major global economies such as Japan, the US, the EU, and China have implemented specific development plans and technology roadmaps to facilitate a cost-effective transition toward a hydrogen economy. While these countries share a common strategic perspective on the opportunities and challenges presented by the hydrogen economy, their competitive positions are likely to lead to long-term rivalries. The strategic focus of these nations, particularly in the area of technological innovation, highlights significant differences. Japan’s substantial initial investments in R&D and demonstration projects have established it as a leader in patent filings. In contrast, the United States prioritizes advancing breakthrough technologies despite the inherent risks, aiming for high potential returns. Additionally, their visions for the hydrogen economy vary: the United States intends to produce hydrogen from domestic resources within hydrogen hubs (e.g., California’s Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) [83]), whereas Japan plans to import hydrogen from politically stable countries with abundant, low-cost fossil fuel resources. The EU adopts a supply-demand balanced strategy, and China views hydrogen as a crucial component of its energy restructuring efforts [84].

Moreover, the renewed focus on the low-carbon hydrogen economy, leading to the establishment of ambitious goals within national and international policies, indicates that hydrogen is anticipated to be a key component in the 21st century’s energy transition [85]. Although advancements have been achieved in the production of renewable hydrogen, storage and transportation are lagging behind, which has spurred research into secure blending alternatives that do not substantially aid in reducing the overall carbon emission intensity. Significantly, nations including Japan, South Korea, and Germany are at the forefront of promoting the utilization of renewable hydrogen in transportation. A bibliometric analysis reveals that research and development trends increasingly concentrate on overcoming obstacles to the hydrogen economy, developing policies, mitigating technical hazards, and ensuring safe hydrogen blending. This requires broad interdisciplinary cooperation among researchers and stakeholders in the hydrogen economy, including state governments and international bodies [85]. Furthermore, it is essential to highlight that the hydrogen economy’s potential for achieving deep decarbonization across various industries can greatly support sustainable development, a fact acknowledged since the early 21st century [86,87].

Table 1. Comparison of selected assumptions of strategies for the hydrogen economy development. Source: Own elaboration based on the further development of the partial overview and comparison of the strategies [11,12,88,89].

Country	EU	Germany	Poland	USA	Australia	China	Japan	S. Korea
Year of Publication of Hydrogen Strategy	2020	2021	2021	2023		2022	2017
Timelines and targets for H2 market development
Hydrogen cost targets
Measures to support H2 development:
Direct investments
Other economic and financial mechanisms
Legislative and regulatory measures
Standardisation strategy and priorities
Research & development initiatives
International cooperation
Strategy addresses social issues for H2 development
Strategy includes review and update
Strategy’s H2 target source by 2030	Clean & low-carbon H2	Clean H2	Clean & low-carbon H2	Low-carbon H2 (SMR + CCS)	Clean H2		Fossil fuels + CCS	Natural gas (SMR)
Strategy’s H2 target source by 2050	Clean H2	Clean H2	Clean H2	Clean H2	Clean H2		Clean H2	Clean H2
Import/Self-reliance/Export	Depends on Member States	Import Export	Import Self-reliance	Export Self-reliance	Export Self-reliance	Export Self-reliance	Import	Import Export
MAIN OBJECTIVES
Decarbonisation	Immediate	Immediate	Immediate	Immediate	Lower	Immediate	Immediate	Lower
Diversify energy supply	Lower	Immediate	Long term	Long term	Lower	Long term	Immediate	Long term
Foster economic growth	Lower	Immediate	Long term	Long term	Immediate	Immediate	Immediate	Immediate
Integration of renewables	Immediate	Immediate	Immediate	Immediate	Lower	Immediate	Lower	Long term
SECTORAL PRIORITIES
Heating	Lower	Lower	Long term	Lower	Immediate	Long term	Immediate	Lower
Industry:
Iron and Steel	Long term	Immediate	Immediate	Long term	Long term	Immediate	Lower	Lower
Chemical feedstock	Immediate	Immediate	Immediate	Long term	Immediate	Immediate	Lower	Not seen
Refining	Immediate	Immediate	Immediate	Immediate	Not seen	Immediate	Lower	Not seen
Power generation	Lower	Not seen	Long term	Long term	Lower	Immediate	Immediate	Immediate
Transport:
Passenger vehicles	Lower	Long term	Long term	Immediate	Lower	Immediate	Immediate	Immediate
Medium and heavy duty	Immediate	Long term	Immediate	Immediate	Immediate	Immediate	Long term	Immediate
Buses	Immediate	Immediate	Immediate	Immediate	Immediate	Immediate	Long term	Immediate
Rail	Immediate	Immediate	Immediate	Lower	Lower	Lower	Not seen	Lower
Maritime	Long term	Long term	Long term	Lower	Long term	Long term	Lower	Lower
Aviation	Long term	Long term	Long term	Long term	Lower	Long term	Lower	Not seen

Table 1. Comparison of selected assumptions of strategies for the hydrogen economy development. Source: Own elaboration based on the further development of the partial overview and comparison of the strategies [11,12,88,89].

Country	EU	Germany	Poland	USA	Australia	China	Japan	S. Korea
Year of Publication of Hydrogen Strategy	2020	2021	2021	2023		2022	2017
Timelines and targets for H2 market development
Hydrogen cost targets
Measures to support H2 development:
Direct investments
Other economic and financial mechanisms
Legislative and regulatory measures
Standardisation strategy and priorities
Research & development initiatives
International cooperation
Strategy addresses social issues for H2 development
Strategy includes review and update
Strategy’s H2 target source by 2030	Clean & low-carbon H2	Clean H2	Clean & low-carbon H2	Low-carbon H2 (SMR + CCS)	Clean H2		Fossil fuels + CCS	Natural gas (SMR)
Strategy’s H2 target source by 2050	Clean H2	Clean H2	Clean H2	Clean H2	Clean H2		Clean H2	Clean H2
Import/Self-reliance/Export	Depends on Member States	Import Export	Import Self-reliance	Export Self-reliance	Export Self-reliance	Export Self-reliance	Import	Import Export
MAIN OBJECTIVES
Decarbonisation	Immediate	Immediate	Immediate	Immediate	Lower	Immediate	Immediate	Lower
Diversify energy supply	Lower	Immediate	Long term	Long term	Lower	Long term	Immediate	Long term
Foster economic growth	Lower	Immediate	Long term	Long term	Immediate	Immediate	Immediate	Immediate
Integration of renewables	Immediate	Immediate	Immediate	Immediate	Lower	Immediate	Lower	Long term
SECTORAL PRIORITIES
Heating	Lower	Lower	Long term	Lower	Immediate	Long term	Immediate	Lower
Industry:
Iron and Steel	Long term	Immediate	Immediate	Long term	Long term	Immediate	Lower	Lower
Chemical feedstock	Immediate	Immediate	Immediate	Long term	Immediate	Immediate	Lower	Not seen
Refining	Immediate	Immediate	Immediate	Immediate	Not seen	Immediate	Lower	Not seen
Power generation	Lower	Not seen	Long term	Long term	Lower	Immediate	Immediate	Immediate
Transport:
Passenger vehicles	Lower	Long term	Long term	Immediate	Lower	Immediate	Immediate	Immediate
Medium and heavy duty	Immediate	Long term	Immediate	Immediate	Immediate	Immediate	Long term	Immediate
Buses	Immediate	Immediate	Immediate	Immediate	Immediate	Immediate	Long term	Immediate
Rail	Immediate	Immediate	Immediate	Lower	Lower	Lower	Not seen	Lower
Maritime	Long term	Long term	Long term	Lower	Long term	Long term	Lower	Lower
Aviation	Long term	Long term	Long term	Long term	Lower	Long term	Lower	Not seen

Table 1 outlines hydrogen strategies and policy priorities across several key economies—namely the EU, Germany, Poland, the United States, Australia, China, Japan, and South Korea—and presents an overview of how different jurisdictions approach decarbonization targets, priority sectors, and hydrogen sources. While all countries covered in the table recognize the potential of hydrogen for achieving deep emissions reductions in various industrial and transportation applications, several important distinctions emerge when comparing these strategies to the EU’s own policy framework. First, most notably, the EU (and its Member States, such as Germany) emphasizes renewable hydrogen (RFNBO) and establishes stringent criteria to ensure the hydrogen has low lifecycle greenhouse gas emissions (e.g., via RED III). This contrasts with the strategies of some other countries (e.g., Japan prioritizing fossil fuels with carbon capture or South Korea focusing on SMR-based hydrogen). Consequently, the EU framework actively discourages direct reliance on fossil-based hydrogen, aligning with its broader objectives under the European Green Deal and Fit for 55 packages to achieve climate neutrality by 2050. Secondly, the EU sets binding legislative mandates—through mechanisms such as FuelEU Maritime, ReFuelEU Aviation, and the extended EU Emission Trading System—that incentivize or require the uptake of hydrogen, particularly in difficult-to-electrify sectors like aviation, shipping, and heavy industry. In contrast, other jurisdictions (e.g., the United States or China) tend to combine voluntary targets with significant funding or tax incentives but, to date, have fewer explicit sub-quotas for RFNBO. Thus, while multiple countries aim for “clean hydrogen”, the EU’s strategy is particularly forceful in its creation of immediate and binding obligations for industry and transport sectors. Third, according to Table 1, the EU sets near-term milestones for adopting renewable hydrogen in steelmaking, refining, chemical industries, and medium- to heavy-duty transport. These decarbonization efforts are reinforced by cross-sector coordination mechanisms and updated rules in the RED III. Several countries—including Australia and Germany—also project long-term hydrogen use scenarios, yet the EU more explicitly incorporates hydrogen across a comprehensive set of policy tools (e.g., regulations, directives, and standards) aimed at driving demand almost immediately. The emphasis on “immediate” versus “long-term” in the table reflects how quickly different economies expect hydrogen to make an impact; in the EU’s case, the policy framework pushes for rapid deployment to align with 2030 climate targets. Lastly, Table 1 also shows diverse orientations toward trade in hydrogen. Whereas countries like Australia and Chile aim to become large-scale exporters, the EU, for now, takes a dual approach of promoting domestic production (targeting 10 million tons of renewable hydrogen by 2030) and securing imports from external partners (an additional 10 million tons by 2030), as stated in the RePowerEU plan. This “mixed” strategy underscores the EU’s balancing act between energy security considerations, infrastructure constraints, and the need to ramp up large-scale electrolyzer and renewables deployment within its borders. Overall, Table 1 demonstrates that while many compared jurisdictions share the overarching goal of accelerating the hydrogen economy, the EU’s regulatory framework—with its immediate decarbonization timelines, mandatory sectoral quotas, and insistence on low-carbon-intensity hydrogen—places it among the most stringent and structured policy environments globally. Moreover, by juxtaposing national strategies, Table 1 highlights the EU’s proactive push toward hydrogen as RFNBO fuel, shaped by cross-cutting legislation and stringent sustainability criteria. This approach is central to achieving the EU’s broader goals under the European Green Deal, ensuring that “clean hydrogen” is genuinely low-carbon, traceable, and increasingly cost-competitive in both industry and transport sectors. The question now is how the EU wants to achieve these ambitious objectives on the demand and supply side.

3. Shaping the Market Demand for Hydrogen as RFNBO—The EU Perspective

Renewable hydrogen is essential for achieving climate neutrality, especially with ambitious targets of over 80% greenhouse gas reductions by 2050, projecting global demand to reach 4–11% of final energy consumption and the European Union anticipating a higher share of up to 14%, primarily driven by its significant roles in industry and transport sectors. However, the wide range of hydrogen demand projections, influenced by inconsistent study methodologies and regional variations in infrastructure and policy ambitions, introduces substantial uncertainty that may hinder timely investments in hydrogen production, transport, and utilization [90].

Our review demonstrates the current and projected demand for renewable hydrogen (Section 3.1) followed by EU legal and policy framework in shaping the demand for hydrogen primarily as RFNBO fuel and diminishing the role of other low-carbon production methods (Section 3.2).

3.1. The Demand for Renewable Hydrogen as RFNBO Fuel

Renewable hydrogen annual consumption in the EU may surpass 100 million tons by 2050, with over half allocated to transport (primarily for heavy-duty and long-distance modes) and a substantial share for industrial feedstock [91]. Renewable hydrogen’s versatility in decarbonizing hard-to-abate sectors is broadly recognized by researchers, which can demonstrate a critical increase in global and regional demand [92]. However, as K. Röper et al. [93] suggest, the current literature on renewable hydrogen in the industry mainly focuses on steel, ammonia, and methanol production, with hydrogen serving predominantly as feedstock, while its potential use as a heat source for other sectors (like cement, glass, or aluminum) is comparatively understudied. Only a handful of publications quantify hydrogen and CO₂ flows in these less-explored industries, and a limited number of works address supply chain efficiency, geopolitical aspects, or raw material constraints. Regarding the industrial sector (especially within high-energy-consumption segments), renewable hydrogen utilization can lower GHG emissions and increase final renewable energy sources (RES) consumption [94]. Examples of its application can be found in the mentioned steel production [95,96,97], ammonia production [98,99,100,101], and some evidence in heat and power generation [102]. Interestingly, renewable hydrogen can also serve as a storage medium for renewable energy communities, allowing RES-based systems flexible operations and energy surplus balancing [103], which also applies to smart grids [104]. However, when comparing hydrogen-based technologies to other low-carbon emission methods (e.g., heat pumps), renewable hydrogen will play a niche role in heating buildings [105], yet it can be an energy carrier providing electricity to residential buildings [106]. Nevertheless, the sector that might generate high renewable hydrogen demand (close to the industrial sector) is transportation, which must undergo deep decarbonization in the coming decades. The increase in the demand for renewable hydrogen can be generated through fueling the fleet of, e.g., transit buses, as recent case studies report [107], allowing achieving environmental benefits [108] and contributing to further penetration of energy mix by renewable electricity [109]. However, the complete commercialization of fuel-cell electric buses will be achieved by 2035 [110]. The applicability of renewable hydrogen in fleet decarbonization can be spotted in medium- and heavy-duty long-haul transportation; however, total-cost-of-ownership parity of hydrogen-powered trucks with their diesel counterparts by 2030 in Europe is feasible if the at-the-pump renewable hydrogen fuel price is around 4 €/kg [111]. In the transportation sector, renewable hydrogen can allow electrification and decarbonization of railways. As compared to a similar diesel train, a hydrogen train allows traction energy and emissions savings to be reached [112], as relevant case studies evidenced [113,114,115]. As a promising alternative fuel for the maritime and shipping industry due to its high energy density and the possibility of production of its derivatives, such as ammonia or e-fuels [116], renewable hydrogen can effectively reduce GHG emissions in this domain [117]. Importantly, to decarbonize this sector competitively, a further reduction of the levelized cost of hydrogen (LCOH) is needed [118]. The last important application and demand-creation industry is aviation, as the global aviation industry is expected to demand around 17 million tons of renewable hydrogen, potentially reducing CO₂ emissions by up to 9% [119,120]. However, other studies assume that there will be a global hydrogen demand of 19.2 million tons for passenger aviation in the year 2050 [121].

Figure 1 illustrates the projected hydrogen demand in the EU across four major sectors—industry, transport, buildings, and energy (the X-axis denotes specific time horizons—namely the years 2030, 2040, and 2050—for which hydrogen demand projections have been estimated). Each bar within these three clusters reflects a different scenario or level of policy ambition, illustrating how varying studies considering policy impact and diverse market conditions can lead to a range of projected hydrogen demands in each target year, exhibiting significant variation across scenarios, with total demand in 2030 ranging from 279 TWh/year (Deloitte conservative estimate) to 388 TWh/year (Deloitte ambitious scenario). These projections draw on multiple scenario-based studies (gathered by the European Hydrogen Observatory) incorporating varying policy ambition levels. These scenarios reflect varying degrees of policy ambition and effectiveness, from more conservative “baseline” cases with limited policy intervention to high-policy scenarios that assume aggressive targets for hydrogen adoption in line with the European Green Deal, Fit for 55, and RePowerEU initiatives. In each of the three years (projection horizons) shown, the industry consistently dominates total hydrogen demand, particularly under the more stringent policy pathways that mandate the use of renewable hydrogen as RFNBO fuel in steelmaking and other high-emissions processes. Transport emerges as the second-largest consumer, especially from 2040 onward, as stricter regulations (e.g., AFIR, FuelEU Maritime, ReFuelEU Aviation) and carbon pricing begin to shift fleet operators toward hydrogen-based solutions. The “spikes” in certain scenario projections for 2050 indicate robust policy-driven decarbonization, where hydrogen expands beyond industry and transport into building heat applications and backup power generation. Nevertheless, By 2050, the EU’s renewable hydrogen demand is projected to reach up to 4818 TWh/year in the most ambitious scenarios. Reaching such high-demand values requires necessary policy instruments.

3.2. The EU Policy Landscape to Develop the Demand Side of the Market for Hydrogen as RFNBO

The EU has recognized renewable hydrogen potential and implemented a diverse policy and regulatory framework to advance the demand specifically for hydrogen as RFNBO fuel across hard-to-abate sectors, considering environmental sustainability and economic growth. Moreover, the EU has significantly strengthened its multi-layer climate governance by diversifying its policy mix and moving beyond carbon pricing to include socioeconomic, regulatory, procedural, and informational instruments. These advancements have enhanced the EU’s ability to address complex climate challenges, though additional actions are needed to achieve climate neutrality by 2050 [124]. Initially, in 2020, The Hydrogen Strategy for a Climate-Neutral Europe [12] outlined a comprehensive plan to scale up renewable hydrogen production and integrate renewable hydrogen into the EU’s energy mix, aiming for a 13–14% share by 2050, supported by investments of €180–470 billion. The strategy focused on five key objectives: (1) increasing investment in hydrogen production and infrastructure, (2) boosting demand, (3) creating enabling regulations, (4) promoting hydrogen-related R&D, and (5) enhancing international cooperation, operationalized through 20 key actions. To drive implementation, the European Clean Hydrogen Alliance (ECHA) and Important Projects of Common European Interest (IPCEI) initiatives coordinate investments supported by funding programs like InvestEU, the European Regional Development Fund, and the Cohesion Fund, positioning the EU as a global leader in supporting renewable hydrogen demand and supply (discussed in Section 3). The EU green industrial policy vastly evolved in this problem domain in 2020–2024, becoming a model approach for the follower jurisdictions aiming to develop the market for hydrogen as RFNBO fuel [125]. As part of the broad portfolio of legislative actions known as the European Green Deal, the EU adopted a legislative package (composed of directives and regulations)—Fit for 55 [126]—aimed at achieving a 55% reduction in net-zero GHG emissions by 2030, compared with 1990 levels, through comprehensive and interdependent regulations across industry, energy, transport, and other hard-to-abate sectors. Fit for 55 become one of the most influential packages for the RFNBO market roll-out, especially on the demand side. A. A. Rodrigez [127] critically evaluates this package, focusing on key legislative proposals—including the Emissions Trading System reform, the Alternative Fuels Infrastructure Regulation, and CO₂ emission standards for vehicles—while emphasizing that they constitute a mix of instruments representing a balance between pricing, targets, standards, and supportive financial demand-side measures. As of the end of 2024, the demand for hydrogen as RFNBO fuel is promoted by several interdependent policies, as indicated in

Table 2. Overview of the EU policy regulations and directives that impact the development of the hydrogen market as RFNBO fuel (primarily on the demand side). Source: Own elaboration and further advancement based on G. Tchorek et al. [128]. Note: an EU regulation is a binding legislative act that applies directly and uniformly across all EU member states, while an EU directive sets specific goals that EU Member States must achieve but allows them to determine how to incorporate these goals into national law.

The Relevant EU Regulation or Directive	The Impact on the Market Demand Side for Hydrogen as RFNBO Fuel	The Sectors Where Hydrogen as RFNBO Fuel Will Be Most Applicable	Additional Description
EU Emission Trading System II (Directive (EU) 2023/959) [129]	As a market-based tradable permit system for CO2 emissions, it puts pressure to reduce the carbon intensity of fuels and promote the use of low- and zero-carbon energy carriers (e.g., hydrogen as RFNBO fuel)	Industry, energy, heating, marine and air transport, passenger transport	By establishing a carbon price for CO2 emissions in fuel-intensive sectors like road transport and buildings, the roll-out of EU ETS incentivizes the demand for renewable fuels, including RFNBOs
RED III—Renewable Energy Directive III (Directive (EU) 2023/2413) [66]	Promotes the use of RFNBO fuels through dedicated sector targets	Industry, transport	RED III introduces dedicated targets for RFNBO use in the industry by 2030 (42%), by 2035 (60%), and in transportation by 2030 (1%)
EED—Energy Efficiency Directive (Directive (EU) 2023/1791) [130]	Promotes gas-fired, high-efficiency cogeneration technology that can be gradually decarbonized using RFNBO fuels	Energy, heating	EED introduces a carbon intensity limit of 270 g CO2-eq/kWh for high-efficiency cogeneration units and efficient district heating systems, which could generate a gradual decrease in CI of cogeneration units using, among other things, hydrogen as RFNBO fuel.
ETD—Energy Taxation Directive (to be adopted, undergoes trialogue negotiations) [131]	Introduces preferential tax rates for RFNBO fuels used for transport and heating (improving their cost-parity with fossil fuels)	Energy, transport	RFNBO fuels used for transportation and heating are to have 6 times lower tax rates than hydrocarbon-based fuels
IED 2.0 –The revised Industrial and Livestock Rearing Emissions Directive (Directive (EU) 2024/1785) [132]	Specifies environmental and emissions requirements for large industrial installations in the EU, leading to the need for RFNBO utilization	Industry, energy, heating	Introduces mandatory best available techniques (BAT) for industrial installations. Plant operators will have to submit plans to decarbonize assets by 2050, also using RFNBOs
FuelEU Maritime (Regulation (EU) 2023/1805) [133]	Requires the use of low- and zero-carbon fuels in maritime transportation (including RFNBO fuels and biofuels)	Transport	The regulation is intended to ensure carbon intensity reductions in the shipping sector using LNG, bio-fuels, and RFNBO fuels (including renewable methanol and renewable ammonia) to use 2% RFNBO by 2034.
ReFuelEU Aviation (Regulation (EU) 2023/2405) [134]	Requires the use of low- and zero-emission fuels in air transportation (including RFNBO fuels and biofuels)	Transport	The regulation is intended to ensure carbon intensity reductions in air transportation with the use of biofuels and RFNBO fuels (including synthetic fuels produced by the Fischer-Tropsch method, e-kerosene)
AFIR—Alternative Fuels Infrastructure Regulation (Regulation (EU) 2023/1804) [135]	Supporting infrastructure deployment for alternative fuels, including hydrogen as RFNBO, to facilitate the decarbonization of different modes of transportation	Transport	It established binding targets for deploying publicly accessible refueling points for BEVs and FCEVs across the Trans-European Transport Network (TEN-T) and urban areas, ensuring sufficient and geographically balanced coverage.

. These regulations and directives adopted in the EU promote the demand side of the market for hydrogen as RFNBO fuel.

The overview of the demand-side policy opens the EU Emission Trading System II as a reform and extension of the already existing emission trading system beyond the industrial-sector-related emissions to include transport and buildings. It is central to this policy framework, as it accelerates carbon intensity (CI) reduction pressures by escalating the costs of hydrocarbon use in industrial, energy, heating, marine, and air transport sectors. This expansion (starting from 1 January 2027) will incentivize the adoption (and therefore demand) of low- and zero-carbon energy carriers, including hydrogen as RFNBO fuel. L. Haywood and M. Jakob [136] evaluated the EU’s ETS II for road transport and heating fuels. They recognized it as a key component of the comprehensive Fit for 55 policy package, highlighting its role in addressing diverse market failures (like carbon leakage) and ensuring fairness among member states in financial resource allocation. The study emphasized (i) the need to stabilize ETS price volatility, (ii) the need for expansion of the Social Climate Fund (designed to re-distribute income from trading carbon emission permits to projects related to deep-decarbonization, energy transition, and just transition), and (iii) clarify penalties to achieve the EU’s climate targets more effectively and equitably. However, the EU’s reliance on carbon pricing alone could be insufficient to stimulate the demand for hydrogen as RFNBO fuel in the short term. The effectiveness of the EU ETS in supporting RFNBO hydrogen is also challenged by a macroeconomic carbon rebound effect, where economic growth driven by ETS policies can lead to increased overall emissions despite sectoral reductions. This finding, demonstrated by C. Kaan Bolat et al. [137], underscores the need for the EU to adopt a comprehensive policy approach integrating ETS with capacity-based subsidies and mechanisms like the Carbon Border Adjustment Mechanism (a non-tariff trade policy instrument that puts a price on the carbon emitted during the production of carbon-intensive goods imported to the EU) to ensure that hydrogen as RFNBO initiatives effectively contribute to climate targets without inadvertently escalating carbon emission leakage.

To effectively decarbonize the industrial, building, and transportation sectors, the EU has implemented sector-specific targets and fuel mix obligations through regulations, which create foundational market demand for RFNBOs and support the transition to hydrogen as RFNBO fuel [138]. Complementing EU ETS II, the Renewable Energy Directive III established ambitious sector-specific targets for RFNBO utilization, mandating a 42% adoption in industry by 2030 and 60% by 2035, alongside a 1% target in transportation by 2030, thereby driving significant growth of demand for hydrogen as RFNBO fuel (and its derivatives) within these hard-to-abate sectors. To add granularity to these deliberations, the study by S. Steinbach and N. Bunk [139] critically assessed the EU hydrogen market design and policy and proposed alternative policy and regulatory measures essential for developing an efficient hydrogen commodity market in Europe. They highlighted the need to reduce regulatory uncertainty, e.g., (i) by avoiding very strict renewable electricity regulations (such as in Article 27(3) of RED III), (ii) by providing higher direct financial support (e.g., through CAPEX subsidies), (iii) establishing foundational infrastructure regulations (e.g., EU-wide feed-in regulations in natural gas infrastructure and infrastructure cross-subsidization), and (iv) implement robust trading and certification systems (e.g., by providing hedging opportunities, liquidity, and price transparency through energy exchange). The following directive, The Energy Efficiency Directive (EED), further supports this transition by promoting high-efficiency cogeneration technologies in the energy and heating sectors, setting an emissions limit of 270 g CO₂-eq/kWh for cogeneration units and encouraging the gradual decarbonization of these systems through the integration of hydrogen-based RFNBOs. As M. Gonzalez-Torres et al. [140] highlighted, the energy efficiency in products is perceived as a cornerstone of EU climate and energy strategies; however, despite over 40 years of EU product policies, their scale has only improved since 2010 (it is estimated that further advancements can reduce final consumption by 17% by 2030). Additionally, the Energy Taxation Directive (ETD) provides economic incentives by imposing preferential tax rates—up to six times lower—for RFNBO fuels, including renewable hydrogen, used in transport and heating compared to their hydrocarbon counterparts, enhancing the financial viability of RFNBO adoption. The Industrial Emissions Directive (IED) mandates stringent environmental and emission standards for large industrial installations, requiring operators to submit decarbonization plans by 2050, thereby aligning industrial processes with RFNBO integration.

As indicated before, transportation sector decarbonization, and therefore, the expected increase in RFNBOs utilization, is guided by FuelEU Maritime and REFuelEU Aviation. The directive targets the maritime and aviation industries explicitly, respectively, by promoting the use of hydrogen as RFNBO fuel and its derivatives, such as renewable methanol, ammonia, and synthetic e-fuels, with goals including a 2% of RFNBO share in maritime transport by 2034 and significant CO₂ reductions in aviation through advanced fuel technologies like Fischer-Tropsch synthetic e-fuels and e-kerosene. Indeed, the EU has incorporated maritime transport into its ETS and established the mentioned FuelEU Maritime regulation. Despite these measures, as Wissner and Graichen advocate [141], the current CO₂ pricing under the ETS is inadequate to drive significant RFNBO investments, underscoring the need for targeted allocation of ETS revenues and more ambitious RFNBO sub-quotas within the FuelEU Maritime regulation. Additionally, fragmented funding mechanisms and concerns about subsidizing foreign electrolyzer manufacturers pose significant challenges to scaling RFNBO hydrogen in the EU’s maritime sector. A recent study by Park et al. [142] highlights that addressing carbon leakage is critical for predicting effective compliance strategies, but current regulations may unintentionally increase operational costs and emissions. J. Flodén et al. [143] stated that the inclusion of maritime shipping in the EU ETS starting in 2024 is projected to significantly drive GHG reductions, making bio-methanol a cost-effective option for up to 75% of ships at emission allowance prices above €150/tCO₂. However, the resulting cost increases could lead to carbon leakage and a shift from shipping in specific segments unless appropriate measures are implemented to address these challenges. M. Latapí et al. [144] demonstrate that implementing CO₂ and fossil fuel taxes, coupled with an eventual ban, can effectively transition the shipping sectors of Denmark, Norway, and Sweden from fossil fuels to methanol by 2040 and to ammonia by 2050. Recent scenario analyses of the Swedish maritime sector by L. Trosvik and S. Brynolf [145] demonstrate that strong and predictable policy signals, such as a robust emissions trading price, are needed to drive early and substantial investments in alternative low-carbon and RFNBO fuels. While measures like the FuelEU Maritime regulation alone have limited short-term impact, their combination with higher EU allowances (EUA) prices accelerates the transition away from conventional marine fuels and toward cleaner options. Noteworthy, J. Scheelhaase et al. [146] examined the EU’s ETS II for aviation within the ‘Fit for 55’ package, emphasizing its environmental advancements through stricter emissions trading, mandatory sustainable aviation fuel (SAF) blending quotas, and the inclusion of non-CO₂ emissions monitoring. It also highlights the economic challenges faced by airlines due to increased costs and SAF price gaps, supported by EU funding for SAF research, and suggests policy enhancements such as linking ETS with ETS2 and expanding the Social Climate Fund to ensure the scheme effectively and equitably meets the EU’s climate targets in this sector, especially, as the demand for SAF within the EU is estimated to be 47 million tons in 2050 [147].

Lastly, the Alternative Fuels Infrastructure Regulation (AFIR) underpins the necessary infrastructure development for RFNBO fuel distribution within the transportation sector, ensuring that adequate and accessible infrastructure networks support the expansion of renewable hydrogen and other alternative fuels. As indicated in Figure A2, across EU Member States, Germany clearly leads in the total number of hydrogen dispensers, followed by the Netherlands and France (which translates to a significant number of hydrogen refueling stations, HRS). Most of these dispensers are at 700 bars for fuel-cell electric vehicles, though several countries—particularly Germany, the Netherlands, and France—also feature 350 bar dispensers (for both cars and heavier transport). Meanwhile, Belgium, Austria, Sweden, Denmark, the Czech Republic, Poland, Italy, and Spain each have just a handful of dispensers planned or already operating, indicating that although hydrogen infrastructure is starting to appear across Europe, deployment patterns vary widely by country. A noteworthy, minimal, yet increasing number of dispensers and HRS is coupled with the number of registered FCEVs. As of 2023—Germany has the largest light-duty FCEV (LD-FCEV) fleet in the EU—over 2000 units—along with notable numbers of fuel-cell buses (149) and medium-/heavy-duty trucks (30). The Netherlands and France also report relatively high LD-FCEV counts (both above 600), with the Netherlands showing a marked uptake of medium-/heavy-duty trucks (35) and France fielding the highest number of fuel-cell vans (273). Denmark, Poland, and Belgium each account for well over 100 LD-FCEVs, though many of the remaining EU countries—such as Austria, Italy, Sweden, the Czech Republic, and Spain—are still in double-digit or single-digit territory. Luxembourg, Portugal, Slovakia, Estonia, Finland, Bulgaria, Lithuania, and Latvia have so far registered only minimal or specialized FCEV fleets, illustrating the uneven but gradually expanding adoption of hydrogen-powered vehicles across the European Union (

Table A1. The structure of the FCEV fleet in the EU as of the end of 2023, where FCEVs were registered [181].

Country	LD-FCEV	FCEB	FCET (vans)	FCET (MD/HD)
Germany	2122	149	16	30
Netherlands	615	64	13	35
France	614	27	273
Denmark	232	4	2
Poland	165
Belgium	107	4	1
Austria	67
Italy	58	13
Sweden	44	2
Czech Republic	28
Spain	24	6
Luxembourg	5
Portugal	4	2
Slovakia	3
Estonia	2
Finland	2
Bulgaria	1
Lithuania	1
Latvia		22

). The current FCEV fleet is a result of a dynamically growing FCEV fleet across the EU, which started in 2010 (Figure A3)—the total fleet of FCEVs in the EU-27 has grown from a handful of early demonstrations to several thousand vehicles on the road. Overall, the IEA data (Figure A4) indicate strong growth in the global FCEV fleet from 2019 through mid-2024, with passenger cars making up the bulk of FCEVs but rising numbers of trucks, buses, and vans. The largest volumes are found in East Asia—especially Korea and China—while the United States and Japan also show considerable momentum. Although Europe’s share is smaller, it has been steadily expanding its FCEV stock over this period, with notable growth across multiple vehicle segments.

Nevertheless, as a response to the need to overcome existing barriers further to the FCEV market roll-out, AFIR sets legally binding national and EU targets for infrastructure for road vehicles, vessels, and aircraft. The regulation requires EU member states to provide a total power output of at least 1.3 kW for each electric car or van and 0.8 kW for each plug-in hybrid vehicle through publicly accessible charging stations. In addition, EU member states must ensure the installation of fast charging points every 60 km in each direction of travel by 2025 along the core TEN-T network and by 2030 along the comprehensive TEN-T network. For trucks and buses, the AFIR includes an approach that combines distance-based targets along the TEN-T network, targets for charging infrastructure at safe and secure parking lots, and targets at urban hubs. For distance-based targets, 15% of the entire TEN-T network must be equipped with fast charging stations at least every 120 km, increasing to 50% by 2027 and 100% by 2030. Besides the requirements for BEVs, it sets targets for one gaseous hydrogen refueling station every 200 km on the TEN-T core network by the end of 2030, as well as one HRS in every urban node. The HRS are expected to have a minimum dispensing capacity of 1 ton of hydrogen per day and must be equipped with a 700-bar dispenser (suitable primarily for light-duty passenger vehicles) [148]. As AFIR is enforcing the infrastructure development for hydrogen as RFNBO fuels, the chances of meeting, for instance, RED III targets are likely higher. The study by K. Pailman [149] emphasizes the necessity for the EU to develop cohesive and adaptable policy frameworks to overcome adoption barriers in renewable hydrogen, particularly in medium- and heavy-duty long-haul transportation.

Collectively, these EU policies create a synergistic and comprehensive regulatory environment that aims at incentivizing and shaping the widespread adoption of RFNBOs, thereby driving the EU towards its ambitious environmental sustainability and carbon neutrality goals.

4. Shaping the Market Supply for Hydrogen as RFNBO—The EU Perspective

The European Union’s vision for hydrogen as an RFNBO fuel is ambitious yet critical for achieving its decarbonization objectives and energy independence. This section explores the EU’s approach to scaling hydrogen supply within this framework, with a focus on the interplay of production capacity (Section 4.1), cost dynamics (Section 4.2), and financial incentives (Section 4.3). The EU has committed to producing 10 million tons of renewable hydrogen domestically and importing an equivalent volume by 2030. However, the path to realizing these goals is fraught with challenges, including disparities in national readiness, regulatory complexities, and high production and infrastructure development costs. As the EU works to scale up infrastructure, the focus remains on balancing ambitious climate goals with the practical realities of building a competitive and sustainable hydrogen market.

4.1. Available and Projected Production Capacity for Hydrogen as RFNBO Fuel

The EU aims to produce 10 Mt of renewable hydrogen domestically and import an additional 10 Mt by 2030, supported by key initiatives mentioned in Section 2.2. A vast majority (449 out of 490) of EU-funded hydrogen production projects in 2023 relied on water electrolysis, demonstrating the strong focus on RFNBO fuels as the primary pathway and underscoring the EU’s commitment to scaling up electrolyzer capacity, which will be critical to meeting production goals. Achieving the EU’s ambitious 2030 target will require nearly doubling hydrogen production capacity annually, with key limiting factors being renewable electricity availability and electrolyzers’ rapid deployment. Addressing these bottlenecks is essential to ensuring the feasibility of meeting the projected demand and decarbonization targets, as B. Thomas et al. [150] advocate.

The regionally differential hydrogen production capacity in Europe using water electrolysis by 2030 (

Table 3. Hydrogen production capacities in the IEA Nm³ H₂/hour using water electrolysis (currently at a different development stage) in Europe to be fully operational by 2030 (23 EU Member States and four non-EU states for comparison). Source: Own elaboration based on IEA Hydrogen Production and Infrastructure Projects Database (October 2024 update) [155].

	Early Stage	Feasibility Study	FID or Construction	Operational	Total per Country
Austria	26.881	64.450	5.449	2.211	98.991
Belgium	110.180	134.955	0.433	0.201	245.769
Cyprus	0.000	4.331	0.000	0.000	4.331
Czech republic	0.000	13.938	0.832	0.000	14.770
Denmark	2972.579	549.919	20.551	1.183	3544.232
Estonia	8.063	181.854	0.000	0.304	190.221
Finland	487.108	568.002	8.855	1.768	1065.733
France	3885.766	696.223	40.694	1.934	4624.616
Germany	1407.438	1134.089	80.994	12.094	2634.616
Greece	71.076	527.721	0.000	0.195	598.992
Hungary	0.000	1.499	0.173	0.300	1.972
Ireland	547.481	585.943	0.000	0.000	1133.423
Italy	209.615	103.859	1.102	0.495	315.072
Lithuania	0.173	36.903	0.000	0.000	37.076
Latvia	5.198	0.000	0.000	0.000	5.198
Netherlands	742.429	1522.985	35.249	1.560	2302.223
Poland	178.797	43.996	1.499	0.364	224.657
Portugal	438.833	229.249	16.582	0.000	684.664
Slovakia	0.000	38.462	0.000	0.000	38.462
Slovenia	0.000	5.891	0.000	0.104	5.995
Spain	6105.911	3044.883	11.653	5.595	9168.042
Sweden	781.658	726.498	230.766	3.809	1742.732
Selected non-EU countries
United kingdom	916.824	365.633	7.420	1.208	1291.085
Switzerland	0.156	4.331	0.832	1.158	6.478
Norway	363.992	353.723	18.201	1.690	737.606
Iceland	0.047	16.949	0.000	1.057	18.052
Total	19,260.205	10,956.288	481.285	37.230	30,735.008

) is at varying stages of development, with countries like Denmark, Germany, and Spain leading in total planned and operational capacities by 2030. Most projects are still in the early or feasibility stages, reflecting the substantial effort required to scale production to meet EU targets. A key insight is the disparity in progress among EU countries, underscoring the need for regional collaboration, infrastructure investment, and policy harmonization to achieve a unified and robust hydrogen market by 2030. The projected renewable hydrogen production volumes can be promising. However, there are several limitations that must be highlighted. First of all, B. Vivanco-Martín and A. Iranzo identified a critical need to secure supply chains for essential raw materials like platinum group metals and iridium, vital for hydrogen production and utilization installations [151]. Second, recent analyses made by Y. Majanne et al. [152] indicate that the EU’s strict regulatory requirements for renewable hydrogen—particularly the temporal correlation rule tying hydrogen production to hourly renewable electricity generation—significantly complicate plant design and operations. Meeting these rules often necessitates (i) larger electrolyzer capacity, (ii) extensive hydrogen buffering storage, and (iii) available battery energy storage solutions. As a result, renewable hydrogen producers face trade-offs in efficiency, investment costs, and supply reliability, underscoring the complexity of integrating renewable hydrogen production with intermittent renewable power sources. Other issues related to meeting strict RFNBO rules per renewable hydrogen supply were studied by R. Besseau et al. [153], who evaluated the carbon intensity (CI) of electricity used to produce RFNBOs (such as hydrogen) within the EU electricity network relying on hourly time-series data from the European Network of Transmission System Operators (ENTSO-E). This assessment allowed for determining when and where the production and consumption of electricity in Europe is sufficiently low in CI to meet the EU’s 70% GHG reduction threshold for RFNBOs. According to their study, in 2023, only a few EU countries (Sweden, France, Finland, Luxemburg, and Austria) consistently achieved sufficiently low CI threshold needed to produce hydrogen as RFNBO (and, by extension, other e-fuels) under the EU legislative framework—18.3 gCO₂-eq/MJ (66.0 gCO₂-eq/kWh) of electricity that the electrolyzer uses. However, even the best-performing countries face limited operating hours when electricity meets the stringent emissions threshold. This lower operational load factor makes producing RFNBOs more challenging and potentially more expensive, as electrolyzers would run less frequently to remain compliant. In this context, L. Engstam et al. [154] provide evidence from a case study in Sweden where a Northern European electricity system model is used to derive hourly grid emission factors for Sweden and apply them to hydrogen production scenarios combining onshore wind with grid electricity. While blending grid power can lower hydrogen production costs by 22–49% compared to wind-only operation, this cost reduction can come at the expense of higher marginal emissions—sometimes exceeding 20 kgCO₂-eq/kgH₂. However, adjusting operating strategies to prioritize low-emission hours or increasing the wind-to-electrolyzer ratio can simultaneously decrease costs and emissions, reducing the marginal carbon abatement cost by up to 20%. Thus, careful temporal matching of renewable electricity and strategic plant operation can ensure both economic and environmental gains for green hydrogen production.

Nevertheless, other supply-side challenges exist. Schmidt et al. [156] argue that the EU’s additionality rule for RFNBOs under the RePowerEU plan and RED III (so that these fuels must be produced using newly added electrolyzers or RES installations not older than three years) fails to ensure carbon neutrality, as it allows non-EU exporting countries to expand renewable capacity for hydrogen production without mandating corresponding emissions reductions domestically. This can lead to a macroeconomic carbon rebound effect, where global CO₂ emissions may increase despite sectoral reductions within the EU. Consequently, achieving net carbon neutrality for hydrogen as RFNBO requires a more comprehensive policy framework that addresses emissions impacts both within and outside the EU, preventing unintended global emission increases.

Therefore, are the EU objectives of renewable hydrogen production achievable? The EU’s ambition to produce 10 million tons of renewable hydrogen by 2030 is extremely challenging and relies heavily on the rapid expansion of RES installations and electrolyzers’ capacity. Meeting these targets would require installing around 100 GW of electrolyzers—implying a growth rate even higher than historical records set by solar power deployment—and up to 500–550 TWh of renewable electricity dedicated to hydrogen production alone. This would represent about one-third of the additional renewable electricity generation expected under the REPowerEU plan, raising questions about competing demands for renewables between direct electrification of end-uses and hydrogen production [150]. In this context, M. Prussi et al. [157] provide a case study of RFNBO fuels production for aviation, which requires large volumes of renewable electricity to generate qualifying renewable hydrogen, yet it yields a relatively low conversion efficiency—only 40–50% of input electricity is transformed into usable fuel. As a result, aviation’s share of total transport primary energy use in the EU could increase dramatically, potentially reaching 22% by 2050, thereby intensifying competition for renewable energy.

While several hundred hydrogen projects have been announced, more than three-quarters remain at the conceptual stage. Achieving EU goals would depend on unprecedented policy support, efficient permitting procedures, and scaling up supply chains, including renewable electricity, electrolyzers, and grid infrastructure [150]. To add granularity to this discourse, the analysis by I. Urbasos argues that the EU’s hydrogen ambitions need recalibration to better reflect realistic growth trajectories and the actual pace of industrial decarbonization. While the REPowerEU plan significantly raised renewable hydrogen targets in the wake of the war in Ukraine and the energy crisis, these aspirational goals risk inflating domestic and international expectations. The study points out that hydrogen demand projections are often detached from a detailed assessment of current industries’ capacity to absorb large volumes of renewable hydrogen, especially as some key consumers like ammonia and oil refining have struggled due to high energy prices and supply disruptions. The author suggests that the EU should acknowledge the complexity of ramping up hydrogen production and consumption within the given timeframe and geopolitical conditions. The EU should base its hydrogen strategy on pragmatic criteria instead of insisting on overly ambitious consumption and import targets for 2030. By doing so, it can maintain credibility, ensure that domestic and imported hydrogen truly contributes to decarbonization, and preserve the EU’s status as a global standard-setter in the hydrogen sector [158]. The study by I. Kountouris et al. [75] employs a sector-coupled energy system model to design a unified European hydrogen infrastructure, identifying four major hydrogen corridors and emphasizing the necessity of prioritizing renewable hydrogen to avoid long-term dependence on blue hydrogen. By 2050, achieving self-sufficient renewable hydrogen in Europe requires substantial electrolysis capacity and infrastructure investments, highlighting the critical need for rapid scaling, renewable energy deployment, and cross-border coordination to support the continent’s decarbonization objectives.

Domestic EU hydrogen supply will primarily rely on a combination of renewable and low-carbon pathways, but even under stringent renewables targets, Europe still relies on hydrogen imports (around 10–15% of total demand in 2050), making cross-border pipelines and associated infrastructure vital for cost-competitive supply. Endogenously modeled cost reductions, triggered by scaled-up deployment of solar and electrolyzer capacity, demonstrate that supporting rapid investment in these technologies can significantly lower future hydrogen production costs (as G. S. Seck et al. [91] report). M.C. Pinto et al. [159] estimate that renewable hydrogen imports from North Africa could fulfill about 16.5% of the EU hydrogen demand by 2050, primarily through pipeline imports from Morocco to Spain and shipping to other EU nations while highlighting the EU energy system’s vulnerability to costs, transport methods, and import capacities. Importantly, no single EU member state can become a global renewable hydrogen export powerhouse, and achieving full internal EU hydrogen supply independence requires extensive cross-border infrastructure and regulatory harmonization—factors far from guaranteed by 2050. Member States like Spain and Ireland can produce competitively at scale, but others, such as Denmark, face escalating marginal costs once their prime resources are fully tapped, making pure independence scenarios inherently costlier. While regional imports from nearby exporters (e.g., Morocco) can minimize costs, this narrow supplier base recreates old energy-dependence risks. In contrast, tapping long-distance partners like the United States enhances supply security through diversification while still maintaining cost advantages. Ultimately, the EU’s policy choices now—on infrastructure investment, standard-setting, and developing both domestic and international production capacity—will shape whether its future renewable hydrogen market prioritizes cost, security, or self-reliance and determine the geopolitical and economic contours of the EU’s hydrogen era (as A. Nuñez-Jimenez and N. De Blasio [160] advocate). These findings are backed up by the Clean Hydrogen Alliance [161], which emphasizes the EU’s identified other challenges, such as inconsistent global standards and insufficient financing and outlines recommendations from the European Clean Hydrogen Alliance, including developing international partnerships, supporting large-scale hydrogen production, establishing common certification standards, investing in infrastructure, and ensuring a stable and consistent regulatory framework to effectively integrate renewable hydrogen into the EU energy system.

According to A. H. Azadnia et al. [162], who identified and ranked 43 specific risk factors across seven categories, developing a resilient supply chain for hydrogen as RFNBO fuel (considering the needs of hard-to-abate sectors in Europe) requires coordinated mitigation of several high-impact risks. Chief among these is the substantial initial capital outlay for electrolyzer capacity and infrastructure retrofitting, exacerbated by uncertain long-term profitability and fluctuating energy costs. Policy and regulatory gaps—particularly the insufficiency of uniform standards or certification and supportive financial incentives—further heighten investment risks, while fragmented governance can delay critical infrastructure developments for production, storage, and delivery. Technological hurdles, such as insufficient electrolyzer manufacturing capabilities, pipeline retrofitting challenges, and ensuring hydrogen quality, can disrupt the entire supply chain unless addressed through targeted R&D funding and strategic scaling efforts. At the same time, market acceptance risks arise from consumer doubts about safety and environmental benefits, which must be overcome through transparent certification schemes and public awareness campaigns. Effectively managing these risks demands an integrated approach—combining financial incentives (e.g., carbon contracts for difference, public-private partnerships, or tax exemptions), robust policy frameworks with clear targets, and multi-stakeholder collaboration. By prioritizing such measures, the EU can establish a stable environment for hydrogen as RFNBO fuel to ensure that supply-side infrastructure is both scalable and economically viable.

4.2. The Production Cost of Renewable Hydrogen in the EU and Its Determinants

The production cost of hydrogen as REFNBO remains one of the leading limiting factors for spurring it across industry and transportation. K. Farhana et al. [163] compare the cost of hydrogen production across various methods, including also those that are based on fossil fuels, including coal gasification, steam methane reforming, oil-based routes, electrolysis (alkaline, proton-exchange membranes, and solid oxide), and more innovative options like photobiological processes and nuclear-assisted thermochemical cycles. The results show that hydrogen production costs vary widely depending on feedstock, technology maturity, CAPEX and OPEX structures, and energy sources. SMR of natural gas currently offers the lowest production cost (around 1.3–1.5 USD/kg H₂) but hinges heavily on volatile fuel prices and raises environmental concerns. Coal gasification can sometimes match or undercut these costs if coupled with CCS, but its high CI is problematic. Renewable hydrogen, particularly from renewable electricity (so it matches the key criterion to be qualified as RFNBO fuel), is cleaner but more expensive (around 3–8 USD/kg H₂). Capital expenditure, energy intensity, and renewable electricity costs are the primary barriers to scaling it as a cost-competitive alternative to well-recognized production methods. Continuous R&D in electrolyzers (alkaline, proton-exchange membranes, and solid oxide) and cost reductions in renewable electricity are needed. The production cost can vary depending on the national conditions, so it is worth reviewing individual case studies from diverse sources. L. Povacz and R. Bhandari [164] model off-grid hydrogen production in Austria using proton exchange membrane electrolysis powered by wind and solar PV, integrating geospatial data and detailed electricity generation profiles at 10-min intervals. The results suggest that the cost of renewable hydrogen ranges from about 3 to 13 EUR/kg, primarily influenced by renewable capacity factors and electrolyzer utilization. Another Austrian example, by S. J. P. Hill et al. [165], estimates LCOH from offshore wind power is calculated to be €8.68/kgH₂ using alkaline electrolysis, €10.49/kgH₂ using proton exchange membrane electrolysis, and €10.88/kgH₂ with grid electricity to back up the offshore wind power. The study by E. Crespi et al. [166] develops a techno-economic optimization model to determine the levelized cost of renewable hydrogen, revealing substantial cost gaps (8.1 €/kg to 29.9 €/kg) that require financial incentives for renewable hydrogen to compete with fossil fuels. Applying the model to Italy highlights the essential need for economic support to launch the hydrogen market and achieve hydrogen penetration targets. In another case, onsite electrolysis of renewable hydrogen at fueling stations leads to production costs well above EU decarbonization targets, with estimated pump prices of around €11/kgH₂ in 2020, decreasing to €7/kgH₂ in 2030 and €5/kgH₂ in 2050—still far from the European Commission’s €1.8/kgH₂ goal [167]. Providing a €3/kgH₂ subsidy could accelerate the cost reduction curve by a decade and help achieve parity with diesel before 2030. However, regulatory measures must ensure that all electricity used is genuinely additional and renewable to secure real climate benefits. B. Filar et al. [168] analyze the economic feasibility of producing green hydrogen in Poland using a 2.5 MW proton exchange membrane electrolyzer powered solely by photovoltaic (PV) energy. Various PV capacities (7–11 MW) were examined to identify an optimal configuration balancing investment and operating costs against hydrogen output. The results show that a 9 MW PV installation could yield a hydrogen production cost of approximately 3.17 PLN/m³ (roughly USD 8.6/kg), which is currently higher than fossil-based hydrogen prices. However, the authors note that ongoing reductions in electrolyzer and PV costs, as well as efficiency improvements, could soon enhance the competitiveness of renewable hydrogen. In essence, while renewable hydrogen in Poland is not yet cost-competitive, strategic scaling and technological advances may rapidly close the gap.

The cost of renewable hydrogen production in the EU varies significantly across countries and production technologies, with key components such as CAPEX, grid fees, and electricity costs being primary cost drivers (

Table 4. Renewable hydrogen production cost in the EU in 2023 (in EUR/kg of hydrogen), with the breakdown of individual costs. Source Own elaboration based on the European Hydrogen Observatory database [123]. The colors indicate the cost values—low (green: below 2 EUR/kg); moderate (yellow: 2–5 EUR/kg); high (orange: 5–10 EUR/kg); and very high (red: over 10 EUR/kg).

	Renewable Hydrogen from Grid Electrolysis						Renewable Hydrogen Directly Connected to RES
	CAPEX	Grid Fees	Other OPEX	Taxes	Wholesale Electricity Costs	TOTAL	CAPEX	Electricity Costs	Grid Fees and Taxes	Other OPEX	TOTAL
Ireland	€2.76	€0.98	€0.11	€0.01	€4.70	€8.56	€2.25	€1.82	€-	€0.06	€4.13
Denmark	€2.76	€0.94	€0.11	€0.07	€2.32	€6.20	€2.58	€2.01	€-	€0.09	€4.69
Sweden	€2.76	€0.60	€0.11	€0.04	€0.92	€4.43	€2.85	€2.08	€-	€0.11	€5.04
Greece	€2.76	€0.55	€0.11	-€0.37	€4.39	€7.44	€3.21	€1.73	€-	€0.14	€5.08
Spain	€2.76	€0.62	€0.11	€0.24	€2.77	€6.50	€3.94	€1.55	€-	€0.13	€5.61
Finland	€2.76	€0.43	€0.11	€0.03	€0.73	€4.06	€3.17	€2.36	€-	€0.14	€5.67
Portugal	€2.76	€0.90	€0.11	-€1.97	€2.91	€4.71	€3.99	€1.65	€-	€0.13	€5.77
Malta	€2.76	€1.46	€0.11	€0.08	€3.76	€8.17	€4.00	€1.72	€-	€0.13	€5.86
Netherlands	€2.76	€1.55	€0.11	€0.58	€3.16	€8.16	€3.09	€2.65	€-	€0.13	€5.87
Cyprus	€2.76	€0.99	€0.11	€4.27	€9.23	€17.36	€3.99	€1.88	€-	€0.13	€6.00
Austria	€2.76	€1.35	€0.11	€0.23	€3.61	€8.06	€3.30	€2.66	€-	€0.15	€6.11
Latvia	€2.76	€0.60	€0.11	€0.07	€2.69	€6.23	€3.34	€2.70	€-	€0.15	€6.19
Lithuania	€2.76	€1.07	€0.11	-€0.41	€2.71	€6.24	€3.35	€2.71	€-	€0.15	€6.20
Estonia	€2.76	€1.18	€0.11	€0.69	€2.44	€7.18	€3.44	€2.78	€-	€0.16	€6.38
Italy	€2.76	€0.69	€0.11	€1.20	€5.34	€10.10	€4.48	€1.92	€-	€0.18	€6.58
France	€2.76	€0.79	€0.11	€0.08	€3.22	€6.95	€4.63	€1.93	€-	€0.19	€6.75
Poland	€2.76	€1.23	€0.11	€3.87	€4.38	€12.35	€3.81	€3.22	€-	€0.12	€7.15
Croatia	€2.76	€0.93	€0.11	€0.71	€3.62	€8.14	€4.09	€3.20	€-	€0.14	€7.43
Czechia	€2.76	€1.18	€0.11	€0.06	€3.55	€7.67	€4.08	€3.29	€-	€0.14	€7.51
Bulgaria	€2.76	€1.38	€0.11	-€0.27	€3.44	€7.42	€5.48	€2.10	€-	€0.27	€7.86
Romania	€2.76	€1.37	€0.11	€0.68	€3.42	€8.34	€5.60	€2.35	€-	€0.28	€8.24
Slovakia	€2.76	€1.51	€0.11	€1.83	€3.66	€9.87	€4.51	€3.63	€-	€0.18	€8.32
Belgium	€2.76	€0.48	€0.11	€0.93	€3.25	€7.53	€2.53	€4.33	€1.41	€0.09	€8.35
Slovenia	€2.76	€0.54	€0.11	€0.41	€3.67	€7.48	€4.64	€3.73	€-	€0.19	€8.55
Germany	€2.76	€1.44	€0.11	€1.79	€3.13	€9.22	€4.50	€4.20	€-	€0.18	€8.87
Hungary	€2.76	€2.96	€0.11	€0.45	€3.73	€10.01	€4.83	€3.88	€-	€0.21	€8.93
Luxembourg	€2.76	€1.04	€0.11	€0.03	€3.13	€7.07	€5.03	€4.04	€-	€0.23	€9.30

). For example, wholesale electricity costs often constitute the largest share, highlighting the critical role of renewable electricity availability and pricing in achieving cost competitiveness. Noteworthy, reducing electricity costs and grid fees, alongside technological advancements in electrolyzers, is crucial to making renewable hydrogen economically viable and scaling its adoption across the EU.

4.3. Financial Incentives to Increase the Supply of Hydrogen as RFNBO Fuel

Despite a growing pipeline of nearly 25 million tons of renewable hydrogen projects by 2030, the EU faces significant challenges in securing financial investments, with only a fracture of projects reaching financial investment decisions by 2023. High production costs, driven by increased capital expenses, slower declines in renewable electricity costs, and recent drops in fossil fuel prices, have widened the cost gap between renewable and fossil-based hydrogen, undermining the competitiveness of RFNBO hydrogen as Cornillie et al. report [138].

To overcome these challenges, the EU supports the supply of hydrogen as RFNBO fuel through a combination of production-based subsidies, such as those offered by the European Hydrogen Bank, and regulatory measures like the already mentioned EU ETS and FuelEU Maritime regulation. Noteworthy, the renewable hydrogen supply targets are backed up by substantial financial commitments, including up to €10.6 billion in public funding through the IPCEI Hy2Tech and Hy2Use programs, designed to increase innovation and industrial deployment in the hydrogen value chain. B. Thomas et al. [150]. Studies conducted by A. Hoogsteyn et al. [169] have shown that capacity-based support mechanisms, including capacity grants and investment subsidies, are more cost-effective and induce fewer market distortions compared to production-based instruments, which can adversely affect electricity and hydrogen prices. Therefore, adopting capacity-based subsidies can enhance the EU’s RFNBO hydrogen deployment while maintaining market stability and advancing its decarbonization objectives. Moreover, as B. Vivanco-Martín and A. Iranzo [151] emphasize, the EU’s hydrogen strategy estimates significant investment needs to scale up renewable hydrogen production, including €24–42 billion for electrolyzers and €220–340 billion for renewable energy sources by 2030. Mechanisms like Carbon Contracts for Difference are proposed to de-risk these investments. These provide financial guarantees by bridging the gap between current hydrogen production costs and market prices, offering predictability and reducing financial risks for investors in the renewable hydrogen project’s view.

Among implemented support mechanisms, The European Hydrogen Bank emerges as an essential mechanism for accelerating hydrogen infrastructure by providing a fixed premium scheme to large-scale projects, thereby catalyzing private investment in production and distribution through an auction-based funding allocation system [170,171]. A. Wolf [172] advocates that such fixed premiums significantly accelerate electrolyzer capacity investments across EU regions more effectively than guaranteed hydrogen prices by maintaining balanced support over time. However, the expert warns that the current premium ceiling of €4.50/kg risks over-subsidizing producers in low-cost regions and recommends lowering the maximum premium, relaxing participation criteria to enhance competition, and ensuring comprehensive policy support across the entire hydrogen supply chain to prevent market distortions and promote sustainable growth. This is echoed by other researchers, including H.M. Spasowska [173], who calls to increase EHB funding, implement support mechanisms for smaller-scale producers, mitigate price volatility risks, and adopt inclusive strategies to prevent regional disparities and develop a diverse hydrogen ecosystem. C. K. Bolat et al. [137] also underscored the design of the EHB that must carefully consider allowance allocations and subsidy structures to prevent carbon leakage and enhance the overall efficacy of hydrogen as RFNBO fuel in the EU’s decarbonization strategy.

In addition to these deliberations, A. Gatto et al. [174], by drawing on successful renewable energy subsidization models, propose a long-term path for renewable hydrogen adoption by transitions from feed-in tariffs to direct marketing with market premiums, complemented by Guarantees of Origin, to facilitate large-scale growth and cost competitiveness in both the EU markets. Another concept can be found in a study by M. Moreno [175], who advocates for instituting differentiated taxation with a minimum rate of €0.15 per gigajoule for renewable hydrogen to promote renewable hydrogen production from wind and solar power to achieve climate neutrality by 2050 and energy independence from Russian fossil fuels by 2030.

Cost comparisons increasingly favor renewable hydrogen over natural-gas-sourced hydrogen as updated data on fugitive emissions and carbon prices undermine SMR-sourced hydrogen’s long-term competitiveness. Low technology-readiness level of CCS technologies and substantial methane leaks along the gas supply chain create significant investment risks that are not fully accounted for in current global decarbonization roadmaps. Consequently, steering green finance toward accelerating green hydrogen scale-up appears both more cost-effective and less risky for achieving net-zero targets [176].

5. Conclusions

Our paper examined the evolving EU regulatory and policy framework and market dynamics shaping the demand for, and the supply of, renewable hydrogen—recognized in EU legislation as a renewable fuel of non-biological origin (under strict requirements). Through analysis of key EU directives and regulations, complemented by comparisons to other major jurisdictions (notably the United States, the United Kingdom, and China), the research offered a comprehensive overview of how renewable hydrogen is poised to enable deep decarbonization in hard-to-abate sectors, including industry and transportation.

Findings indicate that the EU employs a multidimensional policy approach—ranging from market-based emissions trading schemes (ETS II), mandates (FuelEU Maritime and Aviation, and notably RED III), targeted taxation (Energy Taxation Directive), and infrastructure frameworks (Alternative Fuels Infrastructure Regulation)—to establish an efficient, demand-pull mechanisms for RFNBO hydrogen across sectors not that easy to electrify or decarbonize. Although this cohesive strategy positions the EU as a leader in green industrial policy, significant challenges remain on the supply side. That includes (i) the high cost of producing hydrogen as RFNBO fuel and (ii) the complexity of meeting stringent RFNBO criteria (especially regarding additionality and real-time matching with renewable electricity to meet the temporal and geographic correlation) dampens the near-term competitiveness of renewable hydrogen vis-à-vis fossil-derived alternatives. In addition, on the supply side, the current pace of electrolyzer deployment, grid upgrades, and raw material availability for electrolyzer technologies underscores the difficulty of reaching the EU’s ambitious targets—10 million tons of domestically produced hydrogen and 10 million tons of imports by 2030.

These findings are significant for the ongoing political and academic discourse as they highlight the EU’s role not only as a regulatory pioneer but also as a potential catalyst for global shifts in renewable hydrogen production, trade, and technological innovation. Yet the rapidly evolving legislative environment, paired with uncertain long-term policy and market signals, poses limitations for precise forecasting. Many renewable hydrogen projects remain at the conceptual stage, and data on infrastructure costs and sector-specific adoption patterns are still in flux. Furthermore, international comparisons must be cautiously approached, given the divergent policy mixes, availability of primary energy resources, and economic structures in different regions.

Looking ahead, a crucial implication is the need to refine and better align EU policy instruments so that support mechanisms on both the demand and supply sides work in tandem. More efficient and predictable financing—through capacity-based subsidies, premium auctions, or the EU Hydrogen Bank—could spur private investment, overcome early-stage cost barriers, and help realize economies of scale. Equally, stronger cross-border coordination on infrastructure development, certification, and trade rules can mitigate potential market fragmentation and supply bottlenecks.

Future research should expand its scope to underexplored industrial sectors (e.g., cement, glass), deepen examination of the geopolitical implications of large-scale renewable hydrogen trade, and broaden evaluation of alternative production pathways (such as low-carbon hydrogen from CCS-equipped processes) that may bridge the gap between today’s fossil-based systems and tomorrow’s fully renewable hydrogen economy. Such investigations would offer valuable insights into how hydrogen can become a cornerstone for achieving net-zero ambitions within and beyond the EU. Nevertheless, the EU is among the global leaders blazing the trail in the large-scale deployment of renewable hydrogen. While we observe the development of the regulation and policy framework, we might expect the simultaneous and structured roll-out of the RFNBO market in the following years.