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EU Adopts New Regulations to Develop the Hydrogen Market and Decarbonize Gas

The European Council announced the adoption of a new regulatory package that establishes common market rules for hydrogen, natural gas, and renewable energy. The package aims to support the EU’s decarbonization goals and accelerate Europe’s transition from fossil fuels to low-carbon and renewable energy sources.

Following the EU Parliament’s acceptance of the legislation in April, the statement by the EU Council is the last significant step towards the new regulation’s ultimate adoption.

The new regulation is a component of the ‘Fit for 55’ roadmap, which is the EU’s proposed strategy to reduce greenhouse gas (GHG) emissions by 55% by 2030 compared to 1990 levels, and is part of a series of proposals made by the European Commission in December 2021 to decarbonize the EU gas market as part of the European Green Deal, supporting the EU goal to achieve climate neutrality by 2050.

The regulations also seek to promote the Commission’s REPowerEU plan, which aims to wean the EU off of its need on Russian fossil fuels.

In addition to requiring national network development plans based on cooperative scenarios for electricity, gas, and hydrogen, the new legislation encourages the creation of common internal market regulations for renewable and natural gases as well as hydrogen. The Commission claims that by making it easier to connect to and access the current gas grid, the regulation will promote the use of low-carbon and renewable energy sources. It will also establish a consistent method for evaluating the emissions footprint of various gases, allowing member states to compare and take them into account when determining their energy mix.

A voluntary mechanism to support the hydrogen market is being established, and tariff discounts for renewable and low-carbon gas are being offered. The new regulation also includes provisions aimed at phasing out fossil fuels, such as directing long-term contracts for unabated fossil gas to not last beyond 2049, and rules supporting the promotion of the penetration of renewable and low-carbon gases, particularly hydrogen, in coal and carbon-intensive regions.

Member states have two years to amend their national laws to comply with the new terms of the rule, which will take effect six months after it is published in the EU Official Journal.