Loopholes and lobbies: An explainer of the European Commission’s Hydrogen strategy

A hydrogen plant in the Netherlands

In early July, Frans Timmermans, European Commissioner for Climate Action, took the stage in the Commission building. “Clean Hydrogen is one of the top priorities in our energy transition,” he said. For this reason, together with the rest of the Commission, he presented the EU’s hydrogen strategy. Along with the Green New Deal, it is positioned one of the EU’s key instruments for phasing out fossil fuels and making the transition to a climate-neutral era. The Commission would make large sums of money available for this purpose. “We will be investing a lot in making clean hydrogen part of our energy mix in the future,” said Timmermans.

Hydrogen is everywhere, and nowhere. On Earth, the element H is more abundant than almost any other, but almost exclusively in combination with other substances. Hydrogen is part of water and acids. It is found in all organic compounds, in protein, fats and carbohydrates. In the future, it will be used to make steel and power aircraft.

A Tweet from May 2020 by VP Timmermans

To use hydrogen as an energy carrier, it must be extracted from an existing substance. Often, this substance is natural gas. Because natural gas contains hydrogen. If this is to be extracted, a process called steam reforming is usually used. In steam reforming plants, the elevated temperatures required to separate hydrogen from water and hydrocarbons are provided by burners, which release flue gas to the atmosphere. The EU’s hopes are therefore largely based on another process: electrolysis. Electrolysis uses electricity to split water into its components — oxygen and hydrogen.

Misleading rhetorics enable greenwashing

The modes of hydrogen production have frequently been denoted by colour names. For example, hydrogen from natural gas was called “grey hydrogen” and that whose production involves the storage of CO2 was called “blue hydrogen”. Hydrogen from renewable electricity was called “green hydrogen”. 

But hydrogen is not just an element. It is also the subject of the gas industry’s lobbying machine. Working against the rise of the renewables and trying to preserve its business model, hydrogen is being extracted, transported and burned as natural gas. Critics warn that the gas lobby is trying to water down the colour scale, describing hydrogen derived from natural gas as “green”. Economists from the TU Berlin and the German Institute for Economic Research warn that “the rhetoric of many ‘shades of gas’, including ‘green’, ‘blue’, ‘grey’, mainly targets infrastructure issue, to create a sense of justification to maintain the fossil-induced infrastructure”.

The EU Commission around Timmermans therefore propose a new scale in its hydrogen strategy. It calls hydrogen from natural gas “fossil-based hydrogen”. Hydrogen from natural gas whose production involves the storage of CO2 is called “low-carbon hydrogen” and hydrogen from renewable electricity is called “clean hydrogen”. In addition to a new scale, the Commission has also created an additional framework for building renewable hydrogen production capacity in Europe. For example, one million tonnes of “renewable hydrogen” are to be produced by 2024. By 2030, the EU should have an installed capacity of 40 GW of renewable hydrogen electrolysers producing ten million tonnes of “renewable hydrogen”.  At present, there is only 1 GW of installed capacity in the EU. The Commission forecasts that almost 400 billion euros will have to be invested in this by 2030 alone. It wants to help with its own programmes. Ten billion euros are to be made available through the “ETS Innovation Fund”. Other funding instruments are also to be used, including InnovFin Energy Demonstration Projects and InvestEU.

Loopholes in the strategy

The EU has committed itself to achieve climate neutrality by 2050. But it is still far from this goal. If warming is to be limited to less than two degrees Celsius — as promised in the Paris agreement of 2016 — Europeans are only allowed to emit 70 billion tonnes of carbon dioxide into the atmosphere at all. According to energy experts at the German Institute for Economic Research (DIW), that is the equivalent of just 16 years of emissions from the previous consumption of coal, oil and gas. According to the strategy, hydrogen “offers a solution to decarbonise industrial processes and economic sectors, where reducing carbon emissions is both urgent and hard to achieve”. This makes “hydrogen essential to support the EU’s commitment to reach carbon neutrality by 2050”. 

“Hydrogen is just an excuse to continue using fossil fuels.”

Claudia Kemfert, DIW climate economist

But the EU strategy is not quite so clear-cut. It contains several loopholes that could allow the gas industry to continue burning fossil fuels. For example, it says “other forms of low-carbon hydrogen are needed”. This includes so-called “blue” hydrogen from natural gas, whose CO2 is stored. This loophole could thus be used to finance projects in which natural gas is the source of the hydrogen in the future.

The lobbying machine of the gas industry is already working to establish a new narrative of ‘decarbonised gas’. “Some refer to hydrogen, and have natural gas in mind,” warns DIW climate economist Claudia Kemfert. “Hydrogen is just an excuse to continue using fossil fuels.” 

By analysing international documents, Investigate Europe was able to demonstrate how influential the gas lobby is in undermining the hydrogen strategy. The EU strategy states that a platform called “Clean Hydrogen Alliance” should develop an “investment agenda” and a “pipeline of concrete projects”. The documents available to Investigate Europe show that the Commission mandated an organisation called Hydrogen Europe to form the “Clean Hydrogen Alliance”. However, among Hydrogen Europe’s members are many gas companies, such as Gasunie and Equinor.

European Union
VP Timmermans at the virtual launch of the Clean Hydrogen Alliance in July 2020

A few days after Frans Timmerman’s appearance in Brussels, a first meeting of the “Clean Hydrogen Alliance” took place. Following the speeches of three EU Commissioners, it was time for the head of Hydrogen Europe to speak. As shown by his place in the speakers’ list — before any minister from Germany or France —Jorgo Chatzimarakis (a former liberal MEP and now industry lobbyist) has a crucial role to play in the future of hydrogen. In his speech he announced, “The key to success is the leadership of the industry.” The members of this powerful alliance are almost exclusively energy companies, while representatives of civil society are almost completely absent.

Not everybody is as comfortable with the industry’s role in the Clean Hydrogen Alliance. “I have worked ten years on renewables, but I have never seen such an opaque and unusual operation,” said Tara Connolly, a campaigner with Friends of the Earth, about the alliance.

There are no established climate NGOs (such as Greenpeace, the Climate Action Network or Friends of the Earth) among the Alliance’s members. Instead, the member list is populated with the names of many industry representatives, but that too, only from some fields. “What surprises us most is that no renewable companies are present,” said Connolly to Investigate Europe. “You want to build an economy based on Green Hydrogen [but] you do not ask advice from those who produce [this energy].”

Recently, MEPs of the Greens sent a letter to the Commission, complaining about the drift in the governance of the Alliance. In the letter, they wrote, “It is important that hydrogen investments are considered in the context of the broader energy transition and industrial strategy so that the costs and benefits can be fully measured against alternatives. This means that the Clean Hydrogen Alliance should not be dominated by representatives from the hydrogen industry.” They are now considering to report the case to the European Ombudsman, who then could conduct an inquiry into maladministration.

Meanwhile, the fossil industry has had two successes. Its ‘low-carbon’ hydrogen is included in the EU Commission’s hydrogen strategy, and it is also playing an important role in determining how the strategy will be applied. Moreover, gas companies are confident about sustaining their business model with EU funding. Companies are reaching for the €750 bn recovery fund designed to help the EU tackle the crisis caused by the Covid-19 pandemic. A portion of this money could be used to finance so-called ‘low-carbon’ or ‘decarbonised’ projects, including the use of fossil gas.

In early July, Frans Timmermans was still promoting the Commission’s strategy as a roadmap for the EU’s energy transition. However, overwhelming lobby influence risks turning it into an initiative that works against energy transition.

Read more about our investigation, ‘Europe in the Gas Trap’.