Low-Carbon Hydrogen for a competitive and decarbonised Europe

As a world leader in gases, technologies, and services for industry and healthcare, Air Liquide is convinced that notably hydrogen will be a decisive molecule in the energy transition – to decarbonise heavy industry and revolutionise. As a hydrogen pioneer for more than 60 years, Air Liquide welcomes the Clean Industrial Deal as an important step in the right direction. It now requires swift and decisive follow-up actions to strengthen the business case for industry to decarbonise and restore Europe’s competitiveness and environmental leadership.

Transitioning through technology neutrality

Given the urgency of climate change, the EU has set itself ambitious targets to progressively reduce its greenhouse gas emissions and become climate-neutral by 2050. At Air Liquide, we invest in clean technologies, develop innovative materials, and decarbonise industrial processes to become climate neutral, and help our customers do so, by mid-century. The clean transition will only succeed if we tackle it jointly and decisively – as Europeans and together with our global partners.

The EU’s decarbonisation agenda, however, has lately been slowed down by the complexity of regulations, by conflicts about the use and definition of technologies, and by the slow development of infrastructure across member states. Rather than favouring certain decarbonisation solutions, the EU should leverage the diversity of technologies that are already available and mature, while continuing to incentivise investments in future innovations.

•  Stakeholders should be encouraged to develop net-zero trajectories based on their sector’s

specific needs and technological possibilities in order to reduce emissions swiftly and realise our climate potential effectively. There is certainly no time to lose.

Access to affordable low-carbon energy

Above all, access to abundant and affordable energy is the basis for energy-intensive industries to compete globally and domestically and to effect positive change in the world through innovative technologies. The Clean Industrial Deal therefore rightly prioritizes the aim to reduce energy prices and further integrate the internal energy market. Channeling investments in the electricity grid and incentivising demand flexibility are particularly important for stabilising and futureproofing the European energy market.

• The harmonised use of Contracts for Difference (CfDs) and Power Purchase Agreements (PPAs)

can further ensure access to affordable energy for European industry. Indeed, it is important to adapt the framework of PPAs to the needs of industry to source renewable as well as nuclear power, and to well balance the risks of PPAs between the different stakeholders.

 CCS to decarbonize industry

Particularly for hard-to-abate sectors, such as lime, cement or steelmaking, carbon capture and storage (CCS) is a key technology to decarbonise processes, where electrification does not (yet) represent a feasible alternative. But also for the existing hydrogen production, CCS is of great importance to reduce emissions and contribute to the EU’s climate targets innovatively, especially given the pace of development of renewable energy. The importance of CCS for hydrogen also is clear because industry needs the supply of H2 on base-load, which can not be guaranteed through an electrolyser running on renewable electricity, which is intermittent by nature. Air Liquide therefore welcomes the recognition of industrial carbon management in the Clean Industrial Deal. A regulatory framework on how to actually ensure a swift uptake of CCS technologies and investments is yet to be presented.

• It will be key for the future framework to ensure the development and recognition of new storage

capacities, including outside of the EU (e.g. in the UK). It should also ensure open access to CO2 storages and long-distance transport infrastructure, while refraining from overregulating industrial basins. Transportation and storage businesses should be unbundled to ensure competition and cost reduction, and technically and financially reasonable CO2 specifications developed to ensure regulatory certainty for investment decisions. Particularly early-movers should be supported through de-risking mechanisms to channel the most innovative projects.

Scaling up the hydrogen economy and optimizing synergies between industrial and mobility

Production of renewable hydrogen (RFNBO) has not lived up to its overexpectation – which some have even called a ‘hydrogen hype’ during the Green Deal. However, the realism that this Clean Industrial Deal brings should now ensure the effective deployment of key decarbonization technologies. Air Liquide is currently developing various renewable and low-carbon hydrogen projects.

Scaling up the hydrogen economy is indeed key to fostering the EU’s energy transition. Used as a feedstock and secondary energy source, both renewable and low-carbon hydrogen help to significantly reduce CO2 emissions in hard-to-abate industries, such as electronics, glassmaking, and chemicals.

But also for mobility applications, hydrogen plays a critical complementary role to electric mobility. Hydrogen technologies are proven, industry is aligned, the momentum is real. This 2nd of July, 37 CEOs forming a Global Hydrogen Mobility Alliance, called on European decision-makers for urgent political support and proper implementation of policies. Europe risks falling behind and losing the industries, jobs, and energy resilience that hydrogen has started to deliver. Countries in Asia are deploying tens of thousands of hydrogen vehicles, mostly heavy duty ones, while only a few thousands are on the road in Europe.

While Europe’s effort to put forward enabling policies and tools for hydrogen mobility over the last few years was a positive signal for our sector, past policies have not succeeded to efficiently bridge the initial cost gap with diesel, resulting in limited ramp-up volumes and jeopardizing the entire value chain development.

• In order to fully unlock hydrogen mobility, we need today to adopt a comprehensive and

pragmatic approach with support mechanisms addressing both the investment of refueling infrastructure and the deployment of vehicles. And we need to level the playing field with electric battery vehicles to ensure a similar development : no strict requirement of renewable energy source –hydrogen color agnosticity- in the ramp-up phase.

Developing low-carbon hydrogen

While the production of hydrogen is still limited, the growing demand, at least in the short term, cannot be covered by renewable hydrogen alone. Indeed, the different ways to produce renewable and low-carbon hydrogen (electrolysis with low-carbon or renewable electricity, SMR or ATR with CCS and/or fed with biomethane) will realistically coexist at least for a temporary period of time.

Particularly in the early stages of the hydrogen economy, the deployment of low-carbon solutions has the potential to complement and facilitate the uptake of the currently still costly renewable hydrogen production. More cost-competitive low-carbon solutions have the potential to foster a more reliable demand for and supply of hydrogen, deliver quick emission reductions, and build resilient supply chains for the future – a win-win for the uptake of both the CCS and hydrogen markets.

• To this end, Air Liquide calls for the swift adoption of a sound and workable definition of

low-carbon hydrogen, including a complete life cycle assessment of the production (incl. upstream emissions) and flexibility in electricity sourcing. Also when it comes to the hydrogen economy, technology neutrality remains one of the preconditions for decarbonising European industry sustainably and successfully. Hence, beyond definitions, low-carbon hydrogen also should contribute to the 2040 and 2050 decarbonisation targets.

However, given the numerous hurdles that are yet to be tackled and the massive investments needed to ensure the market’s uptake and long-term competitiveness, the EU’s future industrial policy should ensure a level playing field between domestically produced and imported hydrogen under the CBAM and respective certification schemes. As one of the key factors that will decide upon the fate of the EU’s energy transition, the hydrogen market’s uptake simply cannot be left to chance, but must be led to success and allow European industry to become globally more competitive again.

Simplification for decarbonisation

Finally, a stable and harmonised regulatory framework across the EU is key for mobilising investments in clean technologies. At Air Liquide, we welcome the simplification trend put forward by the European Commission, particularly the aim to provide more regulatory certainty for investment decisions and support for rapidly growing cleantech markets. Only based on the consistent and coherent application of EU legislation and enough time for businesses to prepare for their implementation, Europe can meet the challenges of our time and unfold its full potential – for a more competitive and climate-resilient  future.