Hydrogen: A Strategic Imperative for Industrial Decarbonisation and European Competitiveness

Europe stands at a defining moment. Achieving the continent’s climate goals while safeguarding industrial competitiveness and strategic autonomy demands a clear-eyed, pragmatic approach — one that removes regulatory bottlenecks and accelerates the deployment of clean technologies. Hydrogen is not a peripheral element of this strategy; it is a central pillar. Without hydrogen, Europe cannot effectively decarbonise energy-intensive sectors such as steel, chemicals, and refining, nor can it hope to lead the global race for clean industrial innovation.

The European Union has already recognised the essential role hydrogen plays in achieving climate neutrality by 2050, as enshrined in the European Climate Law.

Hydrogen’s unique ability to deliver high-temperature heat without CO₂ emissions makes it indispensable for processes where electrification is technically or economically unfeasible. Projections suggest EU hydrogen demand could reach between 1,350 and 1,800 TWh by mid-century — a figure that signals not only an environmental necessity but a vast industrial opportunity.

Yet despite political momentum and a growing regulatory framework, the actual deployment of hydrogen technologies — especially at industrial scale — remains sluggish and fragmented.

Meanwhile, international competitors are advancing quickly. China already produces one-third of global hydrogen volumes, and the United States has introduced production tax credits of up to $3/kg through the Inflation Reduction Act. In contrast, European hydrogen production remains prohibitively expensive, with costs averaging around $8/kg. To reach the EU’s 2030 target of 10 million tonnes of renewable hydrogen, between 95 and 140 GW of electrolyser capacity will be required. Currently, less than 20 GW are in the pipeline, and only a fraction of those projects are moving at pace.

Several structural barriers continue to undermine Europe’s hydrogen ambitions. High electricity prices — often double or triple those in the U.S. — make European hydrogen production economically unviable. At the same time, infrastructure remains grossly underdeveloped. The European Hydrogen Backbone envisions 58,000 km of pipeline by 2040, yet today, only 1,569 km exist. Regulatory delays and permitting obstacles cast doubt on the timely delivery of this critical network. Europe faces a textbook “chicken-and-egg” dilemma: investors are hesitant to commit to hydrogen supply without guaranteed demand, while potential off-takers wait for reliable, affordable supply. This stalemate is compounded by regulatory complexity and inconsistency. The draft delegated act on greenhouse gas savings from low-carbon fuels, for example, risks discouraging investment in transitional technologies such as blue hydrogen and carbon capture–based solutions.

To unlock hydrogen’s potential, European policy must urgently realign with industrial realities. This requires enabling transitional solutions, including low-carbon and blue hydrogen, to scale rapidly. It also means recognising the value of nuclear-derived hydrogen and allowing the use of non-additional renewables via Power Purchase Agreements (PPAs).

A reassessment of emissions accounting frameworks is also needed. The methodology for low-carbon hydrogen must incorporate supplier-specific data and align with international best practices, such as OGMP 2.0 certification. Arbitrary emission penalties, especially those imposed upstream, risk deterring investment and straining hydrogen diplomacy with strategic partner regions such as North Africa and the Middle East.

Legal certainty is another non-negotiable. Grandfathering clauses must protect early investments from retroactive regulatory changes. Europe cannot afford to undermine first movers through shifting goalposts.

Permitting delays remain a major bottleneck. Approval processes for hydrogen infrastructure — including pipelines, storage, and electrolysers — are stalling across member states. These must be streamlined to accelerate deployment. Additionally, Europe’s electricity grid will require an estimated €210 billion in investment to support hydrogen production. Strategic siting of hydrogen assets — close to both renewable sources and industrial demand — and the development of integrated energy clusters combining hydrogen, renewables, carbon capture, and waste heat can significantly boost efficiency and project viability.

Industrial-scale hydrogen deployment also demands clear investment signals. A combination of EU-level subsidies — such as those from the Hydrogen Bank — and de-risking mechanisms like contracts for difference is essential.

Legal and regulatory stability must underpin these financial frameworks to restore investor confidence.

Globally, Europe must act decisively. Establishing hydrogen import mechanisms, modelled on initiatives such as H2Global, would secure long-term supply contracts with exporting countries. At the same time, carbon border adjustments should be calibrated to support — not penalise — clean hydrogen imports that align with Europe’s climate goals.

Finally, hydrogen policy must remain technology-neutral. Excluding certain production pathways — particularly those crucial in the short to medium term — is both scientifically questionable and economically counterproductive. A diversified hydrogen portfolio, including pathways based on nuclear energy and industrial off-gases, is vital to build resilience and scale.

The path to a decarbonised, globally competitive Europe runs through hydrogen. But the current trajectory is too slow, too bureaucratic, and overly constrained by ideology. A course correction is urgently needed — one grounded in technological openness, regulatory pragmatism, and industrial realism. Hydrogen is not a panacea, but it is a foundational element of Europe’s climate and industrial strategy. It must be treated accordingly: with ambition, urgency, and above all, with common sense.