As the European Commission prepares to publish its long-awaited review of the EU’s Renewable Fuels of Non-Biological Origin (RFNBO) framework this autumn, the hydrogen industry faces an important decision. Europe needs to verify the credentials of low-carbon hydrogen, but there is a risk that the current approach is beginning to work against the market it is trying to build.
RFNBO was created to solve a specific problem. For years, low-carbon hydrogen attracted plenty of investment interest in the race for energy transition but lacked a common way to prove its carbon credentials, making it difficult to compare projects or trade with confidence and thus have cost outcome certainty.
By setting requirements around carbon intensity, traceability and verification, Europe has given buyers, producers and investors a more consistent basis to work from. That was a necessary step, although certification also acts as a threshold for market access. For a globally traded commodity like hydrogen, it will be an important factor in determining how successfully the market develops.
International Competition
Europe’s own ambitions depend heavily on imports, with the EU aiming to reach 10 million tons of domestic renewable hydrogen production and 10 million tons of imported renewable hydrogen by 2030, in line with the REPowerEU Plan. RED III is intended to drive demand alongside this, with binding targets requiring RFNBOs to make up at least 42% of the hydrogen used in industry by 2030, rising to 60% by 2035, subject to certain flexibilities for member states.
Some of the most attractive locations for producing renewable hydrogen at scale sit outside Europe, however. Mideast Gulf states, Australia, southern Africa and parts of Latin America all combine strong renewable resources and large geographical space with, in many cases, the potential for lower-cost production. Producers in those regions will have choices about where to sell.
Europe is not the only market trying to secure future supply. Asian economies are developing their own import strategies and competing for the same projects. The EU’s rules also apply to international producers exporting into the European market, meaning they must weigh European requirements against those of every other market they could sell to.
A producer deciding where to sell will consider how difficult a market is to access as well as the price it can achieve there. If European verification requirements become significantly more complex than those elsewhere or require producers to pass through additional layers of certification to demonstrate broadly similar environmental credentials, commercial decisions will reflect that.
For a sector still trying to turn project pipelines into operating assets, these practical considerations carry real weight. Developers already contend with high capital requirements, uncertain offtake, infrastructure gaps and long lead times. Compliance should give them confidence in the product rather than becoming more of a reason for investment decisions to stall.
Alignment Between Markets
Hydrogen itself is not new, having been produced, transported and used in industry for decades. What is new is the scale at which governments now expect it to contribute to decarbonization, as well as the number of markets, producers and supply chains that will need to work together.
Assurance will be critical to building trust between parties operating under very different regulatory environments. This does not require every market to build an entirely separate system, but international alignment will become increasingly important.
A growing patchwork of certification schemes would make international trade harder rather than easier. If a producer can demonstrate the carbon intensity and provenance of its hydrogen through a credible scheme, there should be a route for that evidence to be recognized across markets without repeating the entire process.
Sustainable and Stable
This need not mean weaker standards. Robust verification is essential if green hydrogen is to retain credibility with buyers, investors and policymakers. Without it, there is no reliable way to distinguish supply chains that genuinely meet low-carbon requirements from those that simply claim to.
Requirements around additionality, for example, are intended to ensure that renewable hydrogen supports new renewable electricity generation rather than simply diverting existing clean power from the grid. The question is whether the same objectives can be achieved in a way that is easier to apply internationally.
Greater alignment around methodologies, definitions and carbon accounting could make a significant difference, as could mutual recognition between credible schemes, reducing the burden on producers selling into more than one market. This matters more as the market grows because hydrogen projects are often designed around multiple potential buyers, sometimes in different countries. A system that requires a project to navigate substantially different rules for each one adds time, cost and uncertainty.
Investors need stability, too, given the long timeframes involved. A developer making an investment decision today may not begin full production for several years. If the rules defining renewable hydrogen are repeatedly revised in the meantime, that adds another layer of risk.
Some change is inevitable. Hydrogen regulation is still developing and changing with an unstable geopolitical backdrop, so policymakers will need to respond as the market matures and fluctuates. But there is a meaningful difference between sensible evolution and a framework that investors cannot plan around. First movers feel this most acutely because the companies committing capital now are already taking on significant commercial risk. They need enough regulatory certainty to know that the product they plan to produce will still meet market requirements when the project comes on line.
Europe’s Balancing Act
Europe should avoid asking RFNBO to solve every issue facing the market. Verification can establish whether hydrogen meets a defined environmental standard, but it cannot by itself resolve questions around security of supply, infrastructure, domestic production or investment incentives.
These issues need to be considered together, pairing strong verification standards with a clearer approach to domestic production and imports. Europe will need to support its own hydrogen industry while also securing access to international supply if it is to meet its wider ambitions. The two should not be treated as competing objectives.
There is also a wider market at stake. Renewable hydrogen is increasingly expected to underpin products such as e-methanol, e-ammonia and synthetic fuels, which means the way its credentials are assessed will have consequences across several emerging markets. Those fuels will be judged against alternatives on cost, reliability and carbon performance. Unnecessary complexity in verification could influence both where hydrogen is produced and which technologies are ultimately adopted.
Europe deserves credit for putting credibility at the center of the renewable hydrogen market. Clear rules have moved the debate beyond simply labelling hydrogen “green” and towards demonstrating how it was produced and what emissions sit behind it. The next challenge is making that system work at scale and not negatively impact the access to international supply.
Europe does not need to choose between robust standards and a competitive hydrogen market, provided it ensures that the rules designed to create confidence do not become a barrier to the trade they are meant to support.
If RFNBO remains credible, stable and workable alongside international approaches, Europe will be better placed to attract the supply and investment it needs. But if it becomes significantly harder or more expensive to comply with than other emerging systems, producers will have other markets to choose from.
Leanne Halliday is the global head of energy and renewables at global risk management specialist LRQA. The views expressed in this article are those of the author.
