The authorized recognition of a kind of gas by way of the introduction of a authorized definition and certification framework is a defining step in establishing a marketplace for such fuels.
Renewable hydrogen took this step when it was formally acknowledged and supported at EU degree by the 2018 recast of the Renewable Vitality Directive (“RED II”), becoming a member of biofuels and biogases, at the very least for what considerations its makes use of within the transport sector. The European Fee’s reform proposal of RED II – as a part of the Match for 55 Bundle of July 2021 – acknowledges the makes use of of renewable hydrogen in business and different sectors, finalizing its full recognition. Nevertheless, till now, there was no recognition of the certification of low-carbon hydrogen, gases or fuels, no official guidelines to arrange it and no complete proposals to take action within the Match for 55 Bundle.1
Subsequently, it’s extremely important for the longer term EU and international hydrogen market that the European Fee lastly proposed to acknowledge the function of low-carbon fuels in its Hydrogen and Decarbonised Gasoline Bundle of December 2021.2 This contribution analyses the brand new definitions and certification framework tabled within the European Fee’s proposals to find out their seemingly impression on the longer term hydrogen economic system.
Definitions
The Gasoline Directive reform proposal defines low-carbon hydrogen, gases and fuels as follows:
Firstly, it covers the Renewable Vitality Directive’s so-called “recycled carbon fuels“ that meet the 70% greenhouse gasoline emission discount threshold.
Secondly, it covers low-carbon hydrogen in itself.
Thirdly, it covers each gaseous and liquid fuels which can be artificial and made out of low-carbon hydrogen, in addition to assembly, in themselves, the 70% greenhouse gasoline emission discount threshold. For this third case, the 70% threshold applies equally to the hydrogen used as an enter to the artificial gas and to the output gas itself.
Low-carbon gases are outlined as “the a part of gaseous fuels in recycled carbon fuels as outlined in Article 2, level (35) of Directive (EU) 2018/2001, low-carbon hydrogen and artificial gaseous fuels, the vitality content material of which is derived from low-carbon hydrogen, which meets the greenhouse gasoline emission discount threshold of 70%”.
In different phrases, low-carbon gases are all low-carbon fuels which can be in gaseous kind, apart from low-carbon hydrogen itself.
The 70% greenhouse gasoline emission discount threshold has thus been made universally relevant to outline low-carbon hydrogen, gases and fuels. Notice, nevertheless, that this threshold might grow to be progressively extra demanding. Certainly, though this isn’t supplied for within the authorized textual content, Recital 9 of the Gasoline Directive reform proposal states that this threshold “ought to grow to be extra stringent for hydrogen produced in installations beginning operations from 1 January 2031 to take note of technological developments and higher stimulate the dynamic progress in the direction of the discount of greenhouse gasoline emissions”. Though this can be cheap from a local weather perspective, the related uncertainty might doubtlessly have a disincentive impact on funding in low-carbon fuels manufacturing.
The exact methodology for assessing the greenhouse gasoline emissions financial savings of low-carbon fuels (i.e., the best way to “meet” the 70% discount threshold) shouldn’t be supplied by the present legislative proposal. As an alternative, the proposal gives that the European Fee ought to undertake it by way of a Delegated Act by 31 December 2024.3 Nevertheless, it ought to be based mostly on a life-cycle method,4 which is able to presumably give rise to controversies on the varied extremely technical however essential questions relating to the exact parameters of the life-cycle method. From a procedural viewpoint, that is much like the methodology for renewable hydrogen, which should even be adopted by a Delegated Act5 and continues to be pending. Nevertheless, there isn’t any assure that the methodology relevant to the calculation of greenhouse gasoline emissions discount would be the similar for renewable and low-carbon gases or fuels.
Past the difficulty of the methodology, these definitions additionally increase two necessary points.
Firstly, these definitions of low-carbon hydrogen, gases and fuels aren’t totally in keeping with the definition of low-carbon fuels outlined within the European Fee’s proposal for the Vitality Tax Directive, or with the factors relevant to outline “sustainable” hydrogen or hydrogen-based fuels within the EU taxonomy.
Certainly, their necessities for hydrogen or different fuels to qualify as “sustainable” or “low-carbon” are completely different from these of the Hydrogen and Decarbonised Gasoline Bundle. Though the variations within the definitions are refined, this implies that there would be sure sorts of hydrogen or different fuels that may be “low-carbon” for community functions, however not for the needs of taxation or sustainable finance and company disclosure. This may create friction in an rising market, which ought to most likely be averted.
Secondly, these definitions don’t make clear the standing of all classes of hydrogen, comparable to hydrogen constructed from the pyrolysis of methane utilizing renewable electrical energy, the place a part of the feedstock is organic in origin. It is because they don’t present any definition for potential “zero-carbon” or “negative-carbon” hydrogen, and since they don’t make clear the standing of hydrogen or hydrogen-based fuels whose vitality content material is partially derived from renewable sources and partially derived from non-renewable sources.
Certification
The brand new certification framework for low-carbon fuels has been established in a means that’s primarily similar to the one presently foreseen for renewable fuels below the Renewable Vitality Directive.
Because of this the certification of low-carbon fuels will depend on a mass-balance method,6 in keeping with both voluntary schemes acknowledged at nationwide or EU degree or nationwide certification schemes.
In different phrases, low-carbon hydrogen and fuels can be licensed utilizing a “observe and hint” certification methodology that permits completely different fuels to be combined in batches, much like these relevant to biofuels. Nevertheless, it won’t be much like the commerce of ensures or origin (GOOs) within the electrical energy sector, the place the GOOs may be traded wholly individually from the electrical energy.
Low-carbon fuels can even be tracked within the upcoming Union database in an identical technique to renewable fuels.7 This can even apply to low-carbon fuels (together with low-carbon hydrogen) which can be imported.8
Help measures
The Hydrogen and Decarbonised Gasoline Bundle doesn’t present for any direct assist measures for low-carbon fuels or hydrogen themselves and doesn’t replicate the system of nationwide targets relevant to renewable hydrogen below RED II.
Nevertheless, it gives for various favorable measures relating to the dealing with of renewable and low-carbon gases, or producers of such gases, by community operators. This consists of making use of a 75% low cost on capability tariffs for the injection of renewable and low-carbon gases within the pure gasoline system and a 100% low cost on cross-border tariffs for renewable and low-carbon gases within the hydrogen and pure gasoline system.9
- A definition of low-carbon fuels was tabled below the reform of the Vitality Tax Directive, nevertheless it didn’t present any framework relating to the certification scheme.
- Recital 9 gives that “(…) low-carbon fuels (LCFs) comparable to low-carbon hydrogen (LCH) might play a task within the vitality transition, notably within the brief and medium time period to quickly scale back emissions of current fuels, and assist the uptake of renewable fuels comparable to renewable hydrogen”.
- Article 8(5) of the Gasoline Directive proposal.
- Recital 9 of the Gasoline Directive proposal.
- See Article 28(5) of the Renewable Vitality Directive.
- The textual content of the Gasoline Directive proposal refers on to Article 30 of the Renewable Vitality Directive.
- Article 8(10) of the Gasoline Directive proposal.
- Article 8(4) of the Gasoline Directive proposal.
- Article 16 of the Gasoline Regulation proposal.