Key facts
- Leaked EU draft proposes replacing binding national renewable hydrogen mandates with an EU-wide target.
- The draft's preferred option suggests an indicative EU-wide renewable hydrogen consumption target of 8 million tonnes for industry and refineries.
- This target is interpreted by industry as annual consumption by 2040.
- The draft favors crop-based biofuels and advanced biofuels from European feedstocks.
- The proposed changes aim to increase energy security and national flexibility alongside emissions reduction.
- The measures remain subject to change before the Commission publishes its formal proposal.
A leaked European Commission working document for the upcoming Renewable Energy Directive (RED IV) indicates a potential shift in renewable fuels policy after 2030, prioritizing energy security, cost, and national flexibility alongside emissions reduction. The draft's preferred package would replace binding national renewable hydrogen mandates with a more flexible EU-wide target, while also favoring crop-based biofuels and advanced biofuels derived from European feedstocks.
The current RED III directive mandates specific renewable fuel of non-biological origin (RFNBO) targets, including 1% in transport by 2030 and 42% in industry by 2030, rising to 60% by 2035. The proposed RED IV option, however, would substitute these with an indicative EU-wide target of 8 million tonnes for renewable hydrogen consumption in industry and refineries. This figure is interpreted by industry analysts as representing the annual consumption level by 2040. The pathway also suggests the need for hydrogen credits and downstream demand incentives, to be implemented through separate legislation.
Rystad Energy's base case forecasts total EU green hydrogen demand to reach 9.5 million tonnes by 2040. If the draft's 8 million tonne target is for annual consumption in 2040, it would constitute a significant portion of the projected demand, especially as it applies only to industry and refineries. The firm notes that the headline volume might be less critical than the mechanism for achieving it.
Frederick Andre Wessel, Product Manager of Hydrogen Research at Rystad Energy, commented that replacing binding national obligations introduces policy uncertainty for the hydrogen market, which relies on long-term demand visibility for investment decisions. He highlighted the need for parallel development of production, infrastructure, and demand, suggesting that flexibility could benefit lower-cost production regions. However, he cautioned that if demand signals remain strong only in certain member states, the market could fragment rather than integrate across Europe. The key challenge will be ensuring sufficiently strong and durable demand support mechanisms.
For biofuels, the draft appears more supportive of energy security goals. It proposes a common 7% EU ceiling for crop-based biofuels, potentially increasing eligible conventional biofuel volumes by approximately 30% compared to the 2020 basis used in the assessment. Advanced biofuels from EU-sourced feedstocks could also receive preferential treatment through multipliers. This aligns with efforts to reduce import dependency, as the EU imported about 1.8 million tonnes of hydrotreated vegetable oil (HVO) and over half of its sustainable aviation fuel (SAF) supply last year.
However, the outlook for advanced biofuels is less certain, as the draft assumes the existing combined transport minimum for advanced biofuels and RFNBOs expires after 2030, making demand more reliant on national policies. Stricter certification requirements might limit some imported fuels and feedstocks, potentially benefiting European producers. Overall, the draft suggests diverging implications for renewable fuels, with weaker policy certainty for hydrogen but potentially stronger support for biofuels linked to domestic European resources.