EU Draft Signals Shift from Hydrogen Mandates to Flexible Targets

The draft for RED IV outlines three distinct policy pathways, moving away from current RED III requirements that anchor demand through specific national RFNBO targets. Instead, the Commission’s preferred option introduces an indicative EU-wide goal of 8 million tonnes of renewable hydrogen consumption for industry and refineries by 2040. This shift replaces hard obligations with downstream incentives and hydrogen credits, raising concerns regarding long-term market certainty for investors.

Frederick Andre Wessel of Rystad Energy notes that while flexibility might allow production to concentrate in lower-cost regions, the transition risks creating fragmented markets rather than a unified European network. Without the backing of binding national obligations, the industry faces a critical need for durable mechanisms to ensure consistent demand. Rystad Energy’s own projections estimate total green hydrogen demand at 9.5 million tonnes by 2040, suggesting the success of the new framework depends entirely on how these indicative volumes are implemented.

Conversely, the proposal offers a more favorable outlook for biofuels, aligning with a broader strategy to decrease import dependence. The draft suggests raising the EU ceiling for crop-based biofuels, which could increase conventional volumes by roughly 30%. Furthermore, advanced biofuels produced from European feedstocks may benefit from new multipliers. This pivot addresses the reality of current supply chains, where the EU remains heavily reliant on external sources for hydrotreated vegetable oil and sustainable aviation fuel. Ultimately, the directive signals a clear divergence in policy: a move toward voluntary, market-driven mechanisms for hydrogen, paired with stronger, localized support for the domestic biofuel sector.