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Green hydrogen, produced using renewable energy sources, is widely seen as the ultimate solution for decarbonising society and is expected to get a significant push under the so-called 'fit for 55' EU policy package.

While we should definitely strive for a future powered with 100% green hydrogen solutions, the simple reality is that transitioning to green hydrogen overnight is not realistic. There is simply not sufficient green electricity generating capacity using wind and solar solutions available in Europe yet. At the same time we can no longer wait in getting the infrastructure ready for hydrogen production, import, transportation and storage. That is where blue hydrogen comes in, albeit for a limited transition period, where the ultimate goal remains the phasing out of hydrocarbons altogether

Blue hydrogen may not be a perfect solution, but it can well play a crucial role in accelerating the energy transition as we work towards a fully decarbonised European economy. In the shorter run, blue hydrogen can help address Europe's energy security concerns more swiftly. After all, hydrogen and hydrogen carriers (like ammonia) are recognised as a good alternative to store large quantities of energy to be used, for instance in cold winters. This will make Europe less dependent on sensitive import in times of high energy demand.

Blue hydrogen to bridge the gap

Blue hydrogen is produced using natural gas or industrial waste gases typically, whilst the carbon dioxide emissions generated during that process get captured and stored or used. This allows to significantly reduce the polluting effect of our current fossil fuel driven power facilities and waste gas incinerators for instance. At the same time it may stimulate investing in and accelerating the transformation of the existing transportation and storage infrastructure to be hydrogen proof. In this way blue hydrogen can serve as a bridge fuel, allowing for a gradual transition of our energy infrastructure to green hydrogen while still reducing our industrial carbon dioxide emissions in the short term.

Europe, and the Netherlands in particular, has a significant natural gas infrastructure in place – including gas-fired power stations – that can be utilised to produce, transport and store hydrogen. Transforming the existing infrastructure to cope with hydrogen can prove to be a relatively cost-effective way to secure our industrial energy supplies going forward. This transformation nevertheless requires significant effort and investments in a very short period of time. Accepting blue hydrogen in the mix may get Europe to net zero emissions quicker. This is because it helps establish a broader hydrogen market earlier, for when the supply of 100% green hydrogen – for instance through the import of green ammonia – is sufficiently reliable. At the same time, policy makers should be aware of the risk that investing in blue hydrogen in the short term may delay the development and deployment of green hydrogen, if resources and funding are directed towards blue hydrogen instead.

Policy makers should create the space for businesses to take realistic risks

So, if we accept that – and if coordinated well – blue hydrogen can help accelerate a market for hydrogen in the short term, getting us ready for the larger scale deployment of green hydrogen over time, what role should policy makers play in supporting the developments? First and foremost, they should create a favorable environment that allows businesses to take realistic risks in developing hydrogen projects. This could include regulations that require a certain percentage of energy to be sourced by industries from low-carbon sources at first, gradually moving the needle to 100% green energy over time. Policy makers should also coordinate that a stable market for hydrogen comes into existence by allowing the companies that step into this arena ample time to make a decent return on the significant investments required. This can for instance be achieved through the support of long-term contracts with large energy suppliers and end-users or by setting targets for the use of blue and green hydrogen in various industries. By stimulating demand for hydrogen, policy makers can help drive the necessary investments to be made by businesses and get the market ready and steady for green hydrogen earlier in time.

In any event, given the high stakes and the significant investments required to be made by companies to get ready, the policies to establish the hydrogen market, whether on a European, national or local level, should be stable and reliable. Policies need to be immune to sudden policy shifts, also in the longer run. Otherwise, without sufficient investor protection, the EUR 250 billion deficit identified by the European Commission in its own Green Deal will never be bridged. The Netherlands did not set a good example in that sense when it simply announced in 2022 to leave the Energy Charter Treaty (ECT) without there being a decent alternative in place. This way, policy-making or decision-making creates too much uncertainty.

Making Europe green again – together

Perhaps that the calls to action by EU Commissioners Ursula von der Leyen and Paolo Gentiloni will help make European businesses resilient in the current energy crisis and stimulate them to do the right thing. The suggestion by the European commissioners to set up a European sovereign fund to finance a 'green industrial policy' could make Europe great again. Something like 'make Europe green again'; as an equivalent to the 'Inflation Reduction Act' aimed at investments in clean energy and climate action across the Atlantic ocean.

In getting to net zero emissions we will all have to step up the plate and accept that without compromises we will not get there in time. It is crystal clear that we are facing a joint effort here, including businesses, policy makers, financiers, investors, consumers, NGOs, scientists, and advisors working closely together. To make Europe green again, cooperation will be key. As a law firm, we contribute by helping to tackle the legal challenges as we build a future-fit hydrogen and CCUS infrastructure together in Europe. Are you interested in also becoming part of the transition from grey to green energy, by participating in this hydrogen economy? We look forward to catching up with you soon.

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