A PricewaterhouseCoopers report commissioned by Hydrogen Europe has laid out how green lead markets can effectively increase demand for hydrogen and its derivatives while helping to meet EU climate ambitions.
The European Commission is presenting its Clean Industrial Deal implementation package, together with relevant pieces of legislation of the Automotive implementation package. One of the flagship initiatives, the Industrial Accelerator Act (IAA), is expected to propose specific tools and measures for certain industrial sectors – green lead markets, aiming to achieve both decarbonisation and competitiveness for European industry at large.
The report evaluates how such lead markets could be developed for the European hydrogen sector and examines which demand-side designs could impact steel and fertiliser industries, and how these might align with current or future EU laws.
The report delves into the effectiveness and applicability of various market making models and confirms that lead markets are an effective way to increase demand and provide investment certainty for clean steel and ammonia-based fertiliser plants, and can be facilitated through various regulatory measures without significantly impacting the end-product prices or sector willingness to pay:
Sector-specific quotas on end-products
• Imposing obligations on end-products including imports; exports may be excluded for competitiveness
• Ensuring off-take for clean primary steel and fertilizers
• Adoption of H2 without major consumer price increase
Public procurement: quotas may require lower implementation effort and serve as a complementary demand driver
Other models: bonus models, voluntary use of labels, or product-based levies may also push clean lead markets
Jorgo Chatzimarkakis, CEO of Hydrogen Europe, commented: “This report highlights the benefits and feasibility of supporting European clean steel and decarbonised fertilisers through lead market measures. This is especially important in light of the upcoming Industrial Accelerator Act (IAA) – if the Commission doesn’t come forward with strong sector-specific measures in the IAA, all the discourse around a Clean Industrial Deal will have been for nothing. It will be the end of climate finance as we know it.”
Matthias Stephan, Local Partner at PwC, added: “Our study proves that lead markets for clean products can stimulate significant clean hydrogen offtake while ensuring Europe’s competitiveness and climate ambitions.”
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