EXCLUSIVE | 'Green hydrogen producers in line for tens of millions of euros a year from EU carbon market'
But free allowances will phase down significantly from 2030, says Norwegian data analyst Veyt
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But after 2027, revenue for green hydrogen producers from carbon credits would fall as the EU’s phase-out of free allowances (which starts in 2026) begins to take hold.
“These benefits will last until 2030 and are going to fluctuate based on the emission price,” the analysts say. “This can be thought of as a green premium to reduce the gap between the grey and green hydrogen prices.”
The extra revenue could provide a significant bolster to the short-term business case for green hydrogen producers, and manufacturers of green steel.
However, there are as yet no pure-play green hydrogen projects in Europe of 500MW or more of capacity that have reached a final investment decision (FID) — meaning that no single producer would be set to receive this level of revenue from carbon credits at present.
The new ETS rules are intended to level the playing field with steel producers that use highly polluting coal, which are already allocated free allowances to incentivise them to keep production capacity in Europe, rather than relocating to regions with lax carbon regulations.
But with the introduction of the Carbon Border Adjustment Mechanism (CBAM) in earnest in 2026, the free allowances are due to be phased out, with the scheme coming to a close in 2034.
This is because the CBAM will impose carbon taxes on imports of a wide variety of industrial products such as hydrogen, ammonia and steel, into European markets, effectively levelling the playing field between European producers and their foreign competitors.
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