Commission approves €200 million German State aid for Canadian-produced renewable hydrogen and its derivatives for EU market

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The European Commission has approved, under EU State aid rules, a €200 million German scheme to support the production in Canada of renewable hydrogen and its derivatives, known as renewable fuels of non-biological origin (RFNBOs). These RFNBOs will be imported to Germany and sold in the EU, contributing to the objectives of the Clean Industrial Deal, the EU Hydrogen Strategy, and the REPowerEU Plan to reduce dependence on Russian fossil fuels and accelerate the clean transition.

The German scheme

Germany notified the Commission of its intention to introduce a €200 million scheme to cost-efficiently support RFNBO production in Canada. This budget will unlock an additional €200 million of funding provided by Canada. RFNBOs are synthetic gaseous or liquid fuels derived from renewable electricity and carbon dioxide.

The scheme will support the construction of up to 300 MW of electrolysis capacity. The aid will be awarded through a competitive bidding process, planned to be concluded in 2027.

Germany expects that the scheme will lead to a total of up to 2.47 million tonnes of CO2 equivalent being avoided, which will also contribute to Germany fulfilling its EU climate targets.

The scheme is based on a double auction system, which brings together RFNBO producers in Canada, and RFNBO buyers in the EU. The companies offering to sell RFNBOs at the lowest price, and to buy RFNBOs at the highest price, will enter into a contractual relationship, with State resources helping to fill the funding gap between the two prices.

Beneficiaries will have to prove compliance with EU criteria for the production of RFNBOs, as set out in the delegated acts on renewable hydrogen.

The scheme will help to meet a growing demand for RFNBOs in Germany and contribute to Germany meeting the targets for industrial RFNBO consumption set out in the Renewable Energy Directive. It will also support the EU’s ambition for renewable hydrogen technologies to be deployed on a large scale from 2030 onwards by helping to meet EU’s demand for renewable hydrogen and its derivatives.

The Commission’s assessment

The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) the Treaty on the Functioning of the EU, which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’).

In particular, the Commission found that:

• The scheme was designed taking account of the experience of two previous German State aid schemes;
• The scheme is necessary and appropriate to facilitate the production of RFNBOs. At the same time, it supports the objectives of key EU policy initiatives such as the Clean Industrial Deal, the EU Hydrogen Strategy, and the REPowerEU Plan;
• The measure has an ‘incentive effect’, as the beneficiaries would not carry out the relevant investments to the same extent without the public support;
• Germany has put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. The beneficiaries will be selected following an open, transparent and non-discriminatory bidding process, and the aid will be kept to the minimum necessary to undertake the projects. In addition, there are no sales restrictions within the EU. Finally, measures are in place to prevent buyers or producers from receiving more support than they are entitled to under different aid schemes;
• The aid will bring about positive effects that outweigh any possible negative effects in terms of distortions to competition.

On this basis, the Commission approved the German scheme under EU State aid rules.

Background

This scheme follows two previous schemes approved by the Commission in December 2021 and December 2024, to support investments in the production of renewable hydrogen in non-EU countries, to then be imported and sold in the EU.

The 2022 Climate, Energy and Environmental Aid Guidelines (CEEAG) provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU.

The Renewable Energy Directive of 2018 sets out stringent criteria for RFNBOs, such as renewable hydrogen, to ensure that their environmental impact is minimal and that they contribute to the deployment of renewable energy. Amongst others, emission savings of the end product must be at least 70% across the entire value chain. Amendments to the Directive in 2023 increased the target for the share of renewable energy in the EU’s gross energy consumption to 42.5% by 2030, and introduced a target that 42% of the hydrogen used in industry should be renewable by 2030, increasing to 60% by 2035.

For more information

The non-confidential version of the decision will be made available under the case number SA.118372 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.