How to make EU green hydrogen policies more cost-effective

Decarbonizing energy-intensive industries is one of the greatest challenges of the energy transition, and green hydrogen is widely seen as a key part of the solution. New research by WU Vienna published in Nature Energy finds that EU hydrogen support could become substantially more cost-effective if policymakers prioritize the installations most likely to mobilize further demand among nearby users. The study also identifies the industrial regions across Europe where targeted support could help green hydrogen spread more quickly and broadly.

The EU aims to produce 10 million tonnes of renewable hydrogen domestically and import a further 10 million tonnes by 2030. It also aims for green hydrogen to supply around 10% of final energy demand by 2050. However, current EU policy measures mostly focus on increasing green hydrogen supply through initiatives such as the European Hydrogen Bank and the EU Hydrogen Valleys, with less focus on demand.

Supply alone is not enough

Amid demand uncertainties, the European Hydrogen Bank fell short of expectations in 2025, deploying only €270 million in subsidies from its €1.2 billion budget. Its funding criteria prioritize installations that require the lowest subsidy per kilogram of hydrogen produced but do not explicitly consider demand.

The paper’s lead author, Christian Rumpelnik, a researcher at the WU Vienna Institute for Data, Energy, and Sustainability (IDEaS), said, “Much of the EU’s existing green hydrogen policy support focuses on scaling supply rather than demand. A hydrogen economy depends on supply, infrastructure, and demand developing together. Our results suggest that policymakers should look not only at which projects require the lowest subsidy but also at where support can help unlock demand around them.”

Demand creates spillover effects

Placing greater emphasis on potential users, where they are located and how they are connected, could accelerate the adoption and spread of green hydrogen through “spillover effects.” These describe how the use of green hydrogen at one installation increases the likelihood that nearby installations will also adopt the technology, even if they do not receive direct policy support. Such effects may arise from shared infrastructure, specialized supply chains, or knowledge exchange. For their analysis, the researchers used a database of more than 14,100 potential hydrogen users across Europe. Green hydrogen demand was then projected from 2024 to 2100 across a range of scenarios and policy measures.

Five industrial regions stand out

More than half of the installations in the top 10% of sites for spillover potential are located in just five regions along the North Sea coast and Rhine-Ruhr industrial corridor. These are Duesseldorf, Cologne, and Rheinhessen-Pfalz in Germany, and Antwerp and East Flanders in Belgium. These regions are characterized by energy-intensive industries such as chemicals, iron and steel, as well as major shipping activities. In these sectors in particular, affordable alternatives for decarbonization are often lacking.

“Both sides of the hydrogen market need to be supported together, and our study identifies the industrial regions across Europe where targeted support can unlock much wider adoption and accelerate decarbonization. This gives policymakers the clarity to identify targets for place- and sector-based interventions,” says Behnam Zakeri, WU researcher and deputy head of IDEaS.

Policy recommendations

The analysis shows that even a modest change to the European Hydrogen Bank scoring criteria, where 10% is based on location-related factors like spillover potential, would improve the cost-effectiveness of stimulating demand by 13–15%. In an idealized setting that strips out differences in sector, size, and cost competitiveness – factors that would need to be considered in real-world policy design – this effect rises to up to 41%.

The researchers therefore recommend directing support to those regions and sectors that show the highest potential for spatial spillovers. This includes future European Hydrogen Bank auctions, hydrogen infrastructure investments under RePowerEU, or Hydrogen Valley funding calls, which could be updated to require bids to include commitments from large-scale industrial sites that could switch from fossil fuels to green hydrogen.

Co-author professor Kavita Surana, head of WU Vienna’s IDEaS, said: “With increasingly limited resources and multiple challenges in the energy transition, our analysis provides an evidence base for more effective policymaking.”

Further Information

Rumpelnik, C., Zakeri, B., & Surana, K. (2026). Spatially informed demand-side policies for green hydrogen diffusion in Europe. In: Nature Energy. https://doi.org/10.1038/s41560-026-02126-2