Carrot and stick: A comparative analysis of instruments for accelerating the hydrogen and power-to-X economy
Year: 2026
Type: article
Study design: Systematic Review
Abstract: The ramp-up of the hydrogen and Power-to-X economy in the EU and Germany is supported by a diverse mix of instruments. Existing research primarily examines individual support mechanisms or their interactions with energy markets and does not provide a comprehensive comparison of the wide range of EU and national instruments shaping the hydrogen and Power-to-X landscape. The objective of this study is to address these gaps by conducting a comprehensive, system-level analysis of how EU and national instruments collectively shape the ramp up of H 2 and Power-to-X markets within the evolving legal framework of the Renewable Energy Directive III. To this end, this paper systematically analyses and compares key instruments - including the EU Emissions Trading System, Important Projects of Common European Interest, Carbon Contracts for Difference, H2Global and the European Hydrogen Bank - and evaluates their structure and impact across the hydrogen and Power-to-X value chain, encompassing production, transport and consumption. The analysis is based on a systematic literature review, through which relevant information is collected, structured, and organised into datasets using clearly defined criteria. This approach enables a transparent comparison and further analysis of the instruments while also providing the quantitative basis for the calculation of CO 2 mitigation costs of expenditure-based instruments. Positive synergies can be obtained when they complement one another, such as when market mechanisms like H2Global are combined with investment subsidies like the Important Projects of Common European Interest. However, significant structural challenges remain. There are high bureaucratic hurdles for funding instruments like the Important Projects of Common European Interest and Carbon Contracts for Difference. The EU regulatory framework, particularly strict Renewable Fuels of Non-Biological Origin criteria, provides clear sustainability goals but can be a curse, limiting funding eligibility for viable, emission-free projects while other technologies like electromobility face no such restrictions. Furthermore, Renewable Fuels of Non-Biological Origin criteria on CO 2 origin hinder the import of carbon-based Power-to-X products, putting the EU at a disadvantage. Our calculations on CO 2 mitigation costs show that the European Hydrogen Bank and H2Global have lower greenhouse gas mitigation costs than Carbon Contracts for Difference by making use of existing infrastructure and green drop-in fuels. In conclusion, while the current instrument architecture offers a foundation, its potential is limited by incoherence, bureaucratic complexity, and regulatory contradictions. To fully unlock the new hydrogen and Power-to-X economy, greater coordination among instruments, more pragmatic Renewable Fuels of Non-Biological Origin criteria, and a reevaluation of rules on CO 2 origin are needed. Ultimately, the most effective approach combines fraud-free, strictly enforced quotas with efficient instruments like the European Hydrogen Bank and H2Global.
Source: Energy Policy
Institution: OTH Regensburg
Language: English
Subfield: Energy Engineering and Power Technology
Field: Energy
Domain: Physical Sciences
Open Access status: hybrid
Estimated APC paid: $3,940
OpenAlex ID: W7154731462