[SMM Analysis] EU's "Low-Carbon Fuel Authorization Act": A "Reassurance Pill" for Green Hydrogen Strategy, Not a Compromise After the Tide Recedes

On November 21, the Low-Carbon Fuels Authorization Act was officially published in the Official Journal of the European Union and took effect 20 days later. Opinions on this policy vary, with some viewing the Act as a compromise and concession by the EU amid the current waning "green hydrogen fever," while others consider it a supplement to and refinement of the Hydrogen and Natural Gas Market Package, with the ultimate goal still being the development of zero-carbon green hydrogen.

In this regard, SMM believes that the Low-Carbon Fuels Authorization Act represents the EU's strategic persistence in green hydrogen rather than a concession.

1. The Real Reasons for the Decline in the Green Hydrogen Industry and the Rational Response of the Act

The decline of the green hydrogen industry is more attributable to its own high costs, long investment payback periods, an incomplete industry chain, and inadequate infrastructure, which have made enterprises more cautious and rational in their investments. However, this does not mean that official support for green hydrogen development has ceased. In fact, the introduction of the EU's Low-Carbon Fuels Authorization Act is more of a balanced strategy resulting from rational deliberation, indicating that an industry decline does not equate to a policy shift.

2. EU Policy Bias Toward Green Hydrogen Far Exceeds "Concession"

In terms of subsidy policies, the EU clearly favors green hydrogen. The Clean Industrial Agreement State Aid Framework (CISAF), released in June 2025, mentions investment subsidies of up to 45% for green hydrogen production, 50% for equipment manufacturing, and as high as 60% for derivatives (green ammonia/green alcohol). In contrast, blue hydrogen is limited to a subsidy cap of only 20% and must meet a carbon capture rate of over 90% along with strict emission accounting. Mandatory clauses stipulate that any subsidized project must allocate 30% of its budget to green hydrogen and its derivatives; otherwise, approval is difficult to obtain.

From the perspective of absolute advantages in emission calculations, the full life cycle emissions of green hydrogen are approximately 0.1–2 kg CO₂eq/kg H₂, directly meeting the 70% emission reduction threshold (≤3.4 kg CO₂eq/kg H₂). The Act explicitly states that the carbon equivalent of green hydrogen electricity (renewable energy generation) is considered zero, eliminating the need for complex upstream emission and capture efficiency calculations as required for blue hydrogen. Therefore, including blue hydrogen does not mean abandoning green hydrogen; instead, the Act serves as a systematic solution to the decline, enhancing the competitiveness of green hydrogen through policy combinations.

In summary, the EU's true intention is to accelerate the commercialization of green hydrogen through policy guidance while respecting market laws, rather than simply abandoning it. The current industry adjustment is not a failure but a necessary stage for green hydrogen to transition from concept validation to scaled deployment, and the Act precisely provides the institutional guarantee for this critical leap.