EU approves €200 million German aid scheme supporting Canadian renewable hydrogen production to boost EU supply, emissions cuts, and energy security.
The European Commission has given clearance, under European Union State aid regulations, to a €200 million support scheme proposed by Germany aimed at boosting the production of renewable hydrogen and its derivatives in Canada for supply to the European market. These products, officially referred to as renewable fuels of non-biological origin (RFNBOs), will be imported into Germany and subsequently sold across the EU. The initiative is designed to advance several cornerstone EU policy frameworks, including the Clean Industrial Deal, the EU Hydrogen Strategy, and the REPowerEU Plan, all of which aim to reduce reliance on Russian fossil fuels while accelerating Europe’s clean energy transition.
Under the approved framework, Germany notified the Commission of its intention to establish a €200 million funding mechanism to support cost-efficient RFNBO production facilities located in Canada. This German contribution is expected to mobilise an additional €200 million in matching funding from Canada, effectively doubling the financial scale of the initiative. RFNBOs include synthetic gaseous and liquid fuels that are produced using renewable electricity combined with carbon dioxide, making them a critical component of future low-carbon energy systems.
The scheme will support the deployment of up to 300 megawatts of new electrolysis capacity dedicated to renewable hydrogen production. Financial support will be allocated through a competitive bidding process, which is expected to conclude in 2027. By relying on competition, Germany aims to ensure that public funding is distributed efficiently and delivers maximum climate benefits at the lowest possible cost to taxpayers.
From an environmental perspective, the German authorities estimate that the programme could help avoid up to 2.47 million tonnes of carbon dioxide equivalent emissions over its lifetime. This reduction will contribute meaningfully to Germany’s national climate objectives and support its obligations under EU-wide emissions reduction targets.
A distinctive feature of the scheme is its “double auction” design. This mechanism brings together RFNBO producers based in Canada and buyers located within the EU. Producers compete by offering to sell RFNBOs at the lowest possible price, while EU buyers submit bids indicating the highest price they are willing to pay. State funding is then used to bridge the gap between supply and demand prices, allowing viable contracts to be formed without overcompensating participants.
All beneficiaries must demonstrate full compliance with EU sustainability and production standards for RFNBOs, as defined in the delegated acts governing renewable hydrogen. This ensures that imported fuels meet the same environmental integrity requirements as those produced within the EU.
The scheme is also expected to help Germany meet rising domestic demand for RFNBOs and support the country in achieving mandatory industrial consumption targets set out in the Renewable Energy Directive. More broadly, it aligns with the EU’s long-term ambition to scale up renewable hydrogen technologies from 2030 onward by contributing to a reliable supply of renewable hydrogen and its derivatives.
In its assessment, the Commission evaluated the measure under EU State aid provisions, notably Article 107(3)(c) of the Treaty on the Functioning of the European Union and the 2022 Climate, Energy and Environmental Aid Guidelines (CEEAG). The Commission concluded that the scheme is necessary, proportionate, and well-designed, drawing on lessons learned from earlier German support programmes. It also determined that adequate safeguards are in place to limit distortions to competition and trade, ensure transparency, and prevent double funding. On balance, the Commission found that the positive environmental and strategic benefits clearly outweigh any potential negative impacts, leading to formal approval of the scheme.
