Hydrogen guarantees of origin as a policy instrument for energy sector decarbonization

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Title: Hydrogen guarantees of origin as a policy instrument for energy sector decarbonization
Author: Ekman, Nicole
Other contributor: Helsingin yliopisto, Oikeustieteellinen tiedekunta
University of Helsinki, Faculty of Law
Helsingfors universitet, Juridiska fakulteten
Publisher: Helsingin yliopisto
Date: 2021
Language: eng
URI: http://urn.fi/URN:NBN:fi:hulib-202105192280
Thesis level: master's thesis
Degree program: Oikeustieteen maisterin koulutusohjelma
Master's Programme in Law
Magisterprogrammet i rättsvetenskap
Specialisation: Eurooppaoikeus
European Law
Abstract: The energy sector causes a significant amount of greenhouse gas emissions annually. Consequently, decarbonization of the energy sector is vital for the EU to reach its target of becoming climate-neutral by 2050. Previously, the focus in the EU has been to push the production of renewable energy, but due to an increasing consensus among stakeholders that renewable energy alone will not be enough, hydrogen has become a viable option for energy sector decarbonization. This puts the focus on policy instruments available to facilitate this energy transition and thereby, the aim of the thesis is to analyze how hydrogen guarantees of origin as a policy instrument can support energy sector decarbonization and what the challenges related thereto are. Before analyzing the research question itself, the anticipated role of hydrogen in energy sector decarbonization is established by a review of relevant EU policy. The review shows that hydrogen, particularly renewable hydrogen, is expected to play a significant role in energy sector decarbonization, especially in hard-to-abate sectors, alongside with renewable energy. This emerging European hydrogen economy is policy-driven and currently guided by the EU hydrogen strategy and its roadmap with action points for upcoming years. The scale-up of hydrogen will require the successful adoption of several policy instruments simultaneously, and hydrogen guarantees of origin is recognized as a key policy instrument. Briefly, guarantees of origin enable both governments and end users of hydrogen to know the quality and origin of it. Furthermore, guarantees of origin make it possible to track the total CO2 emissions caused by hydrogen and thereby, determine where the use of hydrogen is effective. A review of guarantees of origin in the context of the EU shows that the guarantees of origin market for renewable energy is already quite well-established and in the midst of expanding towards hydrogen as the demand for hydrogen guarantees of origin is expected to grow. With regards to regulation, RED II has extended its applicability to renewable gases, including renewable hydrogen. In terms of hydrogen guarantees of origin schemes, it can be noted that different schemes are beginning to emerge, the CertifHy scheme currently being the most prominent one in the EU. However, the landscape for hydrogen guarantees of origin schemes and standards is currently fragmented, which is foreseen to become an issue for the emerging hydrogen market if not resolved. Some of the main differences among available hydrogen guarantees of origin schemes and standards relate to hydrogen terminology, the type of hydrogen supported, the threshold, greenhouse gas emission accounting and chain of custody, all of which can have an impact on how well a hydrogen guarantees of origin system supports the trade of renewable and/or low-carbon hydrogen and simultaneously energy sector decarbonization. The findings of a comparison of the EU and Australia indicate that lack of harmonization with regards to hydrogen guarantees of origin is not only an issue within the EU, but a challenge with regards to international trade of hydrogen as well. Lack of harmonization between the hydrogen guarantees of origin system adopted in the EU, with Member States as importing countries, and exporting countries such as Australia could result in reduced interoperability and efficiency of the global hydrogen market and technical barriers to the trade of hydrogen if not resolved. All in all, there is a pressing need for clear policy guidelines with regards to hydrogen guarantees of origin, which also has been noted by several EU bodies or institutions and other stakeholders. The European Commission is expected to elaborate on its currently vague standpoint later in 2021. These upcoming policy guidelines regarding hydrogen guarantees of origin, together with other policy instruments, will likely support energy sector decarbonization and harmonization within the EU, and potentially internationally, if designed duly while balancing competing interests and taking other relevant aspects into consideration. The key trade-offs and considerations are recognized to be: the economic impact of the hydrogen guarantees of origin system, the political aspect of hydrogen guarantees of origin, work already conducted with regards to hydrogen guarantees of origin, the relationship between hydrogen guarantees of origin and other policy measures and support schemes for hydrogen as well as the international aspect of hydrogen guarantees of origin.
Subject: Hydrogen
Hydrogen economy
Guarantees of origin
EU policy
Energy sector decarbonization

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