The inclusion of hydrogen in the EU CBAM

Author(s): Andrei Marcu,  Michael Mehling, Aaron Cosbey, Olivier Imbault, Antonio Fernandez

On 13 December 2022, the European Parliament and the Council reached a political agreement to introduce a European Union (EU) Carbon Border Adjustment Mechanism (CBAM). Although not part of the initial European Commission proposal, the CBAM will also apply to hydrogen, together with cement, iron and steel, aluminium, fertilisers, and electricity. The inclusion of hydrogen in the EU CBAM was a result of the interinstitutional negotiations or trilogues, between the European Commission, the European Parliament, and the Council.

This report presents the conclusions of an assessment of the rationale and implications of including hydrogen in the EU CBAM. The assessment builds on the methodology used by the European Roundtable on Climate Change and Sustainable Transition (ERCST) to analyse other sectors and on the discussions held during ERCST public meetings on 1 February 2023 and 7 March 2023.

This report is divided into two main parts. Section 2 includes a summary of various hydrogen sector-related considerations (i.e. market, environmental and others) and hydrogen sector-related trade patterns. This lays the foundations for a better understanding of the analysis presented in Section 3, which includes an assessment of some potential implications of including hydrogen in the EU CBAM.