Hydrogen CBAM

Hydrogen imports, especially grey hydrogen produced using natural gas, fall under CBAM due to high embedded emissions. Importers must report emissions and, from 2026, purchase CBAM certificates linked to EU ETS pricing. Green hydrogen produced with renewable electricity faces lower compliance costs, improving EU competitiveness.

Hydrogen importers will begin paying CBAM certificate costs in 2026. Until then, from 2023–2025, only quarterly emissions reporting is required. Once the financial phase begins, grey hydrogen faces high compliance costs, while renewable-based hydrogen benefits from lower embedded emissions and reduced CBAM obligations.

Hydrogen CBAM reporting requires Scope 1 production emissions (mainly from natural gas reforming) and Scope 2 indirect emissions from electricity consumption. Data must be verified and submitted quarterly during the transitional phase. Accurate reporting minimises default value costs and ensures fair CBAM certificate obligations under EU compliance rules.

Green hydrogen, produced via electrolysis using renewable power, has much lower embedded CO₂ emissions. While CBAM certificates are still required, the volume is far smaller compared to grey hydrogen. This creates a cost advantage for green hydrogen in EU markets, encouraging adoption of renewable power procurement strategies.

CBAM favours green hydrogen by making grey hydrogen imports more expensive due to carbon certificate costs. This levels competition with EU producers and accelerates investment in renewable hydrogen infrastructure. Importers who transition early to green hydrogen will secure long-term competitive advantages under the EU CBAM framework.