The European Commission is implementing a central obligation from the Gas & Hydrogen Directive in a new draft delegated act on the assessment of greenhouse gas emission savings from low-carbon fuels. The technical title conceals a politically and economically explosive project: the establishment of a uniform, lifecycle-oriented assessment framework for CO2 savings – with direct effects on investment decisions, eligibility for funding and market access for low-carbon technologies in Europe.
Implementation of the obligation under Article 9(5) of the Gas & Hydrogen Directive
The European Commission draft on the assessment of greenhouse gas emission savings presented on 29 April 2025 supplements the Gas & Hydrogen Directive (Directive (EU) 2024/1788 of the European Parliament and the Council of 13 June 2024 on common rules for the internal markets for renewable gas, natural gas and hydrogen) and implements the obligation set out in Article 9(5) thereof. Accordingly, the Commission must define a methodology for assessing the greenhouse gas emission savings from low-carbon fuels by 5 August 2025.
Background: The Gas & Hydrogen Directive was adopted as part of the Gas & Hydrogen Package, which aims to support the transition to renewable and low-carbon gases, and particularly the transition to hydrogen. The Directive is part of the broader European Green Deal, which aims to ensure the EU’s path to climate neutrality by 2050 (for information on the successor to the Green Deal, see our articles on the Clean Industrial Deal and the associated Action Plan for Affordable Energy). The Gas & Hydrogen Directive is intended to facilitate the adoption of renewable gases, low-carbon gases and hydrogen across the energy system. To this end, it establishes a legal framework that offers all market players opportunities and incentives to phase out fossil fuels.
Draft for the assessing greenhouse gas emission savings – regulatory content and methodology
The Commission’s draft aims – in line with the provisions resulting from the Gas & Hydrogen Directive – to establish a uniform life-cycle assessment of low-carbon fuels. Low-carbon fuels are recycled carbon fuels, low-carbon hydrogen and synthetic gaseous and liquid fuels with an energy content derived from low-carbon hydrogen.
The draft creates the first clear framework for market players in the gas and hydrogen sector for the assessment and recognition of emission savings, which has a direct impact on business models, access to funding and investments.
The draft delegated act establishes a scientifically sound and harmonised method for calculating greenhouse gas emission savings over the entire life cycle of a fuel. In particular, it aims to:
- avoid the double counting of emission reductions (e.g. in the case of CO2 that has already been credited in other regimes),
- take into account indirect emissions from changes in the use of rigid inputs, and
- systematically take into account all process steps from the provision of inputs to transportation and end use.
The draft does not regulate low-carbon fuels in the form of recycled carbon fuels, as these are already regulated in another delegated regulation (Delegated Regulation (EU) 2023/1185) – which contains a minimum threshold for greenhouse gas emissions savings from recycled carbon fuels and specifies the method for calculating greenhouse gas savings from both liquid and gaseous renewable fuels of non-biogenic origin for transport and recycled carbon fuels. In supplement to the Renewable Energy Directive III (RED III), Delegated Regulation (EU) 2023/1185 stipulates that the greenhouse gas savings from the use of recycled carbon fuels must be at least 70% and sets out how these greenhouse gas savings are calculated in detail.
The Commission’s draft refers both to hydrogen from nuclear energy (known as red hydrogen) and to fuels whose carbon intensity has been reduced through CO2 capture and storage. However, it notes that the global warming potential of hydrogen is still unclear, such that relevant values should be added to the methodology as soon as scientific findings are sufficiently mature.
The new methodology is to recognise capture and storage of emissions as an emission reduction if these are permanently stored in a geological storage site, even if the emissions generated in third countries are stored outside the EU. The prerequisite is that the applicable national law ensures the detection and remediation of CO2 leaks in accordance with the legislation applicable in the EU and that the leaks are accounted for in such a way that they are not counted as CO2 reductions. Geological storage sites with repeated leaks should not be approved for injection. This major novelty opens the door to the regulatory acceptance of CO2 capture and storage as a legitimate means of emission reduction. However, that acceptance is linked to specific conditions, e.g. the environmental and safety standards applicable in the EU must also be met in third countries.
The methodology for determining the greenhouse gas emission savings from low-carbon fuels can be found in the annex to the draft. The annex regulates the technical specifics in three parts:
- Firstly, the methodology for calculating greenhouse gas emissions is described. All emissions from the provision of inputs, processing, transportation and distribution as well as the end use of the fuel are recorded and corrected to take into account the emission reductions from CO2 capture and storage or use. The total emissions of the low-carbon fuel are then compared with the emissions of a fossil reference fuel to calculate the percentage saving. Standardised emission factors are used for the individual process steps and inputs, whereby a distinction is made between elastic and rigid inputs.
- Secondly, the annex contains tables with standard values for the greenhouse gas emission intensity of elastic inputs of various fuels to be used in the calculations.
- Lastly, the annex outlines the methodology for calculating the greenhouse gas emission intensity of electricity. Here, emissions are calculated at country or bidding-zone level by considering all potential primary energy sources for electricity generation, actual types of power plant, conversion efficiencies and the power plants’ own consumption.
The draft further stipulates that the Commission will assess the possible introduction of alternative ways to reduce CO2 emissions by 1 July 2028, in particular to take into account low-carbon electricity from nuclear power plants. The Commission is to launch a public consultation on this by 30 June 2026.
Reactions to the draft – a technical methodology with political ramifications
The methodological principles have not been without criticism. Initial reactions reveal clear conflict potential:
- Nuclear-skeptical stakeholders see the preferential treatment of nuclear energy.
- Industry associations such as Hydrogen Europe warn of a regulatory disadvantage for blue hydrogen and criticise the regulations as too restrictive, particularly in respect of economic efficiency and investment security.
- At the same time, green hydrogen is at risk of being pushed into the background due to high production costs and requirements.
However, the draft presents both opportunities and risks for the energy sector:
On the one hand, the draft establishes regulatory clarity regarding the requirements for the recognition of low-carbon fuels and creates planning security for new projects and investments; it also improves low carbon fuels’ eligibility for subsidies and market access if the threshold values are met. On the other hand, the draft creates complex verification requirements that will require additional administrative and technical effort. There are also uncertainties due to unresolved scientific issues (e.g. hydrogen leakage, indirect emissions). The draft may also exert considerable pressure on existing business models to adapt.
Companies in the energy sector – particularly in the areas of hydrogen, synthetic fuels and electricity generation – should analyse the draft at an early stage and check that their business models comply. That could include:
- Evaluating planned and existing projects using the new life-cycle analysis method
- Preparing for any obligations resulting from the draft
- Monitoring the further political discussions, particularly regarding the design of the final threshold values and calculation methods
- Strategic and active positioning as part of the public consultation to ensure one’s own interests are considered
- Examining potential effects on funding programmes, certification and regulatory recognition (and modifying investment decisions if necessary)
Outlook
With its draft delegated act on the assessment of greenhouse gas emission savings from low-carbon fuels, the European Commission is fulfilling a key requirement of the Gas & Hydrogen Directive. The aim is a uniform, scientifically sound methodology for the life-cycle analysis of such fuels, in particular taking into account CO2 capture and storage as well as indirect emissions. However, the draft has already been met with criticism.
What at first glance sounds like a purely technical regulation will in fact become a set of rules for the permissibility of low-carbon forms of energy. That makes the draft a key instrument for the transformation of the energy sector towards climate neutrality – with direct impact on innovation paths, technology choices and capital flows.
The draft delegated act was sent to the Member States on 29 April 2025, with the Commission’s consultation of the experts appointed by the Member States set to follow. The legal act will only enter into force if neither the European Parliament nor the Council raises objections within two months (Article 90(6) of the Gas & Hydrogen Directive).
The final text remains dependent on the ongoing public consultation and potential adjustments as a result of the submissions made. While it remains to be seen what form the final version of the legal act will take, energy policy debate will liekly continue to intensify in light of this draft. For affected companies, that means strategically positioning themselves at an early stage to minimise regulatory risks and take advantage of the opportunities presented.
Forward
