The leaked draft impact assessment recommends abolishing the existing mandatory national sub-quotas for green hydrogen and e-fuels (so-called “RFNBOs”²) in transport and industry with non-binding targets at EU level. There would continue to be an obligation on fuel suppliers to supply renewable energy, with each Member State setting its own targets, rather than nationally mandated shares driven by the EU as under RED III. This would therefore increase variability of renewable fuel mandates across the EU.

These leaked recommendations have created turbulence amongst the EU hydrogen industry, given the potential to adversely impact business cases for RFNBO producers (both inside and outside the EU), and users of hydrogen such as EU refineries, green steel and chemicals.

In this article, we cut through the noise, explaining exactly what has happened and its potential impacts.

Crucially, there has not been any immediate regulatory change in the EU hydrogen landscape. Stakeholders therefore have time and opportunities to seek to shape both the future EU-level laws throughout the legislative process, which can last several years, as well as the Member States’ reaction to any such changes if they are ultimately adopted by the EU.

Even if the Commission follows through with the policies in its leaked draft, its proposal could be changed by the European Parliament (“Parliament”) and Council of the EU (“Council”) before the RED IV legislation is finalised. In addition, EU Member States might be persuaded by their national industries, including stakeholders in existing investments in the sector, not to remove quotas preserved for green hydrogen. Those Member States may therefore be supportive of adopting more ambitious green hydrogen regulations beyond the minimum requirements of RED IV, although energy costs will of course be a consideration.

In addition, Germany, Spain and Belgium have already implemented national legislation with RFNBO mandates running to 2040 (exceeding the 2030 targets required by RED III). Changing those existing laws would create regulatory uncertainty, potentially leading to issues under national laws.

Key takeaways and impacts for the industry

• The industry should not assume this leak reflects future reality, but regulatory reassurance will be welcome. This leaked RED IV impact assessment is unofficial and incomplete. It is not a legislative proposal and has no legal weight.
• The Commission might change this impact assessment before its finalisation. Although the Commission has not, at the time of writing, publicly disowned the leaked impact assessment, there are suggestions circulating in Brussels that the Commission has rejected it and requires it to be altered. That said, it is not clear in which respects it is likely to change. Moreover, the Commission’s silence is not unusual, since it does not generally comment on leaks.
• Even if RED IV follows this proposal, the changes proposed do not alter other sector regulations creating demand for green hydrogen and RFNBO. Any changes in RED IV would not alter the existing mandates and decarbonisation drivers under RefuelEU Aviation, FuelEU Maritime or the EU Emissions Trading System (EU ETS). These regulations are still going to be the primary demand-creation regulations for sustainable maritime and aviation fuels. And of course, the EU ETS will continue to incentivise EU industrial companies to reduce their emissions, including through green hydrogen adoption in industries such green steel.
• There are many steps remaining at EU level to finalise RED IV legislation. Even after the Commission publishes its legislative proposal for RED IV (expected by end 2026), the text will be negotiated and changed through the EU co-legislative process by the Parliament and the Council, which typically lasts several years. This process creates many avenues for stakeholders to seek to shape the outcome of the final RED IV text through submissions to relevant representatives and committees at each EU institution.
• Greater flexibilities in the compliance mechanics for future fuel supplier renewable energy obligation could create new opportunities, depending on its design. The leaked impact assessment does not contain any detail on what new flexibilities might accompany revisions to the mandatory national quotas and fuel supplier obligation to supply minimum shares of renewable energy. As mentioned, the leaked recommendations suggest that these shares would be set by each Member State and then there could be greater flexibilities (e.g., to allow green hydrogen supplied to refineries to be counted). Stakeholders could therefore seek to influence the design of these flexibility mechanisms. Even if the RED IV proposal alters the mandatory national quotas for the fuel supplier obligation, stakeholders will have another line of advocacy. In addition to seeking extension of RFNBO sub-quotas and mandatory national targets, they can seek to influence the design of compliance credit mechanisms and other aspects. This could even create new market opportunities.
• Seek clarifications early from Member States to provide stability for RFNBO investments. Whatever the outcome of the RED IV proposal and final legislation, much depends on Member States’ individual choices about implementation under national laws. This creates opportunities for investors to engage with their Member States to push for a high level of ambition in the countries relevant to their projects. Member States should be encouraged to “plant their flag” early and signal their intentions to preserve stability for hydrogen investments.

Next steps for the RED IV proposal

The EU’s ordinary legislative procedure involves multiple EU institutions and generally takes several years from the point the Commission formally proposes a text, which has not yet even occurred for RED IV, until its adoption into EU law. A few key recommendations in this regard:

• Given that the Commission is scheduled to publish the proposed text of RED IV by the end of 2026, stakeholder and Member State submissions to the Commission prior to this period can help shape that proposal.
• Once published, the Commission proposal will be revised and negotiated by the Parliament and the Council, through their respective committees. Stakeholders may be able to make submissions to the relevant Parliamentary representatives and the relevant ministries of the EU Member States at the Council.

Engagement with Member States on national legislation implementing RED

Many EU Member States have adopted legislation to implement the binding RED III national transport sector renewable fuel quotas, RFNBO sub-quotas and the penalties supporting them. This has been instrumental in creating the conditions for significant projects taking final investment decisions for RFNBO production and for refineries to decarbonise through RFNBO feedstock use for conventional fuels (the so-called “refinery route”). However, the implementation of the RFNBO quotas for hydrogen use in industry lags far behind.

The business case for green hydrogen (and derivative product) projects has, in many cases, been based on the value of RFNBOs in meeting these nationally mandated RFNBO sub-quotas. Investors, fuel suppliers and project developers should therefore engage early with relevant Member States, not only to seek to influence the direction of EU legislation, but also to find ways for Member States to support their projects through ambitious national legislation and clear policy signalling support for their investments.

How Member States implement RED IV into national law will naturally depend on the final RED IV text. However, Member States are free to adopt laws that set more ambitious decarbonisation or RFNBO targets than those that are eventually agreed in RED IV. This is not merely theoretical or naively optimistic: it has already occurred during the implementation of RED III. Germany, Spain and Belgium have already implemented national legislation with RFNBO mandates extending to 2040 (beyond the 2030 targets mandated under RED III) and have set mandatory shares that exceed the minimums prescribed by RED III.

Stakeholders should seek early and concrete policy statements from significant Member States on their intentions for how they will preserve certainty for the hydrogen sector.

What other changes are on the horizon for the EU hydrogen sector?

The forthcoming RED IV is not the only regulatory change expected for the EU hydrogen sector between now and the end of 2026. The Commission has also committed to two other important changes: (1) revising the RFNBO production requirements; and (2) updating the European Hydrogen Strategy.

Revision of the RFNBO rules

Originally scheduled for end of June 2026, the Commission’s revision of the RFNBO production criteria is (at the time of writing) expected imminently. See our related article (linked below) for an overview of these RFNBO production rules.

Industry participants have argued that the current criteria inhibit production and raise compliance costs, undermining the commercial viability of RFNBO projects inside and outside the EU. The general expectation amongst industry is that the changes proposed will be narrow, perhaps even just postponing the application of the “additionality” criteria and the move from monthly to hourly temporal correlation. Though this remains to be seen.

Nonetheless, a change in the rules raises issues of how to protect existing investments that may be disadvantaged as a result (e.g., because they have been engineered to comply with more onerous criteria than newer projects will need to meet). It also highlights the need to give investors confidence that future changes will not further dilute (or strengthen, for that matter) the rules. The perceived risk in this regard is exacerbated by the knowledge that the Commission still intends to conduct a broader review of the RFNBO rules by 2028.

There have been calls from the industry for some form of “grandfathering” protections (allowing existing investments to continue to comply with the earlier rules) and financial compensation to protect first-mover investments, which may be disadvantaged by a relaxation or tightening of the rules.³ Clean hydrogen incentive programmes in Asia have adopted this approach.

Revision of the European Hydrogen Strategy

The EU Hydrogen Strategy⁴, published on 8 July 2020, set out the roadmap for the development of the hydrogen economy in Europe. In 2025, the Commission committed to publishing a revised European Hydrogen Strategy, currently scheduled for the end of 2026. The revised strategy will not be a binding legislative measure. However, it will be an important policy signal indicating the direction of travel for the EU’s hydrogen ambitions in the post-2030 period.

Conclusions and next steps

Industry reaction to the leaked impact assessment has been fierce.⁵ It seems the very existence of these proposals (even before any kind of formal adoption of the RED IV proposal) has had a chilling effect for investors and projects, potentially already delaying development decisions. While this is understandable, this reaction needs to be balanced against the reality of the facts as they are. The leaked impact assessment is not an official policy position of the Commission, let alone a legislative proposal; and there are, and will for some time be, several available avenues to shape these future regulations at EU and Member State level.

Aside from any revisions proposed by the Commission, Member States may have (hard or soft) commitments to investors in respect of either current legislation – especially those that extend RFNBO quotas to 2040 already – or other forms assurance for existing investments. Depending on the course RED IV takes, investors may wish to explore whether their projects could benefit from any legal protections under host government agreements, investment treaties, trade agreements or legitimate expectation-based claims under national or EU laws. These assessments will of course depend on the facts of each case. However, the mere possibility of such claims, and other adverse industrial relations issues, could convince Member States to offer reassurance to investors and projects within their territories. Early engagement with Member States could therefore be a fruitful avenue for projects and investors to gain greater legal certainty.

Member States should be encouraged to fill the silence left by the Commission’s failure to disown the leaked impact assessment, to give greater policy clarity for their investors in the immediate term. Meanwhile, there is far to go before RED IV is finalised, with opportunities for stakeholders to seek to influence the text along the way.

King & Spalding continues to be the market leading law firm in the green hydrogen sector, with key roles advising on the majority of the larger projects internationally to have taken FID or signed binding long-term RFNBO offtake agreements (including advising the project supplying green hydrogen to the winning H2Global first-round bid). We are available to help answer any questions you may have, assist in navigating these complicated new developments, and support submissions to the EU and Member States.