The EU’s regulatory framework concerning renewable and low-carbon hydrogen finally has most of its pieces in place, with the delegated acts of the Renewable Energy Directive as well as the Decarbonized Gas Market Package introduced. Finland has ambitious targets when it comes to renewable hydrogen production. To achieve these targets, Finland’s national legislative framework regarding hydrogen is constantly developing.
Regulatory framework of the EU
Although many long-awaited regulations are no longer missing, the regulatory framework concerning renewable and low-carbon hydrogen can still hardly be regarded as finished. Many stakeholders and Member States remain unsatisfied, arguing that the legislative framework is too restrictive and takes effect too fast to allow for economically feasible operation of industry. And they are not entirely wrong; according to a report published in 2024 by the European Court of Auditors assessing the regulatory framework of RFNBOs (Renewable Fuels of Non-Biological Origin), the rules for the production of renewable hydrogen were set without prior assessment of their impact. Consequently, some Member States exhibit a strong political will to postpone the entry into force of specific provisions of the RFNBO regulation. One example of this is the open letter issued by the German Chancellor Olaf Scholz in the beginning of January 2025 to Ursula von der Leyen, calling, among other things, for a revision of the rules concerning renewable hydrogen.
Low-carbon hydrogen
The Hydrogen and Gas Market Package, consisting of a Directive and a Regulation given in June 2024, sets out to secure and facilitate the market uptake of both renewable and low-carbon gases. The Directive introduces definition for so-called “low-carbon hydrogen”, which is hydrogen that must achieve a 70 % greenhouse gas emissions reduction compared to the fossil fuel comparator of RFNBOs, but the production method does not have to be considered renewable. Low-carbon hydrogen is essentially hydrogen, that can be produced via various different production methods and is more sustainable than fossil hydrogen but does not quite adhere to the strict definition of renewable hydrogen.
Demand for RFNBOs – including renewable hydrogen – is maintained through sector specific RFNBO targets, such as the distribution obligation in transport. Although low-carbon gases and low carbon hydrogen can still be used to reach decarbonization targets across different sectors, such as the maritime sector, they cannot be counted towards these target quotas of RFNBOs. Emissions reduction targets can be fulfilled with low-carbon hydrogen for now, but renewable hydrogen is expected to take over in the long term. The question is, how to manage the transitional phase.
Key advantages of hydrogen production in Finland
Despite the inadequacies of the regulatory framework, Finland is well positioned when it comes to RFNBO as well as low-carbon hydrogen production. Finland is seeing a rapid increase of renewable projects (including solar and wind power), our electricity transmission network is robust, and can add new capacity quickly, all features which are important to electrolysis-based hydrogen production. Furthermore, Finland’s state-owned gas transmission company Gasgrid is working towards establishing a hydrogen transmission network, which will further improve conditions for hydrogen producers in Finland.
As it currently stands, electrolysis-based hydrogen produced using Finnish grid electricity currently meets the emission threshold to be considered low-carbon. It is expected that it will take until 2040s to 2050s for rest of Europe to follow. Furthermore, Statistics Finland is expected to confirm during the spring of 2025, that the emission intensity of our grid electricity is low enough (below 18 g CO2eq/MJ) to enable RFNBO producers in Finland to count the electricity taken from the grid as fully renewable, provided that the fuel producers have concluded a PPA with a renewables producer, and the conditions of temporal and geographical correlation are met. Consequently, the additionality requirement is not required to be met. This allows for the production of low-carbon and renewable hydrogen with grid electricity.
Regulatory developments regarding RFNBO in Finland
The revision of the Act on Promoting the Use of Biofuels for Transport (446/2007), also known as the Distribution Obligation Act obligating fuel suppliers to supply a certain amount of sustainable fuels to the market entered into force on 1 January 2025. Previously, the Distribution Obligation Act has mostly incentivised biofuel production, but now it also includes a gradually increasing sub-target for RFNBOs, incentivising production.
Additionally, the Ministry of Employment and Economic Affairs has published a draft proposal of the renewed the Act on Biofuels and Bioliquids (393/2013), also dubbed as the Sustainability Act, for comments. The Sustainability Act aims to promote the use of renewable energy by introducing sustainability criteria for certain fuels. The Act would include provisions concerning the national certification scheme concerning compliance with the RFNBO rules, operated by the Energy Authority. Furthermore, the Ministry of Employment and Economic Affairs is exploring alternatives to implement the RED III RFNBO targets for industry, but considering that there is no proposal yet, the implementation deadline in May will likely not be met.
It is yet unclear, how the compliance of low-carbon fuels is to be certified; the provisions may be brought to the Sustainability Act or, alternatively, to a completely new act. The specific methodology for calculating the greenhouse gas emissions of low-carbon hydrogen is not yet adopted, but a draft proposal for a Delegated Regulation has been published in September 2024, and the delegated act is expected in the near future, in August 2025 at the latest.
The Ministry of Employment and Economic Affairs is in the process of updating the Guarantee of Origin Act as well as the Electricity Market Act. The details of these updates are yet somewhat unclear, but the update of the Guarantee of Origin Act will likely include the possibility to give guarantees of origin to smaller units than 1 MWh. Furthermore, the updates to the Electricity Market Act would include changes enabling hybrid projects consisting or hydrogen production and renewables production.
It is safe to say the regulatory environment is unpredictable. It remains to be seen how the renewable hydrogen market will emerge however there is much to be gained if Finland succeeds in utilizing its advantages.
