Green hydrogen or lost leadership? Europe must act before China wins

Author: Dr. Thomas Hillig, EUSEW digital ambassador

Europe’s hydrogen economy appears to be caught between high ambition and slow market reality. Demand is weak, prices remain elevated and infrastructure is years away. Yet green hydrogen is not only a climate instrument; it is a future industrial market. If the European Union wants a fair share of global value creation, it must shape the market design and build a competitive industry now.

A Framework in Place, but Momentum Is Missing

The European Union has laid important groundwork through the European Hydrogen Strategy and the Hydrogen and Decarbonised Gas Market Package. Certification rules, infrastructure planning and market principles are taking shape. However, implementation across Member States remains uneven, and several directives have yet to be fully transposed into national law.

Hydrogen systems require synchronised development of production, transport, storage and offtake. Building dedicated pipelines alone can take five to seven years. Without early and coordinated action at European level, the entire system risks delay. Market forces alone will not align these complex moving parts quickly enough.

The Economic Reality: Price Gaps and Easier Decarbonization with Direct Electrification

Green hydrogen remains significantly more expensive than grey hydrogen produced from natural gas. The International Energy Agency confirms that renewable hydrogen production costs are still well above fossil-based alternatives in most regions. As long as this gap persists, voluntary demand will remain limited.

In addition, direct electrification often delivers faster and more cost-efficient decarbonisation results today. Every kilowatt-hour of renewable electricity used directly in electric vehicles, heat pumps or battery storage typically reduces emissions more efficiently than converting it into hydrogen. Green hydrogen will therefore play a particularly important role in hard-to-abate sectors such as steel, chemicals, cement and heavy transport, especially as the transition progresses.

Competing with China Means Building European Industry

Hydrogen is not only about climate neutrality; it is about industrial competitiveness and future value chains. According to the International Renewable Energy Agency, China accounts for more than half of global installed electrolyser capacity. This reflects coordinated state planning and long-term industrial policy.

If Europe does not actively shape its hydrogen market, large state-driven economies will dominate technology manufacturing, project development and supply chains. Individual Member States are not strong enough to counterbalance such scale. Purely relying on market incentives will not deliver the speed and investment volumes required. The transformation is simply too large.

For European companies, however, green hydrogen represents a significant business opportunity: from electrolyser manufacturing and engineering services to project finance, transport infrastructure, storage technologies and hydrogen-based applications. If Europe wants to secure its share of global value creation, it must build up the industry now, in a smart and coordinated manner. This means fostering innovation, scaling domestic manufacturing and creating predictable demand frameworks that allow companies to invest with confidence.

A strong European market design is therefore indispensable. Only coordinated instruments at European Union level can create sufficient scale, reduce fragmentation and provide long-term visibility for investors.

Hydrogen as Diplomacy and Strategic Diversification

Hydrogen will also reshape Europe’s external energy relations. Domestic renewable expansion increasingly faces acceptance challenges, including debates around large wind projects in parts of Scandinavia. At the same time, solar and wind conditions in regions such as North Africa or the Middle East allow for more favourable production costs.

Future imports of renewable hydrogen or its derivatives are therefore likely. The experience of dependence on natural gas from Russia has shown the risks of concentrated supply. Diversified hydrogen partnerships must become part of European diplomacy.

Mechanisms such as the European Hydrogen Bank are crucial to bridge the price gap and stimulate early markets. Over time, they can also facilitate sustainable import corridors that complement domestic production and strengthen European companies’ global presence.

What Needs to Happen Now

In the short term, the European Union must close the price gap between green and grey hydrogen through coordinated financial instruments, carbon pricing and contracts for difference. Support should focus on sector-specific clusters that link renewable generation with application development within each sector separately. Dedicated ecosystems for green steel, green chemicals, or sustainable fuels can accelerate technological learning and business model innovation.

At the same time, Europe must invest strategically in its own industrial base. Manufacturing capacity for electrolysers, system integration expertise, transport technologies and certification services should be expanded within the European Union. Market design must reward early movers and provide long-term security for private capital.

Green hydrogen will become a global growth market. If Europe wants to benefit economically and strategically, it must act collectively and decisively. Building the hydrogen industry now is not only a climate imperative; it is a question of industrial sovereignty and future prosperity.

This opinion editorial is produced in co-operation with the European Sustainable Energy Week (EUSEW) – the biggest annual event dedicated to renewables and efficient energy use in Europe. #EUSEW2026 marks the 20th edition and will once again bring together the community of people who care about building a secure and clean energy future for the next generations.

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Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use that might be made of the information in the article. The opinions expressed are those of the author(s) only and should not be considered as representative of the European Commission’s official position.