H2Global‑​Stiftung publishes expert opinion by Redeker

Is the subsidisation of international green hydrogen value chains permissible?

Bonn, 22 August 2023. Redeker Sellner Dahs has been commissioned by H2Global‑​Stiftung to prepare an expert opinion on subsidisation law. The focus of the opinion is on the admissibility under European and WTO law of national, European and international subsidisation measures that could support the participation of developing and emerging economies in the competitive market ramp‑​up of green hydrogen and derivatives based on it (power‑​to‑X products).

Green hydrogen and derivatives produced from it (e. g. ammonia, methane, methanol and paraffin) are manufactured using renewable electricity. They are essential to achieving national, European and international climate protection goals. The marketing of these products holds out considerable economic potential for investors and for countries where renewable electricity can be produced in large quantities comparatively cheaply. A fierce international competition for investors is already underway, posing particularly great challenges for developing and emerging economies.

The legal opinion that has now been published by H2Global‑​Stiftung is one component of a research project being carried out by this foundation, whose purpose is to address these challenges and develop solutions, with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ). The aim of the research project was to identify the decisive factors enabling participation of developing and emerging countries in the PtX market ramp‑​up on an equal footing. These factors include not only initial economic and technical conditions, but also the legal framework for subsidies. This is because it is evident that the market ramp‑​up will not get off the ground without public start‑​up funding.

Germany and the EU, and the business sector in particular, are dependent on imports from third countries to achieve climate protection goals. Investment in suitable third countries is only picking up slowly, however, because in the absence of sufficient regulatory incentives, buyers in Europe are not yet willing to pay prices that would be sufficient to cover production and transport costs.

This is where the H2Global funding concept comes in: it provides for state funding to compensate the difference between the costs of production in a third country and import to Europe on the one hand, and the price achievable on the European market on the other, for a transitional period. As far back as December 2021, the European Commission granted approval under state aid law for an initial grant from the German Federal Ministry of Economics and Technology in the amount of EUR 900 million to compensate for this delta, following a notification procedure, which was also supported by Redeker. 

The subject of the legal opinion that has now been published by H2Global‑​Stiftung are conceivable variants for a Europeanisation and internationalisation of the H2Global concept, which has so far been backed solely by German funds. These include funding measures jointly financed by Germany and certain developing and emerging economies as well as funding instruments with the participation of the EU, the World Bank and the African Development Bank. The report examines various funding options against the standard of EU state aid law, recently enacted EU regulation on foreign subsidies that distort the internal market (Foreign Subsidies Regulation – FSR) and WTO law.

Dr. Clemens Holtmann, lawyer at the Brussels office of the law firm Redeker Sellner Dahs, comments: “Working with the H2Global Foundation on this forward‑​looking topic at the nexus of climate protection, development cooperation and industrial policy has been very engaging for us. It is particularly pleasing to be involved in the development of funding instruments that can concretely support efforts to meet several key challenges affecting our future at the same time.”

In addition to Dr Clemens Holtmann (Brussels), Prof Dr Jörg Philipp Terhechte (Of Counsel, Berlin) and Bartosz Frydel, LL.M. (MBL) (Berlin/​Brussels) were involved in the drafting of the expert opinion.

You can download the study via the following link: https://​files.h2‑global.de/H2G_RSD_Legal‑​Analysis‑​of‑​Variants‑​for‑​Financing‑​PtX‑​CfD‑​Windows.pdf

For more information about the H2OGlobal Foundation project, click here.

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