EU risks channeling climate funds to dirty energy projects, experts say

The European Commission has announced a list of 235 cross-border energy projects that risk prolonging the use of fossil fuels even though they benefit from access to EU climate funding, according to experts and civil society groups.

At least 100 hydrogen infrastructure projects are eligible to receive funding under the bloc's law to develop cross-border energy infrastructure.

Critics argue that more than 90% of these projects were submitted by gas transmission operators, which runs counter to the 2022 revision of the law, intended to align the EU27's energy and climate goals.

The total investment for these projects exceeds €80 billion, excluding the substantial subsidies required to create demand for hydrogen. Experts warn that pipeline projects will be highly expensive and are likely to end up transporting natural gas.

Some of them include a planned network of hydrogen pipelines connecting multiple countries including the Netherlands, Belgium, Germany, France, Spain, and Portugal, to facilitate hydrogen transportation.

Other projects connect central and southeastern European regions, including Romania, Greece, and Bulgaria.

Civil society organisations, including Food & Water Action Europe, the CEE Bankwatch Network, and several others argue that these projects demonstrate how old fossil gas pipeline projects are now being greenwashed as “hydrogen-ready.”

"With no credible supply of renewable hydrogen in sight, these pipelines, if ever built, will likely carry fossil-based hydrogen for years, all while receiving public money meant for the energy transition," a joint statement from the group of civil societies said.

Gligor Radečić, campaign leader at CEE Bankwatch Network, also questioned the credibility of the selection process for these cross-border projects and its implications for Europe’s decarbonisation efforts.

"The process still grants a central role to ENTSOG, an industry body representing the very companies that stand to profit from this specific status. This inherent conflict of interest undermines trust in the system," said Radečić.

Aspirations vs market needs

A 2024 report from the bloc's energy regulators, ACER, warns that current hydrogen network plans are built on “aspirations rather than concrete market needs”, increasing the risk of over-investment and underused infrastructure that citizens will ultimately end up paying.

George Verberg, former CEO of Dutch network operator Gasunie and past president of both Eurogas and the International Gas Union, shared similar concerns saying that the economics of the EU’s hydrogen infrastructure plans "simply don’t stack up".

"Many of the pipelines on this list are existing natural gas pipelines, with the intention to repurpose them for hydrogen transport. The cost implications of this, to make it safe and functionally effective, would be out of proportion," said Verberg.

The Dutchman added that estimates of the costs of pipeline retrofitting by gas utilities are too optimistic.

"With low market readiness, investment in long-distance hydrogen pipelines is premature," Verberg said, adding that such a venture will further raise the costs of the necessary energy transition, increasing the risk that citizens or taxpayers will lose trust in the EU's energy transition policy.

Instead, Verberg recommended that policymakers take a more measured, regional approach to hydrogen infrastructure, starting with localised industrial clusters where supply and demand can be matched expeditiously.

Similar concerns were raised by Paul Martin, the co-founder of the Hydrogen Science Coalition and lead author of a 2024 paper reviewing the challenges of using the natural gas system for hydrogen.

Martin argues that the "sluggish development plaguing" the hydrogen market makes it unrealistic to expect these pipelines to transport renewable hydrogen.

“Most projects at best plan to transport hydrogen produced from fossil fuels, rather than green hydrogen made from renewable energy," said Martin.

EU's hydrogen targets

Under the EU's renewable energy law, the bloc is set to produce 10 million tonnes of hydrogen by 2030 and is slated to import an additional 10 million tonnes.

To produce green hydrogen, the EU needs to scale up its electrolyser capacity. The bloc aims to achieve a manufacturing capacity of 17.5GW by 2025, with a target of 40GW of renewable hydrogen electrolysers by 2030.

Electrolysers split water into hydrogen and oxygen using electricity, while a renewable electrolyser is powered by 100% renewable energy sources, such as solar or wind, to produce green hydrogen.

The EU27 have several funds to unlock investments in sustainable projects and support member states' climate and energy transitions.

Among them are the projects listed by the EU executive on Monday, known as Projects of Common Interest (PCI) and Projects of Mutual Interest (PMI), which are awarded every two years and enjoy privileged access to EU public financing as well as expedited permitting.

A total 149 actions have been funded by the EU since 2013, disbursing a total of €4.7 billion to 107 PCIs and PMIs.

Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition, dubbed these projects “the lifeline” of the bloc's energy union.

"They empower our EU energy system by unifying the strengths of 27 complementary systems, paving the way for a Europe where green, competitive, and secure energy is not just a promise, but a common reality," Ribera said after the announcement.

European lawmakers and EU governments now have two months to agree on which projects to select.