The European Commission has approved a €6 billion State aid scheme proposed by Italy to support the production of renewable hydrogen, in a move aimed at accelerating decarbonisation in transport and industry.

According to the Commission, the measure will enable the production of up to 200,000 tonnes of renewable hydrogen per year and aligns with the objectives set out in the EU Hydrogen Strategy and the broader clean industrial agenda.

Support mechanism and scope

The scheme will support hydrogen produced both via electrolysis powered by renewable electricity and through biogenic processes, including biological and thermochemical methods.

Financial support will be provided through two-way contracts for difference (CfDs). Under this mechanism, a “strike price” for hydrogen will be set through a competitive bidding process. If market prices for alternative fuels fall below this level, the Italian government will cover the difference for producers. Conversely, if prices exceed the strike price, producers will repay the surplus to the state.

The scheme is scheduled to run until 31 December 2029.

Commission assessment

The Commission assessed the measure under EU State aid rules, particularly Article 107(3)(c) of the Treaty on the Functioning of the European Union, which allows support for certain economic activities under specific conditions, and the 2022 guidelines on climate, environmental protection and energy aid.

It concluded that the scheme is necessary and appropriate to foster renewable hydrogen production, especially in hard-to-abate sectors such as transport and heavy industry. The executive also found that the aid has an incentive effect, as projects would not be financially viable without public support.

In addition, the Commission determined that the measure is proportionate, as funding will be allocated through a competitive process based solely on price. It also noted that the environmental benefits—particularly emissions reductions—outweigh potential distortions to competition.

Strategic context

The approval comes as the EU seeks to scale up clean hydrogen as a key pillar of its decarbonisation strategy. Since the launch of the EU Hydrogen Strategy in 2020, Brussels has been working to accelerate investment and deployment across the hydrogen value chain, including through initiatives such as the European Clean Hydrogen Alliance.

The Italian scheme is expected to contribute to these efforts by supporting domestic production capacity and reducing reliance on fossil fuels in energy-intensive sectors.