Carbon Contract for Differences for the development of low-carbon hydrogen in Europe

Published on 30 November 2021

By Corinne Chaton and Coline Metta-Versmessen

While developing a low-carbon hydrogen economy in the European Union is currently an energy transition keystone, electrolysis based production is not yet competitive compared to steam reforming. This study aims to characterize a new political tool, the Carbon Contract for Difference (CCfD), in the specific case of scaling up electrolysis based hydrogen production. Our analysis suggests that an economically efficient CCfD can be defined for each area with homogeneous electricity mix. This CCfD should be designed depending on the gas prices and the current State aids being used in the EU-ETS system. This paper offers a methodology for policy makers to design CCfD according to their region and the sector application.

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