Lead markets could drive up to 2.8 million tonnes of European clean H₂ demand: Hydrogen Europe

Sector-specific quotas for fertilisers and steel will be essential, trade body warns

European “lead markets” for clean hydrogen-derived steel and ammonia fertilisers could generate demand for up to 2.8 million tonnes per year of low-carbon hydrogen, according to a new report released by industry association Hydrogen Europe.

The study argues that early, targeted markets — underpinned by mandatory sector-specific quotas — are the fastest and most effective way to stimulate large-scale industrial demand for clean hydrogen and accelerate investment across the value chain. Without legally binding market-creation mechanisms, the organisation warns, Europe risks falling short of its decarbonisation goals and losing competitiveness to regions offering stronger policy signals.

Steel and fertilisers as cornerstone markets

Hydrogen Europe identifies green steelmaking and low-carbon fertiliser production as the two sectors most capable of absorbing significant volumes of renewable and low-carbon hydrogen in the near to medium term.

One of the most advanced examples highlighted by the report is Stegra’s green hydrogen-based steel plant in Boden, Sweden, which represents a new wave of hydrogen-enabled industrial projects that aim to replace traditional fossil-based processes.

By mandating a defined share of clean hydrogen-derived products — for example, a required percentage of green steel or low-carbon ammonia in European markets — policymakers could unlock rapid scale-up, improving economics for both producers and consumers, the report suggests.

Quotas needed to de-risk investment

Hydrogen Europe stresses that sector-focused quotas are essential to ensure that early projects can reach Final Investment Decision (FID). The absence of predictable demand continues to be one of the biggest barriers for developers, who face high capital costs and uncertain offtake arrangements.

According to the organisation, introducing quotas would:

• Provide long-term market certainty for industrial buyers

• Support the emergence of competitive European supply chains

• Enable electrolysis and hydrogen infrastructure to scale more efficiently

• Reduce reliance on fossil-based inputs in steel and fertiliser production

The report warns that voluntary commitments alone will not deliver enough demand to justify multi-billion-euro investments in new hydrogen capacity, particularly in hard-to-abate sectors.

Up to 2.8 million tonnes of clean H₂ demand

Hydrogen Europe estimates that robust lead markets across green steel and clean fertilisers could collectively stimulate up to 2.8 million tonnes of low-carbon hydrogen demand per year. This figure represents a substantial portion of Europe’s medium-term hydrogen deployment targets and would help anchor early supply, stabilise project pipelines, and create industrial learning effects.

Such demand creation would also support European climate objectives, including the Fit for 55 package and the broader pathway toward net-zero by 2050.

Risk of losing industrial leadership

The report cautions that regions such as the United States, the Middle East, and parts of Asia are moving faster in offering policy certainty, subsidies, and guaranteed offtake for hydrogen-based products. Without decisive action, Europe could face:

• Delays in domestic clean hydrogen projects

• Loss of industrial competitiveness

• Increased imports of hydrogen-derived products

• Difficulty meeting decarbonisation milestones for 2030 and beyond

Hydrogen Europe concludes that aligning industrial strategy, market creation, and climate goals is critical if Europe is to retain technological leadership in the global clean hydrogen economy.