EU Carbon Diplomacy: Assessing hydrogen security and policy impact on brown, blue and green hydrogen exports to the EU

ACES Ethics, Policy and Public Engagement researchers Prof Linda Hancock and Linda Wollersheim at Deakin University have published a detailed examination of the impact of the European Union’s new Carbon Border Adjustment Mechanism (CBAM) on hydrogen exports to the EU, in the journal Energies.

Linda Wollersheim

The CBAM forms part of the EU’s strategy to reach its emissions reduction targets and applies a levy on emissions of select imported products such as steel, fertiliser or electricity. The policy has been a topic of analysis and debate since it was announced in July 2021 and is due to be phased in gradually from 2023. Importers will start paying financial adjustments from 2026, passed onto overseas exporters depending on how green their hydrogen supply chains are.

The paper, EU Carbon Diplomacy: Assessing Hydrogen Security and Policy Impact in Australia and Germany, focuses on the strategy’s potential impact across the international hydrogen energy market, using empirical case study research of fossil fuel and renewables hydrogen companies.

“The EU is an important leader in carbon diplomacy. The aims of the CBAM are both to provide a level playing field in international trade (when EU producers are doing the right thing) as well as imposing a fair tax on climate policy laggards, like fossil fuel hydrogen exporters. It is not deemed to be protectionist under the WHO international trade rules,” Prof Hancock explained.

“The CBAM is an important marker in the journey to a system of global carbon adjustment mechanisms and international carbon certification so its application and potential impact on the international trade of energy and carbon policies of exporting countries need to be thoroughly examined,” Ms Wollersheim explained.

The researchers examine the CBAM by assessing how it might impact two different countries – Australia, a non-EU state that’s actively developing a hydrogen export industry, and Germany, an EU member that’s reliant on energy imports. A seven-dimension energy security justice framework is used to conduct the investigation.

“We added a seventh dimension to a previously developed framework to specifically review supranational carbon mechanisms and to identify risks and opportunities associated with brown, blue and green hydrogen import and export enterprises in Australia and Germany,” Prof Hancock added.

“In doing this, we’re able to better understand the emerging challenges of complex carbon supply chain certification systems and cross-border taxing arrangements in international trade.”

The research, available open access online, makes an important and timely contribution to the emerging fields of international hydrogen trade and international carbon diplomacy and provides an updated framework for energy researchers and policy analysts.