1. Introduction

Hydrogen is increasingly regarded as an important tool for industrial decarbonisation, particularly in sectors where direct electrification is technically difficult or economically challenging. These include steel, chemicals, fertilisers, refineries, cement, glass, shipping fuels and certain high-temperature industrial processes.

The principal legal and policy question is not simply whether hydrogen can replace fossil fuels, but how law can create a reliable framework for producing, certifying, transporting, financing and consuming low-carbon hydrogen while ensuring environmental integrity, safety and fair competition.

The European Commission has specifically identified hydrogen as an important option for decarbonising steel and metals, including hydrogen-based direct reduction of iron ore and high-temperature industrial heat. (EUR-Lex) India has similarly incorporated industrial applications into its National Green Hydrogen Mission (NGHM), including dedicated steel-sector pilot projects. (Ministry of New and Renewable Energy)

2. Why Hydrogen Is Important for Industrial Decarbonisation

Industrial emissions generally arise from three sources:

Combustion emissions – burning coal, oil or natural gas for heat;

Process emissions – emissions inherent in chemical reactions, such as conventional iron reduction or cement production; and

Indirect electricity emissions – emissions associated with electricity consumed by industrial facilities.

Hydrogen can address the first two particularly effectively.

Where hydrogen is produced using renewable electricity through electrolysis, its use can substantially reduce lifecycle greenhouse-gas emissions compared with fossil fuels, subject to the carbon intensity of electricity and the applicable certification methodology.

Hydrogen can function as:

an industrial fuel;

a chemical feedstock;

a reducing agent;

an energy-storage medium; and

a component in synthetic fuels and hydrogen derivatives such as ammonia and methanol.

The legal framework therefore needs to regulate the entire hydrogen value chain, rather than hydrogen production alone.

3. Hydrogen in the Steel Industry

Steel is one of the most significant potential applications.

Conventional process

Traditional blast-furnace steelmaking generally uses coal/coke both as a source of energy and as a reducing agent. Carbon reacts with iron oxides and ultimately produces significant quantities of CO₂.

Hydrogen-based process

Hydrogen can instead be used to reduce iron ore:

Iron ore + Hydrogen → Iron + Water vapour

The resulting direct reduced iron (DRI) can subsequently be converted into steel, often using an electric arc furnace.

This changes the emissions profile because water rather than CO₂ can become the principal product of the reduction reaction, although the overall climate benefit depends upon the hydrogen-production pathway and electricity source.

The EU has described hydrogen-based direct reduction as a promising route for decarbonising primary steel production. (EUR-Lex)

Indian framework

India's National Green Hydrogen Mission specifically provides for pilot projects in the steel sector. The Government sanctioned three pilot projects intended to demonstrate hydrogen-based steelmaking technologies, including production of DRI using 100% hydrogen and the use of hydrogen in blast furnaces. (National Green Mission)

This illustrates an important legal-development model: governments can initially use pilot-project regulation and public funding before moving toward mandatory hydrogen-use requirements.

4. Hydrogen in Fertiliser Production

Hydrogen is already an important industrial feedstock for ammonia production.

The conventional production of hydrogen from natural gas generates substantial carbon emissions. Renewable hydrogen can instead be combined with nitrogen to produce ammonia:

3H₂ + N₂ → 2NH₃

Green ammonia can therefore reduce the carbon intensity of fertiliser production.

This makes hydrogen policy particularly significant for countries with large fertiliser industries.

India's National Green Hydrogen Mission expressly identifies fertiliser and refinery sectors as sources of potential sustained demand for green hydrogen. (National Green Mission)

A legal framework may therefore establish:

minimum green-hydrogen consumption obligations;

certification requirements;

emissions-intensity thresholds;

procurement mechanisms;

subsidies;

tax incentives;

renewable-energy access rules; and

reporting and verification obligations.

5. Hydrogen in Refineries

Hydrogen is extensively used in petroleum refining, particularly for:

hydrocracking;

desulphurisation;

removal of impurities; and

production of cleaner fuels.

Replacing conventional fossil-derived hydrogen with renewable or low-carbon hydrogen can therefore reduce refinery emissions without necessarily requiring an entirely new industrial process.

This is legally significant because refinery hydrogen can represent a near-term demand centre for clean hydrogen.

The Indian National Green Hydrogen Mission identifies refineries alongside fertilisers as sectors capable of creating sustained demand for green hydrogen. (National Green Mission)

6. Hydrogen for High-Temperature Industrial Heat

Some industrial processes require temperatures that are difficult to achieve economically through direct electrification.

Hydrogen can potentially replace:

natural gas;

coal;

fuel oil; and

other fossil fuels.

Potential applications include:

steel reheating;

glass manufacturing;

ceramics;

chemicals;

metals processing; and

certain thermal treatment processes.

The EU's industrial policy specifically identifies hydrogen as a potential source of high-temperature heat for metals industries. (EUR-Lex)

The legal challenge is to ensure that a facility claiming to be "hydrogen-powered" actually achieves the required emissions reduction. This makes hydrogen certification and lifecycle emissions accounting particularly important.

7. Hydrogen and Industrial Carbon Contracts

Industrial hydrogen projects frequently have a major economic problem: clean hydrogen can initially be more expensive than fossil-based alternatives.

Governments may therefore use:

(a) Production subsidies

The government pays producers for producing qualifying hydrogen.

(b) Contracts for Difference

A public authority can compensate producers when the market price is insufficient to make low-carbon production commercially viable.

(c) Tax incentives

Tax credits or accelerated depreciation can reduce investment costs.

(d) Demand-side obligations

Industrial consumers can be legally required to purchase or consume a specified proportion of renewable or low-carbon hydrogen.

(e) Competitive procurement

Governments can conduct auctions in which producers compete for support.

These mechanisms are important because industrial decarbonisation requires substantial capital expenditure in both hydrogen production and modification of industrial facilities.

8. Indian Legal Framework

India's National Green Hydrogen Mission provides an important policy foundation.

Its objectives include making India a global hub for green hydrogen production, use and export and contributing to significant decarbonisation of the economy. (Ministry of New and Renewable Energy)

The Mission contains several legally significant mechanisms.

8.1 SIGHT Programme

The Strategic Interventions for Green Hydrogen Transition (SIGHT) programme provides financial incentives for:

electrolyser manufacturing; and

green-hydrogen production. (Ministry of New and Renewable Energy)

8.2 Demand creation

The Mission contemplates minimum consumption requirements for designated consumers of green hydrogen or hydrogen derivatives such as green ammonia and green methanol. (Ministry of New and Renewable Energy)

8.3 Renewable electricity access

Policy measures include provisions concerning:

interstate transmission charges;

renewable-energy banking;

open access; and

grid connectivity.

These are critical because the cost and availability of renewable electricity directly affect green-hydrogen economics. (Ministry of New and Renewable Energy)

8.4 Industrial pilots

India has introduced dedicated guidelines for green-hydrogen pilot projects in the steel sector. (Ministry of New and Renewable Energy)

The current framework therefore combines financial support, demand creation, infrastructure regulation and technology demonstration.

9. European Union Legal Approach

The European Union provides another important regulatory model.

The EU has used Important Projects of Common European Interest (IPCEIs) to support hydrogen technologies and industrial applications.

The second hydrogen IPCEI, Hy2Use, supports hydrogen infrastructure and industrial integration, including technologies relevant to difficult-to-decarbonise sectors such as steel, cement and glass. The Commission reports that participating Member States may provide up to €5.2 billion in public funding, expected to unlock additional private investment. (Competition Policy)

The later Hy2Infra programme supports large-scale electrolysers, hydrogen pipelines, storage and related infrastructure. (Competition Policy)

This demonstrates how industrial hydrogen policy intersects with EU State-aid law and competition law.

10. Relevant Case Law and Legal Decisions

Because hydrogen industrialisation is relatively new, there is not yet a large body of reported judicial decisions specifically concerning hydrogen-based steelmaking or hydrogen industrial decarbonisation. Consequently, the most useful authorities include decisions and regulatory precedents concerning State aid, environmental regulation, industrial decarbonisation and energy-transition support.

Case/Decision 1: European Commission – IPCEI Hy2Use

The Commission's approval of Hy2Use is an important regulatory precedent.

It recognised that public support for hydrogen infrastructure and industrial applications could be compatible with EU State-aid rules where the projects pursue common European interests and address technological and market failures. The programme specifically includes industrial sectors such as steel, cement and glass. (Competition Policy)

Legal significance

The decision demonstrates that industrial hydrogen subsidies must be designed around:

technological innovation;

environmental objectives;

proportionality of public support;

additional private investment;

cross-border benefits; and

prevention of excessive competitive distortion.

Case/Decision 2: H2 Green Steel – Sweden

A particularly relevant recent State-aid decision concerns H2GS AB, the Swedish hydrogen-based steel project.

The European Commission authorised Swedish State aid for the decarbonisation of steel production. The measure involved a direct grant with an overall budget of SEK 2.95 billion and an environmental-protection objective. (EUR-Lex)

Legal significance

This illustrates how governments can support hydrogen-intensive steelmaking through public grants while subjecting the measure to State-aid scrutiny.

It also establishes an important principle for industrial hydrogen policy: public funding can support transformational industrial technology where the aid is appropriately structured and justified by environmental objectives.

Case/Decision 3: IPCEI Hy2Tech State-Aid Decisions

The EU's approval of national support under Hy2Tech provides another important legal precedent.

For example, the Commission approved Italian support for companies participating in hydrogen technology projects, including technology related to hydrogen production and associated industrial applications. (EUR-Lex)

The significance is broader than the individual beneficiaries: it demonstrates how European competition law accommodates coordinated public investment in emerging hydrogen technologies.

11. Environmental Law and Hydrogen Certification

Industrial decarbonisation requires more than simply replacing natural gas with a substance called "hydrogen."

The legal system must establish:

What type of hydrogen qualifies as low carbon?

Important criteria include:

source of electricity;

greenhouse-gas intensity;

additionality of renewable electricity;

temporal correlation;

geographical correlation;

methane emissions where fossil-based hydrogen is used;

carbon capture performance for blue hydrogen;

lifecycle emissions; and

chain-of-custody documentation.

Certification is therefore essential to prevent greenwashing.

The Indian Mission expressly contemplates development of a certification framework for green hydrogen and its derivatives. (Ministry of New and Renewable Energy)

12. Industrial Permitting and Safety

Hydrogen has distinctive physical characteristics, including high flammability and a broad flammability range.

Industrial hydrogen facilities therefore require regulation of:

production plants;

electrolysers;

storage tanks;

pipelines;

compression systems;

refuelling infrastructure;

industrial burners;

ventilation;

leak detection;

emergency response; and

worker safety.

The legal system must coordinate environmental approval with occupational safety and industrial licensing.

This is particularly important because industrial hydrogen projects may be located within existing chemical, steel or refinery complexes.

13. Infrastructure and Access Regulation

Large-scale industrial decarbonisation cannot depend entirely on onsite hydrogen production.

Industrial clusters may require:

shared pipelines;

hydrogen storage;

import terminals;

ports;

renewable-energy infrastructure;

electrolysers;

compression stations; and

hydrogen hubs.

The EU's Hy2Infra programme demonstrates this infrastructure-based approach, including thousands of kilometres of hydrogen transmission and distribution infrastructure and large-scale hydrogen storage. (Competition Policy)

Legal questions include:

Who owns hydrogen pipelines?

Who may access them?

Are tariffs regulated?

Is third-party access mandatory?

Who bears balancing responsibility?

Who is liable for contamination?

How are cross-border pipelines regulated?

Thus, hydrogen industrial decarbonisation ultimately requires a network regulatory framework, not merely a fuel subsidy.

14. Public Procurement and Green Industrial Markets

Governments can create demand for low-carbon industrial products through public procurement.

For example, public authorities may create demand for:

green steel;

green fertiliser;

low-carbon chemicals; and

hydrogen-derived products.

This approach can create a market for hydrogen-intensive industrial products even when they initially have higher production costs.

The EU's current industrial policy increasingly considers demand-side measures and low-carbon procurement preferences as instruments for creating markets for clean industrial products. (European Commission)

15. Competition Law Issues

Hydrogen subsidies can potentially distort competition.

For example, if one government provides extremely large subsidies to a domestic steel producer, that producer could obtain an advantage over competitors in another jurisdiction.

Therefore, industrial hydrogen support must consider:

State-aid rules;

subsidy control;

competition law;

trade law;

WTO obligations;

local-content requirements; and

cross-border investment rules.

The EU's State Aid framework has consequently become an important component of industrial decarbonisation policy. The Commission's Clean Industrial Deal State Aid Framework (CISAF) applies from 25 June 2025 through the end of 2030 and facilitates support for clean energy, industrial decarbonisation and clean technologies. (Competition Policy)

16. Major Legal Challenges

16.1 Cost competitiveness

Clean hydrogen may initially be more expensive than fossil-based hydrogen or natural gas.

16.2 Additionality

The law must prevent renewable electricity used for hydrogen from merely shifting existing renewable electricity away from other consumers.

16.3 Certification

Different jurisdictions may use different definitions of "green" or "low-carbon" hydrogen.

16.4 Infrastructure

Large-scale hydrogen use requires substantial investment in pipelines, storage and ports.

16.5 Safety

Hydrogen requires specialised safety standards and emergency procedures.

16.6 Industrial competitiveness

Decarbonisation requirements can increase production costs for energy-intensive industries.

16.7 Carbon leakage

If domestic regulation becomes substantially more expensive than foreign production, industrial production may move to jurisdictions with weaker climate requirements.

16.8 Technology neutrality

Lawmakers must decide whether support should be restricted to renewable hydrogen or also extend to other forms of low-carbon hydrogen.

17. Emerging Legal Model

A comprehensive hydrogen-industrial-decarbonisation framework can be represented as:

Renewable Energy Regulation
↓
Electrolyser Regulation
↓
Hydrogen Certification
↓
Hydrogen Production
↓
Storage & Transport Regulation
↓
Industrial Offtake Contracts
↓
Steel / Fertiliser / Refinery / Chemical Use
↓
Emissions Monitoring & Verification
↓
Carbon Accounting
↓
Industrial Decarbonisation Compliance

This integrated approach is more effective legally than regulating each stage independently.

18. Conclusion

Hydrogen can become a significant legal and regulatory instrument for industrial decarbonisation because it can simultaneously function as a fuel, feedstock and reducing agent. Its greatest potential lies in hard-to-abate sectors such as steel, fertilisers, refineries, chemicals and certain high-temperature industrial processes.

The emerging legal architecture combines subsidies, contracts for difference, demand mandates, certification, renewable-energy access, infrastructure regulation, industrial safety, environmental law and competition law.

India's National Green Hydrogen Mission provides a developing framework through SIGHT incentives, demand-creation measures, renewable-energy provisions and dedicated steel-sector pilots. (Ministry of New and Renewable Energy) The EU provides complementary precedents through its hydrogen IPCEIs and State-aid approvals, including support for hydrogen-based industrial decarbonisation and steel production. (Competition Policy)

The central legal challenge for the future is therefore to ensure that hydrogen deployment produces verifiable emissions reductions without compromising industrial safety, competition, consumer interests or environmental integrity. A successful framework must connect hydrogen policy with broader industrial, energy, climate and infrastructure law rather than treating hydrogen as an isolated energy commodity.