Blog entry

Against all logic, Bosnia and Herzegovina’s Federal government ramps up fossil gas ambitions

Bosnia and Herzegovina has a very low level of gas dependence – less than 3 per cent of total energy supply in 2022. In the FBiH entity, it is mostly used for heating in Sarajevo. So although a rapid move away from its current Russian gas supply is badly needed, it would make more sense to transform the demand than diversify the supply.

There have been some welcome movies in this direction. In 2022, a promising-sounding 36-megawatt heat pump project was announced for Sarajevo, to be potentially financed by the European Bank for Reconstruction and Development (EBRD). But it’s hardly been mentioned in public during the last year or so, and it’s unclear why.

Misguided gas infrastructure plans

Moreover, BiH appears to be falling into the gas dependence trap. In FBiH, efforts to build a new gas pipeline from Croatia are crowding out efforts to reduce the already low gas consumption. The United States Ambassador to BiH is strongly and publicly pushing the FBIH authorities to move ahead with the project, which would have a capacity of almost six times as much as BiH’s 2022 consumption.

A corresponding and highly controversial ‘new eastern interconnection’ with Serbia is also planned by Republika Srpska, and is being used as a bargaining chip in return for allowing the southern interconnection to go ahead. If built, the pipelines will either result in a major increase in fossil gas consumption, or will turn out to be white elephants.

Southern, western, northern interconnections…

It’s now emerged that the FBiH government has been consulting cantonal authorities about ramping up gas use all across the Federation, even in areas nowhere near the planned Southern Interconnection, like the Tuzla and Posavski Cantons.

As if FBiH isn’t having enough problems building one new gas pipeline from Croatia, the minister mentions no fewer than three: the southern, western and northern interconnections, with the goal of gasifying ‘every part of FBiH’.

It’s hard to overstate how unrealistic this is. All these projects have been around for years and not one has been built. The western and northern interconnections are at an even earlier stage of preparation than the southern one. Three pipelines are simply not going to happen, let alone the distribution network that would need to be built in addition.

Worryingly detached from today’s reality

In fact the government’s whole statement on last week’s meetings with the Tuzla and Posavski Canton heads is worryingly detached from today’s reality.

‘Gasification enables the continuation of the Federation of BiH’s energy independence’, claims the title, in a clear case of doublespeak. But the opposite is true. The European Union has just spent years learning the hard way that gas means import dependence and massive price fluctuations. Where have FBiH decision makers been all this time?

The statement also cites energy minister Vedran Lakić claiming that gas is a lot cheaper than other fuels being used at the moment. But the reason why Russian gas was popular was because of its price: liquified gas (LNG) is more expensive, and Azerbaijan is unlikely to be able to keep increasing its exports. No matter how many import pipelines BiH builds, gas will never be a cheap choice.

Nor was FBiH’s last attempt at gasification exactly successful. Back in 2009, the EBRD approved a project to gasify the Central Bosnia Canton, but although a pipeline from Zenica to Novi Travnik was completed in 2013, it was never put into operation. This was partly due to legal issues, but also because there was not enough demand to make it pay off. If gas was such a good deal, surely the pipeline would have been used?

Decarbonisation through fossil fuels

In a final doublespeak flourish, the Minister’s statement claims the gasification of FBiH will enable gas to be used as a ‘fuel of the future’ in order to fulfill decarbonisation targets and ‘make easier our path towards climate neutrality’.

He is certainly not the only official in the Western Balkans who seems unaware that gas is in fact a fossil fuel and that it is as such incompatible with decarbonisation and climate neutrality, but this lack of understanding of today’s reality is deeply concerning.

Reality check urgently needed

The European Commission, United States and EBRD bear part of the responsibility for the popularity of gas in the Western Balkans, due to their overt political and financial support for new infrastructure.

On the EU front, there have been steps forward in recent years, such as gas projects no longer being prioritised as Projects of Energy Community Interest. But recently, DG NEAR failed to apply the ‘no fossil fuels’ provision when approving the countries’ Reform Agendas under the new Western Balkan Reform and Growth Facility.

The EBRD has in principle limited its gas financing to ‘exceptional cases’, but is still being publicly named as a prospective financier for the Southern Interconnection. And the future regarding the United States’ policy towards BiH is not easy to predict.

With the EU having made progress by achieving an 18 per cent reduction in gas demand between August 2022 and May 2024, and several Member States having bans on installation of new gas boilers, it’s therefore high time for the European Commission to take the lead in clearly telling Western Balkan leaders that the era of gas is coming to an end.

Building retrofits, smart grids, heat pumps, geothermal, rooftop solar, solar thermal and suitably-sited, publicly consulted utility-scale wind and solar all need political and financial support and we can’t afford to be fossil-fooled by gas.

Bosnia and Herzegovina southern gas interconnector: ‘Why gas at all?’ should be the key question

The main driver to build the southern gas interconnection between BiH and Croatia is ostensibly to enable BiH – or at least the Federation – to stop using Russian gas. The country currently has only one import pipeline via Serbia, which is mainly used to heat Sarajevo.

But the planned pipeline’s capacity of 1.5 billion cubic metres annually is six times as much as BiH’s 2022 consumption, and would bring gas to new areas of the country like Mostar. So it’s clearly aimed at expanding consumption, not just replacing it with non-Russian gas. In any case, it will take years before this project is built, and much faster options exist to cut Russian meddling in the country’s energy supply – like renewables.

The law on the project has been blocked for years due to disagreements within the Federation of BiH about the company in charge of the project. The existing transmission operator, BH-Gas, owned by the Federal government, has been developing the project, but the Croat HDZ BIH party wants a separate company to be set up in Mostar, as part of its overall strategy to gain more influence in the Federation.

It’s not surprising that this touches a nerve, as it goes to the heart of fraught questions on the country’s constitution. But it also prevents any debate about the merits or otherwise of the actual project.

Stopping the use of Russian gas is crucial, but framing the question as an either-or between buying from Russia or the United States, or BH-Gas versus a Mostar-based company, precludes questions such as how BiH can phase out fossil gas altogether, increase its energy efficiency and leapfrog straight to sustainable renewables.

This might sound optimistic, but it’s the only logical way forward. BiH has a very low level of gas dependence – less than 3 per cent of total energy supply in 2022, and in the Federation, the main issue is securing heating in Sarajevo. This is a major advantage, which must be maximised instead of increasing gas dependence.

The EU aims to reach carbon neutrality by 2050 at the latest, so if Bosnia and Herzegovina wants to be a member, it has to do so as well – and that includes oil and gas, not only coal.

The EU is making progress in this area, not only increasing its share of renewable energy, but also achieving an 18 per cent reduction in gas demand between August 2022 and May 2024. Several Member States also have bans on installation of new gas boilers in place. But the European Commission, particularly its Directorate-General for Enlargement, has been slow to realise that the Western Balkans can and must avoid getting bogged down in gas dependence, resulting in contradictory messages and support for outdated gas projects.

But increasing gas consumption in BiH would directly contradict the 2050 target, as it’s completely unrealistic to build, use and phase out new gas infrastructure by then.

The pipeline would take years to finish – and official estimates for such projects are usually wildly optimistic. The BiH section alone would be almost 169 kilometres long, partly on difficult mountainous terrain, with expropriation and financing still to secure. There’s no chance it will be finished before 2030, and it’s likely to be much later. So it’s hardly a short-term solution for Sarajevo to free itself from Russian gas.

Options like the Sarajevo heat pump project announced in 2023 are much more promising and could be realised more quickly.

If built, the pipeline will either lock BiH into increased gas use, or it will become a costly stranded asset, wasting scarce public money to pay off loans for nothing whatsoever.

It would not be the first time. In 2009, the European Bank for Reconstruction and Development approved a EUR 19 million loan for a gas pipeline from Zenica to Novi Travnik, which was built but has never operated. But the people of the Federation of BiH still had to foot the bill.

If the quality of the debate on the southern interconnector doesn’t improve soon, we may see something similar happening again, on a much larger and pricier scale.

The European Commission must play a decisive role in the Western Balkans, making it clear that gas is not the future. It needs to step up support for better insulating buildings, developing sustainable forms of renewable energy, increasing the use of heat pumps and improving transmission and distribution networks.

Heating the heights: Žabljak’s bold move towards sustainable warmth

For several years now,Žabljak has been on a journey towards a more sustainable future, and has made significant strides in addressing its heating challenges. The town has long relied on firewood and coal for heating, which posed significant environmental risks – especially over the winter tourist season when demand surges nearly tenfold.

In 2020, a pre-feasibility study supported by the EBRD seemed like a promising opportunity to develop a new district heating system. However, the proposed system, based predominantly on biomass, raised concerns among local leaders, as it would strain local forests, worsen air quality, and potentially lead to unpredictable heating costs. Determined to avoid these pitfalls, Žabljak set out to find a cleaner, more efficient solution.

The vision: a hybrid heating solution

The municipal authorities began exploring greener alternatives in 2023, with the European Commission-backed Action Heat initiative and CEE Bankwatch Network providing the needed support.

With the final goal of including 157 buildings and a planned network length of 7.77 kilometres, Žabljak aimed to explore four district heating scenarios. These included combinations of air source heat pumps, solar thermal systems and biomass boilers.

After careful consideration, the municipal authorities selected a hybrid solution that maximizes the benefits of a 2 megawatt (MW) air-source heat pump as the primary heating source, complemented by a 1.25 MW biomass boiler used only during extreme cold periods when additional heating capacity is needed.

Žabljak Municipality proposed district heating network in the selected scenario 3

Network:
Capital cost (incl. Supply): 4.79 M EUR
NPV to operator: 2.73 M EUR
Operating cost: 856.85 k EUR/year

Supply:
Type: Biomass + Air Source Heat Pump (ASHP)
Capacity: 1.25 MW (Biomass) + 2 MW (ASHP)
Capital cost: 2.68 M EUR

Source: SF2: Heat network prefeasibility study for the Žabljak Municipality, CREARA and Žarko Despotović, September 2024

In addition, the municipality is also interested in integrating solar thermal and storage technologies to diversify heat energy sources, achieve higher efficiency, and reduce the biomass capacity requirements. However, this integration will be subject to a detailed technical assessment, for which the municipality aims to secure funding in the next project phase. Currently, the installation of 1,000 m², generating up to 1 MW, is being considered, but not assessed in detail.

The first phase is integrating approximately 35 public buildings and large consumers in the most densely populated urban areas. The second phase will focus on expanding the system to include both collective and individual residential properties.

Zabljak’s choice to prioritize heat pumps comes from their ability to effectively harness the ambient air for heating, even in subzero temperatures. They can efficiently scale up heating output during high-demand periods, providing reliable warmth while scaling back during quieter months to save energy and costs. This adaptability makes them an ideal solution for managing fluctuating heating needs in tourism-oriented, seasonal towns, ensuring both efficiency and sustainability year-round.

heat production — Heat production distribution across the different scenarios, source: SF1-Zabljak: Assessment of Largescale air sourced heat pump, Aadit Malla, TU Wien, November 2024

Another key reason the town prioritized heat pumps over biomass was to help protect the forests of Durmitor National Park, already under threat from illegal logging, while also maintaining better air quality for residents and visitors throughout the season.

Finally, the hybrid system’s economic feasibility played a major role in its selection. The system’s total investment is estimated at EUR 4.8 million and with a payback period of just over five years, the system is both practical and sustainable for the municipality. Heat pumps are also far more economical to operate than traditional biomass boilers, with projected annual savings exceeding EUR 400,000. These savings could allow the municipality to reinvest in other local projects, further benefiting the community.

Marginal heat production costs and capital costs, source: SF1-Zabljak: Assessment of Largescale air sourced heat pump, Aadit Malla, TU Wien, November 2024

Overcoming funding hurdles

While the technical and economic feasibility of the project is clear, Žabljak is facing challenges in securing the necessary funding. As the total investment cost has been scaled back, the investment will look less attractive, especially for big development banks such as EBRD, KfW or other high-volume lenders. Moreover, the local authorities need technical knowledge and expertise to mature the project and secure investment grants. They are actively seeking partners and investors to move the project forward. This is a common issue faced by small towns when trying to implement green energy solutions.

To address the funding gap and advance the detailed technical development of the project, in November this year, the municipal authorities held their first discussions on potential support with the Montenegrin Ministry of Energy. In mid-March 2025, they are also organizing a workshop, in partnership with Bankwatch, to bring together technical experts, policymakers, and potential funders. The workshop will focus on the specifics of the hybrid heating system and explore innovative financing strategies to accelerate the project’s realization. This collaborative approach will help build momentum and attract the support needed to bring the vision to life.

A model for mountain communities

If successful, Žabljak’s hybrid district heating solution could become a model for other mountain towns or small and mid-size towns in the region. Similar efforts are underway in towns like Kakanj and Živinice in Bosnia and Herzegovina, and Kočani in North Macedonia, where local governments are rethinking their heating systems to adopt cleaner alternatives. These initiatives are among those showing the Western Balkans’ potential to leapfrog from coal and wood-based heating to renewables-dominated systems, without the need to resort to fossil gas.

Through this initiative, Žabljak is demonstrating that innovation in energy solutions is not limited to large cities or rich countries. With the right combination of technologies, collaboration, and financial support, mountain towns can lead the way in creating cleaner, more sustainable communities for the future.

No just transition in sight for gas-distracted Serbian coal communities

Miners work hard, but coal mining is digging the region into debt

In November 2024, Bankwatch visited the Despotovac and Zaječar regions in Serbia, where most of its underground coal mines are located. The mining company PEU Resavica receives three times more of its annual income from state subsidies than from sales — approximately EUR 47 million EUR in subsidies and EUR 15 million in sales. This region should therefore be the first to start the transition beyond coal. However, our meetings with municipalities, mine officials and trade union representatives showed that this region is not at all ready to move to a new economy.

Despite being heavily in debt, the mines have yet to be modernised. Mining company representatives are visibly proud of their continued operation since 1830. However, they said they still mine similarly as they did in the beginning – ‘like in Snow White and the seven dwarfs, with pickaxes’.

Despite the use of ancient technology, the region is proud to have never stopped coal production in some of the mines, and a mining museum in Senjski rudnik showcasing this history. Visitors can see the tools and the safety equipment that was used for underground mining over the years and a photo exhibition highlighting how much the local culture has been shaped by the mine. The region is so connected with coal mining that even the local restaurant has a mining-related logo and serves an ‘authentic Sunday lunch in a miner’s house’.

menu from etno konak Majdan — Menu in a local restaurant

Agricultural potential underused

Not everyone is happy with having the mine there, though. The municipality of Despotovac hosts the main offices of the mining company and is among the more developed municipalities. However, they do not receive concession fees from coal mining, and are also unable to collect taxes, as the mine’s bank account has been frozen for years. While the local authorities are acknowledging that some of their residents are employed at the mine, thus preventing labour migration, they would prefer to have a more diversified economy.

Despotovac has good but underutilised agricultural potential. Farming subsidies are available, but the local authorities are not satisfied with their usage rate. The municipality also offers subsidies for improving the energy efficiency of households, with 40 successful applications in the most recent round. Rural tourism also has significant potential and although the number of related businesses is increasing, there is still a lot of room for further development. The local development strategy until 2030 is rather broad and its implementation is dependent on national decisions and on the nearby town of Jagodina which is not very cooperative and does not prioritise support for the region.

Air polluted, but keeping the mine afloat

In Zaječar, a town close to the Bulgarian border, the story is very different. Because Zaječar is larger than Despotovac, it is less dependent on the mines, except for heating, which relies heavily on coal. The local district heating system has been privatised, and many households have disconnected because of the high prices. However, with limited options and support schemes, they use cheap, locally sourced lignite from one of the underground mines at Lubnica, which keeps the Lubnica mine open – supporting around 300 workers and the entire village. This can be seen and felt in the appallingly polluted air. If coal was not sold to heat homes in Zaječar, there would be no market for its lignite and the mine would have to close.

At a meeting with the mining company, company officials complained about the difficulty of finding workers, saying that the average age of new employees is 35 and that young people – understandably –don’t want to work in a mine. The mine’s small size prevents the use of modern techniques, so they use pickaxes, in three shifts, 24/7, just to make sure the mines can stay open, and the tunnels do not collapse.

Switching to gas will just create new dependence

The region’s economy is not entirely dependent on the coal from the underground mines, but there are currently few activities leading to greater independence. On the contrary, the local authorities are looking forward to replacing the region’s dependence on one fossil fuel with another – gas.

The fossil gas network already reaches the nearby town of Paraćin, but an additional pipeline would have to be built to Zaječar. While they wait for another fossil fuel that will create new dependence, they are only prolonging their air pollution agony. The company and the local authorities, although aware that the introduction of gas for household heating will lead to the abrupt closure of the mine, are not taking any action to mitigate the socio-economic impacts.

This transition to a new fossil fuel will require another transition to a decarbonised heat source in the near future, which is totally unrealistic. The region that is already struggling to diversify its economic activities, and gas is distracting the authorities from this task.

The way forward to a just transition

The workers in the inevitably dying coal industry need to be supported and enabled to continue contributing to the development of the region. Their knowledge and expertise can be used to create and expand the economy and the social well-being of citizens in the region — it just takes an innovative approach to finding uses for their skills.

Eastern Serbia, as well as the entire Western Balkans, has huge potential for agriculture, crafts, rural tourism, but also important potential for green jobs in renewable energy deployment, energy efficiency retrofits and the circular economy. Looking to the future, we could see regions that are much more developed, offering not only the same, but a much better quality of life. Creative use of the opportunities offered by just transition may be the kick-start we need to make this future a reality.

Western Balkan governments are willing accomplices in Azerbaijan’s abuse of COP29. Will the EU act to defend climate integrity?

Azerbaijan’s fossil fuel industry profited from its role even before the conference began. The contracts signed by state oil and gas company SOCAR in the last 12 months are worth close to three times more than contracts sealed in the preceding period. A senior COP29 official was even secretly filmed using his role to arrange a meeting to discuss more deals.

Several Western Balkan governments are among those eager to access Azerbaijan’s fossil gas resources. Instead of using COP29 to make new commitments to phase out the region’s choking old coal power plants and speed up their energy transitions, they’ve been willing accomplices to the Azerbaijan government’s abuse of the climate emergency.

The Albanian government has used the event to sign a memorandum of understanding with SOCAR for the construction of a gas distribution system in the southern city of Korçë. A country largely dependent on hydropower for electricity, Albania is likely the only country in Europe planning to transition *to* fossil fuels instead of away from them.

Serbia’s President Vučić and his Azerbaijani counterpart Aliyev also met at COP29 and discussed building a joint gas power plant, including gas supply – either a one gigawatt facility in Niš, the country’s third-largest city, or two of 350 megawatts each.

And North Macedonia’s ESM power utility and SOCAR also signed a memorandum to access Azerbaijan’s gas, though details of the deal are scant.

It has been clear for years already that no more fossil fuel infrastructure can be built if we are to stand any chance of limiting climate chaos to survivable limits. If decarbonisation of all sectors is to take place by 2050 at the very latest, it is too late to start locking in new fossil fuel pipelines and power plants now.

And gasification in the Western Balkans makes no economic or political sense. The region has lower gas dependence than the EU. Serbia and North Macedonia use gas e.g. for district heating, but still not as much as EU countries, while Bosnia and Herzegovina mainly uses it to heat Sarajevo. Albania, Montenegro and Kosovo are gas-free as they are not connected to international gas networks, despite the Trans-Adriatic Pipeline running through Albania.

This low dependence on fossil gas is an advantage to maximise. If the last four years have taught us anything, it is that dependence on imported fuels is a mistake. But this lesson doesn’t seem to be getting through to Western Balkan governments, with the exception of Kosovo, which has wisely decided against building a gas supply pipeline.

In principle, the European Commission could play a key role in preventing more fossil fuel lock-in, explaining to decision makers in the region what decarbonisation at the latest by 2050 really entails, and leading by example.

The problem is, it’s spent years sending mixed messages. Despite strong growth of wind, solar and heat pumps, the EU is struggling to overcome its own gas addiction. Progress has been made with consumption decreasing since 2022, but it has courted Azerbaijan for additional supplies, despite the country’s appalling human rights record.

EU funds channelled through the Western Balkans Investment Framework (WBIF) have supported solar, wind and energy efficiency, but they’ve also financed studies encouraging gasification in Albania and Kosovo and increased gas use in North Macedonia and Bosnia and Herzegovina. They’ve also funded the construction of a pipeline from Bulgaria to Serbia and a planned one from Greece to North Macedonia. Even now, after the recent gas crises, studies on a new pipeline from North Macedonia to Serbia are still under preparation with EU support.

The European Commission has too often shown political support for gas. Among others, outgoing Neighbourhood and Enlargement Commissioner, Olivér Várhelyi, featured it in the EU’s Economic and Enlargement Plan for the region as well as pledging to help Montenegro build a liquified gas (LNG) terminal.

This has cost considerable time and money that should have been spent on sustainable power and heat solutions such as insulation, heat pumps, geothermal, solar and wind.

But with new Enlargement Commissioner Marta Kos set to take office soon, it’s a key moment for the EU to clarify its messages towards the Western Balkans.

There have been signs of hope, with the Trans-European Network for Energy Regulation and the new Reform and Growth Facility ruling out financing for fossil fuels. But the Commission needs to unequivocally reject further support for gas infrastructure in the region and step up its support for an energy efficient, 100 per cent renewable future.

Hydrogen’s empty promises: How Hungary, Poland and Romania are betting on false solutions

A recent Bankwatch report sheds light on the hydrogen plans of Hungary, Poland and Romania, stressing the need to avoid misguided investments in greenwashed fossil hydrogen projects and inefficient end-use applications.

The Financial Times recently reported a major drop in hydrogen stock prices in both the EU and the US, citing ‘lower than expected demand, regulatory uncertainties and growing investor skepticism’. While industry players admit to having ‘unrealistic expectations’ about the pace of project development, they’ve been quick to place the blame on ‘rigid’ and ‘stringent’ EU legal definitions of renewable hydrogen, whilst ignoring the dawning realisation: Maybe they’ve just been plain wrong from the very start?

Though the EU is prioritising the development and use of renewable hydrogen, actual spending has fallen short of its ambitious targets. In fact, the EU is set to reach only about 4 per cent of its 2024 electrolyser target set in 2020, with built capacity of 0.216 gigawatts (GW) of its 6 GW target achieved in 2023. Additionally, most EU funds do not explicitly target renewable hydrogen production, as they also provide funding for ‘low-carbon’ hydrogen, restricting the support available for renewable hydrogen projects.

This confusion extends to the hydrogen plans of governments in central and eastern Europe. As our new report shows, Hungary, Poland and Romania are expecting hydrogen to play a significant part in their decarbonisation strategies, ignoring issues of cost and efficiency. Despite the EU’s alleged focus on renewable hydrogen, these nations are weighing up all their options across the ‘hydrogen rainbow’.

Unfocused

Whilst recognising the need to ramp up renewable hydrogen production, the three countries have worrying plans to increase the use of non-renewable hydrogen. Fossil hydrogen with carbon capture, also known as ‘blue hydrogen’, has been shown to produce higher greenhouse gas emissions than burning fossil gas directly. Furthemore, carbon capture is not commercially viable and has not proven effective in reducing carbon emissions, considering the vast subsidies the projects require. None of these countries’ hydrogen strategies rule out the need for fossil-based hydrogen, not even after 2030.

Hungary and Poland have also adopted more ‘technology-neutral’ definitions of hydrogen production technologies. Hungary lumps water electrolysis in with nuclear hydrogen under the blanket term ‘green and other carbon-free hydrogen’, while Poland classifies fossil gas with carbon capture, utilisation and storage, nuclear, and biomass-based hydrogen all as ‘low-carbon’ along with renewable hydrogen. This greenwashes the use of fossil gas or nuclear for hydrogen production, while promoting false solutions such as carbon capture.

All three countries agree with the EU’s priority sectors for hydrogen use: decarbonising industry and other hard-to-abate sectors. However, they haven’t stopped there, treating hydrogen as a solution to every sector in need of decarbonisation.

The unfocused nature of their hydrogen strategies and plans means that the countries now lack clear ideas about what sectors and hydrogen applications must be prioritised to assess limited public funding. EU funds therefore risk being used to support fossil fuels.

One of the key issues with the hydrogen strategies of Hungary, Poland and Romania is their affinity for blending hydrogen with fossil gas under the pretence that it will reduce carbon emissions. For instance, Hungary plans to blend hydrogen into its existing fossil gas transmission system, with new gas power plants set to incorporate a 5 to 30 per cent hydrogen blend. In Poland, retrofitted gas infrastructure is expected to accommodate a 10 per cent blend. The Hungarian and Romanian governments plan to initially blend 2 per cent hydrogen into the distribution network, with Romania aiming to reach 20 per cent, having invested EU funds for this purpose. But even assuming renewable hydrogen is used in all these cases – which is far from certain – the ultimate emissions savings would be marginal and represent a waste of a limited resource and are associated with significant costs.

Perhaps the most obviously unsuitable application for hydrogen use has somehow also made its way into these national strategies – the heating and cooling sector. Scientific findings suggest that hydrogen is not a cost-optimal solution for decarbonising the heating sector, compared to electrification’s higher efficiency and lower costs. Despite this evidence, Poland has included future large investments in heating and cooling infrastructure to introduce a hydrogen-fossil gas blend, while Romania plans to use hydrogen in heating after 2030, and Hungary potentially after 2040.

Unrealistic

The pace of renewable energy deployment in these countries lags far behind that needed to reach their renewable hydrogen production targets by 2030, which requires even more renewable energy production. The pace and scale of hydrogen targets both within the EU and in these countries is unrealistic, bordering on the impossible. This is also not reflected in hydrogen projects receiving public funding – Romania is the only country of the three that’s allocated a relatively significant amount of funding for electrolysers, and even that’s negligible compared to the intended renewable hydrogen consumption levels. None of the countries target the issue of necessary additional renewable capacity in their hydrogen strategies. Therefore, a massive funding and planning gap stands between the expected renewable hydrogen production capacity by 2030 and the reality of countries lacking electrolyser and renewable projects.

The importance of hydrogen in decarbonising the transport sector is also overinflated and problematic in all the countries, considering that electrification – a more efficient and competitive alternative – is available for local transport and passenger cars. A considerable amount of funding is allocated to purchasing unnecessary hydrogen buses and other vehicles in both Hungary and Poland.

All the countries plan to invest, or are already investing, in hydrogen transmission, both by retrofitting gas transmission networks and developing cross-border projects and brand-new hydrogen pipelines, which is disproportionate to the scale of development of renewable hydrogen production capacity.

Unaffordable

Lastly, no consideration has been given to the misuse of public funds or the social impact of the future renewable hydrogen price in the ‘all-of-the-above’ hydrogen applications approach these countries have adopted. While many hydrogen projects proposed today will remain only dreams of fossil fuel companies, funding the wrong projects could still do a lot of damage. The public is at risk of footing a hefty bill.

Unfocused, unrealistic and unaffordable – three adjectives that sum up the misguided hydrogen strategies of Hungary, Poland and Romania. They all provide unverified plans for their envisaged hydrogen economies. The lack of connection between policy objectives and reality reflects a political perception of hydrogen as a magic bullet, when in practice it’s almost completely missed the target.

What should and should not be funded?

Renewable hydrogen is scarce, expensive and only the most useful solution in a few select cases. Public financing in the EU should be restricted and targeted at those most needed end-use applications and should not be available for solutions outside of that scope to avoid wasting public funds. The EU and its Member States should:

remove support for projects that support the development or use of non-renewable hydrogen and prohibit the subsidisation of fossil hydrogen;
prioritise funding for renewable hydrogen production near to the points of consumption and high-efficiency hydrogen use in ‘hard-to-abate’ sectors over less efficient and no-go applications;

base funding allocations on independent, realistic, scientific assessments and projections for the future of renewable hydrogen, including end-user costs, ensuring investments are grounded in reality;

align investments in demand-side projects directly with the capacity and pace of investments in supply-side projects to avoid mismatches;

exclude public support for hydrogen use in local public transport and passenger vehicles and, under no circumstances, allow funding for the development of the least efficient end-uses of hydrogen, such as heating and cooling;

remove funding for projects that blend hydrogen with fossil gas;

introduce other mandatory hydrogen-use efficiency criteria based on life-cycle emissions savings, cost-effectiveness, energy efficiency, and comparisons to viable alternatives before allocating funding to hydrogen projects; and

revise national strategies and plans for hydrogen based on the above recommendations.