Why RED III implementation matters?

Binding targets and penalties, such as those under the EU Renewable Energy Directive (REDIII) transposed by EU counties, play a key role in commercializing renewable hydrogen and derivatives in the EU.

According to Hydrogen Council’s Closing the Cost Gap report, REDIII transposition could drive up to 3.3 Mt p.a. in renewable hydrogen and derivatives’ demand carrying a positive business case in Europe by 2030. That’s why recent progress on RED III transposition in countries such as Germany, Italy and the Netherlands is important right now.

But the broader picture demands urgency: According to BloombergNEF only 12 of 27 EU member states have legislated RFNBO quotas, nearly a year after the May 2025 deadline – and in most countries, penalties remain too low to drive real compliance.

What is moving:

1️⃣Germany: RED III adopted, with higher ambition locked in

On 23 April 2026, the German Bundestag adopted national RED III implementation, setting a new RFNBO trajectory for transport: rising from 0.1% in 2026 to 5% in 2035 and 10% by 2040. Germany’s €14/kg non-compliance penalty is the strongest in the EU. What’s next: the Bundesrat debates the bill on 8 May 2026.

2️⃣Italy: both industry and transport targets transposed – detailed implementation pending

Italy is among very few countries transposing both industry and transport targets under RED III. Transport target of 1% by 2030. Industry target of at least 42% by 2030 and at least 60% by 2035. Following transposition at a high level, detailed implementation must follow, including penalties.

3️⃣Netherlands: legislation passed, supply on track

The Netherlands passed its transport quota in March 2026, targeting 1.8% by 2030, with a motion to extend targets to 2040. An industry quota is progressing through the national Parliament. The Netherlands is currently well-placed to meet its RFNBO targets with existing pipeline of mature supply projects.

What remains to be addressed:

➡ Industry quotas are facing a deadlock. Countries have been reluctant to impose meaningful industry quotas, primarily due to the rising energy prices for heavy industry and competitiveness concerns. The design of the industry target needs re-thinking in the upcoming RED review.

➡ Penalties are too low in most Member States. Per BloombergNEF’s analysis, effective enforcement requires penalties above €10-12/kg. Most EU countries fall short. Poland’s proposed €1.4/kg is the starkest example of a penalty that will not drive change.

RED III is one of Europe’s most powerful demand-side tools for hydrogen. But its impact depends on timely, consistent implementation at Member State level.

The Commission’s recent legal steps to ensure rule transposition signals now the focus must be on execution, enforcement, and scale across the EU as a whole.