As part of the European Green Deal, the European Commission tabled a legislative proposal on 15 December 2021 to revise the 2009 EU gas directive. It took form of the hydrogen and decarbonised gas markets package. The 2009 EU gas directive is part of the third energy package that set the legislative framework for the EU's internal energy market. Whereas the electricity component of the third energy package was revised in 2019 to align it with the EU's  climate and energy goals, the gas component has undergone only targeted revisions. 

The Commission's proposal of the revised gas directive:

• The scope and definitions in the directive are modified to incorporate renewable gases and hydrogen as key components of the future gas market.
• Rules are set up to ensure competitive, consumer-centred, flexible and nondiscriminatory gas markets. This includes sustainability and certification rules for renewable and low-carbon gases, which are set to become a much bigger share of an internal gas market hitherto dominated by fossil fuels.
  
• Consumer rights in the future EU gas market are further strengthened and the regulatory framework for citizen energy communities is defined.
• Existing EU gas market principles of third-party access, unbundling of transmission and distribution system operators, and independent regulatory authorities are refined and fully extended to cover hydrogen and renewable gases.
• A comprehensive legal framework for cross-border EU hydrogen networks is developed, which incorporates existing EU networks as well as cross-border networks with third countries.
• Long-term contracts for unabated fossil fuel gas could not extend beyond 2049, in order to ensure the EU meets its goal of climate neutrality by 2050.

In the European Parliament, the file was referred to the Committee on Industry, Research and Energy (ITRE), which appointed Jens Geier (S&D, Germany) as its rapporteur. The rapporteur produced a draft report in June 2022, which was opened to amendments until July 2022 that were subsequently negotiated.  The Committee for Internal Market and Consumer Protection (IMCO) was associated to this report under Rule 57 of the European Parliament's Rules of Procedure. On 9 February 2023, the ITRE committee adopted a final report together with a mandate to enter into interinstitutional negotiations, which has been confirmed at the plenary session in March 2023. 

The ITRE report specifies that hydrogen corridors, identified in the REPowerEU plan, should be supported by adequate infrastructure and investments. The aim is to ensure that enough cross-border capacity is available to establish an integrated European hydrogen market – the so-called “hydrogen backbone”, and enable hydrogen to move freely across borders. The report expressed a preference for integrating hydrogen network planning with network planning for gas. Furthermore, the ITRE report aimed for the EU to phase out fossil fuels as soon as possible, with the possibility for individual Member states to decide on an earlier end-date than 2049 for the duration of long-term contracts for unabated fossil fuel gas.

The Council adopted its negotiating position, i.e. its general approach on 28 March 2023. The Council added provisions empowering the Council to declare a regional or Union-wide natural gas price crisis for a period of one year when Member States may apply public interventions in price setting (price regulation). In addition, the Council adjusted the provisions on consumers, including on the right of termination in case of bundled offers and on procedures for changing suppliers. The Council's general approach prolongs the transition phase for hydrogen market development until the end of 2035. The Council specifies that the EU and the Member States would be obliged to conclude international agreements before operating hydrogen interconnectors with third countries, and that they would also be obliged to ensure applicability of EU law. 

The Parliament and the Council reached a provisional agreement on 28 November 2023. The agreement envisages separation of gas and hydrogen supply and generation from the operation of transmission networks, thus retaining both horizontal and vertical unbundling regime. However, Member States may apply derogations from these rules. The agreement includes Parliament’s proposal to introduce provisions on the establishment of plans for the decommissioning of gas networks by DSOs. New definitions ensure the split between Transmission System Operators (TSOs) and Distribution System Operators (DSOs) for hydrogen.

Member states will have to take measures to prevent disconnections, especially of vulnerable clients. Member States can also intervene in case of the surge of gas prices for SMEs, microenterprises, households and essential social services.

The agreement retains the Commission's proposal that long-term contracts for fossil gas should be phased-out by 2049. Agreed provisions on derogation for geographically confined hydrogen networks follow the Council’s position. The delegated act defining low-carbon hydrogen is expected twelve months after the entry into force of the text (the Commission proposed six months). Finally, the provisional agreement provides for increased coordination between network development plans for hydrogen, electricity and natural gas.

The ITRE committee approved the provisional agreement on 23 January 2024 and the plenary on 11 April 2024. The Council approved the agreement on 25 May 2024. The final act was signed on 13 June 2024. The directive on common rules for the internal markets for renewable gas, natural gas and hydrogen was published in the Official Journal on 15 July 2024 and entered into force on 4 August 2024. 

References:

• Directive on common rules for the internal markets for renewable gas, natural gas and hydrogen
• EP Legislative Observatory, Procedure file on Gas and hydrogen markets directive (common rules), 2021/0425(COD)
• European Commission, Proposal for a directive on common rules for the internal markets in renewable and natural gases and in hydrogen, COM (2021) 803
• Directive 2009/73/EC of 13 July 2009 concerning common rules for the internal market in natural gas (consolidated version incorporating subsequent revisions)
• European Commission, Communication on the European Green Deal, COM/2019/640

Further reading:

• European Parliament, EPRS, Revision of the third energy package for gas: Decarbonising the gas market. Regulation 715/2009/EU and Directive 2009/73/EU, Briefing - Implementation Appraisal, December 2021.
• European Parliament, EPRS, EU directive on hydrogen and gas networks, Briefing - Legislation in Progress, July 2024.

Author: Monika Dulian, Members' Research Service, legislative-train@europarl.europa.eu

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