Industry group Hydrogen Europe has warned the European Commission that proposed EU regulations could trigger a mass withdrawal of companies from the bloc in favor of the U.S. market, which has started to attract investors with the federal government’s Inflation Reduction Act (IRA). The group called the IRA “the most impressive incentive any policymaker has undertaken to encourage renewable hydrogen rollout” in its letter to Commission President von der Leyen. The bill includes a raft of measures intended to stimulate hydrogen production and use, including a production tax credit of up to $3/kg, which could make US hydrogen with no or minimal carbon emissions the cheapest in the world.

Hydrogen Europe said many companies and project developers have already started making negotiations to benefit from the scheme. Several companies in the hydrogen industry said they will increasingly focus on the U.S. market as a priority, thanks to the IRA.

The industry group added that the bill’s rules are simple and conditions are attractive. It argues that they are the opposite of what investors find in the EU. Hydrogen Europe further said a European “regulatory framework has not been finalized”, while “rules are overly complex” and incentives are neither concrete nor tangible.

The EU is yet to finalize its legal definition of renewable hydrogen. The regulations are overdue, given that under the EU’s 2018 renewables directive the commission was required to publish the delegated act by 31 December 2021.

What worries Hydrogen Europe the most is the draft legislation’s “additionality” clause. It specifies hydrogen could only be considered “clean” if it is produced from an electrolyzer that runs on power from a new renewable facility. These rules are “disproportionate and will make European renewable hydrogen insufficient for the industry needs and non-competitive vis-à-vis non-European renewable hydrogen”, the industry association said.

Hydrogen Europe called for this aspect of the delegated act to be amended, and for the commission to work towards increasing “strategic co-ordination” between member states. According to the association, “only a handful of member states would see large scale financially viable renewable hydrogen project go ahead under the current environment”.