Why hydrogen projects become so important for Russia

The Nord Stream 2 gas pipeline can be used to supply hydrogen. For the time being, this is just a theory. However, Gazprom has recently announced an intention to set up a new company - Gazprom Hydrogen. The company will deal with the implementation of innovative hydrogen projects.

Gazprom's idea is to build a plant in northern Germany to produce low-carbon hydrogen from Russian natural gas. The plant is to be built in the area of the outlets of Nord Stream and Nord Stream 2 gas pipelines. This is one of the options for cooperation between Russia and Germany in the field of hydrogen energy.

So far, hydrogen cannot compete with traditional energy sources in terms of production costs. However, the above-mentioned project targets the future, which one can hardly refer to as remote future as it goes about 15-30 years.

In July, the European Commission unveiled a strategy, according to which hydrogen fuel is to become part of EU's energy system by 2030. Over the next four years, the EU is to launch the construction of electrolysis plants that will enable the production of up to 1 million tons of renewable hydrogen.

In the future, hydrogen is to be used in sectors that are difficult to decarbonize, for example, in heavy industry and transport.

How EU plans can affect Russian companies

At the same time, the EU recognizes the need to use natural gas until 2030, to say the least. There is not too much time left either - only ten years. Of course, the EU is not going to achieve significant technological progress during this time that will give it an opportunity to refuse from the use of natural gas for good. Yet, it will introduce additional taxes that will primarily affect suppliers from Russia. It goes about the so-called carbon tax, which is to be introduced in the European Union. This tax stipulates that suppliers of goods to the European market, which to burn a lot of fossil fuels in the process of their production, will have to pay about 30 euros per each ton of carbon dioxide released into the atmosphere.

This tax may affect Russian companies in the first place, and they can suffer considerable financial losses when the new tax is implemented. Most of Russia's exports to European countries accounts for oil, gas and ferrous metallurgy products.

Earlier, analysts at KPMG auditing company calculated that during the implementation of the baseline scenario for the introduction of the new carbon tax in the European Union, Russian exporters will have to pay about 33 billion euros in 2025-2030. In the event that the new tax is introduced already in 2022, costs will increase up to 50 billion euros.

It is worthy of note that all of the above is just a theory. The mechanism behind the implementation of the new tax is not yet entirely clear, but this is not likely to stop European bureaucrats. In a nutshell, Russia has to participate in hydrogen projects - this is a necessity, even though the whole project offers more questions than answers.