As summer comes to an end, so too does the season for music festivals here in the UK. Back in June, our largest festival, Glastonbury, welcomed Alanis Morissette to its famous Pyramid Stage for the coveted pre-headliner slot on a Friday evening. It was the first time Morissette had played the festival, and she treated the crowd to a set of her greatest hits, including ‘Hand in My Pocket’, ‘You Oughta Know’ and, of course, ‘Ironic’ – Morissette’s timeless anthem that is, infamously, almost entirely devoid of irony.
No doubt the experts at Wood Mackenzie were humming along to this tune as they penned their latest report, titled: ‘Isn’t it ironic: how Europe’s oil refiners could offer a route to scale green hydrogen production.’ Apologies if I have passed the ear worm onto you, but I promise that the report is well worth a read.1 In a rather paradoxical turn of events, Wood Mackenzie reveals that European oil refining, often seen as emblematic of carbon intensity, could hold the key to unlocking demand growth for green hydrogen.
EU regulations are forcing refiners to decarbonise faster than anywhere else on the planet, and Wood Mackenzie’s analysis suggests that the continent’s refiners are set to become significant producers or buyers of green hydrogen in order to meet this requirement. The refining sector, alongside ammonia and methanol production, accounts for approximately 98% of all hydrogen demand. But producing this essential ingredient using traditional methods is costly, both from an environmental and economic perspective. European refiners are part of the EU Emissions Trading Scheme, which sees them charged for the CO2 that they emit beyond a certain free allowance. However, producing green hydrogen on-site would eliminate many of the CO2 emissions and, therefore, the carbon costs.
The latest edition to the EU’s Renewable Energy Directive (RED III) provides essential support for green hydrogen adoption as it promotes “renewable fuels of non-biological origin”, which includes green hydrogen. Wood Mackenzie forecasts that European refiners will require around 0.5 million tpy of green hydrogen production to comply with regulations, which would replace approximately 30% of the continent’s fossil fuel hydrogen production, at an investment of more than US$15 billion. Many refiners are now looking to produce green hydrogen on-site to decarbonise their operations and supply fuels compliant with RED III. As Wood Mackenzie points out, both Repsol and TotalEnergies confirmed in recent earnings calls that green hydrogen is the most competitive route to regulatory compliance.
While RED III bodes well for green hydrogen’s near-term growth in the European refining sector, Wood Mackenzie warns that much more is required in order to ensure significant longer-term growth. It outlines three key areas that require further action: costs, technology, and the wider regulatory environment. “Parts of the refining sector can be decarbonised quickly – and at an acceptable cost. But it requires policy intervention to lower green hydrogen production costs and increase the refineries’ offtake. Without such policies, the incentives will not emerge.”
Perhaps the biggest irony here is that in striving to decarbonise through green hydrogen, Europe’s refiners face costs that could make their operations less viable – a paradox that only strong and consistent policy can resolve. Don’t you think?
- DOUGLAS, M., GELDER, A, and THOMPSON, G., Isn’t it ironic: how Europe’s oil refiners could offer a route to scale green hydrogen production, (August 2025), Read here
