Raunak Dixit*
Introduction
India and the European Union concluded the India-EU Free Trade Agreement on 27 January 2026, at the 16th India-EU Summit. Tucked into a joint statement was the announcement of a new Green Hydrogen Task Force, set up under the EU-India Clean Energy and Climate Partnership. The Task Force supports production, standards, and technology sharing. What it leaves untouched is a narrower, more technical problem. India’s National Green Hydrogen Mission aims for five million tonnes of production capacity a year by 2030, at a cost of $1.5 per kilogram, and Europe is meant to be the natural buyer for most of it. A certification rule buried inside the EU’s Renewable Energy Directive III (RED III) may exclude much of what India intends to sell, regardless of how India brought its cost down, regardless of how clean the hydrogen itself is.
The question this piece asks is narrower than whether RED III is protectionist in the abstract. It is whether the EU’s “additionality” requirement for renewable hydrogen, tested against the WTO Agreement on Technical Barriers to Trade, is calibrated to the risk it claims to address, or whether it incidentally screens out an entire category of imports regardless of their actual environmental performance. WTO case law requires tribunals to do that fact-specific investigation on their own; Brussels cannot overcome this issue by claiming a green label. No Indian shipment has yet been refused RFNBO status, so what follows is an anticipatory reading of a design flaw, not an account of a live dispute. It is important to address the issue now, before it gets ingrained in custom and before India’s exports grow to the point where confrontation is inevitable. That surfacing ought to begin with the new Green Hydrogen Task Force.
The Dispute
RED III amends the EU’s original Renewable Energy Directive, which first defined Renewable Fuels of Non-Biological Origin (RFNBOs) but confined them mostly to transport. RED III widens that recognition and ties it to the EU’s European Climate Law, which commits the bloc to a fifty-five per cent cut in net emissions by 2030. Under RED III, at least 42 per cent of industrial hydrogen use must come from RFNBOs by 2030, rising to 60 percent by 2035, and anyone hoping to sell into that market needs to be approved.
Certification runs through the Additionality Delegated Act, which conditions RFNBO status on additionality, temporal correlation, and geographical correlation. The analysis here deals with additionality alone; temporal and geographical correlation raise separate compliance questions and are set aside here. The Commission’s own explanation describes additionality as ensuring new hydrogen production is matched by new renewable generation, rather than drawing on capacity that already serves other demand. In practical terms, the renewable installation feeding the electrolyser must be no older than thirty-six months, and the state could not have helped the facility producing such power.
The Delegated Act defines State aid by reference to the Article 107(1) TFEU concept: aid granted by a state, or through state resources, that favours undertakings over others. Article 107 itself binds only EU member states, but the Commission has been explicit that the exclusion reaches subsidised renewable power wherever it is produced, so an equivalent domestic scheme in a third country triggers the same disqualification under the Delegated Act’s own third-country provisions. Regardless of its carbon footprint, hydrogen loses RFNBO certification if the renewable energy source used to produce it was subsidised.
India’s position is the mirror image of that. The Mission’s own communications describe the Strategic Interventions for Green Hydrogen Transition (SIGHT) scheme as carrying an incentive outlay running into tens of thousands of crores for electrolyser manufacturing, on top of viability gap funding, capital subsidies for hydrogen hubs, and waived transmission charges. These are at the core of the plan’s cost-cutting approach. An Indian producer using subsidised renewable power, describing nearly every producer under the Mission, loses RFNBO eligibility over how its inputs were financed, independent of what the hydrogen itself emits.
Why Additionality Cannot Bear the Weight
The concern that additionality functions as a trade barrier is not specific to India’s situation. Commentators and some WTO members have raised versions of this objection against RED II and RED III, and industry analysis has noted that the State aid exclusion can deny European buyers access to RFNBO manufactured outside of the EU that is subsidised. India’s Mission gives the objection a concrete scale. Regardless of how clean its grid gets, it is fundamentally ineligible under the delegated Act.
The two distinct strategies provided by the TBT Agreement should not be combined into one. Article 2.1 inquires as to whether a technical rule treats imported goods similarly to domestic goods, and whether any negative effects on imports are caused by a valid regulatory distinction rather than the measure’s implementation or design. In United States Clove Cigarettes, the Appellate Body accepted a legitimate public-health objective but found the measure’s design produced an unjustified detrimental impact on imports relative to a competing domestic product. In the United States II (Mexico), the Appellate Body ran the same calibration inquiry on a certification and labelling scheme, asking whether its eligibility criteria tracked the risk the scheme claimed to address or instead filtered out imports for unrelated reasons. In this case, the question is whether the State assistance exclusion is calibrated to cannibalisation risk or if it captures producers who are subsidised but do not engage in cannibalisation because of the rule’s design.
Article 2.2’s necessity standard, that a technical regulation be no more trade-restrictive than necessary to fulfil a legitimate objective, applies once a legitimate objective and a restriction are both established, supplying the less-restrictive-alternative inquiry that follows a 2.1 finding, and both standards point the same way here. Additionality’s stated purpose is to stop hydrogen producers drawing on renewable capacity that would otherwise serve existing demand, so-called cannibalisation. RED III separately contains a lifecycle emissions methodology capable of verifying whether hydrogen is genuinely clean, and that alone could carry the environmental objective. The State aid exclusion measures fiscal architecture rather than carbon content or the new-versus-existing capacity distinction, the rule claims to police. A less restrictive alternative sits inside the same directive, unused for this purpose. The EU’s own Carbon Border Adjustment Mechanism Regulation makes the same point by contrast. CBAM prices embedded carbon in imported steel, cement and hydrogen without asking how the exporting government financed its producers. Nothing about the underlying objective required additionality to include the State aid criterion. The drafters added it as a separate policy choice.
The cannibalisation concern also does not travel between regulatory settings. The concern carries real weight when an EU-based producer draws on existing wind or solar capacity and diverts supply that would otherwise serve someone else on the same grid. When hydrogen is produced and consumed entirely within India’s own electricity system, no European grid is displaced, and the concern has nothing left to attach to. When a producer who is unable to displace any EU grid is subjected to a regulation calibrated for grid-diversion risk, the rule’s declared aim and design diverge.
This interpretation is refined by two other bodies of WTO law. The WTO Agreement on Subsidies and Countervailing Measures governs whether a subsidy granted by an exporting member is itself actionable, through an investigation, injury test, and causation requirement: limitations that result from the otherwise disciplined unilateral penalisation of foreign subsidies. Additionally, the State aid exclusion reaches the same target, subsidised foreign production, without any of that process. In substance, because it is designed as a certification standard rather than a requirement, it operates as a countervailing measure outside of SCM’s procedural limitations.
The TBT Agreement, which reaches labelling and certification measures regardless of their SCM-adjacent effect, is the correct forum here. An SCM claim would target the wrong actor, since the EU’s own labelling design is under scrutiny here, not the exporting government’s conduct.
GATT Article XX’s general exceptions, covering measures necessary to protect life or health or conserve exhaustible resources, sit closer but do not settle the question in the EU’s favour. RED III’s RFNBO scheme plainly pursues an environmental objective capable of falling within Article XX. However, since the lifetime methodology serves that purpose, the design decision under scrutiny, which excludes subsidised renewable electricity regardless of its emissions profile, is not required to conserve anything, and Article XX safeguards measures inherently vital to that end.
A chapeau defence would have to justify the State aid criterion specifically, not RED III’s environmental purpose in general; it is more difficult for the EU to prove than the overall explanation implies.
The same additionality logic governs the FuelEU Maritime Regulation and the ReFuelEU Aviation Regulation, both of which count hydrogen derivatives toward shipping and aviation fuel targets using the same certification methodology, verified through third-party schemes like the Commission Implementing Decision on ISCC EU. A solution agreed today for hydrogen bears weight beyond hydrogen alone because a regulation designed for one commodity is becoming the default gate for a comprehensive clean-fuels regime.
What Needs to Be Done
India does not need to go straight to WTO dispute settlement: when it comes to a design fault that hasn’t been proven through direct contact, much alone applied to a real excluded cargo, that method is slow, combative, and premature.
There is currently a place for a more practical method that begins bilaterally. India has more to offer than just an objection, and the Green Hydrogen Task Force provides a direct avenue for raising the asymmetric impact of additionality with the Commission before it becomes a formal dispute.
It operates its own Green Hydrogen Certification Scheme built around its own verification and life-cycle accounting rules. This gives negotiators a framework for mutual recognition rather than asking for a one-time exemption without a domestic counterpart. Cooperation on hydrogen runs through the India-EU Trade and Technology Council, under which more than thirty joint proposals on hydrogen production have been received. Thus far, the record has focused on collaboration between research and manufacturing rather than the certification mismatch itself. The Task Force’s mission is to close that gap.
The narrow channel is requested by the concrete. Rewriting the Delegated Act is not necessary; instead, an alternate compliance route for imported RFNBOs based on the RED III lifetime emissions approach is proposed, with the additionality and State aid tests retained for domestic EU production, where the cannibalisation risk it targets is present. By framing the request in this manner, the EU maintains its environmental goal and only requests that the State assistance criteria be used in cases where its justification is still valid.
If bilateral engagement stalls, a Specific Trade Concern raised at the WTO Committee on Technical Barriers to Trade, through the Specific Trade Concerns mechanism that members use for exactly this kind of grievance, is the intermediate step short of formal dispute settlement. It gains more traction than a bilateral complaint made by India alone since it establishes a public record of the objection and alerts other members with similar subsidy schemes, including numerous exporters from the Gulf and Latin America.
Conclusion
The India-EU Free Trade Agreement was billed as a settlement of the major questions between the two economies. Its Green Hydrogen Task Force has the mandate to settle this one, but nothing in its design so far commits it to doing so. A regulation meant to guarantee climate integrity currently functions, for reasons unrelated to carbon content, as protection for producers who do not depend on subsidised power against those who do. This gap between the rule’s stated purpose and its operative criterion will keep generating friction as the EU’s clean-fuels rules expand to cover more of India’s exports. Closing it through the Task Force is the option available now, before the alternative becomes a Specific Trade Concern, and eventually a formal WTO complaint; neither side has an interest in litigating.
* The author is a second-year Law student at Dr. Ram Manohar Lohiya National Law University, Lucknow. The author may be contacted at raunakdixit.rmlnlu@gmail.com.
This blog reflects the personal views of the author and does not necessarily represent the views of The Policy Chronicle.