The European Commission will outline plans on March 16 for a hydrogen subsidy scheme that would make clean versions of the fuel more competitive with fossil fuel-based hydrogen, a draft document showed.

EU industries use about 8 million tonnes of hydrogen, but the vast majority of that is produced using gas in a process that emits planet-heating CO2. The EU wants to switch to CO2-free hydrogen produced from renewable electricity to cut industry emissions.

The EU will launch a hydrogen funding "bank", consisting of auctions to award a fixed premium to hydrogen producers per kilogram of hydrogen for up to 10 years, according to a draft document seen by Reuters and which is due to be published on March 16.

The first auction this year would offer around 800 million euros. The payments will be made once the hydrogen has been produced. To apply, projects would need proof that they have an interested buyer and a renewable energy supply to power the production site.

"The goal of the bank is to reduce the cost gap to a level that private off-takers are willing and able to cover," the draft said.

Governments will also be able to put national funding into the EU auctions to increase the budget for projects in their own countries, so that if projects miss out on the EU funding, they can still receive this state aid.

The EU wants to produce 10 million tonnes of renewable hydrogen and import another 10 million by 2030. It currently produces less than 0.3 million tonnes of hydrogen from electricity, the draft said.

Hitting those targets would require massive investments to expand Europe's tiny fleet of electrolysers — the equipment used to produce hydrogen from electricity — and install 150 GW to 210 GW of new renewable energy capacity to power them.

That investment could cost up to 471 billion euros ($500 billion), the draft said — most of it expected to come from the private sector.