Decoding RED III: Your RFNBO Compliance Guide

The European Union’s Renewable Energy Directive III (RED III) has officially entered into force, marking a significant shift in the hydrogen landscape. It establishes binding rules that redefine what counts as renewable hydrogen and introduces rigorous standards for Renewable Fuels of Non-Biological Origin (RFNBOs).

For companies producing, purchasing, or investing in hydrogen, understanding and complying with these rules is no longer optional; it is the key to accessing future markets, incentives, and funding under the EU’s clean-energy transition¹.

This article explains what RED III means for the hydrogen industry, how to achieve RFNBO compliance, and why doing so positions businesses for long-term growth.

RED III forms the legislative backbone of the EU’s decarbonisation strategy, setting a collective target for renewables to reach 42.5 per cent of total energy consumption by 2030¹. Within that framework, hydrogen plays a crucial role in cutting emissions from hard-to-abate sectors – from refining and fertiliser production to steel and heavy transport – where direct electrification remains impractical².

The directive introduces binding hydrogen-specific quotas. By 2030, at least 42 per cent of the hydrogen used in industry must be certified as an RFNBO, increasing to 60 per cent by 2035¹. In transport, RFNBOs must provide a minimum of 1 per cent of total energy supplied by 2030³. These targets will expand rapidly as Member States transpose RED III into national law by May 2025¹.

To qualify as an RFNBO, hydrogen must satisfy strict sustainability and emissions criteria defined in two Delegated Acts (EU 2023/1184 and 2023/1185)⁶ ⁷. Only fuels that meet these technical rules can be counted towards national and corporate renewable-energy targets.

An RFNBO is a liquid or gaseous fuel produced entirely from renewable sources other than biomass². In hydrogen’s case, it refers to hydrogen generated by electrolysis powered by renewable electricity such as wind, solar, hydro or geothermal energy². The definition also covers synthetic derivatives – often called e-fuels – like e-methanol, e-kerosene and e-ammonia, made by combining renewable hydrogen with captured carbon dioxide².

To be legally recognised as an RFNBO, a fuel must meet four core conditions.

First, the electricity used for production must come exclusively from renewable sources⁶.

Second, the energy input must be non-biological, excluding any biomass-based feedstock².

Third, the production process must comply with the additionality, temporal correlation, and geographical correlation rules outlined in Delegated Regulation 2023/1184⁶.

Finally, the fuel must achieve at least 70 per cent greenhouse-gas savings compared with its fossil equivalent, following the life-cycle methodology in Delegated Regulation 2023/1185⁷.

The fossil benchmark is set at 94 g CO₂-equivalent per megajoule⁷. To meet the 70 per cent savings requirement, renewable hydrogen’s total emissions must remain below roughly 3.4 kg CO₂-equivalent per kilogram of hydrogen⁷. Any production pathway exceeding this threshold cannot count as RFNBO-compliant.

The additionality principle ensures that renewable hydrogen does not simply divert existing clean electricity from other sectors but actively drives new renewable capacity⁶.

For hydrogen projects commissioned after 1 January 2028, the renewable electricity used must come from new, unsubsidised installations built within the previous 36 months⁶. This prevents double-counting and guarantees that new hydrogen production directly expands Europe’s renewable-energy base.

To ease early investment, the EU has introduced a transitional exemption⁶. Projects that reach commercial operation before 1 January 2028 are granted a ten-year waiver from the additionality rule, lasting until 2038. This window has triggered a race to commission, as developers seek to lock in regulatory relief and lower risk for the first decade of operation.

Beyond additionality, producers must also match when and where their renewable electricity is generated with hydrogen production⁶.

Temporal correlation ensures hydrogen is produced when renewable electricity is available⁶. Until 31 December 2029, a monthly matching rule applies – hydrogen output must correspond to renewable generation within the same month⁶. From 1 January 2030, this becomes hourly matching, or in some cases 15-minute intervals, to prove that hydrogen is produced exactly when renewable power is being generated⁶.

Geographical correlation, on the other hand, requires that the renewable electricity and the hydrogen facility are located in the same bidding zone or in directly connected zones with comparable market conditions⁶. This prevents companies from claiming renewable power from distant regions where it cannot physically support production. A limited exception applies to grids with over 90 per cent renewable penetration, allowing producers to draw directly from the grid if their operating hours are capped at that same percentage⁶.

These temporal and geographical criteria compel producers to adopt advanced digital systems capable of real-time monitoring, smart metering, and data verification. For many, digital traceability will become as critical to compliance as physical renewable energy sourcing.

Delegated Regulation 2023/1185 sets the detailed methodology for calculating life-cycle GHG emissions⁷. It includes all stages – electricity generation, conversion, compression, transport, and storage – and must demonstrate at least a 70 per cent reduction compared to the fossil baseline.

If producers use grid electricity that does not fully meet additionality or correlation requirements, they must include the grid’s carbon intensity in their calculations⁷. Three methods are available, but each producer must choose one at the start of the year and apply it consistently⁷. Selecting the wrong approach can mean failing the threshold, especially in regions where the grid mix still includes significant fossil generation⁸.

Producers should therefore conduct a careful analysis of their location and power supply before beginning certification. Strategic site selection can make the difference between a project that qualifies as renewable and one that does not.

Every certified RFNBO must be traceable from origin to end-use⁷. The mass-balance system is the EU-mandated accounting method that tracks production, purchase, storage, and sale of hydrogen and its derivatives⁹. It distinguishes between fully compliant RFNBO hydrogen, renewable hydrogen that fails specific criteria (such as additionality), and non-renewable or low-carbon hydrogen from other sources.

Mass-balance records are typically compiled monthly or quarterly⁹. These reports underpin the issuance of the Proof of Sustainability (PoS) – the official document verifying that a fuel meets all RED III criteria⁴. Producers must maintain detailed documentation of every batch and ensure that sustainability information remains linked to the hydrogen throughout its entire value chain.

Certification is the bridge between technical compliance and market participation⁴. Only hydrogen certified under an EU-recognised voluntary scheme can be sold or counted towards Member States’ binding targets¹⁰.

Recognised schemes include ISCC EU, CertifHy, and the Roundtable on Sustainable Biomaterials (RSB), each authorised by the European Commission⁴. These certification bodies conduct independent audits covering electricity sourcing, GHG methodology, and traceability systems⁴. Once verified, they issue a Proof of Sustainability confirming the compliant volume of hydrogen produced⁴.

While Guarantees of Origin communicate environmental attributes to customers, only the Proof of Sustainability serves as the legally binding instrument for meeting RED III quotas⁴.

RED III introduces an EU-wide digital compliance platform⁹. All Proofs of Sustainability and related data must be entered into the Union Database, overseen by the European Commission⁹. This centralised system enables real-time tracking and prevents double-counting across borders.

For producers, this means implementing digital traceability systems capable of reporting operational data automatically⁹. Failure to meet these standards can lead to exclusion from subsidy schemes, export eligibility, or public procurement contracts⁹. Investing in interoperable, audit-ready software is therefore an immediate priority⁹.

Achieving RFNBO compliance involves four key steps.

The first is sourcing: producers must establish a new, unsubsidised renewable-energy supply through a Power Purchase Agreement or a direct connection to a renewable installation⁶. This step proves that the electricity used for hydrogen production is genuinely renewable in origin.

The second step is production. Here, producers must calculate their life-cycle emissions and maintain accurate mass-balance records⁷. This ensures that every kilogram of hydrogen produced meets the 70 per cent GHG reduction requirement.

The third step is certification. Producers must undergo an audit by an EU-recognised voluntary scheme, such as ISCC or CertifHy¹⁰. Following successful verification, they receive a Proof of Sustainability, which legally validates that their hydrogen counts towards RED III targets.

The final step is reporting and sales. Producers must register their Proofs of Sustainability in the EU Database⁹ and transfer them to buyers. This enables industrial and transport customers to meet their own compliance obligations under RED III.

RFNBO certification is not just a regulatory obligation – it delivers tangible strategic advantages.

RED III creates guaranteed demand for renewable hydrogen¹. Industrial users and transport suppliers must purchase certified RFNBOs to meet their quotas³. For producers, certification becomes a direct pathway to market relevance and premium pricing.

Only RFNBO-compliant hydrogen is eligible for EU and national funding schemes⁵. The European Hydrogen Bank offers fixed-premium subsidies of up to €1.88 per kilogram for certified production⁵. These ten-year contracts provide stable revenue, de-risking early projects and establishing a transparent price benchmark for renewable hydrogen⁵.

Certification also builds investor confidence. It reassures financiers, partners, and customers that a project adheres to the highest sustainability standards. As corporate decarbonisation accelerates, RFNBO-compliant hydrogen becomes the benchmark for ESG-driven procurement and long-term offtake agreements⁴.

Finally, compliance is a form of risk management. Under RED III, responsibility extends down the supply chain. Industrial buyers carry compliance risk if purchased hydrogen later proves non-compliant³. Acquiring certified RFNBOs backed by valid Proofs of Sustainability is therefore both a contractual safeguard and a regulatory necessity³.

The immediate priority for Member States is to transpose RED III into national law by May 2025. After that, the European Commission will review the additionality and correlation framework by July 2028⁶, with the option to adjust methodology if needed.

For businesses, the key milestones are clear. Before 1 January 2028, producers should commission projects to secure a ten-year additionality exemption⁶. By 1 January 2030, they must implement hourly temporal correlation and full digital traceability⁶. Ongoing compliance will require maintaining a valid certification and aligning with evolving national rules⁹.

RED III sets a new standard for renewable hydrogen – ambitious, data-driven, and legally binding. While compliance is complex, it is also a strategic opportunity. Businesses that act now – commissioning projects before 2028, investing in digital monitoring, and securing recognised certification- will be best positioned to benefit from regulatory relief, market demand, and financial support.

RFNBO compliance is not just about meeting law – it is about leading Europe’s transition to a clean-energy future.

For more insights into hydrogen innovation and compliance strategies, visit hydrogenera.eu.