The European Commission has given Germany permission to invest around €3 billion in its hydrogen infrastructure to build long-distance pipelines.
The commission on Friday said that the positive effects of the government subsidies would be greater than the potential damage that could be caused by distortions of competition.
Germany and other countries are investing in hydrogen as a potentially climate-friendly fuel for use in industry and transport.
The European Union generally has strict rules about state support for companies through direct subsidies or tax benefits.
The rules are aimed at ensuring companies from different EU countries can compete fairly within the bloc's single market.
The European Commission monitors compliance with these rules.
So-called "green" hydrogen produced using renewable energy from wind and solar power is intended to replace fossil fuels such as diesel for trucks or coal in blast furnaces for steel production.
The first major pipeline in Germany is due to go into operation in 2025, and a complete core network should be ready by 2032.
In concrete terms, companies are to be supported in the form of state guarantees, through which they can obtain favourable loans. This could cover losses that are expected at the start of the project.