U.S. Treasury’s final guidance on clean hydrogen production is an important step to bolstering U.S. hydrogen market while reducing emissions
WASHINGTON – Today, the U.S. Department of the Treasury issued its final guidance for the Section 45V Hydrogen Production Tax Credit (PTC), a key step in advancing domestic clean hydrogen production in the United States. The PTC was passed into law as part of the 2022 Inflation Reduction Act (IRA).
“We appreciate Treasury moving toward better hydrogen policy in its final rule for clean hydrogen production. Hydrogen is an important feedstock for fertilizer production, petroleum refining, and other sectors vital to our modern economy and holds significant potential for decarbonizing hard-to-abate sectors, such as marine shipping, steel production, and aviation,” said Conrad Schneider, Senior Director, U.S. at Clean Air Task Force (CATF). “To achieve that potential, hydrogen production must be decarbonized across the supply chain, 99% of which currently uses highly polluting fossil-fuel-based production. Today’s action sets the stage for hydrogen produced using natural gas to access the 45V tax credit if the hydrogen producer can demonstrate low upstream methane emissions throughout the supply chain. The Treasury regulation specifies that this option relies on recently finalized reporting and monitoring requirements for the oil and gas sector remaining in place. In the meantime, CATF is concerned hydrogen production plants could get built using the inappropriate ‘one-size-fits-none’ default leak rate assumption that will be used in the interim.”
Schneider continued: “We also applaud Treasury for releasing guidance on electrolytic hydrogen, as this guidance will help create certainty for clean hydrogen companies. We hoped to see stricter guardrails around the use of existing clean electricity to make hydrogen, but we are glad the final guidance includes criteria for determining the incrementality of existing clean electricity, especially existing nuclear energy, that accounts for the unique circumstances of each plant. We are, however, disappointed in Treasury’s decision to push hourly matching from 2028 to 2030, and we worry that this could cause at least some increase in emissions in the short term. Still, we will continue working to ensure that 45V is implemented in a way that allows the clean hydrogen market to grow while protecting against significant indirect emissions from increased hydrogen production.”
“Successfully making hydrogen a part of the climate solution requires accuracy and transparency for emissions of greenhouse gases from upstream supply chains,” said Veronica Saltzman, attorney at CATF. “Anything less risks making hydrogen part of the climate problem. CATF will continue to closely monitor 45V implementation to ensure it achieves the intended outcomes as outlined in the Inflation Reduction Act.”
The 45V hydrogen PTC aims to promote clean hydrogen production by bridging the cost difference between conventional hydrogen production and low-emission production methods, ultimately reducing long-term clean hydrogen production costs by accelerating the industry along its learning curve. The credit is tiered and becomes more lucrative for progressively cleaner hydrogen, providing as much as $3.00 per kilogram (kg) of hydrogen produced if the carbon intensity is less than 0.45 kg of carbon dioxide equivalent (CO2e) per kg of hydrogen. Several methods of clean hydrogen production can qualify for the 45V PTC, including electrolysis using low-carbon electricity and certain carbon-based production methods like steam methane reforming that make use of carbon capture and storage. To qualify for the most lucrative 45V tax credits, fossil-fuel-based hydrogen producers will need to use carbon capture technology and only utilize natural gas with low upstream methane emissions. With respect to upstream emissions, DOE will revise its 45VH2-GREET model for hydrogen producers to use reported GHG emissions for their supply chain—as reported to the EPA Greenhouse Gas Reporting Program— to assess hydrogen production’s overall climate intensity.
Press Contact
Samantha Sadowski, Communications Manager, U.S., ssadowski@catf.us, +1 202-440-1717
About Clean Air Task Force
Clean Air Task Force (CATF) is a global nonprofit organization working to safeguard against the worst impacts of climate change by catalyzing the rapid development and deployment of low-carbon energy and other climate-protecting technologies. With more than 25 years of internationally recognized expertise on climate policy and a fierce commitment to exploring all potential solutions, CATF is a pragmatic, non-ideological advocacy group with the bold ideas needed to address climate change. CATF has offices in Boston, Washington D.C., and Brussels, with staff working virtually around the world. Visit catf.us and follow @cleanaircatf.
