Treasury Department Finalizes Hydrogen Tax Credit Guidance

Today, the U.S. Treasury Department released final guidance to clarify which hydrogen projects will be eligible for the 45V tax credit established by the Inflation Reduction Act.

Chris Espinosa, Legislative Director for Climate & Energy at Earthjustice, released the following statement in response:

“The Biden administration’s tax guidance supports clean hydrogen projects that by and large do not worsen climate and health-harming pollution, but more protections are needed. While final Clean Hydrogen Production tax credit guidance largely maintains the critical ‘three pillars’ framework that is needed to have maximum positive impact on the climate crisis, the administration included several significant loopholes for dirty hydrogen producers to enjoy the benefits of this important climate program.

“Earthjustice and our partners will continue to work with Congress to ensure that the 45V clean hydrogen program and other hydrogen policies are real climate solutions and not just more greenwashing gimmicks from the fossil fuel industry.”

Background

The stakes are high for communities facing proposed hydrogen projects, particularly communities already overburdened by pollution. The hydrogen production process is energy-intensive and inefficient; it uses more energy than it produces. Using hydrogen to power anything that can run on renewable energy, such as homes and vehicles, wastes critical renewable energy because of this inefficiency. Hydrogen should only be used for projects that lack better climate solutions.

Green hydrogen is made using 100% renewable electricity, like solar and wind. To be truly clean, it must rely on sources of clean energy that are ‘new, now, and near.’ These criteria — incrementality, hourly matching, and deliverability — are often called the “three pillars” of clean hydrogen production.