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We’re leading an all-out national mobilization to defeat the climate crisis.

Join our work today to help us build a thriving and just clean energy future. 

Ensuring the Clean Hydrogen Tax Credits Don’t Fund Climate Opposition

The stakes are high as the IRS finalizes guidance this summer on how the hugely valuable clean hydrogen tax credit in the IRA can be spent.

©2023 Alpha Photo/Flickr CC BY-NC 2.0 DEED

Will the Biden administration allow billions in public money to fund the opposition to its second-term climate agenda or will it seize an opportunity to ensure those funds help build out a clean power grid and support a wave of truly clean hydrogen and industrial decarbonization? The stakes are large as the Internal Revenue Service (IRS) finalizes guidance this summer on how the hugely valuable clean hydrogen tax credit in the Inflation Reduction Act (IRA) can be spent.

But it’s not just about the tons. Instead, there’s a strategy choice in play, with two options that will help set the course of the second Biden term, and of America’s green industrial revolution: 

Background: The Fight to Keep Hydrogen Clean

If the new hydrogen industry is going to reap hundreds of billions of dollars in public money from our marquee climate law, it should reduce greenhouse gas emissions, not worsen the climate crisis. As our colleagues in the environmental movement and academia have explained, meeting hydrogen energy demand with fossil plants would add hundreds of millions of tons of carbon pollution from the grid. The result could be a power doom loop in which hydrogen demand financially underwrites gas and coal plant operation, propping up fossil plants in the midst of a climate crisis. That’s why clean energy advocates have called for applying “three pillars” in the coming IRS guidance on 45V that would ensure that publicly-funded electrolytic hydrogen plants (1) add additional clean energy to the grid, (2) that is delivered to the same grid, (3) when they actually operate.

Independent analysis shows that these basic requirements are compatible with scaling a truly clean hydrogen sector, and will avoid massive spikes in power sector emissions. This would slow the build-out needed for climate action, including creating the fuel and electricity supplies for clean steel and cement facilities.

Don’t Fund Opponents of Progress: Fake Transition Industries and Real Fossil Lobbying

Financially linking together the fossil fuel industry and the new hydrogen industry will weaken and delay the clean energy transition. Like Charlie Brown and the football, some hydrogen and utility lobbyists want to set up the administration to fund hydrogen that is actually dirty while promising they’re really committed this time.

A dirty hydrogen industry would have billions in funds to oppose further climate action using the 45V tax credits they will be securing. If blessed by IRS, none of these dirty facilities will support any efforts to limit the use of their product, including in the current proposed fossil power plant carbon pollution standards or future industrial decarbonization standards.

This problem should be very familiar. Whenever the U.S. has funded an ostensibly almost-clean “bridge fuel" as a compromise measure, we’ve seen that industry turn around to fight progress. It’s the story of fossil gas interests fighting truly clean power (including with your money) to protect market share. It’s the story of corn-based biofuels securing millions of dollars in mandated market share and then opposing vehicle electrification that threatens their polluting 3 fuel. And, unless the IRS guidance is strong, it will be the story of fossil-produced hydrogen fighting truly clean hydrogen and renewable companies and a real industrial and power system transition.

What can we expect if the IRS guidance aligns hydrogen and fossil gas interests?

A Better Path

In the end, the administration faces a false trade-off, self-servingly framed by fossil fuel industry interests. It is simply not true that we need to sacrifice truly clean hydrogen and the three pillars to meet demand for hydrogen in other sectors. There is a better path that begins with strong 45V guidance that stops public funds from flowing to the fossil industry, bolsters a strong Clean Air Act section 111 carbon pollution rule from EPA that makes clear that only clean hydrogen can be used for compliance, and helps stand up a truly clean hydrogen industry that genuinely speeds industrial decarbonization and the clean energy transition. In that world, the hydrogen industry can prosper by aligning itself with clean energy, creating a powerful new political alliance that can jointly push for ever-accelerating renewable and storage deployment. This is a world in which old, expensive, polluting gas and coal plants retire, and a mix of public funds (including 45V and the Production Tax Credit (PTC) and Investment Tax Credits (ITC) for clean energy) are properly aligned with private interests and legislative intent to further super-charge the massive grid and energy investments we need to electrify and decarbonize all sectors, including heavy industry.

What’s more, the same political coalition that strong 45V guidance creates is well-positioned to drive forward industrial decarbonization. On this path, as EPA prepares rules to support industrial decarbonization—which will inevitably drive demand for both electricity and hydrogen—the hydrogen and clean electricity businesses are aligned and investments are ramping up harmoniously. The political coalition will support utility efforts to expand clean energy production for industrial uses (which in turn is needed to secure further 5 45V funding for clean hydrogen), and thereby also support transferring industry energy demands from fossil fuels over to the clean grid and to clean hydrogen.

It is strongly in the administration’s interest to issue firm 45V guidance and align future energy coalitions in favor of industrial decarbonization. Since similar volumes of hydrogen will be produced under either scenario, the key question is the allegiance of the new industry; we should want that industry to be ready and eager to partner with renewable energy to support electrification of steel, cement, and other heavy industry, expediting, not hampering, effective decarbonization of our economy.