Green Groups Feuding Over Treasury’s Clean Hydrogen Tax Credit Rule

President Biden’s climate policy contradictions keep piling up.

Witness the family feud that blew up late last week between the renewables lobby and green groups over the Biden Administration’s new proposed rules for the Inflation Reduction Act’s clean hydrogen tax credit.

The IRA created a new tax credit for producing clean hydrogen from low-emissions sources. [emphasis, links added]

The climate lobby envisions clean hydrogen someday replacing fossil fuels in airplanes, long-distance trucking, shipping, and steel and fertilizer manufacturing. The dispute is over how the government should define “clean.”

Nearly all hydrogen today is made using natural gas as a feedstock.

So-called clean hydrogen can also be produced with electrolyzers powered by solar or wind that split water into hydrogen and oxygen.

But this method is three times more expensive. It also isn’t practical since wind and solar don’t provide power 24 hours a day, 365 days a year.

The renewables lobby says hydrogen producers should be able to claim the tax credit even if their electrolyzers run on grid power generated in part by fossil fuels.

Hydrogen producers would then offset those fossil-fuel emissions by buying what are effectively indulgences from solar and wind generators.

Green outfits complain this scheme would make it too easy to game the tax credit without reducing CO2 emissions.

It could even increase emissions because electrolyzers require enormous amounts of power. That means utilities might have to build more fossil-fuel plants to supply other grid customers.

The Treasury Department on Friday sided with the greens.

Its 128-page proposed rule for the tax credit would require hydrogen producers to prove they are using power from renewable generators built within the prior three years.

The intent is to ensure that hydrogen plants don’t indirectly boost fossil-fuel power generation.

You’d think the renewables lobby would cheer since this stipulation could increase demand for solar and power generation.

But hydrogen producers would also be required to run during the same hours that nearby wind or solar generators operate.

That means they couldn’t run around the clock and buy indulgences from older renewable plants to offset fossil-fuel grid emissions.

Treasury’s proposal also wouldn’t let hydrogen producers claim a tax credit if they use power from existing nuclear plants, even though it generates zero emissions and can provide electricity around the clock.

Yet the Energy Department is subsidizing three “clean hydrogen hubs” that use nuclear power with 2021 infrastructure bill money.

Under Treasury’s rules, few hydrogen projects would qualify for the tax credit.

This may be good for taxpayers. But it undermines the Administration’s goal of using the tax credit to boost manufacturing and employment in areas that have drawn little green energy investment like Appalachia.

“For an Administration that wants to reduce emissions and fight climate change, it makes no sense to kneecap the hydrogen market before it can even begin,” West Virginia Sen. Joe Manchin said.

He may be underestimating the Administration’s cynicism.

The Environmental Protection Agency this year proposed a rule that would effectively require natural gas power plants to use clean hydrogen to reduce greenhouse gas emissions.

If clean hydrogen doesn’t exist in sufficient quantities by the time the rule takes effect, natural gas-fired plants may have no choice but to shut down.

The only consistency in the Biden Administration’s climate agenda is its desire to harm fossil fuels.

h/t Steve B.

Top image via DOE/Wikimedia

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