The Treasury Department finalized long-awaited tax guidance Friday for the production of “clean” hydrogen, a low-emissions energy source that could see federal support wane under President-elect Donald Trump.
The rules outline how companies can obtain tax credits for hydrogen under the 2022 Inflation Reduction Act. For some of the biggest perks, the rules target hydrogen produced with renewable energy and electrolysis, which is referred to as “green hydrogen.”
The final guidance changes several provisions from a proposal issued last year, including allowing hydrogen made from some nuclear plants that avoid retirement to obtain credits. The rule supports use of carbon capture and renewable natural gas, but also largely keeps in tact three “pillars” backed by environmentalists that require developers to use new clean energy added to the grid to produce hydrogen.
“These rules incorporate helpful feedback from companies planning investments which will drive significant deployment of clean hydrogen to power heavy industry and help create goodpaying jobs,” said Deputy Treasury Secretary Wally Adeyemo in a statement.
Proposed guidance released a year ago sparked an outcry from many U.S. companies and some lawmakers who want to produce hydrogen energy with fossil fuels. Treasury officials said they reviewed roughly 30,000 comments before making changes to the rule.
Trump was critical of hydrogen on the campaign trail, and congressional Republicans could scale back federal funding for the fuel or reverse the tax credit as part of a reconciliation bill in early 2025.
The Biden administration has promoted the role hydrogen could play in curbing emissions from sectors such as steel, chemicals and heavy-duty transportation.
Last year, the administration selected seven hydrogen hubs to receive up to $7 billion from the 2021 bipartisan infrastructure law. In mid-December, the Department of Energy launched environmental reviews for three of the hubs.
Environmental groups have voiced concerns about clean hydrogen, arguing rules governing its production should be strict to ensure the fuel cuts emissions and does not harm water resources.
