Treasury Drops a Hydrogen Bomb
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 clean hydrogen tax credit. The IRA created a new tax credit for producing clean hydrogen from low-emissions sources.
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
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