At the recent Hydrogen Americas Summit, major oil and gas companies lobbied intensively for a broad interpretation of hydrogen tax credits under the Inflation Reduction Act (IRA).
The 45V tax credit, established by the IRA, aims to incentivize hydrogen production, particularly from renewable sources. Draft guidance from the Treasury Department and IRS suggests that the highest credits should go to hydrogen produced using renewable energy like wind and solar. This aligns with global efforts to reduce greenhouse gas emissions.
However, traditional fossil fuel companies, including ExxonMobil and BP, are pushing for a “technology-neutral” approach. This would allow hydrogen produced from natural gas—referred to as “blue hydrogen”—to qualify for the same credits. Blue hydrogen is produced using natural gas with carbon capture and storage (CCS) technology, which remains controversial due to its environmental impact and technological efficacy.
At the summit, executives from ExxonMobil and BP argued that policy should not favor any specific technology. Rushabh Shah from BP emphasized the need for a flexible approach, citing the unpredictability of technological evolution. Dan Holton from ExxonMobil echoed this sentiment, advocating for a policy that does not discriminate against natural gas-derived hydrogen.
Their stance reflects a strategic attempt to maximize profitability from existing fossil fuel infrastructure. The reliance on CCS to mitigate emissions from blue hydrogen is particularly contentious. Experts like Cornell University’s Robert W. Howarth argue that CCS has not proven effective over decades of attempts, raising doubts about its viability as a long-term solution.
Hydrogen produced from renewable sources, known as “green hydrogen,” offers clear environmental benefits by reducing carbon emissions. In contrast, blue hydrogen, while cleaner than traditional fossil fuels, still results in significant greenhouse gas emissions due to methane leaks and the inefficacies of CCS technology.
The Biden administration’s approach to defining the 45V tax credit parameters will significantly impact the hydrogen market’s trajectory. If the policy favors truly green hydrogen, it could accelerate the shift toward renewable energy sources. Conversely, a technology-neutral policy might perpetuate reliance on fossil fuels, undermining global decarbonization efforts.
The push by fossil fuel companies is not limited to the Hydrogen Americas Summit. Data from OpenSecrets reveals that in the first quarter of 2024 alone, major firms like Chevron, Exxon, and BP spent over $4.9 million lobbying federal regulators on hydrogen policy. This intense advocacy underscores the high stakes involved in the finalization of the 45V tax credit rules.
Brian Foody, CEO of hydrogen producer Iogen, highlighted the shift in lobbying efforts from legislative to regulatory advocacy. With substantial financial interests at play, fossil fuel companies are keen to shape regulations in their favor, ensuring that their existing operations remain profitable under the guise of clean energy transition.
While the push for broad hydrogen tax credits by fossil fuel companies aims to leverage existing infrastructure and maximize profits, it poses significant environmental risks. The potential for blue hydrogen to undermine genuine decarbonization efforts is substantial, given its reliance on unproven CCS technology and the continued use of natural gas.
For a sustainable hydrogen future, policy must prioritize genuinely green hydrogen, derived from renewable sources, to ensure meaningful reductions in greenhouse gas emissions. The finalization of the 45V tax credit parameters will be a critical determinant in steering the hydrogen market towards either a clean or compromised path.
