US finalizes 45V hydrogen tax credit, hourly rules by 2030

The US Department of the Treasury has finalized rules for the 45V hydrogen tax credit that several companies are aiming to take advantage of. The Treasury recently announced plans to offer the tax credit to companies that operate in the hydrogen production sector. That tax credit aims to build on the existing stance of the federal government and continues the work done by the previous administration. The Biden administration started the United States on a path to transitioning away from fossil fuels towards the more carbon-neutral forms of energy production that hydrogen offers.

The Treasury has finalized the requirements for the 45V program, as part of the Inflation Reduction Act

The Inflation Reduction Act was drafted and implemented in 2022, and it aims to offer a tax credit for hydrogen if the total greenhouse gas (GHG) generated in its production is less than or equal to 4 kg of carbon dioxide per 1 kg of hydrogen. That tax credit builds upon the federal government’s new approach to the energy sector, which has shifted between two administrations.

The final rules include a few significant changes to the existing rule structure, allowing for more flexibility and addressing several key factors that will allow the hydrogen sector in the United States to grow. In a rare state of partisan tranquility, the new rules have been embraced by both the federal government and environmental groups alike.

“These rules incorporate helpful feedback from companies planning investments which will drive significant deployment of clean hydrogen to power heavy industry and help create good-paying jobs. The Inflation Reduction Act and Bipartisan Infrastructure Law represent the world’s most ambitious policy support of the clean hydrogen industry. Scaling the production of low-carbon fuels like hydrogen will be a big boost to difficult-to-transition sectors of our economy like heavy industry.” – U.S. Deputy Secretary of the Treasury Wally Adeyemo

“Clean hydrogen can play a critical role decarbonizing multiple sectors across our economy, from industry to transportation, from energy storage to much more. The final rules announced today set us on a path to accelerate deployment of clean hydrogen, including at the Department of Energy’s clean Hydrogen Hubs, leading to new economic opportunities all across the country.” – U.S. Deputy Energy Secretary David M. Turk

Environmental groups have praised the new rule set as well

For hydrogen production using electricity (e.g., “green” hydrogen using renewables and “pink” hydrogen using nuclear), the new rules include building upon safeguards that were suggested in December 2023. For methane-based hydrogen, the rules propose enhancements in the accuracy of upstream methane leakage rates.

The new rules have been embraced by the industry as a whole as well as several environmental groups. The tax credit can be worth up to $3 per kilogram of hydrogen.

“We appreciate Treasury moving toward better hydrogen policy in its final rule for clean hydrogen production,” Conrad Schneider, a senior director at the Clean Air Task Force (CATF), an environmental group, says in a statement. “Hydrogen production must be decarbonized across the supply chain, 99% of which currently uses highly polluting fossil-fuel-based production.”

The United States is aiming to become energy independent soon

The Trump administration has signed several executive orders, including the “One Big Beautiful Bill”, that aim to revitalize the energy sector in the United States. The Biden administration started America on the journey to a more carbon-neutral energy production process, but hindered the traditional energy sectors with limitations that stifled energy production in the coal and gas sectors. The hydrogen sector is on an upward trajectory to becoming the most dominant fuel source in the not-too-distant future. These new rules can accelerate the revitalization of the energy sector in the United States.