Where is the Treasury's guidance for the US clean hydrogen production tax credit?
The department appears to have missed a one-year deadline to issue regulations set out in the Inflation Reduction Act
A year and a day ago, the Inflation Reduction Act entered into force, setting out a clean hydrogen production tax credit of up to $3/kg and a deadline for regulations or other guidance on lifecycle greenhouse gas emissions to be issued “not later than [one] year after the date of enactment”.
But 16 August 2023 came and went with no word from the US Treasury on whether it will put in place requirements for additionality, geographical correlation, and temporal matching (see panel below) — and if so, when those rules will kick in.
However, these measures, similar to the criteria for renewable hydrogen set out in the EU’s delegated acts, have been strongly opposed by potential H2 producers.
They argue that they will bump up the cost of making the molecule by requiring extra investment in new zero-carbon power generators and limiting the amount of time an electrolyser can be switched on.
The criteria have also been criticised by some Democratic senators as overly restrictive to the take-off of green hydrogen as an industry.
Environmental advocacy groups on the other hand have called for these rules in order to prevent a situation in which electrolysers draw renewable electricity off the grid that would otherwise be used directly, leading to extra fossil fuel-fired power generation to meet demand and ultimately increasing emissions.
Earlier this month, senior government officials suggested that a compromise position — in which additionality and other rules would be gradually phased in over time — would be taken in the final guidance.
Industry and government insiders reportedly anticipate that even if the Treasury releases an initial set of guidelines imminently, this may not be the full suite of rules, which could be delayed to late autumn.
Regardless of what stance the Treasury ends up taking on additionality and other principles, the lack of clear guidance means that projects seeking to access the highest rate of the tax credit are likely to continue to wait and see before taking final investment decision.