The U.S. Department of the Treasury and the IRS have issued final regulations for Section 45V Clean Hydrogen Production Tax Credit, aiming at clarity and a catalyst for investments in clean hydrogen projects. Those rules address a number of high-priority lifecycle emissions standards and investment certainty with industry compliance reflected in extensive stakeholder feedback intended to streamline paths for clean hydrogen production.
Under the Inflation Reduction Act, Section 45V is one of the main initiatives to stimulate the clean hydrogen industry while having very stringent GHG emission standards. The final rules detail the eligibility of the hydrogen producers for the use of various energy sources such as renewable electricity, natural gas with carbon capture, RNG, and coal mine methane. Decarbonize the key sectors of the U.S. economy from heavy industry to transportation while encouraging job growth.
According to Deputy Treasury Secretary Wally Adeyemo, the new measures “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.”
Stringent Lifecycle Emissions Standards
A foundation of the final rules is the lifecycle threshold of emissions. To be eligible for the tax credit, clean hydrogen production must emit no more than 4 kilograms of carbon dioxide equivalent (CO₂e) per kilogram of hydrogen produced. Incentives are tiered, which means that projects that achieve lower emissions intensity have higher incentives available to them. This framework addresses both direct and significant indirect emissions, ensuring that hydrogen production meets strict environmental requirements.
For electrolytic hydrogen, which covers green and pink hydrogen from renewable or nuclear sources, new standards introduce additional precautions to ensure continued emissions compliance. Producers need to prove that they use electricity from new or expanded clean power sources commissioned within 36 months of the start of operation for the hydrogen facility. Robust state-level GHG caps, such as those in California and Washington, qualify electricity as incremental, while a transition to hourly renewable electricity tracking by 2030 will ensure hydrogen production aligns with real-time grid demands.
Methane-Based Hydrogen Innovations
The final rules also expand eligibility for methane-based hydrogen, often called blue hydrogen. Credit calculations include national and project-specific methane leakage rates, which account for the greater environmental impact of methane as a potent greenhouse gas. In addition, the rule supports the development of “book-and-claim” systems for RNG, enabling producers to attribute biogas emissions reductions to their projects. Eligible biogas sources now include landfill and wastewater gas, further diversifying pathways for clean hydrogen production.
Deputy Energy Secretary David M. Turk said that clean hydrogen is transformative, noting that “clean hydrogen can play a critical role decarbonizing multiple sectors across our economy, from industry to transportation, from energy storage to much more.
Treasury and the IRS worked closely with agencies such as the DOE and the EPA in finalizing these rules. With more than 30,000 public comments having been reviewed, the regulation covers industry’s main concerns while achieving broader climate objectives. The regulations will include a new suite of compliance tools-including a draft 45VH2-GREET model-ready for issuance and facilitating accurate calculations of emissions, further aiding the producers in attaining the desired regulatory threshold.
John Podesta, Senior Advisor to the President for International Climate Policy, underscored the impact of the revised rules, stating, “Extensive revisions we’ve made in this final rule provide the certainty that hydrogen producers need to keep their projects moving forward and make the United States a global leader in truly green hydrogen.”
Driving Global Leadership in Green Hydrogen
The Section 45V tax credit aims to make the United States a global leader in clean hydrogen innovation by encouraging investment, simplifying compliance, and fostering technological development. This is expected to accelerate the deployment of clean hydrogen, decarbonize energy-intensive sectors, and significantly contribute to the nation’s climate objectives.
By addressing investment clarity, setting stringent emissions standards, and incorporating industry feedback, the final rules pave the way for transformative growth in the clean hydrogen sector. The U.S. government’s commitment to fostering innovation and environmental stewardship positions the nation to lead the global transition to a sustainable, hydrogen-powered future.