joe biden
Credit: The White House

Biden finalizes long-awaited hydrogen tax credits ahead of Trump presidency

Responses to the new rules have been mixed, and environmental advocates worry that Trump could undermine them.

The Biden administration has finalized long-anticipated hydrogen tax credit rules just weeks before Trump takes office.

The rules, set by the U.S. Department of the Treasury and the Internal Revenue Service, will determine when hydrogen producers can claim substantial tax credits intended to incentivize the production of clean hydrogen energy.


The draft rules received over 30,000 comments from industry groups and environmental advocates alike that Treasury and the IRS spent the last two years interpreting. While concessions were made on both sides, the reception of the rule has been mixed and the rule could be subject to change under the Trump administration.

The Biden administration has pushed for clean hydrogen production to decarbonize heavy industries that are difficult to electrify, like trucking and steelmaking. Hydrogen is often more expensive to produce than traditional energy sources, so the tax credits were created to decrease costs for the producer and allow hydrogen to compete with traditional energy sources in foreign and domestic markets.

- YouTubewww.youtube.com

Hydrogen can be produced through a variety of methods with varying carbon emissions. Clean hydrogen is defined by the new rules as creating up to four kilograms of carbon emissions per every kilogram of hydrogen produced. Credit-eligible hydrogen production has two pathways, electricity or methane. Eligible electricity sources include renewables like solar and wind, but also nuclear. Additionally, hydrogen production from methane, whether using natural gas, steam reforming or coal mining, is also included with the addition of carbon capture technologies to reduce emissions.

The tax credit, which producers can claim for up to a decade, operates on a tiered system that rewards hydrogen producers with the lowest carbon intensity with the largest credit of $3 per kilogram and is scaled down to about 60 cents per kilogram. The program will expire on Jan. 1, 2033, meaning facilities must begin construction by this date if they wish to claim the credit.

Concessions and Changes

Reception of the final hydrogen rules have been mixed. In the 30,000 comments made on the draft rules, industry groups requested things like more pathways for natural gas and looser requirements for clean hydrogen production, while many environmentalists requested a heavier emphasis on renewable energy and strengthened emissions calculations.

Beyond the concerns about rules, many stakeholders have spoken out against federally-funded hydrogen development, citing a lack of transparency and lack of public involvement in the decision-making process.

Environmental groups have supported “three pillars” as safeguards for hydrogen production and lobbied for them to remain in the final rules: incrementality, temporal matching and deliverability. They’re complex, but they aim to ensure that hydrogen growth is from new, sustainable facilities (incremental), that hydrogen facilities can produce energy supply to meet a demand (temporal matching) and that hydrogen is reliably delivered (deliverability). These three pillars, in theory and supported by studies, should prevent imbalances that could inadvertently result in more carbon emissions than not producing hydrogen to begin with. These safeguards specifically apply to hydrogen using electricity, whether from renewables or nuclear sources.

While the principles of the three pillars did remain in the final rule, they did not go untouched.

“There have been a lot of concessions,” Matt Lifson, an attorney with the Institute for Policy Integrity at the NYU School of Law, told EHN. “The Treasury did give industry a bunch of things that it asked for.”

For example, Lifson said, there are some exceptions for existing nuclear facilities that will be allowed to claim the credits despite not being new sources of energy, and some rules are more lax in states like California or Washington due to their “robust greenhouse gas emission caps,” according to the Treasury.

“One of the [federal] hydrogen hubs is in California, [and] one of the hydrogen hubs is in the Pacific Northwest,” Lifson noted. “So that [exemption] will make it easier for those hubs…And going back to the nuclear issue, several of those hubs involve hydrogen made from nuclear energy.”

Other concessions included more flexible timelines and deadlines on production standards, which some hydrogen producers praised.

“The new hydrogen rules mark significant progress, with notable revisions,” Plug Power, a hydrogen fuel cell company said in a statement. “While these updates are encouraging, we look forward to collaborating with the new administration to refine the regulations.”

Will the rules hold under a Trump presidency?

Donald Trump Trump administration plans to overhaul Interior Department with budget cuts and policy reversalsCredit: palinchak/Big Stock Photo

In a matter of days the Trump administration will have the ability to challenge the hydrogen rules under the Congressional Review Act.

“There's still the possibility that the rules could change under the Trump administration,” Lifson said. “So I don't know how much certainty we really have.”

There are a few factors that could prevent the rules from being invalidated. Amidst more pressing issues, hydrogen production might not make it onto Trump’s priority list for his first 100 days in office, and congressional review must be conducted within 60 days of a rule being published. Even if Trump does tackle the new rules on time, the process requires a majority vote, which could be difficult to achieve since the hydrogen credit rule has bipartisan support and the incoming Republican Congress will hold the majority on a thin margin.

“There is always a chance that this is an acceptable compromise between various segments of industry and the environmental community and that [the final rules] could hold,” Lifson said. “There's also the fact that if the Trump administration wanted to rewrite the regulations through its own rulemaking, they would need to rationally explain any departures that they made from the Biden rule. It can't just be a ‘because we said so’ type of thing.”

Pollution streaming from factory smokestacks

World will surpass 1.5C warming limit in two years if emissions stay on current track

Scientists say global carbon emissions must drop sharply starting now to avoid dangerous temperature rise, but fossil fuel use continues to surge.

Damian Carrington reports for The Guardian.

Keep reading...Show less
a large field of dry grass

Climate change is set to shrink crop yields in top farming nations, raising global hunger risks

Humanity’s most productive farmlands, including those in the U.S. Midwest, are likely to face sharp declines in food output due to climate change, threatening calorie availability worldwide.

Umair Irfan reports for Vox.

Keep reading...Show less
Brown doors with hazardous waste sign on them

Supreme Court clears path for temporary nuclear waste storage in Texas and New Mexico

The U.S. Supreme Court has allowed plans to move forward on storing nuclear waste at private sites in Texas and New Mexico, reversing a lower court’s decision that had blocked the effort.

Mark Sherman reports for The Associated Press.

Keep reading...Show less
The New York capitol building.

New York Assembly ends session without voting on plastic packaging waste bill

New York lawmakers ended their legislative session without voting on a widely watched bill that would have made large companies financially responsible for packaging waste.

Jack Arpey reports for Spectrum News 1.

Keep reading...Show less
An open pit mine with dust kicked up by equipment and a processing building in the background.

States push for coal ash control as federal oversight weakens

State governments with close coal industry ties are moving to take over coal ash regulation from the federal government, raising concerns that toxic waste will be left with little oversight for years to come.

Kari Lydersen reports for Canary Media.

Keep reading...Show less
View of a lake with mountains in the background.

Trump moves to open protected Arctic lands in Alaska to oil drilling

The Trump administration has proposed reopening vast sections of Alaska’s National Petroleum Reserve to oil development, including long-protected areas around Teshekpuk Lake.

Yereth Rosen reports for Alaska Beacon.

Keep reading...Show less
A row of data servers in a white room.

AI tools vary in their environmental impact as energy demands grow

Generative AI systems like chatbots require vastly different amounts of energy to run, with the largest models emitting significantly more carbon despite offering limited gains in accuracy, new research shows.

Sachi Kitajima Mulkey reports for The New York Times.

Keep reading...Show less
From our Newsroom
Multiple Houston-area oil and gas facilities that have violated pollution laws are seeking permit renewals

Multiple Houston-area oil and gas facilities that have violated pollution laws are seeking permit renewals

One facility has emitted cancer-causing chemicals into waterways at levels up to 520% higher than legal limits.

Regulators are underestimating health impacts from air pollution: Study

Regulators are underestimating health impacts from air pollution: Study

"The reality is, we are not exposed to one chemical at a time.”

Pennsylvania governor Josh Shapiro speaks with the state flag and American flag behind him.

Two years into his term, has Gov. Shapiro kept his promises to regulate Pennsylvania’s fracking industry?

A new report assesses the administration’s progress and makes new recommendations

silhouette of people holding hands by a lake at sunset

An open letter from EPA staff to the American public

“We cannot stand by and allow this to happen. We need to hold this administration accountable.”

wildfire retardants being sprayed by plane

New evidence links heavy metal pollution with wildfire retardants

“The chemical black box” that blankets wildfire-impacted areas is increasingly under scrutiny.

Stay informed: sign up for The Daily Climate newsletter
Top news on climate impacts, solutions, politics, drivers. Delivered to your inbox week days.