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The Treasury Department is aiming to finalize rules governing the production of clean hydrogen by the end of 2024 (POLITICO Pro, subscription). 
 
What’s going on: The clean hydrogen tax credit—also known as the 45V, after the section of the tax code where it resides—is aimed at incentivizing the widespread production of hydrogen fuel to reduce economy-wide greenhouse gas emissions, especially from sectors that are difficult to decarbonize. It was introduced in the Inflation Reduction Act of 2022. 

• “While the [IRA]’s lucrative credits have already spurred a wave of announced clean energy projects across the U.S., some project developers and companies are awaiting further certainty on a host of provisions under the law. Chief among them are the looming final rules for the clean hydrogen tax credit that is worth up to $3 per kilogram for hydrogen produced through a process that results in low lifecycle greenhouse gas emissions.” 
• The department is also planning to finalize rules for technology-neutral clean energy tax credits, as well as for an advanced manufacturing credit “to help onshore the production of clean energy components.” 

Why it’s important: The Treasury Department last year proposed stringent rules for claiming the 45V. 

• The NAM urged Treasury to ensure flexibility in the proposed rules, which as currently written could “create significant uncertainty for manufacturers who are considering making long-term capital investments, potentially slowing or stopping new projects,” it told Congress in February. 
• The “proposed guidance also left questions on whether there will be pathways for existing, legacy energy sources like nuclear and hydropower, as well as uncertainty surrounding the use of renewable natural gas,” POLITICO reports. 
• The Department of Energy also asked Treasury to relax the requirements in February citing the need for the industry to have “time to embark on a massive expansion,” according to another POLITICO Pro article.    

Our view: “Treasury should follow congressional intent for the final clean hydrogen production tax credit guidance to allow for maximum flexibility, and it should use project-specific emissions data to incentivize and reward those companies that are making strides in lowering their carbon intensity,” said NAM Director of Energy and Resources Policy Michael Davin. 

• “Hydrogen has the potential to be a game-changer in the clean energy economy, so Treasury must get its guidance right—or the U.S. will risk being unable to grow this nascent industry.”