Enhancing Clean Hydrogen Production: Final Regulations under the Inflation Reduction Act of 2022
Key Ideas
- The Inflation Reduction Act of 2022 introduced the Section 45V production tax credit to incentivize clean hydrogen production with rates based on greenhouse gas emissions.
- The U.S. Department of Treasury and IRS released final regulations in January 2025, refining definitions, lifecycle emission calculations, and procedural requirements.
- Key changes include usage of the hydrogen-specific 45VH2-GREET Model for emissions calculations, stringent criteria for Energy Attribute Certificates, and enhanced verification standards.
- The Final Regulations also clarified the definition of 'facility', emphasizing interdependent hydrogen production components and excluding unrelated systems, aiming to promote accurate credit claims.
The Inflation Reduction Act of 2022 brought about significant changes in the landscape of clean hydrogen production in the United States. The introduction of the Section 45V production tax credit under this act aimed to foster the growth of clean hydrogen while addressing greenhouse gas emissions. These tax credits were structured to provide financial incentives based on the amount of clean hydrogen produced and the associated greenhouse gas emissions. In a move to strengthen this framework, final regulations were released by the U.S. Department of Treasury and the Internal Revenue Service in January 2025.
The Final Regulations provided detailed clarifications on several aspects, including lifecycle greenhouse gas emissions calculations, the utilization of the 45VH2-GREET Model, and procedural requirements for claiming the tax credit. Notable changes were made to the Energy Attribute Certificates (EACs) criteria to ensure incrementality, temporal and geographic matching, and to prevent double counting. The regulations also emphasized the importance of detailed information in EACs to establish transparency and prevent misuse.
Another crucial aspect addressed in the Final Regulations was the verification standards for claiming the clean hydrogen production credit. The regulations mandated independent verification by third parties and alignment with the 45VH2-GREET Model for emissions validation. Facilities were required to irrevocably elect one credit to prevent overlapping claims for the same hydrogen production activity.
Furthermore, the Final Regulations outlined a refined definition of 'facility', focusing on interdependent components involved in hydrogen production to streamline credit claims. The regulations excluded unrelated systems and auxiliary equipment to ensure accurate credit allocation.
Overall, the final regulations under the Inflation Reduction Act of 2022 aimed to bolster the clean hydrogen production sector in the U.S. by providing a clear framework, stringent criteria, and enhanced verification standards to promote transparency and accuracy in claiming tax credits.