Last Friday, the Biden Administration announced a new tax credit system to promote clean hydrogen production in the United States. The system offers credits of up to $3 per kilogram, with the amount varying based on the lifecycle emissions of the production method. To qualify for the credit, hydrogen production must emit no more than 4 kilograms of CO₂e per kilogram. This initiative is aimed at encouraging industries like transportation and industrial manufacturing, which are challenging to decarbonize through electrification alone. The tax incentives are part of an effort to steer producers towards cleaner methods of hydrogen production, such as using renewable energy sources like solar, wind, or nuclear power to split water. This approach acknowledges that not all hydrogen production methods are equal in terms of environmental impact. Additionally, firms that use natural gas can also qualify for the tax credit if they employ technology to capture and sequester emissions. While some environmental groups have expressed reservations about potential loopholes in the system, many experts view these tax credits positively as a step towards reducing overall emissions. The credits are particularly important for hard-to-decarbonize sectors like aviation, marine shipping, and steel production, offering a pathway to replace unabated fossil fuels with cleaner hydrogen as a fuel source. Overall, the new tax credit system is seen as a positive move in incentivizing cleaner energy production and reducing greenhouse gas emissions.