Expansion of 45V Tax Credits for Hydrogen Projects in the US
Key Ideas
- US Treasury releases final rules for section 45V hydrogen production tax credit, expanding eligibility for various types of hydrogen production.
- Clarification provided for producers of blue, green, and pink hydrogen, as well as hydrogen from RNG and coal-mine methane to receive tax credits.
- Tax incentive amount tied to GHG emissions during hydrogen production process, including power generation for electrolysers.
- Implementation of four tiers for tax incentives based on environmental impact of hydrogen production.
The US Treasury has finalized rules for the section 45V hydrogen production tax credit as part of the 2022 Inflation Reduction Act. These rules extend eligibility for tax credits to producers of blue, green, and pink hydrogen, as well as hydrogen derived from renewable natural gas (RNG) and coal-mine methane. This step marks a significant move to support low-carbon hydrogen production in the nation. The level of tax incentive a project receives will be determined by the volume of greenhouse gases emitted during the hydrogen production process, which includes any electricity used for electrolysis. The rules introduce four tiers of incentives based on the project's environmental impact, incentivizing cleaner production methods. This development is expected to boost investment in diverse hydrogen projects and promote the transition towards sustainable energy production in the United States.