Final Regulations on Clean Hydrogen Production Credit
Key Ideas
  • The IRS has released final regulations on the Clean Hydrogen Production Credit (CHPC), offering tax incentives for clean hydrogen production based on greenhouse gas emissions.
  • Changes have been made to the three pillars of incrementality, temporal matching, and deliverability, providing additional flexibility for industry compliance.
  • Guidance includes new pathways for compliance with incrementality, such as sourcing electricity from qualifying nuclear reactors, facilities with carbon capture technology, and facilities in qualifying states.
  • The use of energy attribute certificates remains crucial, but modifications have been introduced in response to industry feedback to prevent double counting of environmental attributes and mitigate indirect emissions risk.
The Internal Revenue Code (IRC) Section 45V grants a Clean Hydrogen Production Credit (CHPC) for each kilogram of clean hydrogen produced at a qualified facility, with the credit amount varying based on the facility's greenhouse gas emissions. After the IRS published proposed regulations in 2023, the final regulations were released on January 3, 2025, following industry feedback and consultation with relevant agencies. While the regulations maintain the general framework of the proposed rules, modifications have been made to enhance flexibility and ease compliance. The guidance focuses on the use of energy attribute certificates (EACs) to track emissions associated with hydrogen production, with provisions for incrementality, temporal matching, and deliverability. Notably, the incrementality pillar now includes new compliance pathways involving nuclear reactors, facilities with carbon capture technology, and facilities in states with specific decarbonization standards and GHG cap programs. These changes aim to ensure that clean hydrogen production receives tax incentives while addressing environmental concerns and industry challenges. The Final Regulations emphasize the importance of accurate emissions tracking and the use of clean energy sources to qualify for the CHPC, reflecting a positive step towards promoting sustainable practices in energy production.
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