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$100 Billion Federal Subsidies On A Strong Argument From Two Sets Of Stakeholders Over Clean Hydrogen

The most important tax credit in that historic law was a tax credit to make clean hydrogen in climate-conscious ways.
$100 Billion Federal Subsidies On A Strong Argument From Two Sets Of Stakeholders Over Clean Hydrogen (PHOTO: Seeking Alpha)

The most important tax credit in that historic law was a tax credit to make clean hydrogen in climate-conscious ways.

The most important tax credit in that historic law was a tax credit to make clean hydrogen in climate-conscious ways.

$100 Billion Federal Subsidies On A Strong Argument From Two Sets Of Stakeholders Over Clean Hydrogen (PHOTO: CNBC)

Strong Debates Regarding About Clean Hydrogen

Clean hydrogen is currently used for many purposes, including making ammonia-based fertilizer, which the world turns on for growing crops, and for refining crude oil into useful petroleum products. Moreover, it’s also compared to a “Swiss Army Knife of decarbonization,” because it could be utilized as a power source in industries that are particularly hard to wean off fossil fuels, like airplanes and heavy shipping.

The impact of the tax credit on emissions reductions relies on how federal agencies enforce it and, as with most things in accounting, the devil lies in the details. On one side of the argument, some energy providers state that making the regulations too strict could destroy the clean hydrogen industry before it ever gets off the ground. Moreover, environmental policy groups debate the regulations could end up being so lax that the latest clean hydrogen industry could even end up growing, rather than diminishing, carbon emissions.

$100 Billion Federal Subsidies For Clean Hydrogen

According to an open letter transmitted from 18 organizations to federal agencies stating that weak guidance could force Treasury to expend more than $100 billion in subsidies for clean hydrogen projects that result in raised net emissions, in direct dispute with statutory requirements and tarnishing the reputation of the nascent clean hydrogen industry.

With loose rules and weak life-cycle greenhouse gas emissions analyses for hydrogen production, the hydrogen tax credit could end up going to producers whose hydrogen is not lower emissions than the alternatives, and could even end up having the indirect effect of increasing emissions from the electricity grid, explained Emily Kent, who covers fuel sources for the Clean Air Task Force, a climate policy shop that signed on to the letter.

This debate has placed Electric Hydrogen CEO Raffi Garabedian in an uncomfortable position. Garabedian’s startup is attempting to create a type of electrolyzer to split water into hydrogen and oxygen and has obtained funding from Bill Gates’ climate investment firm, Breakthrough Energy Ventures, among others. With a loose interpretation of the tax credit rules, demand would jump for electrolyzers with companies racing to cash in on the new credit But in the long run, if the industry increases rather than reduces carbon emissions, the public would eventually demand an end to the subsidies, potentially tarnishing the entire idea of clean hydrogen.

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