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Wyden's hydrogen credit "guardrails"

Jun 21, 2023

Wyden this month. Photo: Mandel Ngan/AFP via Getty Images

Sen. Ron Wyden, an architect of the Inflation Reduction Act, has urged the White House to set "guardrails" for a new hydrogen tax credit.

Why it matters: The Senate Finance chairman joins a chorus of renewables representatives and climate advocates seeking requirements for the credit's implementation to help skirt carbon emissions increases from a hydrogen boom.

  • The Biden administration and many congressional Democrats see hydrogen as a crucial plank in achieving broader climate goals.

Driving the news: Wyden told Axios in the Senate basement Tuesday night that he'd spoken with the White House about ensuring there are "straightforward guardrails" for the hydrogen tax credit.

  • "It's really important if you're going to be serious about decarbonizing," Wyden said, adding that he'd made a similar pitch to Biden climate czar John Podesta.
  • Without specifying his guardrail preferences, Wyden said he's seeking "a balanced package" that "will be appealing to both environmental folks and people in the industry, the innovators."

Catch up quick: The IRA included a tax credit for companies producing "clean hydrogen," a fuel that doesn't produce greenhouse gas emissions when burned.

  • But environmentalists fear industry growth left unchecked could create a spike in emissions from the energy needed to produce the fuel and any straining of the grid, similar to their concerns about a U.S. crypto boom.
  • Motivated by those worries, advocates are pushing the Treasury Department to use a three-pronged strategy to ensure the IRA hydrogen tax credit doesn't accidentally hinder climate progress.
  • Last week, the American Clean Power Association came out for at least two of advocates' prongs. One was a requirement that qualifying hydrogen facilities build new renewable energy to power their operations; the other was that the credit be "time-matched" more precisely to when facilities use lower-carbon power.
  • The hydrogen fuel cell sector, meanwhile, maintains that these would be potential speed bumps in front of its growth trajectory.

The intrigue: Other Senate Democrats told Axios they were similarly troubled about the potential emissions from a blossoming hydrogen business.

  • Sen. Martin Heinrich told Axios that hydrogen electrolyzers powered by fossil fuels on the existing grid are "not what we want to incentivize."
  • "We want to get to actual clean hydrogen," Heinrich said. "This administration has done a good job of figuring out how to set these rules in a way that recognizes that you have to walk before you can run. But you want to get to run."
  • Sen. John Hickenlooper told Axios in a Senate elevator: "Certainly, we should be looking at the full life cycle of everything we are incentivizing."
  • "If you're looking at unfettered hydrogen growth, what does that mean? Does that mean reduced emissions down the road? That's what [industry's] argument is. Is that real? I have not seen that data set."

To Sen. Sheldon Whitehouse, hydrogen brings to mind biofuels, a popular fossil fuel alternative with some negative climate trade-offs.

  • "Ethanol's a climate loser," he told Axios. "It was going to open up the pathway so that ... switchgrass and other green solutions could emerge. They haven't, so maybe that's a lesson."

What we're watching: We expect Treasury to speak on this later in the summer. The IRA gave a year from enactment to do "regulations or other guidance," and the law came into effect last August.

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