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Policy Integrity commented on the Department of Treasury's proposed regulation to implement the Section 45V tax credit for clean hydrogen production from the Inflation Reduction Act. This tax credit subsidizes the production of hydrogen based on its emissions intensity. Our comments leveraged our expertise on the electric grid to advise Treasury on how to accurately measure the emissions intensity of hydrogen from grid-connected electrolyzers.

On December 22nd, the Treasury Department issued a notice of proposed rulemaking to implement the Inflation Reduction Act’s (IRA) 45V tax credit for clean hydrogen production. The proposal would establish rules for how electrolyzers can demonstrate compliance with the IRA’s lifecycle greenhouse gas limits—and thus demonstrate their eligibility for the tax credit. The proposed rule includes robust requirements to avoid greenhouse gas emissions: new clean power, annual matching with a transition to hourly matching in 2028, and contracting within the same regional grid. The approach in this proposal aligns with many of the recommendations the Institute for Policy Integrity made in comments to the Treasury Department. 

Along with seven partners, we submitted a letter to the Department of the Treasury about the best methodology for determining lifecycle greenhouse gas emissions of hydrogen production when calculating the applicable amount of the 45V production tax credit (PTC). The letter had two primary purposes: (1) if local hourly energy matching is adopted as part of 45VPTC implementation, to highlight the critical importance of defining “local” in such a way that avoids increasing carbon emissions, and (2) to advocate for carbon matching as a more cost-effective and scalable alternative compliance pathway that also solves the problem that local hourly energy matching addresses.

Following the passage of the Inflation Reduction Act, the Department of Treasury and the Internal Revenue Service issued a series of Requests for Information seeking comments and suggestions on implementing the tax benefits contained in the historic climate law. Building on Policy Integrity's deep expertise in incorporating equity into the rulemaking process, we submitted general comments advising Treasury and IRS to: 

1. coordinate with other federal agencies with experience incorporating environmental justice and equity into their rulemaking process; and
2. conduct robust stakeholder outreach throughout the guidance and rulemaking process, especially in disadvantaged communities.

In addition, Policy Integrity included specific recommendations with respect to the calculation of carbon intensity for hydrogen production based on recent comments to the Department of Energy.