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. We explained how the "three pillars" in the proposed rule—incrementality, time matching, and deliverability—would work together to help ensure that electrolyzers' purchases of energy attribute certificates serve as an accurate proxy for their grid emissions. Unlike Treasury, we grounded our analysis in the concept of marginal emissions rates, explaining how applying this analytic lens would further bolster Treasury's proposed approach. We also cautioned against a formulaic 5% exception to the incrementality rule for existing generators, recommended a more targeted exception based on marginal emissions rates, and offered a suggestion for how Treasury could use locational marginal prices to improve its deliverability heuristic.