Zane McDonald is executive director of the Open Hydrogen Initiative.
Imagine a future where hydrogen fuels our industries, homes and vehicles, offering a clean energy source free from greenhouse gas emissions. However, despite its promise, that future is not guaranteed. Opinions vary on how broadly hydrogen should be applied — whether in widespread renewable energy integration or more targeted uses like heavy industry — but one critical challenge persists: ensuring that emissions from hydrogen production are accurately measured and held to a clear, consistent standard. Without this factor, all visions for hydrogen’s role in the energy transition are at risk of falling short.
The U.S. Department of the Treasury released draft rules for the 45V tax credit last year, critical for shaping and accelerating a clean hydrogen economy. However, the effectiveness of this incentive hinges on implementing a standardized system for measuring and verifying the carbon intensity, or emission rate, of hydrogen production. Without a robust, facility-specific accounting system, the 45V tax credit risks rewarding high-emission hydrogen projects instead of incentivizing the clean technologies needed to meet climate goals. More recently, more than 50 U.S. policymakers sent a letter to Treasury and climate officials urging them to “ensure that 45V will live up to its emissions-reducing potential.”
Bridging the gap between environmental standards and economic growth
As of now, the draft guidance proposes to evaluate producers’ emissions using a national average emissions dataset to evaluate hydrogen production. While this may seem practical, this approach risks misallocating tax credits to projects with higher emissions, undermining the policy’s intent and failing to reward companies outperforming the average. By accounting for emissions based on production technology averages, rather than calculating emissions at the facility level, the policy could potentially discourage investment in cleaner technologies and inadvertently reward operations with higher emissions.
To ensure the 45V tax credit truly incentivizes low-carbon hydrogen production, we need clearer guardrails. A harmonized methodology to assess carbon intensity at the facility level would better reward low-carbon hydrogen producers and ensure tax credits go to projects making tangible progress in reducing greenhouse gas emissions.
Empowering innovation through accurate data
For hydrogen to become a cornerstone of the global energy transition, its production must be economically competitive. Without subsidizing investment, the high cost of clean hydrogen production will be a barrier to its widespread adoption. With precise data, we can incentivize investment by lowering the costs of hydrogen production technology development, spurring innovation and industry growth.
A well-structured emissions accounting system not only ensures environmental integrity but also empowers the development of new technologies. Hydrogen production methods vary widely, from renewable-powered electrolysis to gas reforming with carbon capture, and each method and every individual facility will have a different emissions profile. By implementing a standardized lifecycle analysis methodology, the 45V tax credit can reward the cleanest hydrogen production process regardless of technology, creating a competitive environment where innovation thrives.
Clear, consistent rules will allow stakeholders across the hydrogen value chain to understand and meet emissions targets, accelerating the deployment of hydrogen in sectors critical to decarbonization.
Inclusive dialogues can shape the industry
Establishing a standardized emissions accounting system for hydrogen production requires input from a broad range of stakeholders, including policymakers, industry leaders, environmental groups and technology experts. Policymakers must actively engage with the hydrogen community to develop measures that drive long-term market growth and advance clean energy solutions.
The electrification of vehicle fleets provides a clear example of how inclusive engagement can drive industry-wide transformation. A decade ago, electrifying transportation fleets — from heavy-duty trucks to maritime vessels — seemed out of reach, primarily due to the prohibitive costs of building the necessary infrastructure. Yet, through strategic federal investments and sustained engagement among industry, government and advocacy groups, manufacturers were able to innovate, scale and bring electric fleets into the mainstream. By drawing on these lessons, policymakers can help the hydrogen industry follow a similar trajectory toward widespread adoption, unlocking new innovations while advancing environmental objectives.
Similarly, hydrogen’s success depends on inclusive dialogues among all stakeholders. Thoughtful, well-designed incentives can lead to more sustainable outcomes for the clean hydrogen economy. While environmental groups shape regulations aligned with climate goals, industry insights ensure policies are practical and supportive of technological advancements. By embracing diverse perspectives and fostering collaboration, policymakers can craft incentives that promote genuine decarbonization without hindering industry growth or innovation.
To allow the hydrogen sector to flourish, policymakers, industry leaders and the public must come together to support initiatives that prioritize both economic and environmental outcomes. With a pragmatic, forward-thinking policy, hydrogen can play a central role in a sustainable energy future.
Laying the groundwork for a clean hydrogen economy
A standardized emissions accounting system is not just a technical necessity — it is the cornerstone of a clean hydrogen market. Narrowly focused tax rules could inadvertently slow progress, undermining the very climate goals they aim to protect and the communities they aim to serve.
With the incoming Administration and the Republican-majority Congress, clean hydrogen policy, including 45V, can potentially be shaped by new legislative and administrative priorities. Regardless of these changes, maintaining a steadfast commitment to transparent emissions standards and data-driven innovation will be essential for the hydrogen sector to continue advancing within a dynamic political environment. Focusing on an objective of deep decarbonization working in tandem with economic prosperity will ensure we establish environmental policy that is durable across changes in government leadership.
Growing the hydrogen sector promotes market-driven solutions, supports energy independence and ensures that America can remain competitive in emerging global energy markets. Continued investment in hydrogen is not just a climate issue – it’s an economic and national security lever that has the potential to unite stakeholders across the political spectrum.
The 45V hydrogen tax credit represents a significant opportunity to decarbonize one of the world’s most promising energy sectors. But it is essential to establish a standardized emissions accounting system that ensures taxpayer dollars are directed toward projects that make measurable progress in reducing emissions, while empowering innovation, market growth and supporting the development of cleaner technologies.
