The U.S. Treasury Department and the Internal Revenue Service introduced a plan Friday to incentivize — using tax credits — the use and development of clean methods for producing hydrogen.
Hydrogen is viewed as a viable alternative energy source to fossil fuels because, when it is used to generate electricity or burned as fuel, it produces only water vapor.
In a statement, the Treasury Department said that because most conventional hydrogen production methods typically use fossil fuels such as coal or natural gas, they result in significant pollution.
Hydrogen can be produced through several clean energy methods such wind or solar power — but those methods are more expensive than ones using fossil fuels.
Treasury officials said the Clean Hydrogen Production Credit is designed to make clean energy production of hydrogen more affordable and encourage companies to use it.
Funded through the 2022 Inflation Reduction Act, the plan would give companies that meet established employee wage requirements a tax credit ranging from $.60 to $3.00 per kilogram of hydrogen produced, depending on the level of greenhouse gas emissions from the production process and the amount of fossil fuel used.
The plan is estimated to offer up to $100 billion in subsidies for qualifying companies. In an interview with the U.S. financial news network CNBC earlier this year, Princeton University energy systems professor Jesse Jenkins said the credit is the most generous green energy subsidy in the world.
In the same interview, Jenkins cautioned that if it is not implemented correctly and credits go to companies using polluting methods to create hydrogen, it could backfire and cause an increase in U.S. emissions.
Nuclear power companies asked the Biden administration if they could qualify for the credit. The administration has postponed a decision on that question and has requested feedback from the nuclear power industry.
Some information for this report came from The Associated Press and Reuters.
