A “massive lobbying campaign” by Big Oil, major power utilities, and other polluters is currently underway to “manipulate” the proposed US clean hydrogen production tax credit rules for their financial gain, Friends of the Earth (FOF) claims in a new report.

The Inflation Reduction Act’s 45V clean hydrogen tax credit offers up to $3/kg for hydrogen production. Late last year, the US Treasury proposed regulations to grant these credits, calling for three requirements (or pillars) to ensure the hydrogen produced is truly green. In essence, developers who produce hydrogen with very little or no carbon emissions in its value chain will be granted the maximum tax credit.

However, the proposal was met with criticism from oil majors such as bp and Shell, power utilities like NextEra, electrolyser manufacturers, and others. A recent report by Fitch Ratings also warned that the proposed guidelines could hinder the industry’s market growth potential due to increased capital costs and market risks.

“If Big Oil and other polluters get their way, then the hydrogen credit will become yet another fossil fuel cash grab,” says Sarah Lutz, climate campaigner at FOF and author of the report. “It is more important than ever for the Biden Administration to stand firm with a strong, science-driven approach.” 

The Biden administration’s “three pillars” propose hydrogen production to be powered by new renewable energy (additionality); to be located in the same location as the renewable energy facility (geographical correlation); and hydrogen production from 2028 to be matched to renewable energy production on an hourly basis (time-matching).

Calls by fossil interests to delay, remove, weaken, or waive the time-matching requirements for “first mover” hydrogen projects that start production by 2028 would be “disastrous,” FOF says. 

“Without hourly time-matching, the grid emissions from electrolysis push production up to nearly 40 kg CO2/kg H2, ten times the maximum carbon intensity required to qualify for the credit,” it adds.

The “delay tactics” against additionality requirements, meanwhile, would enable existing renewable energy to be diverted to hydrogen production rather than replacing fossil fuels, the report suggests.

“Weak implementation of the hydrogen tax credit is not a misstep that we can afford,” the report concludes. “Without a strong science-driven standard, hydrogen will rapidly become a taxpayer-subsidised greenwashing activity.”