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U.S. clean hydrogen tax credit will likely come with strict guardrails

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Earlier this year, The Air Current wrote about a fundamental challenge facing the aviation industry’s drive to net zero: the need for prodigious amounts of renewable electricity to generate hydrogen and so-called “e-fuel” — sustainable aviation fuel made from combining energy, hydrogen and carbon dioxide. That story referenced the contentious debate in the U.S. surrounding the clean hydrogen production credit created by the Inflation Reduction Act, which centered on how eligibility for the generous credit should be determined.

Related: Without a clean grid, today’s plans for decarbonizing aviation won’t fly

Many hydrogen players including the aviation startup Universal Hydrogen wanted relatively lenient requirements to encourage investment in electrolytic hydrogen technology, which uses electricity to split water into hydrogen and oxygen (as opposed to creating hydrogen from fossil fuels, which is the most common and cost-effective form of hydrogen production today). 

But environmental groups and some hydrogen companies advocated for stronger requirements, similar to those enacted by the European Union. They pointed to studies warning that the tax credit could actually lead to a net increase in greenhouse gas emissions, if hydrogen producers were allowed to corner the limited existing supply of clean power in the U.S.

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