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Energy & Environment

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The Big Story

Biden loosens rules for hydrogen credits

The Biden administration on Friday finalized fairly strict climate rules for the nascent hydrogen energy industry — but the rules contain new flexibilities that are expected to make them somewhat less stringent than an initial proposal.

The final rule issued by the Treasury Department on Friday determines which facilities can qualify for lucrative tax credits for hydrogen energy.

The tax credits are seen as an important piece of the Biden administration’s climate agenda since hydrogen power could be an important tool to lower carbon emissions from industries like aviation, steel and cement — whose emissions are particularly difficult to eliminate.

The tax credits are key for making hydrogen from low- or no-emitting sources economically viable.

Use of the hydrogen energy itself does not create any planet-warming emissions, but the process of making it with steam or generating the electricity to power an electrolyzer to produce it can create emissions.

Because electrolyzers use up so much electricity, the Biden administration said in a proposed guidance earlier this year that to qualify for the credit, hydrogen produced this way needed to meet certain standards.

Particularly, it required this type of hydrogen to be paired with an additional new energy source to provide that power and that this power be produced within the same hour and in the same region that the hydrogen energy is produced.

Friday’s final regulation largely maintains these safeguards — but also adds some industry-friendly carve-outs.

This includes a new provision that allows existing nuclear plants that may have been in danger of retiring without powering hydrogen energy to count as a new power source as well as a delay in the hourly matching requirement.

It also says that electrolytic hydrogen projects in California and Washington do not need to be built with an additional power source because those states already have strict emission caps for the power sector.

Read more at TheHill.com.

Welcome to The Hill’s Energy & Environment newsletter, we’re Rachel Frazin and Zack Budryk — keeping you up to speed on the policies impacting everything from oil and gas to new supply chains.

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What We’re Reading

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