Without guidance, Inflation Reduction Act tax credit may do more harm than good

Written by
Colton Poore, Andlinger Center for Energy and the Environment
Jan. 26, 2023

One aim of the Inflation Reduction Act is to establish tax credits for cleaner energy, such as hydrogen. But without critical oversight and careful implementation, the credit could backfire by inadvertently increasing nationwide carbon pollution. Although hydrogen does not release carbon when burned, the processes used to produce it are often carbon-intensive.  

Among the leading technologies for producing hydrogen cleanly is electrolysis, which requires only electricity to split hydrogen from water.  But if the electricity comes from fossil fuel or coal generators, widespread electrolysis could lead to more nationwide carbon pollution than today’s steam methane reforming.

In a recently published study in Environmental Research Letters, Princeton engineer and energy transition expert Jesse Jenkins and his research team identify three key implementation guidelines for the tax credit that would require grid-based hydrogen producers using electrolysis to procure clean energy in a way that moves the nation toward, rather than away from, its emissions targets. 

Jenkins and engineering student Wilson Ricks, first author on the paper, said requiring that energy be sourced from new power plants, not existing ones, and making sure those plants are located close to where it’s needed, would go a long way toward making the process sustainable. Hydrogen producers also need to ensure they buy clean electricity that's produced at the same time as they consume electricity, they said. 

The researchers said these conditions could be met without seriously affecting electrolysis’ economic viability. 

Environment Tags
Research Themes