Climate Benefits of Hydrogen Are at Risk as Fossil Fuel Industry Pressures Mount

Hydrogen can play a critical role in the clean energy transition. However, hydrogen is not, and never will be, the core of the clean energy economy. Despite that, the littlest molecule has lately claimed the largest space in seemingly every climate conversation—and is increasingly grabbing an outsized share of climate funding, too. 

One headline policy, the Regional Clean Hydrogen Hubs program, or “H2Hubs,” is a $7 billion Bipartisan Infrastructure Law initiative charged with concurrently developing clean hydrogen production, transport, storage and use. A second, the clean hydrogen production tax credit, or “45V,” is a lucrative Inflation Reduction Act incentive that could add up to tens of billions of dollars—or more—to shift the economics away from carbon-intensive hydrogen to low-carbon hydrogen.

Targeted support to enable hydrogen as a clean energy solution is valuable; unbridled hydrogen enthusiasm is not. The risks are twofold: First, that it distracts from the pressing priority of directly displacing fossil fuels with renewable electricity throughout the economy; and second, that it fails to tailor hydrogen production processes and end uses to those that are truly beneficial and climate-aligned. 

Severe consequences will follow from a reckless start to the clean hydrogen economy. That’s because missing on hydrogen by a little actually means missing by a lot, quickly flipping the gas from a valuable tool for climate progress to an outright reverser of climate gains. As the Biden administration finalizes the details for these two policies, which could fundamentally shape whether and how hydrogen contributes to the clean energy transition in the time ahead, it must get them right.

If it does, hydrogen can slot in as a real and true contributor to climate progress. That’s because when cleanly produced, hydrogen enables the decarbonization of those tricky corners of the economy short on clean energy alternatives. They run the gamut from industrial processes such as steelmaking, to transportation applications such as long-haul aviation.

But if they get it wrong, people and the environment will suffer numerous and consequential harms, including to climate, to health and to the perpetuation of environmental injustices that disproportionately impact communities of color and low-income communities across the country.

Here’s why. Today, hydrogen is nearly exclusively produced from natural gas in a heavily polluting process called steam methane reforming. But hydrogen’s climate credentials require its low-carbon production. Today’s fossil fuel–based approach could be coupled with systems to capture and store some of the resulting climate pollution. Or, to fully sidestep carbon emissions, renewable electricity could split water into hydrogen and oxygen through a process called electrolysis.

The catch is, it’s not enough to just evaluate the production process to determine whether the produced hydrogen is low carbon. There can still be wide differences in total resulting emissions across projects—so much so, in fact, that what might superficially appear to be cleanly produced hydrogen can actually generate even higher levels of carbon emissions than today’s heavily polluting approach.

The Treasury Department must ensure this risk does not become reality in the new hydrogen production tax credit. In particular, three boundary-setting decisions threaten to turn a tax credit intended to incentivize clean hydrogen into one that actually encourages heavily polluting projects instead.

First, upstream methane leakage. The fossil fuel industry is lobbying hard to use outdated assumptions about low rates of natural gas leaking from throughout the extraction, processing and gas transport system. When those assumptions are updated to reflect the best available science, however, they result in much higher leakage rates, such that any fossil-based project—even those achieving very high rates of onsite carbon capture (in and of itself a big “if”)—would be undone by the climate implications of methane released upstream.

Second, carbon offsets. The fossil fuel industry is also advocating for the use of carbon offsets within the tax credit, which would allow today’s heavily polluting hydrogen production projects to now count as “clean” by reducing pollution elsewhere in the economy. But the tax credit is not set up to rigorously manage cross-economy offsetting, and the offsets being pursued by the fossil fuel industry are primarily based on flawed assumptions about industrial farming operations. Greenwashing fully polluting projects to suddenly qualify as clean, without any change to technology or process, would be an abject policy failure and a terrible waste of billions of dollars of taxpayer funds.

Finally, system impacts of electrolysis. Industry incumbents are advocating for the tax credit to ignore the grid-wide impacts arising from the large amounts of electricity needed to run electrolyzers. This omission would improve project economics for hydrogen producers, but only because it hides pollution and shifts costs onto consumers. Without safeguards, the climate and ratepayer impacts are likely to be towering, increasing the price of electricity and forcing costly infrastructure upgrades, while triggering the ramp-up of coal- and gas-fired power plants elsewhere on the grid.

Tools are readily available to address each of these tax credit implementation risks; the Biden administration must simply stand up to industry and apply them.

Beyond ensuring hydrogen is cleanly produced, it’s also of paramount importance to use hydrogen just where we need it most. Hydrogen generates health-harming nitrogen oxides when combusted, is an indirect global warming pollutant when leaked, and requires significant water supplies to produce. Moreover, nontargeted use would wastefully divert renewable energy from its foremost task of directly displacing fossil fuels. As a result, focusing on just high-impact applications is critical.

However, because hydrogen can be used in nearly any application currently running on fossil fuels, it has become a favorite “someday solution” by the fossil fuel industry—and despite that narrative being devoid of plausible paths to a climate-compatible future and in full opposition to the best interests of the public, this has trickled down into wide-ranging policy supports.

In this October’s first round of funding announcements for the H2Hubs program, for example, most selected projects were premised in full or in part on fossil fuel–based hydrogen production and included plans for multiple applications failing the end-use prioritization test. This is a failure of vision and purpose. Moving forward, the H2Hubs program must be laser-focused on cultivating innovative projects that could unlock truly forward progress in those hardest-to-decarbonize sectors.

The Biden administration is right to reckon with the wide range of solutions ultimately required by a wholesale shift to a thriving clean energy economy. But it must be mindful that hydrogen is not a guaranteed clean energy solution. That makes it critical that the administration set rigorous standards from the outset. Otherwise, hydrogen will burn taxpayer money while increasing climate pollution and wasting preciously scarce time needed for real climate progress.

This is an opinion and analysis article, and the views expressed by the author or authors are not necessarily those of Scientific American.