Are Tax Credits Stalling America’s Hydrogen Progress?

Ever feel like the promise of a cleaner, greener future is just out of reach? You’re not alone. The excitement around hydrogen fuel as a cornerstone of America’s energy future has hit a major roadblock—thanks to good old-fashioned regulatory gridlock. But what’s really going on here? Let’s dive into the details and see why this potential catalyst is stalling and what it means for professionals in the accounting, tax, and finance sectors. 

So, What’s the Hold-Up?

Two years ago, when President Joe Biden signed his landmark climate law, there was a lot of buzz about kick-starting green hydrogen production with some sweet tax credits—up to $3 for every kilogram of hydrogen produced. It sounded like a done deal, right? Not so fast. Fast-forward to today, and companies are still scratching their heads, wondering if they’ll qualify for those tax breaks. 

Billions of dollars in investments are sitting on the sidelines, just waiting for some clarity. The Biden administration sees green hydrogen as a critical tool in the fight against climate change, especially for industries that can’t easily switch to electricity. But until the Treasury Department finalizes the rules on these tax credits, the hydrogen economy is stuck in limbo. 

And let’s be real—this isn’t just about bureaucratic red tape. Industry players and environmentalists are locked in a tug-of-war over what the final rules should look like. The clock’s ticking, and every day of delay is another missed opportunity for investment and innovation. In February 2024, the Treasury Department received a letter from industry leaders raising concerns over the ongoing uncertainty. 

Why Should You Care?

You might be thinking, “Okay, cool story, but what’s this got to do with me?” Well, if you’re in the accounting, tax, or finance game, the implications are massive. 

First off, those tax credits are no small potatoes. They’re a big incentive for companies to dive into green hydrogen, and with that comes a flood of investments, jobs, and economic activity. The federal government has also earmarked $8 billion to create hydrogen hubs across the country, expected to generate $40 billion in private investment and support over 330,000 jobs. But none of that will materialize if the current uncertainty continues. 

If you’re advising clients in industries eyeing hydrogen projects, this uncertainty makes it tough to give solid advice. Should they go all-in now, or hold off until the rules are clear? It’s a tricky dance, and one wrong step could be costly. 

Moreover, if you’re involved in corporate tax planning, these credits (or the lack thereof) could significantly impact a company’s bottom line. The size of the tax credit depends on how “green” the hydrogen production is—are they using new clean energy sources, syncing production with electricity generation times, and keeping carbon intensity low? Stricter rules could make it harder to qualify, potentially stalling many projects. 

The Tug-of-War Over Green Hydrogen

Why all the fuss? Environmentalists are pushing for strict rules to ensure that hydrogen production genuinely reduces greenhouse gas emissions. Fred Krupp, president of the Environmental Defense Fund, praised the first draft of the rules as an “excellent framework” but warned against watering down emissions integrity. On the flip side, companies argue that the rules need to be loosened to get the industry off the ground. 

It’s a classic standoff: environmental purity versus economic practicality. And while the federal government tries to strike a balance, the clock is ticking on America’s decarbonization efforts. 

What’s Next?

Here’s where things get even trickier. The Treasury Department has been carefully considering all the feedback it’s received, but there’s no word yet on when the final rules will be announced. John Podesta, Biden’s senior adviser for international climate policy, admitted that the hydrogen incentives are “the most complex of the credits, technically and legally.” No kidding! 

Even if the Treasury drops new guidelines tomorrow, companies might still wait until after the 2024 election to make their move. Why? Because there’s a chance the political winds could shift, especially if Donald Trump retakes the White House. Trump has vowed to target the IRA, but it’s anyone’s guess what his stance on hydrogen would be. 

This uncertainty isn’t just a U.S. problem, either. Across the pond, German company Thyssenkrupp Nucera recently scrapped its 2025 forecast for its electrolyzer business, citing slow progress on regulatory fronts. Siemens Energy AG is feeling the pinch too, with delays in funding commitments due to regulatory uncertainties in both the U.S. and Europe. 

The Bottom Line

So, what’s the takeaway here? For professionals in accounting, tax, and finance, this situation is a perfect example of how policy uncertainty can ripple through the economy, affecting everything from corporate tax planning to investment strategies. The potential for green hydrogen to revolutionize the energy landscape is huge, but it won’t happen without clear, supportive policies. 

Until the Treasury Department finalizes those tax credit rules, the hydrogen sector is stuck in neutral. And that means billions of dollars in investments—and the jobs that come with them—are also on hold. It’s a classic case of hurry up and wait, with a lot at stake for businesses and the broader economy. 

So, keep your ear to the ground and be ready to adapt your strategies as the regulatory picture becomes clearer. Because once those rules are set, the hydrogen train (or should we say, fuel cell vehicle?) could finally start moving full steam ahead.