Tax credits for green hydrogen could support industrial transition to clean energy
Tax credits for green hydrogen could support industrial transition to clean energy
A new study from two researchers at the UNC-Chapel Hill Gillings School of Global Public Health offers hope for a cleaner, healthier future.
The study paper, published in Renewable and Sustainable Energy Reviews, shows that green hydrogen, a clean fuel made from water, could soon compete with dirtier versions of hydrogen thanks to United States tax credits — but only if more industries adopt its use.
Hydrogen is a key component in industrial processes ranging from oil refining and fertilizer production to metal and glass manufacturing.
Right now, many companies use “grey hydrogen,” which is made from natural gas in a method that creates carbon dioxide as a byproduct. Green hydrogen is a better option for the environment because it uses electrolysis to split water into hydrogen and oxygen, producing no carbon emissions in the process. However, it’s historically been too expensive for most industries to use.
Noah Kittner, PhD, assistant professor in the Department of Environmental Sciences and Engineering at the Gillings School, and his co-author, doctoral student Rui Shan, work to increase green hydrogen adoption by using modeling tools.
For this study, using California as a test case, they conducted a comprehensive analysis of sector-specific strategies to promote green hydrogen use in various industries, including trucking, manufacturing and energy production.
Ultimately, they found that the tax credits — which offer up to $3/kilogram for clean hydrogen production through the Inflation Reduction Act (IRA) — could make green hydrogen even more affordable than grey hydrogen.
Kittner says,
This could be a turning point,
“Making green hydrogen cost-effective gives businesses an economically compelling reason to switch to cleaner fuels. But we have a bit of a chicken-and-egg problem: The tax credit helps lower costs, but more users are needed to really bring prices downthrough economies of scale.”
As he notes, while the IRA tax credits are a big step forward, the study found that they won’t be enough on their own. (They are also set to expire in 2032.) Green hydrogen will only become truly affordable in the long-term if more companies start using it, creating higher demand and lowering prices over time.
The researchers suggest that the best way to make green hydrogen cost-competitive is to build new solar and wind farms specifically for hydrogen production instead of relying on electricity from the power grid — which can be more expensive and may still involve fossil fuels.
They also propose rethinking how the tax credits are distributed. Instead of giving all industries the same incentive, Kittner and Shan advise policymakers to target larger tax credits toward sectors that are most ready and willing to switch to green hydrogen. This more strategic approach could lead to 4.6% more green hydrogen use and 7.3% fewer greenhouse gas emissions — all at about half the cost to the federal government compared to the current flat-rate model.
Kittner, says:
This finding highlights how building a customer base for green hydrogen can be just as important as providing financial support,
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Tax credits for green hydrogen could support industrial transition to clean energy, source
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May 8, 2025 at 06:15AM
Tax credits for green hydrogen could support industrial transition to clean energy
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