As Republicans wield their budgetary scalpel on the Inflation Reduction Act, the 45V tax credit for clean hydrogen production might appear an easy target. The industry is nascent, the technology less familiar than other IRA-backed initiatives, and its return on investment for taxpayers remains hard to quantify. Yet, a closer look demonstrates that preserving the tax incentive will likely position the United States to outpace China in scaling clean hydrogen — a victory for economic competitiveness, energy security and global emissions reduction.
Hydrogen has long been a linchpin of the global economy, most notably through its role in ammonia production for fertilizers. In the early 20th century, the Haber-Bosch process — synthesizing ammonia from hydrogen and nitrogen — unlocked a revolution in agricultural productivity. Without this innovation and the affordable fertilizers it enabled, the global food supply could sustain only about half of today’s population. Beyond fertilizers, hydrogen is vital in oil refining, and its versatility is now driving new applications — from steel manufacturing to fuels for shipping and aviation, and even grid energy storage.
Hydrogen produces water, not greenhouse gases, making it a theoretically clean fuel when burned. However, it still has a high carbon footprint due to the energy-intensive production process. Enter “clean hydrogen,” which decarbonizes the process. The industry uses a color-coded system to distinguish production methods: “blue hydrogen” pairs natural gas with carbon capture, “green hydrogen” relies on renewables, “pink hydrogen” leverages nuclear power, and “gray hydrogen” reflects the carbon-heavy status quo of unabated natural gas.
Environmentalists’ obsession with renewables as a silver bullet solution to climate change has fueled a push for green hydrogen. Beijing has capitalized on this, building an early lead in electrolyzer manufacturing. These devices split water into hydrogen and oxygen using electricity. Yet, blue hydrogen, which bypasses electrolyzers and taps into abundant natural gas, offers a faster path to scale. The United States, with its vast natural gas reserves, holds a clear edge here. Blue hydrogen is projected to account for nearly 80 percent of the U.S. supply, mirroring how the shale revolution — credited by the International Energy Agency’s Fatih Birol for the most significant emission reductions “in the history of energy” — transformed our energy landscape. A blue hydrogen boom could similarly decarbonize hard-to-abate industries worldwide.
This doesn’t dismiss green hydrogen’s potential; it deserves a place in market-driven incentives. However, conflating it with blue hydrogen when evaluating 45V’s value to taxpayers is a mistake. Skeptics often point to the European Union’s disastrous hydrogen rollout, but this is an apples-and-oranges comparison because Brussels went all-in on green hydrogen. In 2020, the EU set an ambitious target of 20 million tons of green hydrogen consumption by 2030. Five years later, it’s limping along at 0.02 million tons — 1 percent of its goal — with 83 percent of projects stalled or abandoned. This isn’t a failure of clean hydrogen as a concept; it’s an indictment of green-only idealism in Brussels.
The Biden administration’s stringent rules regarding 45V also present hurdles that stifle investment in all forms of clean hydrogen. As former senator Joe Manchin of West Virginia asserted, “For an administration that wants to reduce emissions and fight climate change, it makes no sense to kneecap the hydrogen market before it can even begin.” Fortunately, these burdensome rules were finalized in January, giving the Trump administration leeway to revisit them.
Rather than harping on Europe’s predictable failures or the Biden administration’s counterproductive regulations, we should recognize that our natural gas abundance combined with Trump’s deregulatory agenda gives us an incredible opportunity to lead in clean hydrogen and further bolster U.S. energy dominance. BloombergNEF projects that, despite China’s head start, the United States could double Chinese output by 2030, thanks to blue hydrogen’s scalability.
By leveraging our natural gas advantage to establish early dominance in the clean hydrogen market, Republicans can champion a conservative vision for clean energy that boosts domestic industry, outmaneuvers China, and delivers tangible emissions reductions without sacrificing economic reality for green dogma. To get this burgeoning industry up and running, we need to preserve the 45V credit.