Additionality reaches the US: Proposed rules under the IRA to mirror the success of the EU 

Publish date: February 13, 2024

As hydrogen takes central stage in most climate policies around the world, the United States (US) has included a substantial subsidies scheme for hydrogen producers under the Inflation Reduction Act (IRA). The scheme will reward hydrogen producers with a tax credit up to 3 US dollars per kilo of hydrogen produced depending on the climate footprint of the molecule: the lower the footprint, the higher the tax break. The scheme was revealed in 2022, however the methodology to define how to account the carbon emissions associated with hydrogen production was only announced on the 22nd of December 2023, after months of debates, mirroring the ones that previously happened in the EU. 

After a three-year-long battle, Bellona together with a wide coalition of likeminded NGOs and industry players, managed to ensure that with the adoption of its Delegated Act on additionality in February 2023, Europe enshrined into law a climate sound definition of renewable hydrogen. The final definition is based on the three pillars of additionality, temporal matching and geographic correlation.  After a transitional period, under these rules, for hydrogen to be considered green there must be a power purchase agreement between the electrolyser and a renewable producer. Only renewable generation that has come online specifically for hydrogen production can be contracted, avoiding to cannibalise renewables already allocated to other parts of the economy. Moreover, renewables must be consumed and produced in the same hour and bidding zone, to ensure electrolysers consume electricity that is actually available on the grid.  

This groundbreaking delegated act as well as the European advocacy campaign served as a blueprint to American NGOs to fight to get similar rules under the IRA scheme for hydrogen, particularly Article 45(v). The recent announcement and unveiling of the proposed rules on December 22nd showed that efforts have been successful. 

One of the key provisions in the proposed rules is the concept of incrementality, the US version of Europe’s additionality. It dictates that to be contracted for clean hydrogen production, clean power generators must have commenced operation within three years of a hydrogen facility’s commissioning.  

The rules also address the issue of deliverability of clean power, emphasising that the source of clean power must be located in  the region of the hydrogen producer. This ensures that the environmental benefits of hydrogen production are not offset by long-distance power transmission, or worse that electricity that cannot be physically transferred from one place to another is claimed for the hydrogen production while this relies in practice on dirty power. 

Furthermore, the US rules introduce the concept of time-matching, stipulating that clean power generation must be synchronised with hydrogen production on an hourly basis, ensuring accountability and transparency in hydrogen production. This will however enter into force only after 2028, until when yearly matching will be sufficient. 

Bellona highly welcomes the proposed US rules, which we determine to go beyond the existing regulations in the EU, as they include no transitional period on additionality and require hourly matching from a year before the EU. 

However, the battle for climate proof regulations is far from over. Despite the release of the proposed rules, there is a 60-day  period during which stakeholders can provide feedback and recommendations. This period  offers an opportunity to water down the rules in the name of simplifying the hydrogen production. It is of outmost importance that US policymakers stick to the line they proposed by showing their commitment to making hydrogen a tool to address climate change and not yet another climate hazard. 

The significance of adopting strict regulations extends beyond national borders. With both the US and EU moving towards stringent standards for hydrogen production, there is a growing momentum towards global harmonisation. This alignment not only facilitates international trade of a truly green commodity, but also sets a precedent for the rest of the world to follow suit. 

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