With the publishing of the draft guidelines for the subsidy scheme for hydrogen under the US Inflation Reduction Act (IRA) on the 22^nd of December 2023, the US addressed the need to define a standard both for green and blue hydrogen. For renewable based hydrogen, the US followed the European lead in establishing rules that follow the three principles of additionality, temporal matching and geographic correlation, helping to create a global golden standard for truly green hydrogen. However, regarding low carbon (or blue) hydrogen the picture is not as positive. 

The EU has so far not defined what counts as low carbon hydrogen. This is a question that the Commission will soon need to delve into with the upcoming adoption of the Hydrogen and decarbonised gas market package in April. Unfortunately, the current US draft presents a few flaws that are crucial for the EU to avoid, if we want to ensure that low carbon hydrogen contributes to decarbonisation. 

As a reminder, emissions associated with blue hydrogen production mostly come from two sources: upstream methane emissions coming from fossil gas extraction, processing and transportation; and the CO₂ emissions coming from the hydrogen production process that are not captured. To achieve truly decarbonised hydrogen, both these need to be kept to a minimum. Methane is particularly concerning since its global warming potential is several times that of CO₂ (86 times if one considers a 20-year time horizon). 

According to the draft presented, to calculate the emissions from blue hydrogen, the GREET model will be used. The calculation of emissions of the actual hydrogen production from methane is quite well regulated through this model. However, the problem lies in how the upstream methane emissions are addressed. This is flawed for mainly two reasons: it uses a fixed coefficient of 0.9% for methane leakage and it allows for the use of offsets to compensate for these emissions. 

Using a fixed coefficient is problematic because the methane intensity of fossil gas (or the percentage of gas that is leaked from the extraction to the consumption point) varies majorly between countries and even different production routes within the same country. It is thus crucial that real world data is used to ensure a true accounting of the climate impact of blue hydrogen, especially given the high global warming potential of methane: a small variation in its intensity results in a significant variation in the overall climate footprint of the final gas. 

In the US context, offsets can be used by companies to claim a compensation of the methane emissions associated with the hydrogen production value chain, by paying for emissions reduction certificates somewhere else in the economy. Otherwise said, if someone was going to release methane into the atmosphere (let’s say another oil and gas company) but decides instead to prevent these emissions (by for instance flaring the methane) this emissions reduction could be bought by the hydrogen producer to reduce the overall carbon footprint of the final gas. Offsets are thus measured against a counterfactual scenario and shift emission reduction from one part of the economy to another. This implies that blue hydrogen would not actually be low carbon, just at best financing emissions reduction somewhere else in the system that would have most likely happened anyway. Ultimately, the hydrogen production process continues to emit the same amount of greenhouse gases and does not effectively abate nor counterbalance its own emissions. 

If Europe wants to maintain the leadership it gained by setting the first strict standard for renewable hydrogen (RFNBOs), it is crucial that it does not make the same mistakes as in the US draft in setting its emission calculation methodology for low carbon hydrogen. Using real world data and not allowing offsets is crucial to ensuring that blue hydrogen can contribute meaningfully to climate mitigation.