New Study: How Carbon Accounting Rules Shape Incentives for Hydrogen Production
Governments around the world have launched comprehensive support programs for hydrogen to drive industrial decarbonization. Numerous programs tie the level of subsidy to the assessed carbon intensity of the hydrogen produced. In the United States, for example, producers can receive a tax credit of up to three US dollars per kilogram of hydrogen produced. There is currently a policy debate over which carbon accounting rules are appropriate: Should the renewable electricity used for electrolysis be matched on an hourly basis, or is annual accounting sufficient? If stricter requirements are adopted, will companies still have sufficient incentives to make the necessary investments? And do the rules ensure that subsidized hydrogen is actually “green”?
The Mannheim-based research team addressed these questions in the context of the US Inflation Reduction Act. The researchers examined electrolytic hydrogen, in which water is split using electricity in so-called Power-to-Gas systems. The study’s findings were published today in the prestigious journal Nature Communications. Unlike many earlier analyses, this study takes the perspective of commercial investors that require adequate returns in order to invest in Power-to-Gas plants.