The True Cost of the 45V Tax Credit (May 2025) evaluates the cost of the clean hydrogen production tax credit (45V), part of the Inflation Reduction Act (IRA) signed into law in August 2022. As Congress and the White House consider new budget cuts, a wave of uncertainty has emerged around the credit. But accurate assessments are crucial.
EFI Foundation’s (EFIF) analysis shows that the credit will cost significantly less to U.S. taxpayers than is currently being estimated by the U.S. Treasury. Despite the cooling effect the credit’s prolonged rulemaking process had on the market, the final 45V rules are sufficient for jumpstarting a new domestic industry and bringing enough supply online to reduce the technology costs.
The final rules, released 2 1/2 years after the IRA was passed, established a complex and bespoke approach to defining the emissions footprint of clean hydrogen. Numerous projects were delayed nationwide because producers lacked enough clarity to estimate supply costs or plan investments. Estimating the cost of a tax credit for an emerging industry is challenging, and Treasury’s 45V cost projections—unchanged since the IRA’s passage—fail to reflect shifts in the market.
EFIF has tracked more than 250 publicly announced clean hydrogen projects; roughly half are reformation (“blue”) and half are electrolytic (“green”) production pathways.i Using project-level data and weighted readiness scores, EFIF projected 45V-eligible hydrogen projects through 2035. Even if all projects received the maximum credit, the total tax expenditures would be far below Treasury’s 10-year projections.
45V can spark a domestic clean hydrogen industry while costing taxpayers significantly less than current Treasury estimates suggest. EFIF finds that 45V can drive the development of 8-10 gigawatts of new clean hydrogen projects in the coming years, sufficient to help reduce technology costs and support serious capital investments.
Any policy changes must be grounded in accurate estimates of the potential cost to U.S. taxpayers.
[i] https://efifoundation.org/reports/the-u-s-hydrogen-demand-action-plan-2/
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