Section 45V of the U.S. Internal Revenue Code was enacted as part of the Inflation Reduction Act (IRA) of 2022. It establishes a production tax credit (PTC) for "clean hydrogen" produced at qualified facilities in the United States, available for the first ten years of a facility's operation, provided construction begins before January 1, 2033.
The credit value is tiered according to the lifecycle greenhouse gas emissions of the hydrogen produced, measured in kilograms of CO₂-equivalent per kilogram of hydrogen (kgCO₂e/kgH₂):
- 0.45–1.5 kgCO₂e/kgH₂: 33.4% of the full credit
- 1.5–2.5 kgCO₂e/kgH₂: 25%
- 2.5–4.0 kgCO₂e/kgH₂: 20%
- Under 0.45 kgCO₂e/kgH₂: full credit
The maximum credit is $3 per kilogram of hydrogen when producers meet prevailing wage and apprenticeship requirements; otherwise it is one-fifth that amount. Values are indexed for inflation from 2022.
Lifecycle emissions are assessed using the Department of Energy's GREET model (specifically a 45V-adapted version, "45VH2-GREET"). The Treasury Department and IRS issued proposed regulations in December 2023 and finalized rules in January 2025, structured around three controversial pillars for electrolytic hydrogen using grid power: incrementality (new clean generation), temporal matching (eventually hourly), and deliverability (regional). These pillars were designed to prevent grid-emissions leakage from electrolyzers drawing on fossil power.
Producers may elect either 45V or the Section 48 investment tax credit for hydrogen infrastructure, but not both for the same facility. The credit is transferable under IRA Section 6418, allowing developers without tax liability to sell credits to third parties.
45V is the largest hydrogen subsidy globally and is intended to drive U.S. costs of clean hydrogen toward the DOE Hydrogen Shot target of $1/kg by 2031. The credit has been politically contested, with industry groups pushing for looser rules and environmental NGOs defending the three pillars.
Example
In January 2025, the U.S. Treasury finalized 45V regulations requiring electrolyzer projects, such as those proposed by Plug Power and Air Products, to source electricity meeting incrementality, hourly matching, and regional deliverability standards to claim the full $3/kg credit.
Frequently asked questions
45V rewards low-emissions hydrogen production per kilogram of H₂, while 45Q pays per metric ton of CO₂ captured and stored or used. A blue hydrogen project using carbon capture must choose one or the other; it cannot stack both.
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