The Section 45V Clean Hydrogen Production Credit

Updated March 30, 2026

The Section 45V Clean Hydrogen Production Credit

P.L. 117-169, commonly known as the Inflation Reduction

Act (IRA), enacted a new tax credit for the production of

“clean” hydrogen. Widespread adoption of hydrogen fuel

may reduce economy-wide greenhouse gas (GHG)

emissions, especially in sectors that have traditionally been

difficult to decarbonize, such as cement production, steel

manufacturing, and trucking. The credit aims to incentivize

hydrogen fuel production, but it reduces government

revenue, and the Internal Revenue Service (IRS)

implementing regulation generated significant public

comment.

The IRS modified and finalized its CHPC regulations on

January 10, 2025. The IRS set rules based, in part, on over

30,000 comments received on a December 2023 proposed

rule. The CHPC also underwent substantive changes as part

of the FY2025 Reconciliation Law (P.L. 119-21).

This In Focus provides information on hydrogen fuel and

the clean hydrogen production credit (CHPC), also known

as “the 45V credit,” based on its Internal Revenue Code

section.

The Basics of Hydrogen Fuel

Hydrogen currently fulfills important uses in chemical

plants and oil refineries, but does not deliver energy

services other than in demonstration-scale quantities.

However, a future economy using hydrogen as a fuel could

offer an alternative that provides the numerous modern

energy services currently associated with fossil fuels. In

addition to providing a fuel for transportation, hydrogen

could support industrial processes or building operations, or

become part of the energy infrastructure by storing energy.

Demonstrations of hydrogen technology and the value

propositions based on hydrogen continue to emerge,

ranging from one-off funded projects to public-private

partnerships in the United States and abroad.

GHG emissions rate greater than 4 kilograms of CO2e per

kilogram of hydrogen through the point of production. If a

facility placed in service before 2023 did not initially

produce QCH, but is modified to produce QCH before

2028, and if those modifications are charged to the

taxpayer’s capital account, then the facility qualifies for the

credit. Without additional modifications, changing the fuel

source would not be a capital expense and therefore would

not make a facility eligible for the credit.

Tax-exempt entities including nonprofits, state and local

governments, and rural electric cooperatives may receive

direct cash payments in place of traditional income tax

credits. Taxable entities may also elect to receive direct

cash payments for five years, starting with the year a

facility is placed in service. Taxable entities cannot make

this election after 2032. The CHPC is transferable, meaning

that credits may be sold from one business to another for

cash. Businesses of all types, including businesses not in

the energy sector, may buy credits. Once bought, credits

cannot be resold to a third entity.

CHPC Credit Values and “Cliffs”

For taxpayers meeting prevailing wage and apprenticeship

requirements as described under 26 U.S.C. §45V, the

maximum credit in 2025 was $3.185 per kilogram of QCH;

amounts are adjusted annually for inflation. Taxpayers

producing QCH with lifecycle GHG emissions below 0.45

kilograms of CO2e (through the point of production) are

eligible for the full $3.185 credit. In 2025, taxpayers were

eligible for partial credits of

• $1.065 per kilogram of QCH if the CO2e emissions rate

was from 0.45 kilograms to less than 1.5 kilograms;

• $0.795 per kilogram of QCH if the CO2e emissions rate

was from 1.5 kilograms to less than 2.5 kilograms; and

• $0.635 per kilogram of QCH if the CO2e emissions rate

was between 2.5 and 4.0 kilograms.

Credit Eligibility Requirements

Taxpayers producing clean hydrogen at qualifying facilities

may receive the CHPC based on the amount of clean

hydrogen produced, the lifecycle carbon dioxide equivalent

(CO2e) emissions rate of the hydrogen through the point of

production, and the taxpayer’s compliance with prevailing

wage and apprenticeship requirements. The carbon dioxide

equivalent is a measurement unit that allows disparate gases

and their effect on global warming to be expressed in a

common unit. Credits are available for 10 years after a

facility is placed in service.

A qualified facility must be owned by the taxpayer, produce

qualified clean hydrogen (QCH), and have begun

construction prior to 2028. QCH cannot have a lifecycle

Figure 1 shows how the CO2e emissions rate affects the

value of the CHPC. The CHPC includes four “credit

cliffs”—points at which the value of the credit rises or falls

based on small changes in CO2e emissions. Policy cliffs can

provide inconsistent incentives for behavioral changes,

depending on the proximity to the given cliff. In the case of

the CHPC, such cliffs are combined with flat or unchanging

credit values over much wider ranges of CO2e emissions.

For example, the CHPC increases significantly when

taxpayers reduce their CO2e emissions from 0.46 to 0.44

kilograms (per kilogram of hydrogen); on the other hand,

producers have no CHPC-related incentive to reduce their

emissions from 0.44 to 0.00 kilograms.

https://crsreports.congress.gov

The Section 45V Clean Hydrogen Production Credit

Figure 1. Value of the Clean Hydrogen Production Credit in 2025, by Carbon Dioxide Equivalent Emissions

Credit per kilogram of hydrogen for a firm meeting applicable wage and apprenticeship requirements

Source: CRS analysis of 26 U.S.C. §45V and IRS regulatory documents.

Notes: Values displayed are before reductions for the use of tax-exempt bonds. kg = kilogram.

CHPC amounts are reduced by four-fifths for producers

failing to meet prevailing wage and qualified apprenticeship

requirements. These requirements are discussed in CRS

Report R48428, Inflation Reduction Act (IRA) Wage and

Apprenticeship Requirements: Effect on Tax Credit Values.

Finally, the CHPC is reduced by the share of financing

from tax-exempt bonds, up to a maximum 15% reduction.

Fiscal Costs

In December 2025, the Joint Committee on Taxation (JCT)

projected that the CHPC will reduce federal revenues by

$400 million from FY2025 through FY2029. The JCT

estimated that approximately half that amount will come in

the form of direct payments to hydrogen producers.

A year earlier, the JCT had projected that the CHPC would

cost $7.2 billion from FY2024 through FY2028. The fall in

the cost estimate likely cannot be attributed to the FY2025

Reconciliation Law, which shifted the beginning of

construction deadline forward from 2033 to 2028. This still

allows taxpayers to begin receiving the credit through the

mid-2030s and continue receiving it through the early

2040s, and thus would have little effect on FY2025FY2029 expenditures. Rather, the change is likely

attributable to the inherent difficulties in calculating the

costs of a credit for a new and budding industry with an

uncertain growth trajectory.

Recent Developments

Under the final CHPC rule, certain GHG emissions—CO2,

methane, and nitrous oxide—are to be calculated through

the point of production (well-to-gate) as determined by the

version of the Greenhouse Gases, Regulated Emissions, and

Energy Use in Transportation (GREET) model in effect

when construction begins. GREET is maintained by

Argonne National Laboratory. The IRA allows the use of

successor models, and the final rule specifies “45VH2GREET.”

The final rule explicitly includes a number of methods of

making hydrogen, including some based on electricity and

some based on chemical transformation of feedstocks such

as natural gas, coal bed methane, and others. If the rule

and/or GREET does not explicitly cover a particular

method, taxpayers may petition for a provisional emissions

rate to calculate the credit. Generally, the calculation of

CO2e emitted when making hydrogen with electricity and

water (i.e., electrolysis) uses the CO2e emissions of the

regional electricity grid. Taxpayers seeking to attribute their

emissions to a specific electricity facility rather than the

grid may do so provided they meet three conditions known

as incrementality, deliverability, and temporal matching.

In the final rule, incrementality involves establishing that

the source of electricity is no more than three years old

(implying that new “increments” of electric energy were

added to the grid) or, if the facility relies on carbon capture

and sequestration technology, that technology cannot have

started operation more than three years before the hydrogen

production facility. Restarted facilities or expanded

facilities may also meet the conditions for incrementality.

Nuclear generation satisfies the incrementality requirement

if purchasing the facility’s electricity is “likely to mitigate

risk of retirement” as elaborated in a further set of criteria.

Deliverability is met if the electricity is generated in the

region where the hydrogen is produced. The condition can

also be met through use of interregional electricity if there

are contractual arrangements between the generator and the

facility and if the transmission can be demonstrated hourly.

Under the third condition, temporal matching, the

electricity must be produced in the same time period as the

hydrogen. Through 2029, the hydrogen must be produced in

the same year as the electricity; starting in 2030, it must be

produced during the same hour.

The FY2025 Reconciliation Law required that all hydrogen

facilities qualifying for the credit begin construction before

January 1, 2028. The previous cutoff was the start of 2033.

Nicholas E. Buffie, Analyst in Public Finance

Martin C. Offutt, Analyst in Energy Policy

https://crsreports.congress.gov

IF12602

The Section 45V Clean Hydrogen Production Credit

Disclaimer

This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to

congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.

Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has

been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the

United States Government, are not subject to copyright protection in the United States. Any CRS Report may be

reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include

copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you

wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF12602 · VERSION 4 · UPDATED