Created by the treasury department. This is one hour and 15 minutes. Good afternoon. Thank you. Good afternoon. Thank you. Welcome. In case you did not know, this is an independent nonprofit think tank focused on a healthy environment and a private economy. Thank you so much for being with us here today for this important conversation. The Hydrogen Tax Credit consideration for u. S. Treasury guidance is a complicated topic. Ance. Its a complicated topic and we have a fantastic panel of experts here today. Jason, ceo of american clean power, nathan, senior associate at the u. S. Program. Already durbin, associate for policy at chamber of congress. Paul, policy engagement for electric hydrogen and kevin, fellow and director of our Climate Program will be serving as a moderator for todays conversation. The event is being broadcast live and also recorded. The recording will be available after the event so visit our website to check it out. I want to say hello to our virtual audience. You can ask questions in the q a box on your screen and we will be monitoring questions and get to as many as we can. Finally, if you would like to join the conversation on twitter, use the rff live. I want to thank supporters. We could not be having this conversation without you today, so thank you so much for being here and joining us. And for that, i will turn it over to kevin. Thank you to everyone for being here online, here in person. Thank you to our panelists for contribute in thoughts and perspectives as well. So to reach the u. S. Decarbonization goal is going to require a huge set of tools and lots of policy. Hydrogen has emerged as one of those tools because it has a lot of beneficial properties. You can use it as a fuel, feedstock, Energy Storage and 2d carbonized sectors that are challenging to decarbonizing and do not have other options. For these reasons, lawmakers recognized the value of hydrogen and Clean Hydrogen in particular. And invoked the 45 v tax credits in the Inflation Reduction Act. Now Current Hydrogen production is generally done from natural gas almost exclusively. Which unless you capture the emissions resulting from the process, can lead to emissions that are undermining potential decarbonization benefits of hydrogen. But you can also generate hydrogen from electrolysis, living hydrogen and oxygen from water which does not produce emissions but consumes a lot of electricity. In doing so, it does contribute to the Carbon Footprint of the hydrogen. So lawmakers were aware of this as well and they wrote it into the statute for 45 that they should account for the lifecycle of gas emissions when you are coming for the eligibility for the credit as well as the value of the credit that is actually given to producers. Now since the Inflation Reduction Act passed hydrogen has taken on increasing prominence. The epa proposed regulations for stationary sources generating electricity. It actually proposed including hydrogen as one of the best systems of Emission Reductions for natural gas units. In addition there has been a tremendous amount of activity on the outside, helping for the rules developed by treasury to be developed and thought about. We have had multiple fullpage ads that have been produced in prominent newspapers. My wife does not follow climate and energy but reports that Hydrogen Shows up in all of her favorite content. There is a looming showdown as reported between joe manchin and President Biden about the ultimate Implementation Plan that the treasury puts out, so theres a lot going on. There are a lot of groups on different sides of what the implementation guidance should look like but theres a lot of agreement on a very high level about the opportunity that hydrogen poses for contribute into decarbonization goals in the United States economy and the opportunity to grow a very domestic Clean Energy Industry that is currently basically in its infancy and capture a great opportunity. It a lot of agreement on those points. Tension and disagreement comes from thinking about how to incentivize and get that industry off the ground with minimal obstacles to slow it down. While also setting rules for the long term. So that the decarbonization benefits of hydrogen actually are recognized and the hydrogen is produced and electrolyzers onboard are ready to reinforce the d carbonized grid. So today we are going to, you know, be able to explore some perspectives on different approaches implementing the 45 tax credits. Im looking forward to the conversation and hearing what everybody here thinks, getting it right in the context of treasury guidance. Thank you very much for being here. The way we are going to structure the program is we will have each panelist give opening remarks, then we will have a moderated panel discussion, then we will open it up to the great people in the audience an online to ask questions and we will go from there. Thank you again for being here. Take it away. Thank you, kevin. Good to be here at rff with lots of old friends. The last day of july, we are in a windowless room talking about 45v and mission alley. Im sorry. We are here because this actually does matter. And i want to give you a sense of why the American Clean Power Association thinks this matter so much. Talk about the larger challenge, which is really fundamentally the rff sweet spot of decisionmaking under uncertainty and innovation policy. And then a little sense of how theyve tried to balance this. As kevin said, there are people on all sides of these issues and they are all members. We have folks on all sides of the issue and we decided to come out with a pathway to navigate uncertainty. On why we were here, we are all working on Climate National security things for a long time and there is one sentence that gives you a little bit of a sense of how this might be possible. Basically to electrify everything you can while decarbonizing the grid. Easy to describe, hard to achieve. The problem is you cannot electrify everything as kevin indicated. Big parts of our economy domestically and globally do not lend themselves to electrification. Steel, heavy freight transport, aviation, so that has always been the missing piece. In this narrative of success. So here is where Green Hydrogen fits the bill. As kevin said, it can do a little bit of everything. The clean energy transition. So it matters, right . If we do not figure out a way to provide a zero carbon solution, we are not going to solve it. So there is a lot of urgency and imperative to get it done. Here is the problem, none of us know the answer. The industry does not exist. We do not have a Green Hydrogen industry. We do not have zero and nisshin steel facilities, airplanes that travel. We are all making projections about a very important future. The stakes are high but the truth is none of us know. Interestingly in the past in an absence of knowledge, that tended to create a sense of humility. That is not how washington works today. The reason i think this issue is theologically intense is everyone is just making it up. We are all making our best guesses based on models. All models are wrong, some models are useful. Were tried to figure it out together. So here is where atp has tried to come forward with what we think is kind of a balanced proposal. That is recognizing remember the issue in simple terms is Green Hydrogen is great, it can make clean power. But what if we start to build electrolyzers faster than we have clean power . That could require other power, is not zero omissions and you create an indirect increase in omissions. Worth noting, we do not worry about that in the transportation sector right now. Transportation sector right now. The thought was, we have to change the demand from fossilbased transportation to electric based transportation. It will clean up and all work out. We decided to take a different approach when it comes to Green Hydrogen, and there are some reasons for that. We are worried if we build these electrolyzers too fast, we will outpace Clean Energy Production and that could increase emissions. We will talk about that, time matching, we will get into all of it. What we propose is to try to put some guardrails on the process to acknowledge fundamentally, you can turn the dials too far in either direction if you dont have any restraints at all. We are concerned that significant taxpayer investments will not be moving towards the public goal of decarbonization. We are embracing region analogy to make sure the power coming online is in the same place that it is being used. We are embracing additionality, and not everybody on stage will agree with that, to say that we have to have brandnew, clean, zero emission power if you want the green credit. That was a tough one. And we are committing to a transition annual to hourly time matching of admissions we will get there, but to make sure the clean power is generating power roughly at the same time we are using the power. That would be incredibly expensive right out of the box. Our fear is if you acquire all those things right away, you do not have the Green Hydrogen industry. If you require none of those things right away, there is no ambition to the system. We are starting with the obligation, this is going to be new, clean power, and phase in the time matching so any first mover facilities that Start Construction before the end of 2028 can have a more flexible, and you will matching requirement that transitions. Annual matching requirement that transitions. We are looking at that flexible regime. We hope that any first movers in the industry, 10 of the does goal will happen in that first period, so that is what we designed for. We are encouraging flexibility to the first 10 of that industry. Maybe it is 4 , 16 , we dont know, but how do you make sure we actually get off the ground . If we dont have a strategy to achieve our climate goals yeah. Thank you and thank you for having me. My name is nathan ira, i am a senior associate rmi, formerly the Rocky Mountain institute, and we are a clean Energy Think Tank focused on decarbonizing the Global Economy as rapidly as possible. We have all sorts of experts, including experts in Clean Energy Procurement who have knowledge of the Hydrogen Industry and industrial decarbonization of all flavors. There is a lot to discuss today, but my comments will focus on greater electro alice electrolysis. The top credit is the most valuable credit by a head and shoulders in the now Inflation Reduction Act in terms of dollars per energy as well as dollars per energy evaded if the hydrogen is used to abate dirty, great hydrogen. It is 450 per ton of co2 abated if you add on the stack ability of the Clean Electricity credits. 300 if you exclude it. This is a core Building Block of a low carbon economy, and if designed well, the credit is perfectly designed to cover and make decarbonization financially competitive in heavy industries that are critical to the modern economy. To achieve this vision, this vision of decoupling from fossil fuels, there is a puzzle at the heart of this credit. That puzzle will define the next era of the energy transition. Over the past two years, that has drawn in 20 staff across almost every program in our institute and has led to our beds, countless reports, and fancy baseball podcast, advertisements, and it is centered around one core question. How do you prove that the electricity you are consuming is low carbon when you have a much dirtier grid. To understand this challenge, you must first understand the law. The lara law refers to a greek model in order to calculate emissions. Grid connectors have but one option. Use the grade average emissions. If you run the grid model, the output is around 22 grams of co2 per kilogram of hydrogen. That is double the emissions rate of currently methane produced great hydrogen. About 30 to 60 times, depending on where you are, from being able to qualify for the top credit. No grid project would all of i for any credit in any grid. Then article x the logical next step is to say ok, this will be simple and noncontroversial, and treasury could release guidance in enabling this pathway to that. But if that was the end of the story, we would not be here today. In the congressional record, there is an opportunity, a phrase that is the foundation of all this debate, that the intent of congress is to enable a book and claim system that reduces effective Greenhouse Gas emissions. If a producer books or ads clean capacity or power to the system, they get to claim this capacity for the hydrogen facility. The system has to reduce effective Greenhouse Gas emission. You cannot move Greenhouse Gases from one pocket into the other and claim one pocket has no emissions while the overall emissions remain increased. In the accounting world, we have a term of art that describes effective Greenhouse Gas emissions, and that additional term is additionality. That means the system is effective at reducing emissions, its not a result, any one standard or requirement. Its an ideal, the point of an Emissions Accounting system. It is the accounting framework that treasury is now tasked with. Lets be clear eyed about the complexity of this task. There are many tools you can use to build a system like this in the real world, time matching, vintage location, contracts, double counting, the list goes on. We included our recommendations in the blog we released last week. As jason mentioned, we can risk forcing all projects behind the meter and not getting the outcomes we want. The irs would be able to distinguish between the lowest and highest Carbon Hydrogen in the country and risk poisoning or at least confusing all the industries that rely on Clean Hydrogen. In the messy middle is a solutions ace that solution space that is productive and balances emissions into point. But havent we already solved this system . Yes, in the first phase of the transition, sure. Renewable energy was scarce and expensive, and you could drive the transition forward by covering the extra cost and buying Renewable Energy certificates, or recs. These served their purpose well, but clean energy is cheap and the primary bottleneck is not always money. Study after Study Confirms that the racs of the past are both inaccurate and ineffective, and we are in the next phase of the transition. Treasury will need a system that can do better. We all do. It needs to be calibrated to the current economic, technological, and policy landscapes to achieve this congressional intent. We recognize that often the controversy flooding the zone is not just about the facts or the law, there is a lot of money on the line. Everyone wants in. This standard is so much more important than any single project or company. This Emissions Accounting system , blessed by the u. S. Government, potentially for decades, will have ripple effects. A lot depends on truly Clean Hydrogen, International Trade agreements for green steel and fertilizer, the epa clean palette rule, and disclosures on what is clean or greenwashing. As the largest credit, this will set a national precedent. This could be a huge step forward if it is durable and effective at reducing emissions in the real world. While the structure of this credit forces the question for hydrogen first, this is not the first time we will have this debate. In the european union, india, state offices and boardrooms across industrial electrification, the same questions emerge. This is not a debate about emissions versus deployment, it is about solving the dual challenge of decarbonizing the grid while adding massive new looks. If the missions and economics are aligned as the law requires, we have not only the opportunity for exponential rose, but exponential decarbonization. That is the only force that will get us to the finish line in time. Thank you so much, and i look forward to our discussion. Thank you, kevin, and thanks for the invitation to be here today. I am with the u. S. Chamber of commerce and i appreciate the comments of several panelists here. It is often described that this is a complex and complicated question that we have in front of us i would argue, we have made it complicated and complex, and it can actually be fairly simple on how to address this and what i think is the shared goal here. To take a step back, everyone agrees we need to be focused on accelerating decarbonization of the economy writ large, and we agree we need to be rapidly building out the hydrogen economy, especially to help the hard to evade sectors of the economy. I think we would all agree that one of the things you need to make all that happen is private sector capital. How do you bring the investment into the sector to make that happen . In our view, congress was very clear about what the intent was. The intent of the provisions, as we have heard again and again, they have provided incredible funding and incentives to help the buildout of the hydrogen economy. Doing that, in order to not only decarbonizing hard to evade sectors, but Broader Energy for job creation, and thats one of the reasons we have such a focus on these hydrogen elements we have seen. I like to see with the u. S. Has done to put in place policies tha