How "Big and Beautiful" U.S. Hydrogen Tax Credit Changes Could Affect Natural Hydrogen
A new tax bill, titled the One Big Beautiful Bill Act, recently passed by the U.S. House of Representatives, seeks to dismantle core components of the Inflation Reduction Act (IRA), including clean energy tax credits that have fueled a surge in renewable energy investments. While this has raised concerns across the clean tech sector, the implications for the emerging natural hydrogen industry are more nuanced, and may even be somewhat welcome.
Under the existing IRA framework, hydrogen production tax credits (known as 45V credits) served as a significant incentive for green hydrogen, produced via electrolysis powered by renewable energy. Natural hydrogen, however — generated by geological processes deep underground — was not explicitly included. This lack of clarity on whether natural hydrogen qualified for the full $3/kg refundable tax credit created insecurity and frustration within the industry.
Recently, momentum had been building to reassess the eligibility criteria and potentially include natural hydrogen in future guidance. Technical assessments and lobbying efforts were underway to have this low-carbon resource recognized for tax credit eligibility. However, the passage of the House bill now threatens to make those efforts moot by effectively scrapping the entire system of clean hydrogen subsidies — removing tax credits for all hydrogen production pathways.
While this is a blow to the broader hydrogen economy, particularly for green and blue hydrogen developers who have already invested based on the IRA’s incentives, it paradoxically levels the playing field for natural hydrogen. With no one receiving production tax credits, the natural hydrogen sector is now in a policy environment free from competitive distortion. In that sense, the bill delivers what natural hydrogen advocates have long called for: a level playing field.
That said, this outcome is far from a windfall. Natural hydrogen companies would definitely have welcomed access to the (up to) $3/kg tax credit — a potential boost that might have meant any company bringing hydrogen to the surface could be “in the money” even before the hydrogen was sold to off-takers. And given that the first producing natural hydrogen wells are likely to deliver only small quantities of H₂, the tax credit would have been a welcome way to make such wells commercially viable.
Still, no subsidies at all may be preferable to a system that favors only competing hydrogen types.
In conclusion, if the Senate upholds the House's changes — a big "if," considering that many Republican-led states have already benefited from IRA subsidies — this could mark a radical shift in U.S. clean energy policy. One that harms many sectors, but in a strange twist, might finally give natural hydrogen a fair shot at proving its value on merit alone.
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