Explore the Clean Hydrogen Technology Working Group: Demand-side Support Policy Recommendations, developed by C2ES in consultation with more than 50 companies across the clean hydrogen value chain.
Following the hottest summer on record, it is more critical than ever for policymakers to refocus their attention on advancing clean energy solutions. Accelerating decarbonization efforts will require developing and deploying new clean technologies and low- and zero-carbon fuels as substitutes in emissions-intensive sectors. As an increasing number of sectors are working to electrify their products and facilities, the petroleum refining, chemical, aviation, maritime, and heavy-duty long-haul trucking industries are limited in their ability to directly substitute emissions-intensive fuels and feedstocks with clean electricity. A C2ES-led, stakeholder engagement effort is focused on maturing a solution from which many of these activities could benefit from: the use of clean hydrogen as a versatile, low-carbon energy carrier and feedstock.
While most hydrogen in the United States today is produced through the emissions-intensive process of steam methane reformation, clean hydrogen can be made through multiple production methods which significantly reduce its lifecycle greenhouse gas emissions. These methods can extract hydrogen from natural gas (e.g., steam methane reforming with carbon capture), biomass (i.e., gasification), or from water with the use of clean electricity (i.e., electrolysis).
Federal support for clean hydrogen has grown in recent years, driven by its potential to decarbonize hard-to-electrify sectors and safeguard U.S. economic competitiveness as global trade partners consider and begin to implement carbon pricing on imports. These investments, such as the Regional Clean Hydrogen Hubs Program (and its associated Regional Clean Hydrogen Demand-Side Support Mechanism) and the establishment of the 45V Credit for Production of Clean Hydrogen, not only position the United States to lead in clean energy innovation but also generate high-quality domestic jobs in hydrogen production, transport, and export.
Despite these federal investments, significant demand for clean hydrogen has yet to materialize. Established users of emissions-intensive hydrogen have no financial incentive to procure clean hydrogen at current prices. Ineffective price signals that fail to account for climate impacts, nascent transportation and storage infrastructure, and a lack of large-scale technology demonstrations slow the maturation of prospective use cases in heavy-emitting sectors.
Recognizing its value, in January 2024, C2ES launched a technology working group dedicated to helping scale the market for clean hydrogen. As one of four technology working groups focused on how to rapidly deploy and commercialize critical-path technologies, the clean hydrogen technology working group convenes leading voices across the ecosystem, including current and prospective hydrogen consumers and producers, innovators and startups, energy and technology companies, infrastructure and capital providers, members of C2ES’s Business Environmental Leadership Council (BELC), and other key stakeholders. Informed by working group discussions, C2ES has identified a shortlist of priority federal policies to address key demand-side barriers to scaling clean hydrogen. These recommendations—outlined below and described in detail in our report—fall into three broad categories: demand-side funding, transmission and distribution, and creating market certainty.
1. Provide further funding for demonstration and commercial-scale projects under the Office of Clean Energy Demonstrations
In the absence of structural incentives like carbon pricing or a clean fuel standard, demand-side support is needed until clean hydrogen prices decrease. With an average of less than $150 million in demand-side support available for each hub through the Regional Clean Hydrogen Demand-Side Support Mechanism, the existing one-time funding opportunity may be insufficient. A lack of near-term demand within the Regional Clean Hydrogen Hubs would significantly undermine the future of clean hydrogen in the United States.
2. Grant the Federal Energy Regulatory Commission authority to regulate interstate hydrogen infrastructure and commerce
Safe, reliable, and affordable delivery of clean hydrogen will be an important prerequisite to building and growing demand. Pipelines are the safest and most cost-effective transportation method for large volumes of hydrogen at long distances. The capital costs and time required to build out a network of dedicated interstate hydrogen pipelines demands strategic siting for long-term hydrogen demand volumes and locations. In the near-term, establishing the regulatory framework under which interstate hydrogen pipelines must be built and operate will provide the certainty needed to support investments and the public’s interests.
3. Update the Renewable Fuel Standard
The Renewable Fuel Standard (RFS) is a highly influential policy and has been one of several key drivers that has scaled the production of biofuels in the United States. However, new clean transportation fuels have emerged since the passage of the RFS that must now compete against RFS-credited fuels. The EPA can update the RFS to provide clear crediting pathways for hydrogen-based e-fuels produced from biogenic carbon dioxide. In the absence of a broader clean fuel standard (CFS) (see recommendation four), Congress should remove restrictions on renewable fuels’ statutory ties to biomass altogether to allow technology-neutral crediting of low-carbon fuel, including clean hydrogen for vehicle fueling and e-fuels produced from non-biogenic carbon dioxide and clean hydrogen.
4. Enact a Federal Clean Fuel Standard
In addition to being a major source of emissions, the transportation sector also represents massive future demand for clean hydrogen, if incentive structures prioritize lower-carbon fuels. A program that sets carbon intensity benchmarks for transportation fuel would support demand for hydrogen and hydrogen-based fuels (i.e., e-fuels) as petroleum alternatives. A CFS that was broadened to reward improvements in petroleum refining could generate additional new demand for clean hydrogen as a feedstock beyond its use in low-carbon fuels.
5. Enact federal economy-wide carbon pricing
Assigning a cost to carbon-intensive hydrogen production—whether through a carbon tax or a cap-and-invest program— would more accurately recognize the market value of clean hydrogen, facilitating emission reductions commensurate with the environmental, societal, and economic benefits of reducing global greenhouse gas pollution. A carbon pricing program would provide an important demand signal that can drive adoption of clean hydrogen, while supporting its economically preferable deployment across sectors of the economy.
Federal policy is essential to drive private sector demand for this critical-path technology. Strengthening existing programs and introducing new, market-focused initiatives will inject stability as the domestic clean hydrogen industry grows. C2ES’s federal policy recommendations for clean hydrogen present a potential path forward in the pursuit of this objective.
Read the full recommendations and the fact sheet.