Research Brief
The impact of the proposed “first productive use” requirement for biogas for Inflation Reduction Act 45V tax credits
A “first productive use” requirement for biogas or biogas-derived renewable natural gas (RNG) in the Inflation Reduction Act (IRA) Section 45V tax credits would safeguard against unintended displacement emissions and ensure that eligible hydrogen pathways deliver the largest greenhouse gas (GHG) savings possible. This requirement would mean that the biogas used to produce hydrogen should not have previously been used for any other valuable application.
This brief estimates the fuel cycle GHG emissions of landfill gas (LFG)-derived RNG, electricity, and hydrogen when used as fuel for trucks, and analyzes the GHG impact of diverting biogas from electricity production for powering a battery electric truck to hydrogen production to power a fuel-cell electric truck (FCET). The analysis illustrates how diverting existing biogas from electricity production to hydrogen production could induce indirect emissions that reduce the overall GHG savings from that hydrogen.
Figure. Diversion from the current uses of biogas as RNG or electricity to hydrogen to power trucks in the absence of a first productive use requirement
If the first productive use requirement is removed from the proposed guidance for the Section 45V tax credits, hydrogen producers could claim billions of dollars in tax credits even though the hydrogen production may induce more GHG emissions than would have occurred in the absence of the tax incentive. In the case illustrated in the brief, hydrogen producers would receive around $1.6 billion in tax incentives for hydrogen that would not have qualified for the tax credit if the GHG emissions associated with diverting the biogas from its first productive use were considered.
