Emissions Effects of Differing 45V Crediting Approaches Aaron Bergman and Kevin Rennert Report 23-07 June 2023 Emissions Effects of Differing 45V Crediting Approaches A About the Authors Aaron Bergman is a fellow at Resources for the Future (RFF). Prior to joining RFF, he was the Lead for Macroeconomics and Emissions at the Energy Information Administration (EIA), managing EIA’s modeling in those areas. Before working at EIA, Bergman spent over a decade in the policy office at the Department of Energy, working on a broad array of climate and environmental policies. Bergman has worked in the White House at the Office of Science and Technology Policy, managing the Quadrennial Energy Review and handling the methane measurement portfolio, and at the Council on Environmental Quality, working on carbon regulation. Bergman entered the federal government in 2009 as a Science and Technology Policy Fellow with the American Association for the Advancement of Science, after working in high energy physics. Kevin Rennert is a fellow and director of the Federal Climate Policy Initiative at RFF. Prior to his arrival at RFF as a visiting fellow in 2017, Rennert served as deputy associate administrator for the Office of Policy at the US Environmental Protection Agency. Leading up to his appointment in the Office of Policy, he worked as senior advisor on Energy for the Senate Finance Committee. In that role, Rennert advised the committee’s Chairman, Senator Ron Wyden (D-OR), on a wide range of topics related to clean energy, efficiency, and policies to reduce greenhouse gas emissions. From 2008 to 2014, he worked on energy and climate legislation as senior professional staff for the Senate Energy Committee. In that capacity, Rennert led the development of the Clean Energy Standard Act of 2012 (S. 2146), a presidential priority that would use market mechanisms to double the amount of electricity generated in the US from low or zero carbon sources by 2035. In 2010 and 2011, Rennert also taught graduate courses in energy policy as adjunct faculty in the Department of Strategic Management and Public Policy at George Washington University. Acknowledgements The authors would like to thank Yuqi Zhu for his work on the analysis of local marginal emissions rates presented here. Resources for the Future i About RFF Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy. The views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. Sharing Our Work Our work is available for sharing and adaptation under an AttributionNonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) license. You can copy and redistribute our material in any medium or format; you must give appropriate credit, provide a link to the license, and indicate if changes were made, and you may not apply additional restrictions. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. You may not use the material for commercial purposes. If you remix, transform, or build upon the material, you may not distribute the modified material. For more information, visit https://creativecommons.org/licenses/by-nc-nd/4.0/. Emissions Effects of Differing 45V Crediting Approaches ii Summary • There are two primary emissions effects from the production of electrolytic hydrogen that are relevant for crediting under the new 45V tax credit. • The most consequential effect is the capacity effect, which is determined by the carbon intensity of added generation capacity that comes online to meet new load from electrolyzers. This effect can result in emissions higher than those from uncontrolled hydrogen production from natural gas. Many current implementation proposals are intended to incentivize additional clean generation to reduce or eliminate this effect. • Smaller emissions effects can arise from the dispatch effect—when clean electricity generation is not colocated in space or coincident in time with the new sources of load. Our analysis of the PJM region suggests the magnitude of this dispatch effect can be