Impacts of the Inflation Reduction Act on the Economics of Clean Hydrogen and Synthetic Liquid Fuels

Abstract

The Inflation Reduction Act (IRA) in the United States provides unprecedented incentives for deploying low-carbon hydrogen and liquid fuels, among other low-greenhouse gas (GHG) emissions technologies. To better understand the prospective competitiveness of low-carbon or negative-carbon hydrogen and liquid fuels under the IRA in the early 2030s, we examined the impacts of the IRA provisions on the costs of producing hydrogen and synthetic liquid fuel made from natural gas, electricity, short-cycle biomass (agricultural residues), and corn-derived ethanol. We determined that, with IRA credits (45V or 45Q) but excluding the incentives provided by other national or state policies, hydrogen produced by electrolysis using carbon-free electricity (green H 2 ) and by natural gas reforming with carbon capture and storage (CCS) (blue H 2 ) is cost-competitive with the carbon-intensive benchmark gray H 2 , which is produced by steam methane reforming. Biomass-derived H 2 with or without CCS is not cost-competitive under the current IRA provisions. However, if the IRA allowed biomass gasification with CCS to claim a 45V credit for carbon-neutral H 2 and a 45Q credit for negative biogenic CO 2 emissions, this pathway would be less costly than gray H 2 . The IRA credit for clean fuels (45Z), currently stipulated to end in 2027, would need to be extended or similar policy support would need to be provided by other national or state policies in order for clean synthetic liquid fuel to be cost-competitive with petroleum-derived liquid fuels. The levelized IRA subsidies per unit of CO 2 mitigated for all of the hydrogen and synthetic liquid fuel production pathways, except for electricity-derived synthetic liquid fuel, range from $65−$384/t of CO 2 . These values are within or below the range of the U.S. federal government's estimates of the social cost of carbon (SCC) in the 2030−2040 time frame.

Co-assessment of costs and environmental impacts for off-grid direct air carbon capture and storage systems

“…Labour costs are not included since DACS operation is a highly automated process, and previous work has shown that labour costs account for <1% of total costs 24 . For any U.S. location, the 45Q credit for carbon dioxide removal is of high relevance 41 . As stated therein, DACS systems are eligible for a $ 180 per tCO 2 credit (in the form of tax credit or direct pay) 42 .…”

Engineering biology and climate change mitigation: Policy considerations

“…Recent US legislation has also provided potential financing (e.g. tax credits in the Inflation Reduction Act that might be accessed by synthetic fuel producers) 17 and general support for EngBio research—e.g. creation of a 'National Engineering Biology Research and Development Initiative' by the Chips and Science Act (2022).…”

How to Compute Whether Biomass Fuels Are Carbon Neutral

“…In order to realistically fulfil the (existing and most urgently needed) global and national climate protection targets, all potential measures have to be implemented to a maximum extent. Given its immediate technological availability [1][2][3][4][5][6][7][8][9], biomass energy has been playing a key practical role for decades already, and was conceptually supported by the traditional assumption of its carbon neutrality: under sustainable conditions, carbon dioxide emitted during combustion was held to be equal to its absorption during plant growth [10][11][12][13][14][15][16][17]. However, in order to clarify conditions of carbon (C) neutrality quantitatively and more reliably [18][19][20][21][22][23][24][25][26][27][28][29][30][31], it became necessary to model the annual natural C cycle globally and to consider its changes as a result of steadily growing large-scale biomass strategies [32][33][34][35][36][37][38][39][40].…”