Colorado Poised to Set First-In-Nation Clean Hydrogen Standards

DENVER (May 9, 2023) – As a national battle broils over the standards for more than $100 billion in federal tax credits for clean hydrogen, the Colorado legislature voted Saturday in favor of state tax credits for the use of clean hydrogen, setting nation-leading greenhouse gas standards for hydrogen production that should have strong bearing on the national debate. The bill now awaits signature from Governor Polis. 

Notably, Colorado’s bill includes critical guidelines seeking to ensure the energy-intensive production of hydrogen does not ultimately increase greenhouse gas emissions. These include a requirement for the hydrogen project to be powered by new clean electricity supply and hourly match its operations with the clean electricity supply.  

Produced properly, hydrogen can serve as a substitute for fossil fuels in hard-to-electrify uses, including some industrial processes and marine shipping. But produced without guardrails, the energy-intensive production of hydrogen will significantly increase emissions on the grid by driving fossil fuel generators to stay online to support production. In the context of the federal IRA clean hydrogen tax credit, experts from Princeton ZERO Lab, Energy Innovation, and others estimate that absent guardrails similar to the ones that the Colorado legislature voted to enact, hydrogen could have an emissions intensity up to 4 times today’s dirty status-quo hydrogen, due to the high emissions it drives on the grid. 

In response to the passage of the bill, the NRDC released the following statement: 

"By requiring critical guardrails that will ensure genuinely clean hydrogen production for their state tax credit, Colorado can simultaneously influence the federal clean hydrogen standards and set its emerging clean hydrogen industry up for success,” said Rachel Fakhry, Director of Emerging Technologies at NRDC (Natural Resources Defense Council). “Despite fierce lobbying by some industry groups to loosen the rules, the Colorado legislature held firm to bolster its climate progress, protect its communities from reckless polluting hydrogen development and boost the credibility of its emerging clean hydrogen industry. Treasury, the Department of Energy, and other states should take note and follow Colorado’s lead.”