'Deeply flawed' emissions model could derail hydrogen tax credit success: FoE

The environmental advocacy group Friends of the Earth is pushing back against "hydrogen hype" in a recent report in which the group warns that hydrogen tax credits within the Inflation Reduction Act could easily be exploited by incumbent energy producers to greenwash their operations.

The report, which was published Feb. 6, takes particular aim at the way lifecycle emissions of blue hydrogen will be measured. The IRA requires lifecycle emissions to be measured by the Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies model, known as GREET.

The GREET mode, which was developed by the Argonne National Laboratory, was originally designed to estimate the emissions of various vehicle types. In a hydrogen context, it will be used to determine the carbon intensity of hydrogen production methods, and those carbon intensity levels will determine the tax credit amounts producers receive.

Per the law, the credit would offer $3/kg of hydrogen produced with no more than 0.45 kilograms of CO2 emissions, and between 60 cents/kg and $1.02/kg for hydrogen produced with between 4 kg and 0.45 kg of CO2 emissions.

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How exactly the GREET model will measure carbon intensity levels of hydrogen remains to be seen. The US Treasury Department and Internal Revenue Service are currently crafting guidance for how the GREET model will be applied to hydrogen, and that guidance is expected to be released later this year. Many observers say that the entire success of the hydrogen tax credits will hinge on these measurement methodologies.

But to Friends of the Earth, the GREET model is a "deeply flawed" tool.

GREET estimations

At issue is the way GREET estimates methane leakage – the primary source of emissions with blue hydrogen's value chain. The GREET model used by the Department of Energy assumes a methane emissions rate of 1.1%. It's Friends of the Earth's belief that this number is under half of what it should be, and they cite research by Cornell University's Robert Howarth, professor of ecology and environmental biology.

To Howarth, the "preponderance of peer-reviewed literature" shows that methane leakage should be estimated at 2.6%. And Friends of the Earth says that assuming a leakage rate of 1.1% instead of 2.6% "is an unfortunate lifeline to the fossil industry."

"The latest research indicates that accurately accounting for both methane leakage and the power demands of CCS makes blue hydrogen even worse for the climate than coal, per unit of heat energy," their report says.

Recent data from S&P Global's monthly assessments of upstream methane emissions for 19 US gas fields show a wide range of methane leakage rates. In the Permian-Delaware Basin, for instance, average leakage rates were assessed at 0.69% in 2022. In the Anadarko Basin, they were assessed at 10%.

"Friends of the Earth's concerns about reliance on the current GREET model are reasonable," said S&P Global hydrogen analyst Brian Murphy.

"Using data measured at regular intervals would not only lead to more accurate CO2e measurements for the hydrogen production tax credit, but also bring more focus to fugitive methane by putting pressure on producers to reduce emissions in order to retain hydrogen customers," Murphy said.

Future GREET updates

Friends of the Earth also fears that oil and gas interests will pressure the Treasury Department and IRS to lower the standard definition of clean hydrogen during this stage of implementation. That fear is based on its review comments submitted to the Treasury Department and IRS in late 2022, when the agencies requested input on how the guidance should be crafted.

The group points to comments submitted by BP America, CNX Resources Corporation and the American Petroleum Institute, who advocate in favor of the GREET model and request that it undergo no future changes or updates once it is in place.

"Once provisional emissions rates are confirmed by the IRS, the methodology used to determine such emissions rates should not change, regardless of any changes or updates to the GREET model, or any other model used in the determination," BP Americas said in its comment to the IRS and Treasury last year.

The American Petroleum Institute added that protections against future modifications provide producers with "certainty that their method will not become disqualified due to changes in modeling without sufficient time to revise their production method if necessary."

But to Friends of the Earth, this approach would keep the GREET model is "out of step" with the latest science.

"Whether the Department of Energy updates GREET or develops a successor model, it is vital that the government rely on a model that reflects the true toll of hydrogen production on the climate," the report said.