CMI Annual Report 2022

Table 3.1.
Hydrogen and
Fischer-Tropsch
liquids production
pathways.*
Hydrogen
With credits from 45Q, H 2
produced by reforming natural gas
with CCS (P2 or P3) is cost-competitive with conventional
carbon-intensive H 2
from natural gas without CCS (P1) (Figure
3.1a; P1-13 defined in Table 3.1). Also, because of its zero-carbon
footprint, electrolytic H 2
(P3) is eligible for the maximum
available 45V credit and is consequently less costly than P2 or
P3. Thus, the IRA incentives promise to encourage deployment
of H 2
production via P2, P3 and P4 pathways. H 2
made by
biomass gasification (P5) has a non-zero carbon footprint due
to emissions from upstream biomass collection and transport,
so the available 45V incentive is less than for P4. The P5
pathway is not cost-competitive with incumbent H 2
(P1). The
same is true for biomass gasification with CCS (P6), despite this
pathway being able to garner the full 45V credit because
negative emissions more than offset the upstream emissions.
The P6 pathway could instead collect 45Q credits for its CCS,
but the 45V credits are larger, and an individual facility may
only collect one type of IRA credit.
Figure 3.1b demonstrates that the size of a pathway’s IRA
incentive is not uniformly proportional to the emissions
reduction it achieves. IRA incentives for the P2 and P3
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Carbon Mitigation Initiative Twenty-second Year Report 2022