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What a Biden Presidency Means for Hydrogen in the United States: Low-Carbon Transportation Fuel

  • USA
  • Energy and infrastructure - Clean energy

12-01-2021

With the global energy transition gaining momentum, President-Elect Joe Biden has the opportunity to set the United States on a course to greater renewable energy reliance upon entering office on January 20, 2021. In particular, the prospect of hydrogen being a renewable, low-carbon transportation fuel alternative has piqued significant interest both in the United States and abroad, and the incoming Biden Administration could provide hydrogen with the catalyst it needs to become a mainstream source of renewable transportation fuel that could help the United States meet its carbon-reduction goals.

Hydrogen as a Transportation Fuel

The transportation sector is one of the most significant contributors to greenhouse gas emissions in the United States and worldwide, accounting for almost 30% of emissions in the United States in 2019. Identifying and incentivizing renewable and low-carbon transportation fuel has become a priority at both state and federal levels of government. To date, this has largely been accomplished through the issuance of valuable environmental credits to those companies that produce and supply such low-carbon fuels, and President-Elect Biden is likely to only support such programs at the state level, and potentially initiate and expand the development of a similar program at the federal level.

Currently, two states—California and Oregon—have low carbon fuel standard (LCFS) programs that set an overall carbon intensity (CI) for the supply of fuel within the state and issue credits to those fuel suppliers that produce fuels with a CI lower than the standard. Low-carbon fuel producers and suppliers can then sell these credits at a given market price to other suppliers, providing a significant financial incentive for such production and supply. Under both the California and Oregon programs, a number of pathways exist for hydrogen transportation fuel, and credits can be generated on hydrogen supplied as a transportation fuel. A number of other US states are actively considering LCFS programs, including New York, Colorado, and Washington, among others. The credit generating opportunities state LCFS programs provide suppliers of low-carbon fuel like hydrogen assist those suppliers in offsetting the significantly higher technology costs associated with the production and supply of those low-carbon fuels.

At the federal level, the US Environmental Protection Agency (EPA) Renewable Fuels Standard (RFS) is fundamentally different from, but operates in the same spirit as, state LCFS programs—namely, that the RFS incents low-carbon fuels through requiring refiners to ensure renewable fuel is used as transportation fuel. One significant difference is that the RFS is not technology and fuel neutral, meaning only a select number of fuels are eligible to generate credits. Hydrogen produced from biogas is eligible under the statute to generate credits, but EPA has not yet approved a pathway.

What a Biden Administration Can Do

The incoming Biden Administration would have the authority under the RFS to approve a hydrogen pathway, which would lead to credit generating opportunities and investment in hydrogen fuel development. Another option being considered is a federal LCFS program, which may incorporate portions of California’s LCFS, allowing for investment in and incentives for a greater diversity of renewable fuels than federal law currently allows. Such a measure would likely take two or more years to develop, but after implementation, it would provide a significant incentive to supply hydrogen transportation fuel. Moreover, any federal LCFS program would likely be designed to be compatible with, rather than preempt, state LCFS programs, which may also encourage more states to develop their own LCFS programs.

President-Elect Biden campaigned as a pro-renewable fuel nominee, and his stance on addressing climate change and greenhouse gas emissions suggests a Biden-EPA would be eager to approve additional pathways for low-carbon fuel, including those pending for hydrogen. Such measures would not require action from Congress and could be completed via EPA rulemaking, which would likely be initiated and finalized with little resistance and relatively quickly compared to legislation.

Additionally, a Biden Administration would likely favor and support the creation of a federal LCFS program, for which Democrats in Congress have already expressed their support; however, such an effort would likely need to be initiated by an act of Congress followed by EPA rulemakings—a process that would likely take two or more years to complete. Moreover, getting such legislation passed in Congress would prove challenging considering the various interests at play and the current composition of the Legislature.