Negative emissions rates should not be allowed for biomethane

The Issue

Negative emissions from biomethane would allow non-innovative, carbon-intensive hydrogen production to qualify for the 45V tax credit. 

Some hydrogen producers may opt to blend biomethane (sometimes called “renewable natural gas” or “RNG”) with fossil natural gas to produce hydrogen through carbon-based pathways like steam methane reforming (SMR). Though biomethane can be produced from any organic waste, the proposed 45VH2-GREET model only considered a pathway for biomethane sourced from landfill gas. To the extent Treasury considers pathways for biomethane sources in its final guidance, it must avoid assigning them negative carbon intensities. Methodologies that calculate life cycle analysis (LCA) of biomethane sources, especially from animal manure, are complex. Multiple methods of LCA are reported in the literature with little standardization and uncertainty regarding systems boundaries and allocation methods. Therefore, assigning negative carbon intensities to biomethane will reward environmentally harmful practices and cause market distortions that are counter to the statutory intent.  

Consider the magnitude of credits that might be claimed for biogenically sourced methane if negative emissions rates are allowed. For example, under the California Low Carbon Fuel Standard (LCFS), the carbon intensity for current fuel pathways for biomethane produced from dairy and swine manure ranges from -92.22 to -790.41 g CO₂e/MJ biomethane, averaging -302.75 g CO₂e/MJ biomethane. Assigning negative emissions values would allow hydrogen producers who blend biomethane with fossil natural gas to meet the carbon intensity thresholds for the 45V tax credit without using carbon capture at the hydrogen facility. As shown in Figure 1, under some circumstances, producers would only have to blend small amounts of biomethane (15% or less) with natural gas, without carbon capture, to receive the credit. Negative values would therefore offset, on paper, real-world hydrogen production facility emissions and therefore promote carbon-intensive hydrogen production. 

While capturing biogenic methane from sources such as landfills and digesters to produce biomethane can be environmentally beneficial, the technology to do so (e.g, gas capture equipment at landfills; anaerobic digesters) is mature and not the type of nascent technology Congress intended to advance through 45V. Allowing negative emissions values would not only create a pathway to the most lucrative tier of 45V without requiring investment in carbon capture equipment, it could also cause undesirable market distortions. For example, there could arise highly disparate prices between newly captured biomethane used for 45V projects and biomethane from sources which had gas capture systems in place before the passage of IRA, which could not be used in projects receiving credits under 45V. Operators may also be incentivized to maximize biomethane production from digesters, making negative carbon intensities even more inappropriate and potentially incentivizing environmentally harmful practices.  

The Solution

Disallow negative emissions rates for hydrogen production pathways using biomethane. 

If Treasury includes additional pathways for biomethane in 45VH2-GREET or authorizes pathways under the provisional emissions rate process, it should ensure that the carbon intensity of biomethane cannot be assigned a value below 0 g CO₂e/MJ. Including negative emissions values for biogenically sourced methane in this and other tax credits, such as the section 45Z clean transportation fuel credit, will lead to environmental harms and market distortions. 

Scenario

Negative emissions rates could allow producers blending fossil natural gas and biomethane feedstocks to inappropriately qualify for 45V.  

A Port is interested in using fuel cell electric vehicles to decarbonize its operations, but there is no nearby hydrogen production. To address this problem using readily available, cheap technology, the Port has approved a project to build a new dirty hydrogen plant using SMR without carbon capture.¹ The Developer plans to “decrease” emissions by purchasing carbon credits from biomethane producers, and it anticipates the project may qualify for 45V depending on the final guidance. The Developer points to the LCFS as an example of successfully using biomethane credits. But in reality, assigning negative emissions values under the LCFS has led to perverse practices where, for example, hydrogen producers earn LCFS credits by producing high-emissions hydrogen in California and purchasing the environmental attributes of biomethane from farms across the country. In this scenario, the Developer’s hydrogen project will emit an estimated 18 kg of CO₂ for each kg of hydrogen produced, which is well above the qualification threshold for 45V. Negative emissions rates for biomethane could allow projects like this one to obtain 45V credit, promote development of similar dirty projects, and undermine the climate benefits of 45V. 

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¹ Real-world example of such a project: https://heatmap.news/economy/hydrogen-port-stockton-bayotech