December 20, 2023 

The Honorable Lily Batchelder 

Assistant Secretary for Tax Policy 

Department of Treasury 

1500 Pennsylvania Avenue, NW, Room 3120 

Washington, D.C. 20220 

Dear Assistant Secretary Batchelder: 

This letter responds to a U.S. Department of Treasury request that the U.S. Environmental Protection 

Agency provide information related to the definition of lifecycle greenhouse-gas emissions under the 

Clean Air Act to support Treasury’s interpretation and implementation of Internal Revenue Code 

Section 45V. 

Enacted by section 13204 of the Inflation Reduction Act, IRC section 45V provides a tax credit to 

produce qualified clean hydrogen. IRC section 45V(b)(2) creates a system of tiers under which the 

amount of the tax credit varies based on, inter alia, the “lifecycle greenhouse-gas-emissions rate” of 

the production process. IRC section 45V(c)(1)(A) defines “lifecycle greenhouse-gas emissions” as having 

the same meaning as CAA section 211(o)(1)(H),1 subject to section 45V(c)(1)(B).2 CAA section 

211(o)(1)(H), in turn, defines “lifecycle greenhouse-gas emissions” in relevant part to mean “the 

aggregate quantity of greenhouse-gas emissions, including direct emissions and significant indirect 

emissions such as significant emissions from land use changes, as determined by the Administrator of 

the EPA. 

Treasury has therefore requested that the EPA provide guidance on the agency’s interpretation of CAA 

section 211(o)(1)(H) – in particular the term “significant indirect emissions” – to inform Treasury’s 

implementation of IRC section 45V. Specifically, Treasury has asked whether it would be consistent 

with the EPA’s interpretation of CAA section 211(o)(1)(H) in the Renewable Fuel Standard program for 

1 IRC 45V(c)(1)(A) states that, subject to subparagraph B, “lifecycle greenhouse-gas emissions” generally “has the same 

meaning given such term under subparagraph (H) of section 211(o)(1) of the Clean Air Act (42 U.S.C. 7545(o)(1)), as in effect 

on the date of enactment of this section.” 

2

 IRC 45V(c)(1)(B) states that “[t]he term ‘lifecycle greenhouse-gas emissions’ shall only include emissions through the point 

of production (well-to-gate), as determined under the most recent Greenhouse gases, Regulated Emissions and Energy use 

in Transportation model (commonly referred to as the “GREET model”) developed by Argonne National Laboratory, or a 

successor model (as determined by the Secretary).”
Treasury to determine that indirect greenhouse-gas emissions associated with increased demand for 

electricity from electrolytic hydrogen production constitute “significant indirect emissions.” Relatedly, 

Treasury has asked under what circumstances and for what purposes, if any, it would be reasonable 

and consistent with the EPA’s interpretation of CAA section 211(o)(1)(H) to use energy attribute 

certificates to substantiate claims about electricity used in electrolytic hydrogen production for 

purposes of IRC section 45V. 

The EPA emphasizes that it has not analyzed the lifecycle greenhouse-gas emissions associated with or 

conducted a lifecycle analysis for electrolytic hydrogen production. Nor has it interpreted CAA 

211(o)(1)(H) in the context of hydrogen production. However, based on the EPA’s prior 

implementation of CAA 211(o)(1)(H), the EPA believes it would be reasonable and consistent with the 

agency’s precedent for Treasury to determine that induced grid emissions are an anticipated realworld result of electrolytic hydrogen production that must be considered in lifecycle greenhouse-gas 

analyses under IRC section 45V. Such interpretation would be consistent with the EPA’s long-standing 

interpretation and application of CAA section 211(o)(1)(H) in the context of the RFS program. The EPA 

additionally believes that Treasury can reasonably rely on EACs with attributes that meet the specific 

criteria discussed below to document and verify claims of zero greenhouse-gas-emitting electricity3

 use 

and to serve as a methodological proxy in lieu of quantifying certain indirect greenhouse-gas emissions 

associated with electrolytic hydrogen production.

I. The EPA’s interpretation of CAA section 211(o)(1)(H) 

Congress provided the definition of “lifecycle greenhouse-gas emissions” in CAA section 211(o)(1)(H) 

for the purpose of the RFS program, and it is within that context that the EPA has interpreted and 

applied this term. The EPA promulgated its interpretation in a 2010 notice-and-comment rulemaking 

establishing the regulatory framework for the updated RFS program (the “RFS2 rulemaking”). The EPA 

interpreted CAA section 211(o)(1)(H) in the context of the facts and policy framework of the RFS2 

program and based on information available at that time; however, the analysis and implementation of 

the RFS2 rule offer relevant precedent in this context. 

In the RFS2 rulemaking the EPA addressed whether greenhouse-gas emissions from, inter alia, 

international indirect land use change4 induced by biofuel production are “significant indirect 

3 The EPA uses “zero greenhouse-gas-emitting” and “zero-emitting” to mean electricity generation that has zero direct 

greenhouse-gas emissions. As discussed in section III of this letter, the EPA believes it would be reasonable for Treasury to 

use EACs with attributes that meet appropriately stringent criteria as a methodological proxy in lieu of calculating induced 

grid emissions as part of a lifecycle greenhouse-gas analysis. Electricity generation may have direct and indirect 

greenhouse-gas emissions in addition to induced grid emissions that should be considered in a lifecycle analysis. For nonzero greenhouse-gas-emitting electricity generation, in particular, it is necessary to address any additional direct and 

indirect greenhouse-gas emissions, in addition to induced grid emissions, in order to consider the full range of relevant 

emissions pursuant to CAA section 211(o)(1)(H). 

4 Indirect land use change can occur when bioenergy production leads to the displacement of production of land-based 

products (crops or animals) to other locations, either directly or through changes in agricultural prices. Indirect land use 

change can occur domestically and internationally; however, a key aspect of the EPA’s analysis in the RFS2 rulemaking 

focused on international indirect land-use change. One example of international indirect land use change from that 

rulemaking is increased volume of corn used for ethanol production in the U.S. could lead to decreased corn exports, which 

in turn results in increased corn production and land use impacts (such as conversion of forested lands to cropland), and 

associated greenhouse-gas emissions, in other countries. 
3 

emissions” under CAA 211(o)(1)(H). The EPA determined that they are.5 In addition to land use 

changes, the EPA also included other sources of indirect emissions in its assessments of lifecycle 

greenhouse-gas emissions, such as indirect emissions associated with crop and livestock production.6

The agency has consistently applied this interpretation of CAA 211(o)(1)(H) in rulemakings and other 

actions under the RFS program since 2010. 

First and foremost, in the RFS2 rulemaking the EPA interpreted CAA 211(o)(1)(H) as requiring the 

agency to account for the real-world emissions consequences of increased production of renewable 

fuels.7

 Thus, the EPA determined that CAA section 211(o)(1)(H)’s inclusion of “direct emissions and 

significant indirect emissions such as significant emissions from land-use changes” requires a 

“consequential” approach to considering the real-world emissions associated with biofuel production.8

Such an approach includes consideration of market interactions induced by expanded biofuel 

production and use that may result in secondary or indirect greenhouse-gas emissions. 

In determining whether market-based interactions and resulting greenhouse-gas emissions are 

“related to” the full fuel lifecycle of biofuels, the agency explained that “[t]he term ‘related to’ is 

generally interpreted as providing a broad and expansive scope for a provision. It has routinely been 

interpreted as meaning to have a connection to or refer to a matter.”9 Consequential modeling of 

systems involved in biofuel production and use expected that increased demand for feedstocks to 

produce biofuels would likely result in international land use change as a consequence of meeting that 

demand. The EPA therefore concluded that greenhouse-gas emissions resulting from international land 

use change may be attributable to biofuel production under the RFS program, noting that the linkages 

between biofuel production and its market-mediated impacts “are generally close, and are not 

extended or overly complex.”10 Moreover, the EPA explained that it is not necessary for biofuel 

producers to have direct control over land-use changes occurring overseas for the resulting emissions 

to be “related to” biofuel production.11 Again, the agency’s focus under CAA section 211(o)(1)(H) was 

5

 75 Fed. Reg. 14670, 14765-67 (Mar. 26, 2010) (“RFS2 Final Rule”). 

6

 RFS2 Final Rule at 14770 (“Our analysis addresses the lifecycle greenhouse-gas emissions from feedstock production by 

capturing both the direct and indirect impacts of growing corn, soybeans and other renewable fuel feedstocks. For both 

domestic and international agricultural feedstock production, we analyzed four main sources of greenhouse-gas emissions: 

agricultural inputs (e.g., fertilizer and energy use), fertilizer N2O, livestock and rice methane.”). 7

 RFS2 Final Rule at 14766 (“Ignoring international emissions, a large part of the greenhouse-gas emission associated with 

the different fuels, would result in a greenhouse-gas analysis that bears no relationship to the real-world emissions impact 

of transportation fuels.”). 

8

 RFS2 Regulatory Impact Analysis for Final Rule at 299, available at 

https://nepis.epa.gov/Exe/ZyPURL.cgi?Dockey=P1006DXP.txt (definition of lifecycle greenhouse-gas emissions in CAA 

section 211(o)(1)(H) “and specifically the clause ‘(including direct emissions and significant indirect emissions such as 

significant emissions from land use changes)’ requires the agency to consider a consequential lifecycle analyses [sic] and to 

develop a methodology that accounts for all of the important factors that may significantly influence this assessment, 

including the secondary or indirect impacts of expanded biofuels use.”). The EPA further explained that a consequential 

approach “provides information about the greenhouse-gas emitted, directly or indirectly, as a consequence of changes in 

demand for a product. This approach typically describes changes in greenhouse-gas emissions levels from affected 

processes, which are identified by linking causes with effects.” Id. 9

 RFS2 Final Rule at 14767. 

10 Id.; see also 74 Fed. Reg. 24904, 25021-24 (May 26, 2009). 

11 RFS2 Final Rule at 14767. 
on the real-world emissions that can be expected to result from biofuel production, regardless of 

where those emissions occurred.12 

The EPA also noted in the RFS2 rulemaking that the significance of indirect emissions should be 

assessed “in terms of their relationship to total greenhouse-gas emissions for given fuel pathways.”13

The agency determined that emissions from indirect international land use change were significant by 

this measure. To take just two examples, relative to total mean lifecycle greenhouse-gas emissions of 

38 kgCO2e/mmBTU for sugarcane ethanol, mean international land use change greenhouse-gas 

emissions were estimated to be 5 kgCO2e/mmBTU14; for switchgrass ethanol produced through a 

thermochemical process, mean international land use change greenhouse-gas emissions were 

estimated to be 16 kg CO2e/mmBTU, compared to total lifecycle greenhouse-gas emissions of 27 

kgCO2/mmBTU.15 

II. It would be reasonable for Treasury to include induced grid emissions under IRC section 45V 

Increased demand for electricity from electrolyzers for hydrogen production can result in indirect 

greenhouse-gas emissions. Specifically, adding new incremental electricity demand to the electric grid 

will often result in either increased generation from existing generators, with associated emissions, or 

new incremental capacity coming online. If the new incremental generation is not zero-emitting, it will 

also lead to increased systemwide greenhouse-gas emissions from the electric grid. Such indirect 

emissions, sometimes referred to as “induced grid emissions,” are an anticipated real-world impact of 

increased electricity demand due to electrolytic hydrogen production. 

The EPA believes that based on its precedent in the RFS context Treasury may reasonably conclude 

that induced grid emissions resulting from electrolytic hydrogen production must be considered when 

determining “lifecycle greenhouse-gas emissions” as defined by CAA section 211(o)(1)(H). However, 

the agency reiterates that it is not determining here what emissions associated with electrolytic 

hydrogen constitute “lifecycle greenhouse-gas emissions” pursuant to CAA section 211(o)(1)(H) for 

purposes of the RFS program. 

In the RFS2 rulemaking the EPA discussed induced grid emissions associated with biofuel production 

generally and indicated that such emissions may be significant indirect emissions. However, the agency 

concluded that the analytical tools available at the time were not sufficient to include induced grid 

emissions in LCAs.16 Therefore, for most of its LCAs the EPA currently uses an “emission factor” for 

electricity use in biofuel production that represents grid average emissions. In doing so, the EPA 

attempts to capture, on a systemwide basis, both the direct and indirect emissions associated with 

increased electricity demand due to biofuel production. 

In the context of IRC section 45V, the EPA believes Treasury may reasonably determine that induced 

grid emissions are “related to” increased electrolytic hydrogen production. Electricity users, including 

12 RFS2 Final Rule at 14765 (“It is clear that, especially when considering commodity feedstocks, including the market 

interactions of biofuel demand on feedstock and agricultural markets is a more accurate representation of the impacts of 

an increase in biofuels production on greenhouse-gas emissions than if these market interactions are not considered.”). 13 Id. at 14766.

14 Id. at 14791, Table V.C-3. 

15 Id. at 14793, Table V.C-4. 

16 RFS2 Regulatory Impact Analysis for Final Rule at 445-46. 
5 

hydrogen producers, can cause or induce emissions by adding new load and consuming electricity. 

Because the grid must always balance electricity demand with supply, this increased electricity demand 

results in increased electricity supply and, if the new electricity is not zero-emitting, additional 

emissions from the grid. The linkage between increased electricity demand from grid-connected 

electrolyzers and greenhouse-gas emissions induced by that demand does not appear to be “extended 

or overly complex” and, as the EPA noted in the RFS2 rulemaking, it is not necessary for hydrogen 

producers to have control over induced grid emissions for them to be considered significant indirect 

emissions under CAA section 211(o)(1)(H). 

Further, publications have noted that electrolysis projects that use large amounts of grid electricity to 

produce hydrogen have the potential to be several times more greenhouse-gas intensive than the 

threshold for even the lowest value IRC section 45V tax credit tier, and could in fact be more 

greenhouse-gas intensive than existing forms of conventional hydrogen production.17 Assuming that 

electrolytic hydrogen production is not expected to entail large greenhouse-gas emissions from 

sources or activities other than electricity use, Treasury could reasonably determine that induced grid 

emissions are “significant,” consistent with the EPA’s interpretation of that term in CAA section 

211(o)(1)(H). 

III. EACs are an appropriate tool in conjunction with zero-emitting electricity use in the 45V context 

The emissions profile of electricity used by an electrolyzer may largely dictate which tier of the IRC 

section 45V tax credit applies to the resulting hydrogen. Thus, it is important to document that any 

zero-emitting electricity that a hydrogen producer claims for the purposes of IRC section 45V 

corresponds to the generation and use of zero-emitting electricity for electrolytic hydrogen production. 

EACs are an established mechanism for verifying the purchase of such electricity, and the EPA believes 

that their use is an appropriate way for Treasury to document zero-emitting electricity inputs to 

electrolytic hydrogen production for the purpose of IRC section 45V. 

In addition to being a means to document and verify the generation and purchase of zero-emitting 

electricity, EACs provide further information on attributes of generation. Particular attributes 

documented by EACs can inform whether the electricity meets criteria designed to match generation 

to use – electricity that is matched geographically with use, matched temporally with use, and 

generated by new incremental capacity. EACs whose attributes satisfy these specific criteria are 

referred to as meeting the “three pillars.” 

The EPA has not considered the use of three-pillar EACs in conjunction with its lifecycle analyses for 

fuels that involve the use of grid electricity under the RFS program. However, the agency believes that 

Treasury could reasonably rely on such EACs to substantiate the deliverability of zero-emitting 

electricity to a hydrogen producer. Similarly, the EPA’s regulations under the RFS program governing 

the use of renewable natural gas to produce renewable fuel are designed to, inter alia, demonstrate 

deliverability of renewable natural gas transported via commercial pipeline. These regulations require 

a contractual pathway between renewable natural-gas providers and users. They also require that a 

volume of renewable natural gas claimed for use to produce renewable fuel must be placed into and 

withdrawn from a commercial pipeline in a manner consistent with that volume actually being used by 

17 See, e.g., Pathways to Commercial Liftoff: Clean Hydrogen at 10-12, U.S. Department of Energy, available at 

https://liftoff.energy.gov/wp-content/uploads/2023/05/20230523-Pathways-to-Commercial-Liftoff-Clean-Hydrogen.pdf. 
the downstream renewable fuel producer.18 That is, the renewable natural-gas injection point must be 

physically connected to and upstream of the withdrawal point and the volume(s) injected must be 

equal to or larger than the volume(s) withdrawn; additionally, the injection must occur before the 

associated withdrawal. 

Moreover, the EPA believes it would be reasonable for Treasury to use three-pillar EACs that meet 

appropriately stringent criteria as a methodological proxy in lieu of calculating induced grid emissions 

as part of a lifecycle greenhouse-gas analysis. Although such use does not constitute a quantification of 

induced grid emissions, it would be reasonable to expect that the purchase and use of zero-emitting 

electricity represented by three-pillar EACs does not result in induced grid emissions.19 In the context 

of its Green Power Partnership, the EPA has similarly recognized partners with awards for renewable 

energy purchasing that has attributes that satisfy the criteria of geographic proximity, temporal 

matching and power sourced from newer capacity, which are in line with the goal of ensuring that 

power consumption does not result in induced grid emissions.20 

IV. CONCLUSION 

In summary, the EPA believes it would be reasonable for Treasury to determine that induced grid 

emissions are an anticipated real-world result of electrolytic hydrogen production that must be 

considered in lifecycle greenhouse-gas analyses under IRC section 45V. Such interpretation would be 

consistent with the EPA’s long-standing interpretation and application of CAA section 211(o)(1)(H) in 

the context of the RFS program. Moreover, EACs with attributes that meet the criteria of new 

incremental capacity, geographic matching and temporal matching are an appropriate way of verifying 

the generation and delivery of zero greenhouse-gas-emitting electricity and can serve as a reasonable 

methodological proxy for quantifying induced grid emissions associated with electrolytic hydrogen 

production. 

The EPA thanks Treasury for the opportunity to provide information regarding its interpretation of CAA 

section 211(o)(1)(H) and the use of EACs. I look forward to our continued support of Treasury as it 

proceeds with its important work in implementing IRC section 45V. In the meantime, please accept my 

warmest wishes. 

 Sincerely, 

 Janet G. McCabe 

18 See 40 CFR 80.1426(f)(11)(ii), 40 CFR 80.125(b)(3); see also RFS2 Final Rule at 14712 (“Producers may therefore take into 

account such displacement provided that they demonstrate that a verifiable contractual pathway exists and that such 

pathway ensures that (1) a specific volume of landfill gas was placed into a commercial pipeline that ultimately serves the 

transportation fueling facility and (2) that the drawn into the facility [sic] from that pipeline matches the volume of landfill 

gas placed into the pipeline system.”). 

19 While this letter addresses the use of EACs with attributes that meet appropriately stringent criteria in conjunction with 

electrolytic hydrogen production under IRC section 45V, the EPA believes that it would be reasonable for Treasury to 

extend the rationale and conclusions herein to the use of zero greenhouse-gas-emitting electricity under hydrogen 

production pathways in the context of IRC section 45V more generally. 

20 See Green Power Partnership at https://www.epa.gov/greenpower.