Earlier this month, Hydrogen Insight exclusively revealed that the EU had officially asked the US to make substantial changes to its forthcoming “market-distorting” clean-hydrogen subsidies.

And it has now emerged that Norway and Australia have similarly complained to US authorities that the hydrogen tax credits — part of the Inflation Reduction Act (IRA) passed into law by President Joe Biden in August — are discriminatory and potentially in breach of international trade rules.

The tax credits of up to $3 for every kilogram of clean hydrogen produced — along with $8bn of federal funding for clean hydrogen hubs in the separate Bipartisan Infrastructure Law — are widely expected to make the US the most attractive market in the world for green hydrogen producers and electrolyser makers.

But with the tax credits only available to hydrogen produced in the US, it is said to discriminate against imported hydrogen.

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Responding to a call for comments by the US Internal Revenue Service ahead of implementation of the legislation, the Norwegian embassy in Washington stated that the ten-year hydrogen tax credits “appear to be in violation of the USA’s WTO [World Trade Organization] obligations”.

It added that “certain elements” of the IRA “discriminate against Norwegian products and producers based in Norway... severely disadvantaging Norwegian products in US value chains”.

These elements include other tax credits in the IRA, such as those for clean electricity and “advanced manufacturing”, which are available for US-produced components and minerals used in solar panels, wind turbines, batteries and electric vehicles. Electrolysers are not specifically mentioned, but the iridium needed for PEM electrolysis and the platinum used in PEM fuel cells can receive tax credits.

“Such restrictions will generally make it more difficult to utilize the tax credits in question and lead to a slower transition to a green economy than if foreign producers and imports were allowed to contribute,” added the Norwegian complaint.

The embassy pointed to the domestic-content requirements needed for tax credits, and asked for “the removal of these discriminatory elements, allowing Norwegian products to qualify for bonus credits on a similar level as domestic producers”.

The Australian government’s comments on the new bill were less forthright and couched in more diplomatic language.

“We note the US has a substantial demand domestically for hydrogen, but with increasing investment in production for export globally, Australia would welcome clarification on what, if any, steps the US may take to minimise the risk of its incentives causing distortion in the global hydrogen market.

“Respecting the US’ national interests in facilitating the growth of US domestic industry, Australia would encourage the US to draft guidance that minimises the possibility of negative impacts on the development of free, fair, open and well-functioning export markets in existing and new industries such as clean hydrogen, which operate consistent with the rules-based multilateral trading system.

“Australia would encourage the US to ensure implementation and delivery of this legislation is conducted in line with the US’ international obligations.”

The EU described the hydrogen tax credits as having a “strong market distorting character”.

The IRA, it stated, “contains a problematic domestic production requirement that puts EU-based producers at a disadvantage as they must compete on a distorted market with subsidised US-based producers”.

“The EU [therefore] requests a shift of the production to a non-discriminatory consumption subsidy.”

To avoid a trade row over the IRA, a new task force has been set up by the EU and US to work through and mitigate European concerns.

The European Commission, however, is also planning to unveil its own subsidies for clean hydrogen production — but these will be paid to end users, rather than producers, and would therefore not discriminate against imported H2.

Canada has taken a different approach entirely, with plans to introduce its own hydrogen tax credits to ensure its H2 industry will not be left behind by the US subsidies.

Industry actors and nations have until 3 December to submit their comments on the hydrogen tax credits to the US government.