The explosion of proposed “low-carbon” hydrogen and ammonia facilities is difficult to follow, even for dedicated climate advocates. The regulatory processes are complex, the finances are murky, and federal law keeps changing.
This blog post is intended to help climate advocates opposing proposed hydrogen and ammonia facilities solve one information gap: How much money in federal 45V hydrogen tax credits or 45Q carbon capture tax credits are these facilities eligible for?
To that end, I dove into the details of the law and created a publicly available 45V and 45Q tax credit calculator. Click here to go to the calculator, or continue reading for a guide to use the calculator and an explanation of the 45V and 45Q tax credits.
What Are 45V and 45Q Tax Credits?
The 2022 Inflation Reduction Act incentivized clean hydrogen production through two related yet distinct accounting methods. The 45V tax credit provides a financial incentive per metric ton of low-carbon hydrogen produced, with higher incentives for hydrogen production that emits less carbon. While both “green” and “blue” hydrogen facilities theoretically qualify for the highest 45V tax credit, in practice only “green” facilities will.
The issue for “blue” hydrogen producers is that qualifying for the most lucrative 45V tax credit requires less than 0.45 metric tons of carbon dioxide equivalent (mtCO2e) for each metric ton of hydrogen produced (Figure 1). But producing hydrogen from natural gas emits 11.4 metric tons of carbon dioxide equivalent, and upstream emissions alone emit 2.4 mtCO2e. The 45V tax credit is calculated based on lifecycle emissions, meaning that even if a “blue” facility captured and sequestered all 9 mtCO2e it emitted to produce 1 metric ton of hydrogen, it would still fail to qualify for the 45V Tier 1 tax credit. The floor for producing one metric ton of hydrogen from natural gas is emissions of roughly 2.4 mtCO2e, which is just under the 2.5 mtCO2e ceiling for Tier 3.
A “blue” facility qualifying for Tier 3 tax credits is functionally impossible. The facility would have to capture and sequester 99% of its emissions. Even qualifying for Tier 4 tax credits is difficult because it would require CCS rates of about 83%. In practice, CCS rates rarely, if ever, exceed 80%, let alone 99%.
For these reasons, the 45V tax credit functionally applies only to “green” facilities. The upstream emissions for “green” facilities are dependent on the carbon intensity of the electricity used to power the facility. The value of 45V tax credits is multiplied by five if the facility meets certain prevailing wage standards.
Figure 1: 45V Tax Credit Tiers
The 45Q tax credit provides a financial incentive of $17 per metric ton of carbon captured and sequestered (CCS), which would only be available to “blue” facilities that use fossil gas as feedstock for hydrogen production. The $17 figure is set to 2025 dollars, plus future inflation. The value of 45Q tax credits is multiplied by five if the facility meets certain prevailing wage standards.
Facilities must choose between 45V and 45Q tax credits; they cannot receive double credit.
Further, under the IRA, facilities had to have begun construction by January 1, 2033 to qualify for either tax credit.
However, Section 70511 of the 2025 One Big Beautiful Bill Act moved up the deadline for construction to January 1, 2028. As I predicted last summer, this accelerated timeline is causing companies to either intensify their efforts to navigate the regulatory processes or begin canceling projects that are unlikely to win permitting approval before January 2028.
How Much Money Is At Stake?
Let’s examine a “green” facility and a “blue” facility. First, the 1.2 million-metric-ton-per-year ACME Green Ammonia Plant. Producing 1.2 million metric tons of ammonia requires about 218,000 metric tons of hydrogen. This requires a lot of electricity, roughly 2 million megawatt hours, which is enough to power 184,000 homes for a year (assuming 10.8 MWh annual electricity consumption per household). If the electricity is clean enough to qualify for Tier 1 tax credits, the ACME plant would qualify for $681 million in 45V tax credits. At the lowest Tier 4 level, ACME would qualify for $136 million in 45V tax credits every year.
Second, the now-canceled 900,000-metric-ton-per-year blue hydrogen project at the ExxonMobil Baytown Chemical Plant.
(The fact that this project was indefinitely paused in November 2025 is one piece of evidence that my summer prediction was correct. Exxon CEO Darren Woods directly referenced the changed timeline as a complicating factor: “We were disappointed that, under the recently approved 45V tax credit, timing for start of construction was shortened from 2033 to the beginning of 2028.”)
Canceling the project was a huge financial blow to Exxon, even though as a “blue” facility it would likely have only qualified for Tier 4 45V tax credits. Producing 900,000 metric tons of hydrogen would have qualified the facility for $558 million in tax credits. Alternatively, the facility could claim $571 million in 45Q tax credits for sequestering 6.7 million metric tons of carbon dioxide, assuming an 83% CCS rate.
How To Use The Climate Advocate’s Low-Carbon Hydrogen Tax Credit Calculator
There are three options for using this calculator.
First, you can calculate the range of tax credits available for “blue” or “green” hydrogen facilities. To do this, input the amount of hydrogen the facility will produce each year. In this example, I’m using the now-canceled Baytown project. The 45V calculator assumes that facilities will meet the wage requirement to increase the tax credit five-fold.
Into the orange cell B11, I input 900,000 as the annual hydrogen production. The outputs in the purple cells B14 – B17 show the range of the 45V tax credit value. Since Baytown is a “blue” facility, it cannot qualify for Tier 1 or Tier 2 tax credit values shown in cells B14 and B15. Cell B16 shows the value of Tier 3 tax credits. Cell B17 shows the value of Tier 4 tax credits for a facility producing 900,000 metric tons of hydrogen.
To calculate 45Q tax credits, add the CCS rate into cell B12. The outputs in cells B18 – B19 show the value of 45Q tax credits for the facility. For this example, I used an 83% CCS rate to be able to compare Tier 4 45V tax credits to 45Q tax credits, which are similar in value.
Figure 2: Calculating 45V Tax Credit Value for Hydrogen Facilities
Second, you can calculate the range of tax credits for ammonia facilities. Figure 3 shows that the calculator works the same for ammonia facilities as it does for hydrogen. The only difference is that the input cells are B23 and B24, and the output cells are B26 – B29 for 45V and B30 – B31 for 45Q.
The example used in Figure 3 is the ACME Green Ammonia Plant, which is slated to produce 1,200,000 metric tons per year. The value of 45V tax credits for this ammonia facility range from $136 million to $681 million. If ACME were a “blue” facility, the calculator also shows the value of 45Q tax credits assuming an 83% CCS rate.
Figure 3: Calculating 45Q and 45V Tax Credits for Ammonia Facilities
Third, Figure 4 shows how to calculate 45Q tax credits for any facility that plans to sequester carbon. For example, the Linde Nederland facility currently under construction in Texas plans to sequester 1.7 million metric tons of carbon dioxide per year. Input the amount of carbon sequestered into cell B35 and the outputs appear in cells B37 – B38. The value of 45Q tax credits for the Linde Nederland facility range from $29 million to $145 million per year.
Figure 4: Calculating 45Q Tax Credits Based Off Amount of Carbon Sequestered
A Single Facility Can Be Eligible For Billions of Dollars of Tax Credits
With such astronomical figures, it is no wonder that companies have proposed so many new projects. Yet all those projects must break ground within the next 24 months to qualify. It stands to reason that companies will spare no expense to speed their way through the regulatory process to begin construction before the January 2028 deadline.