Trump’s recent executive orders are unlikely to impact existing tax incentives for low- and zero-emission fuel production in the US, but they may redirect focus from green to blue fuels.

US President Donald Trump recently issued an executive order to pause all unspent federal funding tied to the Inflation Reduction Act (IRA). Federal agencies now have 90 days to report how these funds align with the administration’s broader energy goals to the Office of Management and Budget and the National Economic Council.

This order has raised questions about its potential impact on the US low- and zero-emission fuel production sector. But some experts suggest that the move is unlikely to harm the existing tax subsidies for clean fuel production under the IRA.

“All spending on Inflation Reduction Act and IIJA (Bipartisan Infra Law) ordered to be stopped by Trump Executive Order. I assume this applies to unspent discretionary grants and loans like most (all?) of DOE LPO and GDO, but not tax credits,” said Rob Gramlich, president of power-grid consultancy Grid Strategies. He added that stopping mandatory grants would venture into legal complexities under the impoundment law, which requires such funds to be spent unless overridden by the Supreme Court.

IRA tax credits like 45V for green hydrogen and 45Q for carbon capture promote the production of green and blue hydrogen-based fuels in the US by reducing the production cost of these fuels.

These subsidies could benefit several green and blue fuel projects in the US that could produce hydrogen-based fuels for the bunker market. For instance, Methanex and Woodside Energy are developing green methanol and blue ammonia production in Beaumont. HIF Global is building an e-methanol plant in Matagorda County, and LSB Industries has plans for a blue ammonia plant near the Houston Ship Channel.

Removing tax credits will raise low-carbon fuel production costs and contribute to keep price gaps with fossil fuels wide.

But since they are already enacted, removing them would require further congressional action, which could “prompt legal challenges,” according to Robert Moczulewski, senior director at tax advisory firm Baker Tilly.

Gerben Hieminga, senior energy sector economist at ING, believes that “hydrogen and CCS tax credits can survive and continue to play a crucial role in reducing costs” under the Trump administration. In fact, they may even see “loosened eligibility criteria,” which can help to reduce costs, he added.

He also noted that the freeze could impede funding for green hydrogen technologies such as electrolysers, but Trump’s focus on natural gas and carbon capture and storage (CCS) might boost blue hydrogen production.

“Blue hydrogen is likely to dominate green hydrogen, allowing the industry to grow more significantly due to the larger scale of blue hydrogen projects,” he said, estimating US blue hydrogen production could reach 4.8 million mt/year by 2030, compared to only 1.2 million mt/year of green hydrogen.

While tax credits may survive Trump’s presidency, Hieminga cautions that uncertainties around “tax credit guideline finalisation, non-credit funding, and government-enabled hydrogen development programmes can slow down project development.”

In other news this week, Spanish project developer Reolum plans to build a plant to produce 140,000 mt/year of e-methanol for bunkering and other industries. The plant will be located in the Castilla y León region of northwestern Spain and is expected to become operational by 2027.

Swedish e-fuel company Liquid Wind plans to build another 100,000 mt/year e-methanol production plant in Finland. The fuel produced will primarily be supplied to the maritime and aviation sectors. Commercial operations are expected to begin in 2029.

Global marine fuels supplier Monjasa will start supplying biofuel bunker blends in the Panama Canal area. Monjasa will offer ISCC-certified B30-VLSFO blends in Panama, the company said in a social media post. It expects to supply about 5,000-7,000 mt/month.

By Konica Bhatt

Photo credit: Venti Views on Unsplash
Published: 27 January, 2025