Biden Administration’s New Subsidy Rules Greenwash Dirty Energy

The Biden administration’s decision to expand subsidies for hydrogen produced using fossil fuels with carbon capture alongside hydrogen from renewable sources undermines the intent of clean energy policies, risking environmental credibility and advancing greenwashing practices at a critical moment in the fight against climate change. Carbon capture is, at best, ineffective and, at worst, contributes to pollution.

The revised rules, unveiled earlier this month, allow fossil fuel-derived hydrogen produced with offsetting carbon capture to qualify for the same tax incentives as hydrogen made from renewable energy sources like wind and solar. The intent is to accelerate the adoption of hydrogen as a clean fuel, but this move undermines the purpose of these subsidies by equating sustainable practices with fossil fuel-dependent methods for tax subsidy purposes.

Hydrogen has been hailed as a key arrow in the quiver of decarbonization — with applications in industries such as steel production, cement manufacturing, and transportation. However, the method of hydrogen production matters significantly: Hydrogen made with renewable energy has a negligible carbon footprint while hydrogen derived from fossil fuels, even with carbon capture, results in substantial emissions. The latter also perpetuates a reliance on extractive industries, keeping the metaphorical wheels greased on the fossil fuel industry rather than encouraging it to begin winding down.

Carbon capture, while often proposed as a technological cure-all for emissions, has proven to be both inefficient and insufficient in addressing the full pollutive effects of fossil fuel burning. By subsidizing hydrogen from these sources, the Biden administration is at once greenwashing and diverting resources away from scalable, renewable-based hydrogen technologies that will be necessary if a decarbonized economy is possible.

This policy decision places in stark relief the need for greater scrutiny of what exactly constitutes “clean energy” in the race to combat climate change. Investors, customers and constituents may be bamboozled — but the climate will not be.

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Carbon capture and storage is often touted as a silver bullet for reducing greenhouse gas emissions, but its real-world effectiveness falls far short of its promises. Many CCS systems fail to trap more than 60% to 70% of carbon emissions even under perfect conditions, and most perform still worse in practice. This raises critical questions about its viability as a lynchpin of climate policy.

In addition, capturing and storing carbon requires energy itself—which often leads to it drawing energy from the same sources it aims to mitigate. This creates a vicious cycle where the process of reducing emissions contributes additional emissions, effectively canceling out at least part of the purported benefit. Issues in transportation and storage, like leakage from pipelines or tanks, only adds to the risk of long-term net environmental harm.

If the goal of hydrogen subsidizes it to drive decarbonization, relying on fossil fuels with carbon capture is a counterproductive strategy that further entrenches dependence on polluting industries. Instead of addressing the root cause of emissions, fossil fuels, this approach offers a superficial fix that delivers superficial results.

Hydrogen produced through renewable energy-powered electrolysis, a process that splits water into hydrogen and oxygen using electricity, has near zero emissions. This enables a transformative and sustainable pathway to decarbonizing industries that would otherwise be hard to electrify—like heavy transportation and industrial manufacturing.

The Biden administration’s decision to subsidize fossil fuel-derived hydrogen alongside renewable hydrogen sets a dangerous precedent and is tantamount to moving the decarbonization goal posts back significantly. By holding out both methods as equally eligible for incentives, the administration risks misleading the public and investors about the environmental benefits of these approaches, greenwashing fossil fuel-derived hydrogen and giving green energy opponents ample ammunition to attack the initiative broadly.

The expanded rules also risk discouraging industries from fully committing to costly conversions to renewable energy — if companies can access subsidies while continuing to rely on the fossil fuel infrastructure they have built, there is little incentive to invest in scaling renewable production. This stalls progress toward a truly decarbonized energy system in favor of a somewhat-cleaner green façade.

If the U.S. is to lead on climate action, policymakers must ensure that subsidies prioritize genuinely sustainable technologies like renewable hydrogen—not the carbon offset shell game. With an incoming administration likely to stall or roll back green initiatives, now was the time to double down on renewable solutions, not to hedge bets on fossil fuel stopgaps that offer, at best, an illusion of progress.