When it comes to the climate impact of making hydrogen, to say the devil is in the details is an understatement.

Two primary ways to produce hydrogen exist today: heating fossil fuels (natural gas or coal) and separating out the resulting hydrogen or using electricity to power a device called an electrolyzer, which splits water into hydrogen and oxygen.

Producing hydrogen with an electrolyzer has the potential to produce close to zero or relatively few carbon emissions. But, as a recent report from energy consultancy Wood Mackenzie shows, it can also release just as many — if not more — carbon emissions as using natural gas. Electrolyzers require a lot of electricity, so the carbon intensity of that power directly influences the cleanliness of the resulting hydrogen.

The two graphs above show the carbon intensity of hydrogen produced with an electrolyzer and with natural gas equipped with carbon capture in four countries: Australia, Norway, the United Arab Emirates and the United States.

Wood Mackenzie made the following assumptions in its analysis, and acknowledged actual numbers will vary:

• Electrolyzers would be powered by renewable energy generated on site and 20% electricity from the grid, using the average carbon intensity of each country’s grid.
• For hydrogen produced with natural gas, the use of a carbon capture device is assumed to capture 60% of the emissions. The analysis used the average upstream emissions from producing the gas in each country, including methane leaks.

The charts show relying on even a relatively small share of grid electricity to make hydrogen with an electrolyzer can have significant carbon costs if the grid itself is dirty. Norway’s electricity comes almost entirely from renewable energy, so its emissions from electrolysis are near zero. Meanwhile, fossil fuels still make up roughly 40% of electricity in the U.S., 68% in Australia and nearly 90% in the United Arab Emirates.

This dichotomy explains why the debate around drafting U.S. rules to determine which hydrogen projects should qualify for a tax credit included in the 2022 Inflation Reduction Act has been so contentious. As the Internal Revenue Service writes the rules for implementing the credit, much of the consternation has been about how to account for the electricity that powers an electrolyzer.

A public hearing on the proposed rules is set for March 25. It’s not yet clear when the final rules will be released.