Blue hydrogen subsidies could cost U.S. taxpayers billions while offering minimal environmental returns, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA). The study reviews Air Products’ Louisiana Clean Energy Complex (LCEC), one of the largest planned blue hydrogen projects in the U.S. While the company may benefit financially, the report says the project could fail to deliver meaningful climate benefits.

“Spending billions of dollars on untested carbon capture technology in applications with no net climate benefit is a waste of taxpayer money,” said Anika Juhn, IEEFA energy data analyst and co-author of the report. “Building out renewable power infrastructure, improving energy efficiency, and reducing methane leakage from the natural gas system are more cost-effective and proven approaches to a clean energy transition.”

IEEFA Highlights Emissions Risk in Blue Hydrogen

Air Products estimates it will spend $7 billion to build the facility, which is scheduled to begin operations in 2028. The company plans to produce 600,000 metric tons of hydrogen annually using methane gas. It also claims it will capture and store 5 million metric tons of carbon dioxide each year. These efforts qualify the project for federal tax credits under the 45Q program.

IEEFA’s analysis found that only under optimal conditions would the facility achieve modest emissions reductions. Under more realistic scenarios, the plant would likely generate significant new carbon emissions. At the same time, taxpayers would fund subsidies through blue hydrogen subsidies with no guaranteed net climate benefit.

Tax Credits Enable Billions in Subsidies

Under the 45Q credit, Air Products could receive up to $440 million annually in 2025 dollars. Over 12 years, that adds up to $6.3 billion, even if the project fails to cut emissions. Current U.S. regulations do not require net emission reductions and impose no penalties for increased emissions. This loophole could allow companies to benefit from public subsidies without delivering on environmental promises.

IEEFA’s report urges policymakers to reconsider the role of blue hydrogen subsidies. It also questions whether the 45Q credit offers responsible support for climate goals.