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Research from the Institute for Energy Economics and Financial Analysis calls blue hydrogen’s carbon math into question.

The largest hydrogen producer in the world, Air Products, stands to earn up to $440 million per year in clean energy tax credits once it opens its massive, $7 billion complex in Louisiana in 2028. But a recent report argues that while the hydrogen produced there will be highly profitable for Air Products, it’s a “lose-lose proposition” for the environment — and for taxpayers.
The research adds to the long-running debate around the climate benefits of “blue hydrogen,” which is produced via the separation of hydrogen molecules from carbon molecules in natural gas, with systems that capture the resulting carbon emissions and store them underground. Advocates of the technology say it’s a critical bridge to a renewables-powered hydrogen economy, as it allows for cleaner hydrogen production now by relying on existing infrastructure. Critics, however, say that blue hydrogen’s emissions benefits are minimal if any, and that a focus on this technology diverts money from more meaningful climate solutions.
The blue hydrogen produced at Air Products’ Louisiana facility will be eligible for the lucrative 45Q carbon sequestration tax credit, which was expanded by the Inflation Reduction Act in 2022 and provides up to $85 per metric ton of carbon that’s permanently locked away.
The March report from the Institute for Energy Economics and Financial Analysis, however, argues that Air Products makes overly optimistic assumptions about both methane leakage rates and the effectiveness of carbon capture equipment, while underestimating the potency of methane in the short term. The company’s estimates are largely based on a Department of Energy life cycle analysis tool, which the report's authors also believe is flawed. The result, the authors write, is that the Louisiana plant would “cost billions of dollars in subsidies for essentially zero environmental benefit.”
With lawmakers in Congress considering which IRA tax credits to preserve and which ones to cut to make way for Trump’s spending priorities, now is a critical moment for climate-focused policymakers to have their priorities in order. It’s worth asking which provisions from Biden’s signature climate law are actually delivering a climate bang for their buck.
Air Products says that its Louisiana facility will sequester 5 million metric tons of CO2 annually over the 12 years that it’s eligible for the tax credit, which equates to $6.3 billion in total tax savings. To state the obvious, that’s a lot of taxpayer money for a project that a leading research group asserts will likely be a net negative for the environment.
“As you start expanding the envelope to take into account the full footprint and the full impact of this project and its product, there’s just not much of a benefit there, if any. It may be making things worse.” Anika Juhn, an energy data analyst at IEEFA and one of the report’s authors, told me. These findings are not specific just to Air Products’ upcoming facility — they’re “broadly applicable to other blue hydrogen projects,” Juhn said. (My colleague Emily Pontecorvo, for instance, wrote about a similar finding regarding methane leakage from the Permian Basin.) At least four of the DOE’s seven hydrogen hubs rely on natural gas with carbon capture and storage to some degree. Meanwhile, the Trump administration is looking to cut funding for the hubs that primarily produce hydrogen via renewable energy.
The DOE’s life cycle analysis tool uses an industrial methane leakage rate of 0.9% and a carbon capture rate of 94.5% for the specific method the Air Products facility will use, called autothermal reforming. (Or at least that’s what the IEEFA report said — I couldn’t find evidence of this carbon capture number in the government’s model itself.)
When Juhn and her co-author David Schlissel adjusted the analysis of Air Products’ Louisiana project using more typical industrial methane leakage rates of 1% to 4% and carbon capture rates ranging from 60% to 94.5%, they found that only under the most optimistic scenario would the project yield any carbon reductions at all. Even then, avoided emissions would only be about 200,000 metric tons per year of CO2 equivalent, whereas at the high end of the report’s “realistic scenario,” the project could result in an additional 7.5 million metric tons of CO2 equivalent annually.

To calculate the net life cycle emissions of a hydrogen project, the authors had to take the estimated benefits of hydrogen production into account, a task complicated by the fact that Air Products hasn’t announced any offtakers, making it impossible to know what dirtier (or cleaner) options customers might turn to if they didn’t have access to blue hydrogen. So instead, IEEFA relied on the White House’s general estimate that the 3 million metric tons of blue and green hydrogen (i.e. hydrogen released from water molecules using carbon-free electricity) produced by the hydrogen hubs would displace 25 million metric tons of CO2. But because the White House didn’t release its formula for determining avoided emissions, take their numbers with a grain of salt.
All of Air Products’ calculations thus come with the usual caveat, which is that they’re measured against an unknowable counterfactual — essentially a best guess at what would happen if plans for the Air Products facility went poof. Would the end users opt for hydrogen alternatives or would they rely on a standard natural gas-powered hydrogen facility with no carbon capture? Is it possible that a green hydrogen plant using renewables-powered electrolysis would be built instead?
All we know is that a portion of the hydrogen will be turned into ammonia and exported abroad, where Juhn told me it’s likely to be burned as fuel. Another portion will be injected into an existing 700-mile hydrogen pipeline on the Gulf Coast for use by existing customers in industries such as energy, transportation and chemicals.
While Air Products did not respond to my request for comment on the report, I was able to discuss the results with John Thompson, a director at the climate nonprofit Clean Air Task Force, which advocates for a wide array of climate-focused technologies, including hydrogen with carbon capture and storage. He took issue with the IEEFA study’s methodology, and told me that blue hydrogen projects have the potential to be a big win for the climate, so long as they’re replacing “gray” hydrogen projects — that is, those powered by natural gas with no carbon capture.
“When you do displace gray hydrogen, you get huge, huge benefits,” Thompson told me. Despite all the unknowns involved, he’s confident the Louisiana project will do just that, primarily due to the existing network of hydrogen pipelines at the site. “Those pipelines are there because they’re serving existing customers — refineries, ammonia plants, chemical manufacturing,” he said, meaning that “the likelihood that you’re displacing existing sources is pretty great.”
Thompson also took issue with the notion that a 95% capture rate is overly optimistic, telling me that there’s no technical barriers to achieving industrial capture rates in the 90s. “The 95% capture rate that they’re proposing to build towards is what is commercially guaranteed by many vendors,” Thompson said. “It hasn’t been widely used, not because it’s not commercially available, but because it’s costly, and there hasn’t been much demand for it until we got into climate considerations.”
To Thompson, the IEEFA report looked more like an “advocacy piece.” To IEEFA, the Louisiana project still appears to be a government subsidized money-making scheme. Notably, the Air Products facility probably will not qualify for the much debated 45V clean hydrogen production tax credit, the most generous subsidy of all in the IRA. That credit provides up to $3 per kilogram of clean hydrogen produced — a whopping $3,000 per metric ton — for projects with the lowest emissions intensity. It’s also tech-neutral, meaning that so long as blue hydrogen projects have life cycle emissions under 4 kilograms of carbon dioxide equivalent per kilogram of hydrogen produced, they will be eligible for at least a $0.60 credit per kilogram of clean hydrogen.
Air Products said last May that it would not even attempt to claim this credit for the Louisiana facility, even as the company asserts that the complex will produce “near-zero carbon emissions.” A 2023 DOE report indicated few blue hydrogen projects will be eligible, period, given “the added [natural gas] and electricity needed to run the [carbon capture and storage] facility.”
So at least by the DOE’s own standards, the hydrogen produced by Air Products will not be “clean.” That’s not a precondition for the carbon sequestration tax credit, though, which doesn’t demand life cycle analysis, just proof that you’re putting a certain amount of CO2 in the ground. Juhn thinks that’s a big mistake. These analyses are “the only way that you can know whether or not investing in CCS projects makes sense, either in a climate sense or in a financial sense,” she told me.
But as fossil fuel interests including Occidental and ExxonMobil have advocated for preserving and even increasing the 45Q tax credit, Juhn doesn’t expect to see any changes to the rule that would mandate more stringent requirements.
“I do hear the fossil fuel industry saying, Oh, we need blue hydrogen first because we can get things moving. We can get this online and we can start creating this product to stimulate demand,” she told me, citing a common argument that blue hydrogen is a necessary stepping stone to creating a robust, economical green hydrogen economy. “But the problem is that these facilities, they’re not going to go away when green hydrogen projects come online, and these projects are being built with a 25-, 30-year lifespan.”
At the very least, what everyone can agree on is the need to address upstream methane leakage. “It’s not enough to do carbon capture, I can’t emphasize that enough,” Thompson told me, pointing out that methane emissions are “not a law of thermodynamics” but rather “a variable that we can control if we choose to.” Unfortunately, it looks like the Trump administration won’t be choosing to, as the president recently signed legislation scrapping a Biden-era rule that imposed fees on oil and gas producers who emit excess methane.
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Big fundraises for Nyobolt and Skeleton Technologies, plus more of the week’s biggest money moves.
Following a quiet week for new deals, the industry is back at it with a bunch of capital flowing into some of the industry’s most active areas. My colleague Alexander C. Kaufman already told you about one of the more buzzworthy announcements from data center-land in Wednesday’s AM newsletter: Wave energy startup Panthalassa raised $140 million in a round led by Peter Thiel to “perform AI inference computing at sea” using nodes powered by the ocean’s waves.
This week also saw fresh funding for more conventional data center infrastructure, as Nyobolt and Skeleton Technologies both announced later-stage rounds for data center backup power solutions. Meanwhile, it turns out Redwood Materials is not the only company bringing in significant capital for second-life EV battery systems — Moment Energy just raised $40 million to pursue a similar approach. Elsewhere, investors backed an effort to rebuild domestic magnesium production, and, in a glimmer of hope for a sector on the outs, gave a boost to green cement startup Terra CO2.
Cambridge-based startup Nyobolt has become the latest battery company to reach a $1 billion valuation, with its expansion into the data center market helping fuel excitement around its tech. Spun out of University of Cambridge research in 2019, the company develops ultra-fast-charging batteries based on a modified lithium-ion chemistry. Its core innovation is an anode made from niobium tungsten oxide, which Nyobolt says enables its batteries to charge to 80% in less than five minutes, with a cycle life that’s 10 times longer than conventional lithium-ion, all without the risk of fire.
The company has now raised a $60 Series C, following what it describes as a period of “rapid commercial momentum,” with revenue increasing five-fold year-over-year as customers in the robotics and data center industry piled in. Symbotic, an autonomous robotics company and existing customer, led the latest round. While Symbotic previously relied on supercapacitors to power its robots, Nyobolt’s says its batteries provide six times more energy capacity in a lighter package, allowing its warehouse robots to work for retailers like Walgreens, Target, and Kroger around the clock.
Now the startup is targeting data center customers too, positioning its tech as a fast-acting fix for the sudden power surges common to large-scale artificial intelligence workloads, as well as a temporary backup power solution for outages. While it has no confirmed domestic data center customers to date, it does have a nonbinding agreement with the Indian state of Rajasthan to deploy over 100 megawatts of off-grid AI data center and power management infrastructure, part of a broader push to expand its presence across the country.
Notably, the press release made no mention of plans to sell its tech to electric vehicle automakers, though this appears to have been a central focus previously. As recently as last summer, executive vice president Ramesh Narasimhan told the BBC that he hoped Nyobolt’s batteries would “transform the experience of owning an EV.” But while its tech does enable extremely fast charging, its underlying chemistry is not optimized for long-range driving. A sports car built to test the company’s batteries had just a 155 mile range. So like many of its climate tech peers, the company appears to be betting that data centers now represent a more reliable opportunity.
This week brought additional news from another European player aiming to smooth out data center power surges. Estonia-based supercapacitor startup Skeleton Technologies raised $39 million in what it describes as the first close of a pre-IPO funding round, with a U.S. listing planned for next year. Its core tech is built around a “curved graphene” structure, which the company likens to a crumpled sheet of paper with a high surface area. The graphene’s many exposed surfaces and edges allows it to hold more electric charge, which Skeleton says delivers a 72% improvement in energy density.
Like Nyobolt, Skeleton says its tech offers faster response times and longer cycle life. But supercapacitors are a fundamentally different technology than Nyobolt’s modified lithium-ion solution. Though they offer near-instantaneous response times, they store very little energy — just enough to smooth out microsecond power spikes in GPU workloads. Nyobolt’s batteries, by contrast, aim not only to smooth out data center power spikes, but also to deliver about 90 seconds of backup power in the case of an outage, before a generator or other backup source kicks in.
Skeleton is already mass-producing supercapacitors in Germany and delivering to unnamed “major U.S. hyperscalers for AI infrastructure.” It’s also making moves to expand its U.S. footprint ahead of its pending IPO, opening an engineering facility in Houston and aiming to begin domestic manufacturing of AI data center solutions in the first half of this year.
Last year brought a wave of new climate tech coalitions, with one of the most ambitious efforts known as the All Aboard Coalition. This group of venture firms is targeting the investment gap known as the missing middle, which falls between early-stage venture rounds and infrastructure funding. The model is relatively mechanical: When three or more member firms participate in a later-stage round for a company, the coalition automatically coinvests out of its own fund, matching the members’ combined contribution.
The group made its first investment in January, supporting the AI-powered geothermal exploration and development company Zanskar’s Series C round. This week, it announced its second: a $22 million commitment to low-carbon cement startup Terra CO2, bringing the company’s Series B total to $147 million. Cement production accounts for roughly 8% of global emissions, a figure Terra aims to shrink by making so-called "supplementary cementitious materials” — which can partially displace traditional cement in concrete mixes — from abundant silicate rocks. By grinding and thermally processing these rocks into a glassy powder, Terra’s product mimics the properties of conventional cement. The company says it can replace up to 50% of the cement in typical concrete mixes, lowering associated emissions by as much as 70%.
The new funding will help Terra build its first commercial-scale plant in Texas, exactly the type of first-of-a-kind project that the coalition was designed to support. But the scale of this challenge remains clear. As noted in ImpactAlpha’s coverage, the coalition has raised just $100 million toward its goal of a $300 million fund — already a relatively modest goal considering the capital intensity of novel infrastructure projects. Bloomberg previously reported that the group aimed to raise the full amount by the end of October 2025, raising questions about the willingness of LPs to bet on projects at this crucial but capital-intensive juncture.
When I think about repurposing used electric vehicle batteries for stationary storage, I think of battery recycling giant Redwood Materials, which raised a $425 million Series E in January after moving aggressively into this promising market. But while Redwood’s well-established recycling business certainly provides it with the largest pipeline of used batteries, it’s far from the only company pursuing this business model. A smaller player with a largely similar approach underscored that this week, when it announced a $40 million Series B to scale its gigafactory in Texas and expand its facilities in British Columbia.
That’s Moment Energy, which focuses on using second-life EV batteries to power commercial and industrial sites such as data centers, hospitals, and factories. Like Redwood, it relies on proprietary software to aggregate battery packs with myriad chemistries and design specs into coordinated grid-scale systems. What the company sees as its critical differentiator, however, is its safety standards. Moment has achieved UL certification, a key safety benchmark that it says others in the industry have yet to meet.
In a shot at its competitors, the company described itself in a press release as the “only provider proven capable of deploying second-life battery storage systems in the built environment without special dispensations or regulatory loopholes.” While Moment never names names, Redwood’s first commercial-scale system sits on its own private land in an open air setting, where certification is arguably unnecessary. “What most other second life [battery] companies are now trying to say is, let’s just lobby to make second life UL certification easier, because it is impossible to get UL certification, as it stands,” the company’s CEO, Edward Chiang, told TechCrunch. “But at Moment, we say that’s not true. We got it.”
As I wrote last September, it’s a good time to be a critical minerals startup, because as you may have heard, “critical minerals are the new oil.” These materials sit at the center of modern energy infrastructure — batteries, magnets, photovoltaic cells, and electrical wiring, to name just a few uses — plus their supply is concentrated in geopolitically tense regions and subject to extreme price volatility. It also certainly doesn’t hurt that the Trump administration loves them and wants to mine and refine way more of them in the U.S.
The latest beneficiary of this enthusiasm is Magrathea, which this week raised a $24 million Series A to build what it says will be the only new magnesium smelter in the U.S., in Arkansas. The company has now raised over $100 million in total, including a $28 million grant from the Department of Defense. Its approach relies on an electrolysis-based process that’s able to extract pure magnesium from seawater and brines, which it positions as a cleaner, cheaper alternative to the high-heat, emission-intensive method that China uses to produce most of the world’s magnesium today.
The U.S. military has taken note of this potential new domestic supply. Magrathea’s 2022 seed round coincided with Russia’s invasion of Ukraine, as the military looked to scale domestic defense tech supply chains. Magnesium alloys are often used to help reduce weight in EV components, a benefit equally applicable to military helicopters, drones, and next-generation fighter jets. So while these defense applications represent somewhat of a pivot from the startup’s initial focus, a greener fighter jet is still better than a dirty fighter jet.
Current conditions: A series of tornadoes has flattened entire neighborhoods in central and southern Mississippi, causing what one pastor called “just total devastation” • The heat index across the northern half of the Philippines’ main island of Luzon could feel as high as 122 degrees Fahrenheit, raising the risk of heat stroke • There will be some hot moms in Phoenix this weekend when temperatures in Arizona’s sprawling capital top 108 degrees on Mother’s Day.
President Donald Trump’s attempts to kill the offshore wind industry through regulatory fiat have largely failed to hold up in court. But as the administration finds new success in paying off developers to abandon ocean leases for seaward turbines, it’s attempting the original playbook now on the onshore wind sector, holding up more than 150 projects by refusing to give out once-routine approvals from the Department of Defense. That includes projects that are nowhere near military bases or defense-related infrastructure, and comes despite the fact that U.S. policymakers across the political spectrum agree we need to bring as much new power online as quickly as we can to meet booming demand from data centers and electrification. “This is the strategy for how you kill an industry while losing every case: just keep coming at the industry,” an energy lawyer told Heatmap’s Jael Holzman. “Create an uninvestable climate and let the chips fall where they may.” In other words: The bombardments may fail, but the siege can win..
When French energy giant TotalEnergies became the first offshore wind developer to take up Trump on his offer of $1 billion to abandon two projects back in March, the administration’s effort to kill off an industry Trump has personally opposed since long before he gained political power seemed to finally be catching a foothold following a series of legal retreats. By April, however, blowback to the deal had started building. Reporting from Heatmap’s Emily Pontecorvo found that the U.S. government’s agreement with Total didn’t actually mandate any new investments in fossil fuels, as the administration strongly implied, and that and that the payment may not have actually met the requirements to be drawn from a federal coffer designed to fund legal settlements. Shortly afterward, House Democrats announced plans to investigate Total’s contract with the government. This week, California regulators launched their own probe into one of two new developments that took up Trump’s offer, a floating offshore wind project that was set to be the first such project on the West Coast. Now one of the largest U.S. pension funds is reconsidering its stake in Total. Citing “significant concerns” over Total’s decision to cancel its two offshore wind leases and double down on fossil fuels, the New York State Common Retirement Fund said it would evaluate selling the $1.6 million stake in the company.
In a letter to Total CEO Patrick Pouyanné that the Financial Times reviewed, Thomas DiNapoli, the New York State comptroller and trustee of the retirement fund, said: “As the fund continually evaluates companies based on credible transition plans, portfolio companies’ backtracking may impact the fund’s risk assessment results and proxy voting decisions.” While “TotalEnergies had sought to be a leader in [the] energy transition,” he added, “now investors are left scratching their heads over how the board came to this decision to abandon that strategy and what it means for the future of the company and our stake in it.” In Total’s home country, the picture for offshore wind looks quite different. While Paris remains committed to expanding its world-leading nuclear fleet, a new floating offshore wind farm off France just started pumping electricity onto the grid.
Occidental Petroleum has once again pushed back the opening of the world’s largest carbon removal facility, with executives warning that they’re uncertain how quickly the delay can be resolved. Construction on the direct air capture megaproject in West Texas, known as Stratos, has been mostly complete for months. Last August, the company revised the start date to the end of the year. In February, Occidental said the operations would begin by the second quarter of this year. But in its first-quarter earnings call Wednesday, Richard Jackson, Occidental’s chief operating officer, who will take over for CEO Vicki Hollub when she retires at the end of this month, told analysts “the technology and process unit operations performed as expected.” He said the company had “identified an issue related to non-process components of the facility, unrelated to the technology” and was “currently evaluating the repair timeline and assessing the impact on the operations schedule,” according to Occidental’s official transcript of his remarks. When I emailed the company to ask for more details on what issues and specific components are holding up the project, a spokesperson responded: “We have nothing to offer beyond what Richard said that it’s non-process and we’ll provide an update next quarter.”
Make no mistake, it’s not all doom and gloom for DAC. Colorado and Wyoming this week signed an agreement to work together on carbon storage infrastructure. And a major breakthrough in Kenya “signals a new era” for geological storage of carbon dioxide, so heralded the Carbon Herald.
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The United States has expanded its sanctions on Cuba, forcing the Canadian miner that had been the Caribbean nation’s biggest foreign investor to flee as the Trump administration ramps up its effort to topple the 67-year-old communist regime and reassert Washington’s suzerainty over the island just 90 miles south of Florida. The new sanctions on Thursday, which came days after Trump broadened the U.S. embargo on Cuba, sent the price of shares in Canada’s Sherritt International Corporation tumbling 41% by the time the market closed in North America. For the past 32 years, the company has operated a nickel and cobalt mining operation on the island, providing one of Cuba’s few commercial lifelines into the global economy. While Sherritt said it had not yet been designated for sanctions, a listing “could occur at any time,” the company warned, and banks and other vendors might be “unable or unwilling” to keep supplying the firm. “In any event, the mere issuance of the executive order itself creates conditions that materially alter the corporation’s ability to operate in the ordinary course, including activities related to Sherritt’s Cuban joint venture operations,” Sherritt said in a statement on its website. “This is a massive blow to an already sinking economy,” Ricardo Torres, a leading Cuban-born economist at the American University in Washington, told the Financial Times.
The internal combustion engine is still the profit motor for Volkswagen. But when the world’s second-largest automaker reported its first-quarter earnings last week, the company said its latest electric vehicles are up to 80% as profitable as gasoline-powered alternatives. That’s according to a nugget InsideEVs highlighted this week from the investor update. Once Volkswagen launches its newest modular blueprint for its electric vehicle offerings — known internally as the Scalable Systems Platform, or SSP — the margins are expected to align more closely, said Arno Antlitz, the German auto giant’s chief financial officer. “We expect the margin to be fully comparable only with our future SSP platform,” he said.
Things are looking sunnier for what has long been the weakest sector of the American solar industry. SEG Solar, a Houston-based manufacturer, has announced plans to add 4 gigawatts of module production capacity to its factory in Texas’ largest city, creating a 6-gigawatt facility. The move comes as Elon Musk has vowed to dramatically scale up Tesla’s solar manufacturing capacity and First Solar builds its own 4-gigawatt facility.
And more of the week’s top news around development conflicts.
1. Benton County, Washington – The bellwether for Trump’s apparent freeze on new wind might just be a single project in Washington State: the Horse Heaven wind farm.
2. Box Elder County, Utah – The big data center fight of the week was the Kevin O’Leary-backed project in the middle of the Utah desert. But what actually happened?
3. Durham County, North Carolina – While the Shark Tank data center sucked up media oxygen, a more consequential fight for digital infrastructure is roiling in one of the largest cities in the Tar Heel State.
4. Richland County, Ohio – We close Hotspots on the longshot bid to overturn a renewable energy ban in this deeply MAGA county, which predictably failed.