Australia: parliament passes tax incentive for renewable hydrogen – AUD 2 per kilogram

The Australian parliament passed on 10–11 February 2025 (the Future Made in Australia (Production Tax Credit and Other Measures) Act) legislation introducing the Hydrogen Production Tax Incentive – a tax incentive of two Australian dollars for every kilogram of renewable hydrogen produced. The incentive covers projects producing hydrogen from the 2027–28 tax year to 2039–40, and a single project may benefit from it for a maximum of 10 years.

Scope and conditions

The incentive is tied to production rather than investment, which distinguishes it from capital grants. The hydrogen must meet renewability criteria, and its origin is to be certified in the Guarantee of Origin scheme, run by the Clean Energy Regulator; the act on that scheme entered into force in December 2024.

Budgetary costs

The size of budget spending depends on assumptions about the number of projects and prices. The law firm Pinsent Masons gives an estimate of about AUD 6.7 billion, and PV Magazine about AUD 13.7 billion. The discrepancy shows that a full picture requires consulting the government's budget documentation. According to KPMG, the incentive takes the form of a refundable tax offset, and the same act also introduces an incentive of 10% of processing and refining costs for critical minerals.

Link with other programmes

The incentive complements Hydrogen Headstart, a competitive ARENA programme based on production credits paid for hydrogen produced, which supports large projects. In the Headstart programme the first round was then under way.

What this means for Poland and Europe

The Australian “per-kg subsidy” model resembles the American 45V credit and, in the EU, auction-based mechanisms (e.g. the European Hydrogen Bank). For Polish agricultural biogas projects the lesson is that different low-emission technologies compete for limited budgets, and regulators rarely treat biomethane and hydrogen equally.

The incentive does not cover biomethane or bioenergy.

Legislative process

The incentive is introduced by the Future Made in Australia (Production Tax Credit and Other Measures) Bill 2024. According to Pinsent Masons the Senate passed it on Monday 10 February, and according to KPMG final passage by parliament came on 11 February 2025. The joint statement by the ministers for finance, climate, industry and resources was titled “Production tax credits pass the Senate”.