The U.S. has experienced more than $200 billion in new clean energy project investments since passage of the Inflation Reduction Act (IRA) in 2022. Because of its natural resources for clean hydrogen feedstock (both gas and renewables), Texas has been one of the major beneficiaries. However, throughout 2023 and into 2024, would-be clean fuels project developers and sponsors struggle with uncertainty in developing their projects. Legal and regulatory risk, in particular, has caused some would-be developers to wait on the sidelines for the time being. First-movers in the clean fuels space must learn to adapt to a long list of challenges.

Fortunately, in certain ways, legal and regulatory certainty have improved in the last 12 months. The European Union , a likely major importer of Texas-produced clean fuels, continued to take steps forward in defining and refining its legal and regulatory framework for so-called renewable fuels of non-biological origin (RFNBOs), which are subject to mandatory consumption quotas in the EU beginning in 2030. The EU rules defining clean hydrogen and derivative fuels became binding law in June 2023. The EU has also launched additional ambitious carbon-related regulatory programs, including a Europe-wide import tax on carbon-intensive products—the Carbon Border Adjustment Mechanism (CBAM)—which will advantage imports of certain clean fuels compared to carbon-intensive competition. This should keep clean fuels producers—which Texan projects are well placed to become—very competitive in this large, forced-buyer market.