Updated federal guidance on the 45Z Clean Fuel Production Credit gives biofuel producers greater certainty while strengthening demand prospects for U.S. soybeans and soybean oil.
The American Soybean Association (ASA) is welcoming new actions from the U.S. Department of Energy (DOE) and Internal Revenue Service (IRS) that provide greater clarity around the Section 45Z Clean Fuel Production Credit, a federal incentive designed to support domestic biofuel production and encourage the use of American-grown feedstocks.
The updated guidance addresses several key issues that biofuel producers and agricultural stakeholders have been seeking since the credit took effect.
According to federal agencies, the changes include updates to the DOE's 45ZCF-GREET emissions model, guidance on the treatment of regenerative agricultural practices, transition rules for producers, and additional certainty regarding how carbon intensity scores will be calculated.
ASA said the actions will help make the credit more practical and accessible for companies producing renewable fuels.
"ASA appreciates DOE, IRS, USDA and the administration for taking this important step to make the 45Z Clean Fuel Production Credit usable for biofuel producers," said Dave Walton, ASA vice president and Iowa soybean farmer. "These actions provide greater economic certainty for the biofuels industry, which is a critical source of domestic demand for U.S. soybeans."
The 45Z Clean Fuel Production Credit rewards producers based on the lifecycle greenhouse gas emissions associated with transportation fuels. Lower-emission fuels can qualify for larger tax incentives, making carbon intensity calculations a critical component of the program. The DOE's updated GREET model provides a standardized framework for determining emissions rates and credit values.
Federal officials said the latest guidance also recognizes qualifying agricultural practices that may help reduce the carbon intensity of biofuel feedstocks. Industry organizations have argued that clearer pathways for incorporating on-farm conservation and regenerative practices are necessary to ensure farmers can participate in the benefits created by low-carbon fuel markets.
In announcing the guidance, the IRS said the action is intended to help crop and livestock producers, ranchers, and fuel manufacturers access growing opportunities in the domestic biofuels market while providing greater certainty for rural investments. Additional provisions address the use of manure-derived fuels and establish safe-harbor rules for certain agricultural practices.
The latest update also reflects legislative changes affecting the treatment of indirect land use change (ILUC) emissions and feedstock sourcing requirements. Industry groups have long maintained that previous ILUC assumptions understated the environmental benefits of crop-based biofuels, including fuels derived from soybeans and corn.
For soybean growers, the guidance is significant because renewable diesel and sustainable aviation fuel continue to be major sources of demand growth for soybean oil. ASA has consistently supported policies that expand domestic biofuel markets and create additional value opportunities for U.S. soybean producers.
The agencies are expected to continue refining implementation details as Treasury works toward final regulations for the program, but farm and biofuel organizations are viewing this week's actions as an important step toward making the 45Z credit more workable for producers across the renewable fuels supply chain.