New US government guidance on the 45Z biofuel tax credit will limit eligible feedstocks to the US, Canada, and Mexico, a development that could have significant implications for North American biofuel markets and Canadian oilseed producers.
The U.S. Department of the Treasury and the Internal Revenue Service on Tuesday released proposed regulations outlining how domestic producers can qualify for and calculate the clean fuel production credit, commonly known as the 45Z credit. The guidance reflects changes made under last year’s One Big Beautiful Bill and is intended to provide greater clarity and certainty for fuel producers navigating the program.
The clean fuel production credit applies to clean transportation fuels produced in the U.S. after Dec. 31, 2024, and sold by Dec. 31, 2029. To claim the credit, producers must be registered with the IRS and comply with detailed certification, emissions accounting, and reporting requirements set out in the proposal.
Among the most consequential changes is a restriction limiting eligible feedstocks to those grown or produced in the U.S., Canada, or Mexico, explicitly excluding foreign-origin inputs. This provision has been welcomed by industry groups as a boost for continental supply chains, particularly for Canadian canola used in renewable diesel and other low-carbon fuels.
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