(WASHINGTON D.C.) — On Friday, long awaited guidance on tax credits that are key to the future of the U.S. sustainable aviation fuel industry were released and met with disappointment due to a lack of clarity.
The Biden administration released guidance for the 45Z Clean Fuels Production tax credit and announced an update to the GREET model is expected soon. The guidance out on Friday from the IRS and U.S. Treasury also included a notice of intent to propose regulations on the on the section 45Z tax credit and a notice of providing the annual emissions rate table for 45Z.
Many industry and stakeholder groups, who have been waiting months for this guidance that is deemed key for the growth of SAF production in the U.S., shared disappointment with many aspects of Friday’s release from the Biden administration.
“This long-overdue guidance is far from complete—it still lacks the critical details that are needed to help ensure that American biofuel producers and their farm partners can lead the world in clean fuel production,” said Growth Energy CEO Emily Skor. “While we appreciate the work of Secretary Vilsack to champion our issues on behalf of rural America, today’s announcement falls short of providing the information that our industry and its farm partners need, including a model for an expanded number of eligible decarbonization technologies and guidance on climate smart agriculture (CSA) practices.
Growth Energy’s Skor added that “we look forward to working with the next Administration to fill in the gaps left by today’s announcement and to ensure this economic opportunity for the struggling farm economy is not left on the table. Demand for low carbon energy will continue to grow with or without us, and we need strong policy support in order to unleash the kind of investments that will position the U.S. for leadership in this market. Today’s guidance does not satisfy that need.” View Skor’s full statement here.
The Renewable Fuels Association noted that today’s release of a “notice of intent to propose regulations” begins a 90-day comment period that leaves major decisions on the future of the 45Z credit to the incoming Trump administration.
“While we are pleased to see Treasury has finally released its long overdue guidance on 45Z, today’s package falls short of expectations and remains incomplete,” said Geoff Cooper, President and CEO of the Renewable Fuels Association. “The guidance is a potential step in the right direction, but much work remains to be done before clean fuel producers, farmers, and consumers can fully benefit from the 45Z program.”
Cooper noted that important information from the emissions rate table remains unavailable in today’s guidance, making it impossible for producers to know whether their fuel is eligible for the credit or not. While that information, along with a new 45Z GREET model, is expected to be released soon, today’s guidance leaves biofuel producers in limbo. Today’s guidance also fails to integrate climate-smart agriculture (CSA) practices that can lower the carbon intensity of renewable fuels, and it does not allow producers to determine their own unique carbon intensity values (called a “provisional emissions rate”).
“Unfortunately, today’s guidance does not provide the certainty or flexibility that ethanol producers were looking for, and many questions remain unanswered,” Cooper said. “We do not believe this guidance alone will spur the investment, innovation, and job creation in the clean fuels sector that Congress and the administration intended. It simply isn’t bankable, investible, or otherwise actionable for the vast majority of biofuel producers.”
Clean Fuels Alliance America thanked U.S. Treasury and USDA officials for releasing long-awaited guidance describing the intended rules for the 45Z Clean Fuel Production Credit and giving stakeholders an opportunity to evaluate its workability. Kurt Kovarik, Clean Fuels Vice President of Federal Affairs, stated, “We look forward to working with our members to evaluate the overdue guidance and forthcoming GREET model. We appreciate USDA, Treasury and the Department of Energy for issuing guidance. We’re hopeful that today’s notice provides the necessary certainty that producers can rely on ahead of the final rules. Clean fuel producers still need the carbon intensity scores from the GREET model to calculate their credit values; this missing information is key to enabling them to negotiate feedstock and fuel offtake agreements for the year and get back to business.”
Kovarik added, “Domestic production of biomass-based diesel has doubled since 2020, benefitting from multiyear certainty in federal tax policy. Biodiesel and renewable diesel combined now meet 9% of U.S. demand for distillate fuel for heavy-duty transportation needs. Clean Fuels and its member companies will carefully evaluate the guidance to ensure it provides needed certainty for all stakeholders and supports the industry’s continued growth.”
American Coalition for Ethanol (ACE) CEO Brian Jennings issued the following statement in response to the 45Z news, saying in part that “ACE thanks the Biden Treasury Department for issuing preliminary guidance, acknowledging the need to incorporate climate-smart agriculture practices, and agreeing that emission values should be determined using the most recent GREET model which is updated annually. Despite this step in the right direction, the job is unfinished because the preliminary guidance doesn’t provide the clarity our industry has been awaiting. The guidance omits key details essential for biofuel producers to capitalize on 45Z, including how climate-smart agriculture practices will be incorporated. Our focus will be to engage the incoming Trump administration to make the final regulations for the 45Z credit beneficial for our members.”
Jennings added that “we are eager to collaborate with the Trump Treasury team to ensure 45Z is implemented effectively, with consideration of USDA’s technical guidelines on climate-smart agriculture practices that are under development. Since ag-based feedstocks represent about half of ethanol’s carbon footprint, it is critical to allow farmers and ethanol producers to realize the full value of sustainable farm practices through this tax credit. We once again applaud USDA Secretary Vilsack for his leadership on this topic. ACE will continue advocating for flexibility that recognizes the unique contributions of facility-specific process technologies and climate-smart farming practices to achieve meaningful carbon reductions.”
While today’s news included more information, leaders at the National Corn Growers Association said they still need better clarity about the specific environmental practices that will be required for accessing the credit.
“What a missed opportunity for growers,” said Illinois farmer and NCGA President Kenneth Hartman Jr. “We have spent the last year providing Treasury officials with fact-based information in hopes of helping them develop clear and realistic guidelines for qualifying for the tax credit. It’s frustrating that our feedback fell on deaf ears.” The burden to preserve this credit and to make it useful now shifts to the new administration, Hartman noted.
National Sorghum Producers (NSP) Chair Amy France, a sorghum farmer from Scott City, Kansas, said in a statement in part that “While the release of this short-term guidance marks a step forward, it falls short of delivering the clarity and comprehensive framework needed to fully realize the potential of the 45Z Clean Fuel Production tax credit.
France added that “NSP appreciates the inclusion of sorghum as a recognized feedstock in this program, reflecting its value as The Resource Conserving Crop™. However, critical gaps remain, particularly regarding the specifics of the Greenhouse gases, Regulated Emissions, and Energy Use in Technologies (GREET) model and USDA’s guidance on climate-smart agricultural practices. As we await their release in the coming weeks, it is clear that much remains to be seen before the full impact of this guidance can be understood. These details are essential to determine how helpful this program will ultimately be for producers at the farm level.”
In a joint statement on Friday, the American Soybean Association and National Oilseed Processors Association appreciate the U.S. Treasury Department’s notice of intent to propose regulation on the Clean Fuel Production Credit (45Z), which provides interim guidance for taxpayers to claim credits while developing a roadmap to spur additional investment in the domestic biofuel industry.
“ASA thanks the Biden administration and Treasury for listening to our concerns and developing guidance that supports U.S. farmers while strengthening our domestic biofuels industry,” said ASA President Caleb Ragland, a soy farmer from Kentucky. “The guidance released today is an investment in U.S. farmers, who stand ready to feed and fuel the world—while also fueling the U.S. economy. We look forward to working with Congress and the incoming Trump administration to build on this progress and develop final guidance that supports rural America.”
Also, American Carbon Alliance CEO Tom Buis issued a statement saying that “Today’s 45Z guidance falls short of expectations and is a missed opportunity to provide the clarity that rural America was hoping for. The 45Z program holds immense potential to drive new demand in the agriculture sector, expand market opportunities, strengthen rural economies, and provide much-needed stability for farm incomes. However, the lack of critical details released today undermines the certainty the agriculture industry needs to fully capitalize on this opportunity.”
Another aspect that has been a concern to the industry in recent months is the use and continued imports of used cooking oil (UCO) as a feedstock for biofuels and SAF. On Friday, the Treasury Department declared that UCO’s are ineligible for the 45Z credit until further guidance is provided.
“With respect to used cooking oil feedstocks, the Treasury Department and the IRS are concerned about the improper identification of a substance that is not UCO as UCO (for example, virgin palm oil mislabeled as UCO), which could have substantially greater emissions impacts than genuine UCO, and the uncertainty of market impacts caused by incentivizing UCO (for example, the degree to which increased UCO demand would be backfilled by virgin oils such as palm oil),” Treasury said in the proposal.
There were also no rules for the use of climate smart agriculture practices released with the latest guidance on Friday.
