Corn, soybean and sorghum growers could be a step closer to premiums for biofuel crops grown with a reduced carbon intensity, thanks to recently announced guidance from the U.S. Department of the Treasury. For farmers delivering their crop directly to ethanol plants, it signals that long-anticipated financial opportunities tied to the 45Z tax credit might soon become a reality.
“How that crop is grown will count for how the final carbon intensity of the ethanol is calculated,” explains Chad Asmus, Sustainability Market Development Manager for BASF, unpacking the Feb. 4 Treasury guidance. “That’s the clarity the industry needs.”
The Treasury’s proposed rulemaking doesn’t mean farmer premiums stemming from 45Z are a sure thing. An open comment period is underway, and May 2026 is being targeted for finalization of the rules.
“While we’re waiting for all the details to finalize, I’d go talk to my ag retailer about xarvio® BIOENERGY, which is a platform being provided by BASF to ag retail to simplify the process,” says Scott Kay, vice president of U.S. agricultural solutions, BASF. “I would want to have a plan to make sure I could take advantage of whatever those credits are.”
What 45Z is, and why the outlook just improved
The 45Z tax credit allows biofuel producers to earn incentives for lowering the carbon intensity of their fuel below a set baseline. For corn ethanol, that’s significant because nearly half of ethanol’s carbon intensity is the result of how corn is grown.
Until now, speculation had centered on whether conservation practices would be recognized. As of Feb. 4, the answer is yes. Treasury’s proposed rule also references U.S. Department of Agriculture’s (USDA’s) guidelines for calculating and verifying feedstock carbon intensity. That provides greater clarity on data and documentation needs, Asmus says.
Although corn represents the largest opportunity for recognizing farming practices under 45Z, the proposed Treasury guidance also applies to soybeans and sorghum.
Conservation practices and data capture for carbon intensity reduction
Under current USDA guidance, conservation practices for lowering carbon intensity are expected to include reduced tillage, no-tillage, cover crops and certain nitrogen management practices.
Cover crops are the biggest lever to reduce carbon intensity followed by no-till. Using nitrification inhibitors and specific nitrogen fertilizer application methods can also reduce carbon intensity.
“Roughly 70% of corn’s carbon intensity is related to nitrogen,” Asmus says.
Any future premiums will be determined by individual local ethanol plants and the growers who sell directly to them. They will be based on each ethanol plant’s carbon intensity and their ability to monetize the 45Z tax credit. Asmus expects farmer payouts will exceed those from earlier carbon programs.
Focus on gathering good farm data for this season, Asmus says, because carbon-intensity scoring must be verified by third parties. Incomplete records could result in delays and missed payments.
How BASF’s xarvio® BIOENERGY ecosystem works
To help biofuel producers report and verify feedstock carbon intensity, BASF has developed xarvio® BIOENERGY. This digital ecosystem connects growers, retail agronomists, third-party verifiers and ethanol plants. Retailers use xarvio® FIELD MANAGER to help farmers collect the necessary data.
“All of that end-to-end connectivity is the most secure opportunity for a farmer,” Asmus says, “rather than scoring their own corn, seeking their own verification, and then trying to shop around for the best premium.”
Kay agrees that working with a trusted adviser is key. BASF research has found that while 18% of growers say they’d participate in such a program on their own, up to 80% would participate if their ag retailer helps.
Kay believes most growers who are near an ethanol plant will be able to qualify for potential future premiums, since many are already employing no-till practices, using a nitrogen stabilizer or planting cover crops.
Asmus encourages farmers to ask their agronomist how they’re participating in 45Z.
“I think in many instances, farmers and agronomists already have much of this information,” Asmus says. “The key is how they work together for a successful experience for everybody.”
Stay tuned for more updates on 45Z opportunities for growers, and learn more about BASF’s xarvio® Bioenergy. Reach out to your BASF preferred retailer or BASF representative for more information.
