There’s a new push in Congress to boost renewable fuels production in the U.S.
The 45Z tax credit is set to begin January 1, 2025 under the Inflation Reduction Act and run until the end of 2027. But this week, a bipartisan group of lawmakers has proposed extending the credit through 2034 and restricting the credit to domestic feed stocks.
The Farmer First Fuel Incentives Act was introduced in the Senate by Sens. Roger Marshall (R-Kan.) and Sherrod Brown (D-Ohio), and in the House by Reps. Tracey Mann (R-Kan.) and Marcy Kaptur (D-Ohio).
Donnell Rehagen, chief executive officer for the Clean Fuels Alliance America, says, “This tax credit 45Z will be effective January 1, 2025, but it’s really only good for a couple of years. Because it’s a critical element to our industry and the ability for industry to grow, getting that tax credit extended now creates that certainty our producers need in order to make that investment to continue to grow their production capacity.”
The tax credit ranges from $1.25 to $1.75 per gallon depending on the carbon intensity score of the feed stock used, but currently allows foreign feed stocks. The proposed bill would target the credit to only domestic feed stocks, which is drawing mixed response as some biofuels producers currently rely on imported feed stocks like used cooking oil from countries such as China.
Rehagen says their members support free trade, but more importantly, they need the Treasury Department to provide 45Z guidance as soon as possible so biofuels producers can acquire feedstocks for the program.
“We want to be able to export our finished fuels to countries that would use them and maybe pay production incentives for that. So, we don’t want to really be doing anything that could cause harm for our ability to access international markets. Some of that starts with trying to then disincentivize the importing of other products,” he explains. “We’re concerned it’s going to result in a pullback of some of the production that’s going on today as those producers have to wait for a little more certainty.”
Farmers also need this guidance as they make cropping plans for the 2025 growing season as feed stocks will need to be produced with climate smart agricultural practices to lower their carbon intensity score and qualify for the program.
