The clock is ticking on the U.S. government to provide clarity around the 45Z tax credits outlined in the Inflation Reduction Act. The provisions are scheduled to go into effect beginning Jan. 1, 2025.
But the latest efforts in Washington D.C. could change the size of opportunity for farmers who sell their grain with a carbon intensity score.
“USDA is trying to put some guidance together to help the Department of Treasury with the final 45Z rules,” explains Mitchell Hora, founder of Continuum Ag. “This administration has been keen on climate smart ag and climate smart commodities. But climate smart ag and low carbon feed stocks for biofuels are not the same thing.”
Hora says the distinction between the two will help ensure farmers are able to pursue the largest incentive. Whereas bundles were used with 40B and other previous programs, Hora contends 45Z needs to use the Department of Energy’s GREET model.
“If bundles are used, it stifles farmer innovation—it waters down the impact,” he says.
As an example, he offers a farm from northeast Iowa.
When implementing no-till, cover crops, and manure, the farm averages a 250 bu. yield. With a bundled approach, there’s $0.00 incentive. However, using the GREET model, there’s a -4.6 carbon intensity score equating up to $1.82/bu value.
“We have to get this done right. The weight of this decision is massive. The ripple effect 45Z could have is tremendous.”
Continuum Ag has scored more than 330 million bushels using the GREET model.
“It takes five minutes, is very scalable, and we’re offering it for free,” he says.
Hear more in Hora’s latest conversation on AgriTalk with host Chip Flory.
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