US farmers have moved a step closer to sharing in the 45Z Clean Fuel Production Credit after guidance from the Internal Revenue Service and a model update from the Department of Energy. The IRS said qualifying low-carbon agricultural practices, as set out in technical guidelines USDA issued earlier this year, can be used in calculating the credit, and the DOE folded USDA's feedstock carbon-intensity calculator into its 45ZCF-GREET model, which fuel producers use to score the carbon intensity of their output.

"This guidance helps unlock billions of dollars for America's agricultural producers, provides greater certainty for investment across rural America, strengthens domestic biofuel production, and helps lower fuel costs for American consumers," said Frank J. Bisignano, the IRS chief executive.

The ethanol trade association Growth Energy said the guidance also set transition rules for changes the One Big Beautiful Bill Act made to 45Z, including a requirement that emissions rates exclude "flawed, outdated, and inaccurate" indirect land-use change calculations, a long-standing complaint of the biofuel industry.

Farm groups welcomed the decision. Dave Walton, vice president of the American Soybean Association and an Iowa soybean farmer, said the actions gave greater economic certainty to the biofuel industry, "a critical source of domestic demand for U.S. soybeans." Jed Bower, president of the National Corn Growers Association, said the guidance recognised existing regenerative practices and codified the land-use change fix, and that NCGA would press the Treasury to accept "book and claim" as a chain-of-custody method in the final rule due by November.

Tim Lust, chief executive of National Sorghum Producers, said farmers and biofuel producers "finally have a workable 45Z framework" that would strengthen domestic biofuel demand and create opportunities for sorghum. Mitchell Hora, founder of the soil-health data company Continuum Ag, said on-farm practices were "closer than ever to being a major lever" for raising 45Z claims.

In practice the change means a grower who documents practices such as reduced tillage or cover crops could see that lower carbon score passed through to the ethanol or biodiesel plant that buys the grain, and in turn into the value of the credit. Reporting by Cassidy Walter and Mariah Squire.

Source: Successful Farming