The U.S. Department of the Treasury has released guidance on the 45Z Clean Fuels Production tax credit, part of the Inflation Reduction Act (IRA). This tax credit aims to encourage the production of low-carbon fuels such as biodiesel, renewable diesel, and sustainable aviation fuel based on their carbon reduction levels. The initiative is expected to benefit farmers while supporting efforts to reduce greenhouse gas emissions.
"Today’s guidance on the 45Z tax credit is the right step forward in bolstering renewable fuel production and providing new market opportunities for family farmers and ranchers," stated National Farmers Union (NFU) president Rob Larew. He added that although this guidance marks progress, more work is needed. "We hope this process will be finalized quickly to ensure the tax credit delivers optimal benefits for farmers and rural communities."
The guidance aims to enhance clean fuel production's potential to lower carbon emissions and support climate-smart agricultural practices. By limiting eligibility for imported used cooking oil (UCO) for the tax credit, it emphasizes domestic resources and American farmers. It also promotes individual climate-smart agriculture practices, allowing farmers more flexibility in implementing strategies suitable for their operations. Last summer, NFU and other organizations advocated for these provisions in a letter to Treasury Secretary Janet Yellen and U.S. Office of Management and Budget Director Shalanda Young.
To fully realize the potential of the 45Z tax credit, further progress is necessary, including updates to the Greenhouse gases, Regulated Emissions, and Energy use in Technologies (GREET) model and improved climate-smart agricultural practices. These developments are vital for maximizing benefits for American agriculture and clean energy advancement.
