Industry stakeholders submitted comments this week to the U.S. Department of the Treasury and the Internal Revenue Service regarding proposed rules on the 45Z Clean Fuel Production Credit.
The proposed regulations, released on February 3, provide guidance on the determination of clean fuel production credits, emissions rates, and certification and registration requirements. The proposal would extend the credit to Dec. 31, 2029, limit feedstocks to those grown or produced in North America, and eliminate the special rate for sustainable aviation fuel, among other stipulations.
Renewable Fuels Association President and CEO Geoff Cooper says the proposal makes “meaningful progress” in developing rules implementing tax credit, but the top priority for Treasury should be releasing an updated 45ZCF-GREET model as soon as possible.
“The technology-neutral structure of 45Z is a crucial feature, allowing clean fuel producers to pursue the most economically efficient and practical pathways for reducing emissions and boosting domestic energy production,” wrote Cooper in RFA’s comments to Treasury. “However, as currently drafted, certain aspects of the proposal introduce inconsistencies and implementation challenges that may limit participation, create unintended market impacts, and reduce the near-term effectiveness of the program.”
In addition to updating 45ZCF-GREET model, RFA says agencies should work with USDA to finalize and integrate workable, equitable, and science-based technical guidelines for regenerative agriculture feedstocks and an updated Feedstock Carbon Intensity Calculator (FD-CIC). Treasury should adopt a more flexible Provisional Emissions Rate process that allows for efficient characterization of new technologies and incremental emissions-reducing improvements at existing clean fuel facilities, as well as clarifying certain rules, such as the interaction of “undenatured fuel ethanol” and “denatured fuel ethanol” for 45Z credit generation, and that only transportation and industrial fuels are eligible for the credit.
In comments from the American Coalition for Ethanol (ACE), CEO Brian Jennings stressed the significant financial pressure facing rural America and that enabling farmers and producers to benefit from low-carbon practices is critical to unlocking the full value of the 45Z credit.
“Since farming practices represent about half of ethanol’s carbon intensity, clean fuel producers must have the opportunity to monetize low-carbon farming practices such as reduced tillage or precision fertilizer use to fully unlock the value of 45Z,” said Jennings. “If Treasury allows low-carbon farming practices to qualify towards emissions rates it could mean billions of dollars annually for clean fuel producers and farmers, providing a market-based opportunity to dramatically increase rural and farm income.”
ACE also noted the importance of keeping 45ZCF-GREET model and FD-CIC updated with the latest science and real-world data supported through activities such as the USDA Regional Conservation Partnership Program (RCPP) activity being led by ACE and specifically designed to address information gaps regarding the low-carbon benefits of farming practices to help improve the accuracy of modeling tools.
“We have strongly recommended updates to FD-CIC values for low-carbon farming practices by incorporating the best available science and results from real-world activities, so we are encouraged Treasury expects to make these updates as part of future iterations of the 45ZCF-GREET.”
In their comments to Treasury, fuel retailer organizations NATSO, NACS and SIGMA, which represent 90 percent of fuel sold at retail, continue to urge Congress to reinstate the Biodiesel Blenders’ Tax Credit to help stabilize fuel supplies and help lower prices for consumers, claiming that the 45Z tax credit is not helpful.
“The real-world implications on American energy supplies and the price that consumers pay at the pump should serve as the regulatory North Star of biofuel policy…“The ‘45Z’ Credit is not alleviating these affordability challenges for American consumers and businesses. It has not helped American consumers by lowering fuel prices and it has not helped American farmers by increasing sales of corn or soybeans used to produce renewable fuels.”