by Cole Martin (Argus Media) President Donald Trump's administration expects to update the rules around a low-carbon fuel tax credit to allow more types of fuel sales to qualify and to encourage farmers to grow crops more sustainably.
...
The proposed regulations Tuesday will clarify, for instance, that producers can claim 45Z tax breaks for fuel that is sold to intermediaries, according to Treasury officials. Sales to wholesalers or traders are common in fuel markets, but lawyers interpreted partial guidance issued in the waning days of former-president Joe Biden's term as potentially requiring that fuel must be sold to end users to qualify.
The fuel sale question had left many refiners unclear how exactly to qualify for an incentive crucial to their margins and snarled logistics in key biofuel markets. Major biofuel producers idled facilities last year too, in part because of the lack of final rules around what was then a new and unfamiliar tax break.
45Z tax guidance has been closely awaited by producers of biofuels like ethanol, biodiesel and sustainable aviation fuel, especially as the Trump administration is late setting new biofuel blend mandates and Congress has punted on a proposal to allow a higher-ethanol gasoline blend year-round.
The proposed regulations, which will go through a 60-day public comment period after publication in the Federal Register, will still need to be finalized. But they signal how the Trump administration is thinking about the complicated incentive, and will allow producers to rely on existing guidance when preparing their tax returns until final regulations are available.
Some details will depend on final rules, however. The proposal will signal that the Trump administration expects to eventually credit more on-farm emissions reductions, which would effectively reward biofuel producers that source sustainably grown crops with larger subsidies, Treasury officials said.
The Biden administration had released an initial calculator so that corn, soybean and sorghum farmers could track the climate benefits of practices like cover crops and no-till agriculture. But it was unclear whether Trump, a skeptic of climate science, would continue the effort at all.
Treasury expects to publish additional guidance on recordkeeping and verification requirements and will also need to coordinate with other agencies to fully incorporate new data on agricultural practices into a government model for tracking emissions.
Legislation signed by Trump last year already restricts the 45Z credit starting this year to US producers of fuels sourced from North American feedstocks. The law also changed how regulators track land use emissions, effectively hiking subsidies this year for crop-based fuels. READ MORE
Related articles
Excerpt from Clean Fuels Alliance America: Biodiesel and renewable diesel industry looks for policy certainty to support renewed growth
Today (February 3, 2026), Clean Fuels Alliance America welcomed Treasury’s proposed rules for the 45Z Clean Fuel Production Credit. While the credit has been available since January 2025, producers and farmers have struggled to capitalize on it with only minimal guidance. Today’s proposal responds to taxpayer comments on prior guidance and provides additional certainty for the industry as the formal rulemaking process moves forward.
Kurt Kovarik, Clean Fuels’ VP of Federal Affairs, stated, “We greatly appreciate Treasury for moving forward with formal rules for the 45Z Clean Fuel Production Credit. The agency responded to many taxpayer concerns and resolved some uncertainties from the guidance issued a year ago. We anticipate this proposal will provide additional market certainty for biodiesel and renewable diesel producers.”
The proposed rules provide taxpayers with safe harbors and clarify questions on qualified sales, tolling arrangements, and qualifying fuels used in non-transportation applications raised after the January 2025 guidance. The proposal makes no changes to prevailing wage rules in place since June 2024. The proposal includes changes to the 45Z Credit passed by Congress in July 2025, including limits on feedstock eligibility. Additional changes to carbon intensity scores – such as consideration of regenerative agriculture practices – await publication of a new version of the 45ZCF-GREET model.
“The delay in rulemaking led to market uncertainty that took a heavy toll on our industry, undercutting fuel production and the value added to agriculture. Clean Fuels and its members look forward to working with IRS and Treasury to finalize rules that support renewed growth for biodiesel and renewable diesel producers. The biodiesel, renewable diesel, and SAF industry has proven its ability to meet America’s demand for secure, affordable transportation fuels and to generate jobs and rural economy prosperity.”
ABOUT CLEAN FUELS ALLIANCE AMERICA
Made from an increasingly diverse mix of resources such as recycled cooking oil, soybean oil, and animal fats, the clean fuels industry is a proven, integral part of America’s clean energy future. Clean Fuels Alliance America is the U.S. trade association representing the entire biodiesel, renewable diesel and sustainable aviation fuel supply chain, including producers, feedstock suppliers and fuel distributors. Clean Fuels receives funding from a broad mix of private companies and associations, including the United Soybean Board, Nebraska Soybean Board and other state checkoff organizations. READ MORE
Excerpt from Renewable Fuels Association: “Today’s 45Z proposed rule is a step in the right direction toward providing the clarity and certainty that ethanol producers are seeking,” said RFA President and CEO Geoff Cooper. “We thank the Treasury Department and Trump administration for listening to the input provided by ethanol producers and other stakeholders. The proposal appears to resolve some of the previous confusion around what constitutes a ‘qualified sale,’ and begins to integrate the important improvements to 45Z that resulted from the One Big Beautiful Bill Act, such as the removal of indirect land use change emissions from the carbon intensity scoring framework.
“However, much work remains to be done and many questions still need to be answered. First and foremost, ethanol producers are anxiously awaiting a new, revised version of the 45ZCF-GREET model, which will help shed light and provide clearer direction on several critical issues. In addition, questions remain to be resolved around the quantification of emissions related to low-carbon feedstock production at the farm level, implementation of foreign feedstock prohibitions, and provisions related to the use of energy attribute credits.”
Cooper said RFA looks forward to providing comments on the proposal to the Treasury Department and intends to testify at an upcoming hearing on the rule.
RFA initially filed detailed comments with Treasury in April 2025, stating that the final 45Z regulations must recognize the realities of today’s biorefining and agriculture sectors and the complexities of our nation’s transportation fuels marketplace. At the same time, we said, final regulations must maintain an intuitive and manageable approach to registration, reporting, and recordkeeping that creates the kind of dependable value that empowers businesses to invest.
Since then, the passage in July of the One Big Beautiful Bill Act made several changes to improve the tax credit, such as extending its duration and including feedstocks grown in Canada and Mexico. Importantly, it also harmonized indirect land use change emissions with actual data and evidence, resulting in zero ILUC penalty for corn ethanol. READ MORE
Excerpt from Reuters: Representatives for soy farmers also welcomed the rule.
"Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud Treasury for this action which will help build domestic markets for U.S. soybeans," said Scott Metzger, president of the American Soybean Association. READ MORE
Excerpt from DTN Progressive Farmer: PUBLIC HEARING SET
A public hearing is scheduled for May 28, 2026, with requests to attend the hearing due on May 26, 2026, according to the proposal.
The proposal also calls for integrating a feedstock carbon intensity calculator under development by USDA. This will allow for carbon intensity adjustments for feedstocks produced using no-till farming, cover crops and nutrient management practices.
So, farmers producing corn and soybeans or other feedstocks with lower carbon intensity would benefit from making the crops more valuable to biofuels producers seeking higher credits.
...
NO FOREIGN FEEDSTOCKS
According to the proposal, fuels produced after Dec. 31, 2025, must be derived exclusively from feedstocks produced or grown in the U.S., Canada and Mexico, with no foreign feedstocks allowed. The rules would be in effect for fuels production after Dec. 31, 2024, since the credit originally went into effect in 2025.
The proposal is designed to protect U.S. farmers from foreign competition for biofuels feedstocks and to secure a domestic market for U.S. corn, soybeans and other crops.
The 45Z credit would require producers to sell fuel to an unrelated person in their trade or business and the credit could only be claimed for the year of sale.
...
Fuel retailers were not satisfied with the 45Z credit, as they continue to call for biofuels policies that address affordability.
On Tuesday, SIGMA: America's Leading Fuel Marketers, and the National Association of Convenience Stores, said the tax credit was a step in the wrong direction.
"But years of regulatory reviews, public comments, copious stakeholder input, and Congressional reevaluation, can't alter the fact that 45Z is a giant step backward for American biofuel policy," the groups said in a statement.
"NACS, NATSO and SIGMA, which represent 90% of retail fuel sales, urge Congress and the administration to support simpler biofuel policies that would quickly reinvigorate biodiesel consumption and higher ethanol blends while enhancing the economy and energy market security."
David Fialkov, executive vice president of government affairs for the groups, said the 45Z would not actually lower fuel prices or benefit biofuels or farmers.
"It is past time for lawmakers and regulators to acknowledge that 45Z is too complicated and flawed and it should be replaced with simpler tax incentives that lower fuel prices and support American farmers," he said.
With the expiration of the biodiesel blenders tax credit, biodiesel production plummeted while the industry waited for 45Z guidance.
The groups said the 45Z proposal "underscores the need" to reinstate the biodiesel tax credit.
The 45Z guidance proposal was met with support by the American Soybean Association and the National Oilseed Processors Association.
"Updating federal biofuel policies to prioritize soy-based fuels is a key ASA priority, and we applaud treasury for this action which will help build domestic markets for U.S. soybeans," said Scott Metzger, ASA president and Ohio farmer.
"While Treasury's work to update tax guidance is critical, ASA strongly urges the administration to immediately finalize RFS (Renewable Fuel Standard) blending targets that complement the work of Treasury and Congress, by setting robust biofuel volumes and implementing new policies that will prioritize the utilization of U.S. soybeans in production."
NOPA President and CEO Devin Mogler said the industry also needs a "strong RFS that includes the import RIN (renewable identification numbers) reduction mechanism."
Another key aspect of the 45Z proposal is its removal of the indirect land use change penalty on agriculture feedstocks. READ MORE
Excerpt from Glacier Farm Media/Manitoba Cooperator: The big news for Canada’s canola producers is that the credit limits feedstocks to those grown or produced in the United States, Mexico and Canada.
That is something that Canada’s canola industry had been hoping for.
The credit has also been extended to Dec. 31, 2029.
Clean Fuels America welcomed the proposed 45Z rules.
“The agency responded to many taxpayer concerns and resolved some uncertainties from the guidance issued a year ago. We anticipate this proposal will provide additional market certainty for biodiesel and renewable diesel producers,” Kurt Kovarik, Clean Fuels’ vice-president of federal affairs, said in a press release.
“The delay in rule-making led to market uncertainty that took a heavy toll on our industry, undercutting fuel production and the value added to agriculture.” READ MORE
Excerpt from News Dakota: “The transition away from the Biodiesel Tax Credit to the 45Z production credit instituted a catastrophic decline in biofuels consumption that hurts the economy,” said NACS Deputy General Counsel Matt Durand. “Congress can fix it by bringing back the Biodiesel Tax Credit, which has a proven track record of delivering lower prices to consumers while benefiting farmers and biofuel producers.” READ MORE
Excerpt from Carbon Capture Magazine: According to the IRS, 45Z currently provides businesses with an income tax credit for clean fuel produced domestically after Dec. 31, 2024, and sold by Dec. 31, 2029. To claim the credit, taxpayers must be registered with the IRS using Form 637 at the time of production.
The proposed regulations specify that to qualify for the 45Z credit, taxpayers must produce a transportation fuel that meets the requirements for sustainability, emissions rate, coprocessing, and prevention of double crediting; produce the fuel at a qualifying facility in the U.S., including in any U.S. territories; be registered as a producer of clean fuel under section 4101 at the time of production; and sell the fuel to an unrelated person in a qualified sale during the taxable year. Transportation fuel produced after Dec. 31, 2025, must be exclusively derived from a feedstock produced or grown in the U.S., Mexico or Canada to qualify for 45Z.
The proposed regulations also confirm that the 45Z credit cannot be stacked with the 45Q tax credit for carbon capture, utilization and storage (CCUS).
For fuel produced on or before Dec. 31, 2025, the credit starts at 20 cents per gallon for non-aviation fuels and 35 cents per gallon for sustainable aviation fuel (SAF). For facilities that satisfy the prevailing wage and apprenticeship requirements, the value of the tax credit is up to $1 per gallon for non-aviation fuels and $1.75 per gallon for SAF. The SAF premium is eliminated as of Jan. 1, 2026, with the credit capped at 20 cents per gallon/$1 per gallon for all eligible fuels, depending on whether the taxpayer meets prevailing wage and apprenticeship requirements. For calendar years after 2024, the value of the credit is adjusted for inflation via an inflation adjustment factor. In July 2025, the IRS announced the inflation adjustment factor for 45Z in calendar year 2025 would boost the value of the credit to 21 cents and $1.06 per gallon for non-SAF fuels and 37 cents and $1.86 per gallon for SAF, depending on whether the taxpayer meets prevailing wage and apprenticeship requirements. The agency has not yet announced the inflation adjustment factor for 2026.
Eligible fuel must be suitable for use in a highway vehicle or aircraft and must have a lifecycle greenhouse gas (GHG) emissions rate of not greater than 50 kilograms (kg) of CO2e per mmBtu. Eligible fuels cannot be derived from coprocessing an applicable material with a feedstock that is not biomass. In addition, eligible fuels cannot be produced from a fuel for which a section 45Z credit is allowable.
Within the regulations, the IRS explains that “if one fuel is used as a primary feedstock to produce a second fuel, and the first fuel qualifies as a transportation fuel for purposes of section 45Z, the second fuel would not qualify for a section 45Z credit.”
“For instance, SAF produced from ethanol as a primary feedstock, and hydrogen produced from RNG as a primary feedstock, may not qualify as transportation fuel for purposes of section 45Z,” the IRS continued. “However, a fuel could still qualify for a section 45Z credit if its production process uses a transportation fuel solely as a process fuel or other non-primary-feedstock input.”
As directed by the OBBB, the proposed regulations eliminate indirect land use change (ILUC) from lifecycle GHG emission calculations for fuels produced after Dec. 31, 2025. The proposal also indicates that the lifecycle GHG emissions rate for fuel derived from animal manure may be less than zero starting in 2026.
GHG emissions rates for eligible transportation fuels can be determined by the taxpayer by either using the annual emissions rate table published by Treasury and the IRS or by obtaining a provisional emissions rate (PER) determination from the agency.
According to the proposal, 45Z divides transportation fuel into two categories for purposes of emissions rates: non-SAF transportation fuel and SAF transportation fuel. For non-SAF transportation fuel, lifecycle GHG emissions rates must be based on the U.S. Department of Energy’s latest GREET model. For SAF, lifecycle GHG emissions rates must be determined in accordance with the most recent CORSIA methodologies adopted by the International Civil Aviation Organization or any methodology similar to the most recent CORSIA methodologies.
For renewable natural gas (RNG) transportation fuel, the proposed guidance specifies that the 45Z credit should be claimed by the processor that produces the fuel, not the party that compresses the resulting RNG. Similarly, for liquid fuels, the credit is to be claimed by the fuel producer, not the fuel blender. Electricity is not considered an eligible transportation fuel for purposes of 45Z.
Within the proposed rule, the IRS indicates that some stakeholders requested the ability to lock-in a GHG emissions rate tied to the year for which construction began on a facility, regardless of when the taxpayer actually produces a transportation fuel. Under such a system, a taxpayer that began constructing a facility in 2025 would be able to use the emissions rate table from 2025 to determine the emissions rate of its fuel for all taxable years. The proposed regulations do not adopt that suggestion. Rather, eligible taxpayers will be required to update their GHG emissions rates annually.
The IRS is seeking stakeholder input on possible approaches regarding feedstock tracking, to ensure only fuels derived from feedstocks produced or grown in the U.S., Canada and Mexico qualify for the 45Z credit. “The Treasury Department and the IRS are considering appropriate substantiation and recordkeeping requirements for feedstocks imported from Canada and Mexico (including [used cooking oil (UCO)]), and request comments on possible approaches with respect to substantiating that any imported feedstocks meet the statutory sourcing requirement,” the agency wrote in the proposal. “The Treasury Department and the IRS are also interested in any industry practices to track feedstock source(s) that would mitigate potential taxpayer burden while being administrable for the IRS. For example, whether using specific existing business records, a taxpayer could demonstrate that feedstocks exclusively produced in Canada or Mexico did not contain other feedstocks or additives that originated outside of Canada or Mexico.
“The Treasury Department and the IRS also request comments on purchases from aggregators of UCO and approaches to determine the underlying source(s) of the UCO that are administrable for taxpayers and the IRS,” the agency continued. “The Treasury Department and the IRS request comments on, for instance, whether there are reliable methods that would indicate the geographic location where seeds originated or crops were grown as a precursor for use as cooking oil, which could be used to determine whether the foreign feedstock limitation in section 45Z(f)(1)(A)(iii) applies.”
A 60-day public comment period is scheduled to open following publication of the proposed regulations in the Federal Register. A public hearing is scheduled to be held on May 28. A pre-publication version of the notice of proposed rulemaking is available on the Federal Register website. READ MORE
Excerpt from Biofuels Digest: The password is: “Registered under Section 4101 at the time the fuel is produced.” Miss that, and nothing else matters.
...
Registration is not paperwork. It is eligibility itself.
If your facility is not registered when the fuel is produced, that fuel does not qualify for 45Z.
...
The facility entity must be registered.
Many production plants are owned by LLCs that are “disregarded entities” for tax purposes. For 45Z, the entity conducting the activity must be registered — even if the parent company ultimately claims the credit.
“Producer” has a technical meaning.
For RNG, the producer is the party that upgrades raw biogas to pipeline-quality renewable natural gas.
...
The IRS has effectively set up customs control for carbon. Starting in 2026, feedstocks must originate in:
- The United States
- Mexico
- Canada
Feedstock must meet North American sourcing/origin requirements under the proposed rules. Why this matters more than it sounds? In the past, supply chains often operated on trust, aggregation, and market-grade documentation. Now:
- Imported UCO (used cooking oil) that was commonly sourced from Asia may not qualify.
- Tallow or fats from outside North America may be out.
- Aggregated streams — where material from multiple regions mixes — create traceability risk.
This is where the metaphor fits perfectly: Some feedstocks may look North American.
Some may travel through North American intermediaries.
Some may even be sold as if they’re something else. But 45Z cares about origin, not accent. Also important:
- The fuel does not have to be used in a highway vehicle — it just has to be suitable for that use. This keeps some marine fuels in play.
...
The system moved from: “Certain fuels get special premiums” to: “Everything competes on CI under the same ceiling”.
Translation: If you built your SAF economics around a higher premium, this is the scene where the song changes mid-performance. The industry’s feeling is: “Whatever the rule was, we financed it.
Whatever the rule is now, we’re against it.” But from Treasury’s perspective, the shift is toward a single, CI-based scale — simpler, flatter, and less generous at the top.
...
Certain manure-based pathways (especially dairy RNG) can still achieve very low or negative CI scores in a way that may translate into higher effective credit value. That’s not a philosophical statement.
It’s a modeling outcome tied to how avoided methane emissions are treated.
...
Indirect Land Use Change (ILUC). ILUC used to function like an invisible surcharge: If crop-based fuels caused land to shift elsewhere, the model added emissions. Now, under 45ZCF-GREET: ILUC is out. Not reformed.
Not tweaked.
Just… “Hello, I must be going.” This materially changes how corn ethanol, soy biodiesel, and similar pathways score.
...
You cannot collect multiple major federal energy credits on the same fuel or project pathway. Treasury does not allow the “all-you-can-eat” version of decarbonization incentives.
Credits you generally cannot stack with 45Z if the fuel or facility is already benefiting from:
- 45V — Clean Hydrogen45Q — Carbon capture and sequestration
- Section 48 — Investment Tax Credit (for certain energy property)
...
Only one gets to stay in the contract. These interactions are pathway- and facility-specific, and depend on how a project is structured and which elections were previously made.
And you can switch — sometimes.
...
45Z isn’t just a production decision.
It’s a strategic tax architecture decision that interacts with financing, depreciation, and prior elections. You’re not just choosing a credit. You’re choosing which version of the contract you live under for years.
The Bottom Line
In 45Z, the sanity clause is this: register first, document everything, and choose your credit strategy before the steel is in the ground. READ MORE
by Jake Spring (Washington Post) Trump’s biggest climate rollback stalls over fears it will lose in court -- Trump officials have delayed finalizing the repeal of a landmark legal opinion key to their effort to eliminating the Environmental Protection Agency’s climate rules because of concerns the proposal is too weak to withstand a court challenge, according to two people familiar with the matter who spoke on the condition of anonymity to discuss confidential information.
The EPA’s 2009 “endangerment finding” concluded that greenhouse gases harm public health, establishing the basis for regulating them under the Clean Air Act. Repealing the finding would end the agency’s regulation of greenhouse gas emissions from cars and trucks.
The White House’s Office of Information and Regulatory Affairs, which reviews agency regulations, has expressed concerns over the strength of the scientific and economic analysis of the proposed repeal, the people said.
EPA officials are resisting revisions to the policy and arguing that the regulation should be finalized and announced publicly in its current form as soon as possible, they added.
...
The EPA’s policies to curtail greenhouse gas emissions will not make a large enough difference to the global climate to justify the enormous costs that regulations impose, said Diana Furchtgott-Roth, director of the Center for Energy, Climate, and Environment at the Heritage Foundation, a conservative think tank.
“These rules impose vast costs on the American economy and the American people,” Furchtgott-Roth said. “They need to be abolished.”
Furchtgott-Roth said that repealing the endangerment finding would also bolster the EPA’s proposal to end Biden-era limits on greenhouse gas emissions from power plants, which it issued in June and has yet to finalize.
The agency’s scientific argument for repealing the endangerment finding, released in July, primarily relied on an Energy Department report that was written last spring by a working group of five known climate skeptics. Scientists say the report is riddled with errors, and environmental groups have sued, saying the secretive way the department produced the report violated federal law. The working group has since been disbanded.
“Their work was obliterated. The criticism leaves nothing standing,” said David Doniger, a senior attorney for the Natural Resources Defense Council.
The EPA has pursued an ambitious legal strategy of rewriting and finalizing rules as quickly as possible to force them into the court system, experts say, aiming to receive favorable rulings before the end of Trump’s term.
But the agency missed its goal of finalizing the repeal of the endangerment finding by the end of 2025, and target dates for undoing other Obama- and Biden-era regulations have also slipped. READ MORE
Related articles
Excerpt from Politico Pro Climatewire: A top White House regulatory czar is shoring up a final rule gutting the bedrock of U.S. climate rules even as the administration’s assault on climate science comes under legal fire, people familiar with the process said Thursday.
The deliberative work happening behind closed doors at the Office of Information and Regulatory Affairs pits the administration’s desire to quickly scrap EPA’s endangerment finding, which underpins many of the agency’s climate change regulations, against the imperative to ensure those actions can survive legal scrutiny. The attempt to repeal the finding is shaping up as the Trump administration’s single-biggest — and riskiest — swing at the federal government’s ability to fight rising temperatures linked to fossil fuels.
Success would deliver a long-sought win to hard right conservatives by obliterating EPA’s authority to issue rules they have likened to command-and-control diktats over the entire economy. But failure would jeopardize President Donald Trump’s goal of eradicating U.S. climate regulations before his second term ends. READ MORE
Excerpt from E&E News Climatewire: Misleading. Unjustified. Hypocritical.
Those are just some of the words that Department of Energy scientists used to describe a 141-page report on climate change that was commissioned by DOE Secretary Chris Wright.
The feedback appears in newly revealed emails that were made public as part of a court fight between DOE and public interest groups. And they show that criticism of the report — which calls into question the basic tenets of climate science — isn’t limited to scientists outside the Trump administration.
The department’s own internal reviewers took issue with the document, which was written by five climate contrarians from outside DOE who were handpicked by Wright.
The latest revelations could further undermine the credibility of the DOE report, which is at the center of efforts by the Trump administration to roll back federal climate regulations. A team of outside climate scientists has dismissed its findings as “misleading or fundamentally incorrect” — in part because the report touts the “supposed broad benefits of carbon dioxide,” a main driver of global warming.
One DOE reviewer echoed that opinion and said it was “misleading” for the report to talk about how climate change could boost plant growth without mentioning its other drawbacks. Another comment described the report’s criticism of climate modeling as an “unjustified (and at worst a biased) judgement.” A third noted it is “misleading to state that the aggregate sea-level rise trend in U.S. tide gauges is not accelerating.”
Yet the DOE reviewers reserved some of their most pointed criticism for Wright himself, who wrote a one-page introduction to the report. In it, he criticized the news media for distorting climate science and declared that global warming “is not the greatest threat facing humanity.”
That last line drew an especially sharp rebuke from one of the reviewers.
“Since the Secretary criticizes others for blurring the line between scientific conclusions and policy recommendations … it is hypocritical to offer a value judgement without clearly labeling it as such,” the commenter wrote.
...
Travis Fisher, a DOE adviser who helped organize the report, wrote in an email to the group of contrarian researchers that “it’s my hunch that most comments will be rejected.” READ MORE