Calculating Paths to Cleaner Corn

by Sue Retka Schill (Ethanol Producer Magazine) ... Impressive 45Z tax credit incentives promise to reward ethanol producers who succeed in driving their CI below the qualifying threshold in the Inflation Reduction Act. The incentives are potentially even greater for those who figure out how to buy low-CI feedstock grown with climate-smart agriculture practices.

Just how much that tax credit could be worth is generating some excitement in corn country. Former ISU Extension Economist Alejandro Plastina designed a Carbon Intensity Score Calculator for corn farmers based on the GREET R&D model. “We don’t know what the model for the 45Z tax credit will be like,” he says, “but most think it will be an improvement, and the basic structure will be similar.” ...

Plastina calls the ISU calculator an educational tool, giving corn growers a glimpse into low-CI corn’s value to ethanol plants, and also assisting policymakers in understanding the aggregate effect of these measures.

There are limitations to this Version 1.0 tool. The biggest one is that the details of the final GREET model to be used, along with other 45Z guidance, were still unknown when the tool was released (and at press time). Another is that while it calculates potential tax credit values, the calculator doesn’t account for costs. ISU provides a separate decision tool for farmers to evaluate the cost of changing farming practices, which enables them to compare that to the potential net return when selling carbon credits, Plastina says.

The plant will want to recover that investment, he points out, with the next question being how much of the tax credit will get passed through to the farmer once the costs for record keeping and third-party certification and verification get covered.

The Center for Agricultural Law and Taxation dug into the guidance for 40B—the sustainable aviation fuel (SAF) tax credit that gets folded into the 45Z program when it starts—to give insight into what 45Z requirements might look like. The center’s Ag Docket blog, “Unpacking the Section 45Z Clean Fuel Production Credit,” listed requirements for feedstocks supplied under the Climate Smart Agriculture pilot program for 40B, summarized below:

• CSA farmers must meet specific and detailed record keeping for each practice.

• The farmer must have a contract with the SAF producer and the SAF producer must maintain records.

• Unrelated party certifiers must verify CSA practice and supply chain traceability.

• The unrelated party certifiers must be accredited and be a certified crop advisor or USDA technical service provider.

• The farmer must provide a certificate to the SAF producer supporting the farmer’s claim.

• Farmers must certify that they have not and will not sell carbon credits elsewhere for the same acreage.

• Farmers must attest they intend to continue the practices on the same acreage.

Kelvin Leibold, a recently retired ISU Extension regional specialist and long-time farmer, says the deal breaker for him would be a requirement to segregate qualifying bushels in a separate bin. There’s great potential for these tax credits to reward farmers, “but I’m not sure how it’s all going to work out.”

He hopes the farmers’ certificates will function like RINs—the renewable identification numbers assigned to each gallon of ethanol that are used to demonstrate compliance with the Renewable Fuel Standard. He hopes these certificates will be easily transferrable.