Can Push for Carbon Capture Pipelines Also Mean Billions for Conservation-Minded Farming?

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September 21, 2023

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by Donnelle Eller (Des Moines Register) Builders of carbon capture pipelines stand to reap billions in tax credits. Will farmers also get a share?; Advocates say incentives to adopt less carbon-intensive farming practices also could be part of the equation; Whether that will happen may depend on which model the U.S. Department of Agriculture chooses to measure carbon reduction.

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But experts say farmers also can cut ethanol's greenhouse gas emissions and help ethanol producers qualify for even greater tax incentives by adopting measures such as planting cover crops and improving fertilizer use, potentially making the renewable fuel carbon-negative.

The federal government supports lowering fuels' carbon emissions through two lucrative federal tax credit programs. One would pay companies to capture carbon dioxide, with a premium for sequestering it, referred to as 45Q,. The other, which supports lowering transportation fuels' environmental impact, is called 45Z.

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The federal government is now assessing how it will calculate ethanol’s greenhouse gas emissions, a critical step in determining whether ethanol could be used to make sustainable aviation fuel, a 35-billion-gallon-a-year market that could more than double ethanol demand.

“Farmers need to understand the significance of this,” U.S. Agriculture Secretary Tom Vilsack told ethanol industry leaders at a Sept. 12 ethanol industry conference in Washington, D.C. “The future of this industry is … linked to its capacity to take advantage of this new and amazing opportunity.”

The former Iowa governor added that it's “critical to keeping mid-sized and small folks (farmers) in business. And that's critical to keeping small towns vibrant.”

David Miller, chief economist at Decisions Innovation Solutions in Urbandale, in a report earlier this year warned Iowa could lose $10 billion annually without carbon capture pipelines to lower ethanol’s greenhouse gas emissions. Those losses include about $1 billion annually in income to the state’s farmers, the report said.

But Miller said Iowa farmers also have an opportunity to boost their income if corn-based ethanol can be used to make sustainable aviation fuel.

The federal law requires companies to cut greenhouse gas emissions at least 50% below those of fossil fuels to qualify for sustainable aviation fuel tax credits. The U.S. Treasury Department is weighing models that will go into determining whether feedstocks like ethanol can be used to meet the sustainable aviation fuel goal.

The ethanol industry backs a U.S. Department of Energy model, saying it's the most scientifically accurate, wrapping in updated ethanol production and conservation-oriented corn-growing practices. Vilsack said the U.S. Department of Agriculture will spend up to $400,000 to improve the model, responding "to concerns and criticism we've heard about it."

The decision is important, since sustainable aviation fuel production carries rich tax incentives: Low-carbon ethanol could snag up to $1 a gallon in tax credits through the clean fuel tax credit, while sustainable aviation fuel could pull in as much as $1.75 a gallon.

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But Miller said another model under Treasury consideration more heavily weighs the effect of clearing trees and grasslands so corn and other row crops can be grown. That model “takes no individual agronomics into account,” such as farmers who use cover crops, no-till farming and other conservation practices to lower their corn’s carbon footprint, he said.

With that model, “it doesn't matter what you do as a farmer,” he said. So, “there's no incentive” for ethanol producers “to pay anybody any differently.”

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Without low-carbon ethanol, the airline industry will have difficulty getting the amount of sustainable fuel it needs, Vilsack said.

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But he cautioned ethanol leaders that “you have to be able to make the case that your product is in fact a low-carbon fuel. Which means you got to do something with CO2."

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Next year’s crop will be used to produce ethanol in 2025, when the federal clean fuel tax incentives become available. Many farmers will make decisions this fall about their 2024 practices, including whether to plant cover crops, tillage and fertilizer use.

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(Jim) Walsh, the Food & Water Watch policy director, sees the tax-subsidized pipelines as a costly effort to extend the life of ethanol in an economy turning away from carbon-based energy production. He said those billions should instead be invested in helping farmers transition to a post-ethanol era. READ MORE

Carbon Capture Pipeline Tax Credits Raise Questions About Benefits (AgWeb)

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