Carbon Market Could Offer Farmers Opportunity for More Money

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June 17, 2026

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by Gil Gullickson (Wallaces Farmer/Farm Progress) As Things Look to Me: Carbon intensification score helps determine eligibility for Section 45Z payments.

Section 45 of the Inflation Act of 2022 could determine payments to farmers who produce low-carbon fuels.
The tax credit’s worth is based on a carbon intensification score that tracks the biofuel supply chain’s carbon footprint.
The hope is biofuel makers will pass on the tax credit value to others in the supply chain, including farmers.

Several years ago, carbon markets simultaneously intrigued and perplexed Mitchell Hora.

“Back then, it seemed like there was a new carbon market every month,” said Hora, a Washington, Iowa, farmer and CEO of the software company Continuum Ag. “Some of them worked out, some of them not so much.”

Then he noticed a seemingly minuscule portion of the Inflation Reduction Act that President Joe Biden signed in August 2022. The legislation’s Section 45Z granted federal tax credits to biofuel manufacturers who make low-carbon fuels.

The tax credit’s worth is based on a carbon intensification (CI) score that tracks the biofuel supply chain’s carbon footprint. This includes greenhouse gas emissions — such as carbon dioxide, nitrous oxide and methane — that can fuel climate change.

The fewer emissions used to produce a gallon of biofuel, such as ethanol or biodiesel, the more tax credits — and money — biofuel companies glean. The hope is biofuel makers will pass it on to others in the value chain, including farmers, grain merchandisers and third-party verifiers.

Farmers play a part in reducing these emissions, since the answer is literally under their feet. Soil health practices they implement — such as cover crops, reduced tillage and efficient fertilizer use — also can reduce or sequester greenhouse gas emissions.

Tax credits center mainly on corn, but also include soybeans and other crops. It’s estimated that tax credits could be worth over $100 per acre in potential value among farmers, biofuel manufacturers and other stakeholders, Hora said.

Section 45Z payments will give farmers another carbon market payment option that now includes offset and inset programs that firms currently offer to farmers.

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Hora was frustrated that many carbon programs did not pay for greenhouse gas-reducing practices that he and his father, Brian, adopted years ago.

So, he ran his family’s farm through the Department of Energy’s Greenhouse Gases, Regulated Emissions and Energy Use in Transportation model, which enabled him to obtain a CI score.

“But I knew that getting farmers to go through the GREET model, which is a really clunky government Excel file, wasn't going to happen at scale,” Hora said.

Continuum Ag then created a more user-friendly model that quantifies greenhouse gas-reduction steps farmers take into a CI score.

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Continuum Ag is partnering with MillPont, a firm that serves as a market exchange for a CI certification program. So far, Continuum Ag has CI-scored 2 million acres. It’s also gearing up for future audits to ensure farmers have completed practices backing their CI score.

“[45Z] is about choices farmers make about tillage, cover crops, soil and soil value that actually impacts the carbon footprint,” said Jonathan Sherrill, a senior development leader with AON, a risk management firm. “The policy is designed to reward the farmer who farms differently — who builds resilience in the soil function, more so than extracting from it.” READ MORE

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USDA's 45Z Feedstock Rule Moves Carbon Accounting Closer to the Farm (ResourceWise)

Excerpt from ResourceWise: Many US growers already use practices that can reduce field-level emissions or improve soil health. The USDA says 68% of corn farmers and 70% of soybean farmers already implement at least one regenerative practice. The new rule gives producers and supply chain participants a clearer structure for documenting those practices and connecting them to biofuel markets.

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That matters because the market has been waiting for a bridge between agronomic practice and credit calculation. Without a recognized way to quantify feedstock CI, biofuel producers face uncertainty when estimating 45Z value, evaluating supply contracts, or comparing domestic feedstock options.

Why Traceability Now Matters More

The rule also outlines standards for field-level CI quantification, mass-balance chain-of-custody, traceability, record-keeping, auditing, verification, and regenerative agriculture practices.

This shifts the conversation from "Which feedstock is cheapest?" to "Which feedstock can be documented, verified, and valued?"

For producers, that creates both opportunity and complexity. A lower-CI feedstock may improve credit economics. However, this only happens if the supporting data can move through the supply chain with enough integrity to support tax credit claims. Procurement teams, originators, aggregators, and fuel producers will need to understand not only the crop but also the documentation behind it.

A New Layer of Competition for Domestic Feedstocks

The rule could also intensify competition for qualifying domestic feedstocks. If regenerative corn, soybeans, sorghum, or canola can support stronger 45Z economics, buyers may begin to segment feedstock markets by documented CI profile rather than treating crop inputs as interchangeable commodities.

That could influence basis levels, contracting structures, and regional sourcing strategies. It may also create new premiums for growers able to provide verified low-CI feedstocks into biofuel supply chains.

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What Biofuel Producers Should Watch Next

The USDA rule is a major step, but it is not the end of the 45Z implementation story. The FD-CIC must ultimately work within the broader 45ZCF-GREET and Treasury/IRS credit framework.

The DOE released the 45ZCF-GREET model in January 2025, and IRS guidance describes 45Z as a credit for domestically produced clean transportation fuel sold during the eligible credit window.

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For market participants, the key questions now include:

How quickly will buyers incorporate FD-CIC results into feedstock procurement?
Will verified regenerative feedstocks command meaningful premiums?
How will mass balance and documentation requirements affect smaller growers and aggregators?
Which regions and crop pathways will show the strongest CI advantage?
How will 45Z economics interact with RINs, LCFS, SAF demand, and global feedstock trade?

45Z Is Becoming a Supply Chain Strategy

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Carbon intensity is no longer just a compliance metric applied at the fuel production stage. It is becoming a supply chain strategy that begins at the field level. READ MORE