The Clean Fuel Production Tax Credit (45Z), Part 3: Reviewing the Potential Value

Zhangliang Chen, Kaiyu Guan and Jonathan Coppess (University of Illinois/farmdoc daily) Continuing the review of the Clean Fuel Production Tax Credit, this article explores the potential economic benefit that could be created for Midwest corn and soybean producers implementing approved practices. Previously, we introduced the 45Z tax credit and its relevance to grain producers even though the tax credit is claimed by biofuel producers (farmdoc daily, May 27, 2026). We also explained how feedstock carbon intensity scores are calculated for a farm, reviewed the CI-reducing practices recognized under the current FD-CIC framework, and used Illinois corn as a case study to show that the estimated CI benefit from the same practice can differ across counties (farmdoc daily, June 18, 2026). Note: USDA released the official FD-CIC version 1.0 on June 25 and some of the discussion in the second article is now outdated. We discuss the official USDA FD-CIC (USDA, FD-CIC) in more detail, highlighting the main changes relative to the earlier version, in a future article. For the discussion in this article, all calculations are based on the newly released official model.

In summary, whether the potential financial value that could be credited by a recognized CI-reducing practice is large enough to matter for producers depends first on the total tax credit value that could be created under different scenarios. From that total value, the next question is how much of that value might actually be passed on to the farmer–a question that cannot be answered at this time. Importantly, this discussion is intended to inform interested producers about 45Z opportunities, it is not a projection or estimation of actual benefits to the farmer.

Calculating the Total 45Z Value Created per Acre

How much of the 45Z value might be divided between a farmer and a biofuel producer depends first on the total potential tax credit value in the best-case scenario. Farmers do not claim the tax credit directly and in no case could they receive more than the total value created. The total value acts as a useful screening tool because if the total value possible for a recognized conservation practice is too small to matter for a farmer, there is little reason to spend much time thinking about how that value might later be divided.

Figure 1 illustrates the step-by-step calculation of the estimated total 45Z tax credit value created per acre for corn produced in Champaign County, Illinois, under a cover crop adoption scenario.

Figure 2 illustrates the total 45Z tax credit value created across Illinois counties.

Preparing for a Possible 45Z Market Opportunity

If the county-level estimates of total value created in Figure 2 are large enough to consider implementing the practices, the next step to evaluate is what the farmer needs to do to be prepared for this potential opportunity. This also applies to producers who have already adopted recognized practices for agronomic reasons and want to preserve the option of benefiting from a potential price premium if a 45Z-driven market for low-CI grain emerges.

Even before a fully developed market exists, there are several low-risk steps producers can take, starting with documentation readiness.

Concluding Thoughts

For Midwest producers, 45Z creates a possible new market for low-CI grain. Whether it matters for producers depends on three things: how much total tax credit value a recognized practice creates, whether local grain buyers or biofuel plants are willing to source low-CI grain, and how much of that value they are willing to share with producers. In some counties and under some plant-CI assumptions, the total value created may be large enough to attract interest. In other cases, the size of the opportunity may be too small to matter.

The 45Z tax credit should be treated as a market opportunity to watch, not as a guaranteed new source of farm income. Producers who see meaningful potential value in their county can prepare by keeping good records, following how recognized practices and documentation requirements are finalized, and watching whether local buyers begin to offer programs for low-CI grain. Producers who do not see enough value to matter can reasonably set the issue aside for now and revisit it later if the rules or markets change.