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
- Clean Fuels Welcomes Proposed 45Z Rules (Clean Fuels Alliance America)
- RFA Welcomes Proposed 45Z Tax Credit Regulation (Renewable Fuels Association)
- US issues proposed rule for clean fuel tax credit (Reuters)
- Trump plan confirms farm GHG cuts in clean fuels tax credit -- The Treasury Department’s proposed regulation pleased biofuel groups and provided additional clarity, though key details remain to be determined. (Politico Pro Greenwire)
- Biofuels Notch Win With IRS Proposal, Await Further Guidance (Bloomberg Tax)
- 45Z Credit Rules Released by Treasury -- Treasury's 45Z Credit Guidance Brings Clarity, Questions for Biofuels Producers (DTN Progressive Farmer)
- Biofuel industry cheers 45Z tax credit proposal, awaits final details (Brownfield Ag News)
- U.S.’s 45Z clean fuel regulations good news for Canada’s canola producers (Glacier Farm Media/Manitoba Cooperator)
- Fuel Retailers Express Concerns About 45Z Guidelines (News Dakota)
- Treasury, IRS release proposed 45Z regulations (Carbon Capture Magazine)
- Section 45Z Clean Fuel Production Credit ACTION: Notice of proposed rulemaking and public hearing (AGENCY: Internal Revenue Service (IRS), Treasury)
- The Password is Swordfish: The Digest’s Guide to getting Money via 45Z tax credits (Biofuels Digest)
- Proposed rule adds incentives for ethanol but some questions remain (Iowa PBS; includes VIDEO)
- Biofuel producers get first look at proposed 45Z credit regulations (Ag Daily)
- US Treasury and IRS Release Proposed 45Z Regulation Update (ResourceWise)
- Treasury Releases Proposed 45Z Regulation (Energy.AgWired.com)
- Section 45Z Clean Fuel Production Credit: A Proposed Rule by the Internal Revenue Service on 02/04/2026 (Federal Register)
- Fuel retailers express ‘serious concern’ with section 45Z proposed rules (NATSO/Biobased Diesel Daily)
- Iowa Biodiesel Board welcomes published guidance on federal tax credit (Iowa Biodiesel Board/Biobased Diesel Daily)
- SABR welcomes proposed 45Z rules (Sustainable Advanced Biofuel Refiners Coalition)
- Biodiesel Producers Welcome New IRS Tax Credit Guidance -- NATSO Among Stakeholders Favoring Reinstatement of Simpler Policy (Transport Topics)
- Treasury Department and IRS Issue Proposed Rule Regarding Section 45Z Clean Fuel Production Credit, Will Hold Public Hearing on May 28, 2026 (Bergeson & Campbell)
- Fuel Retailers Press for Simpler Tax Policy Before Biofuels Collapse: "Time to Bring Back Biofuel Policies that Address Affordability" (NATSO/The Auto Channel)
- 45Z Clean Fuel Credit Updates Draw Praise From Farm and Biofuel Groups (Successful Farming)
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.
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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
Excerpt from Federal Register: This document contains proposed regulations regarding the clean fuel production credit enacted by the Inflation Reduction Act of 2022 and amended by the One, Big, Beautiful Bill Act (OBBBA). These proposed regulations would provide rules for determining clean fuel production credits, including credit eligibility rules, emissions rates, and certification and registration requirements. In addition, the proposed regulations would amend three sets of final regulations: the elective payment election regulations and the credit transfer election regulations, to clarify language relating to ownership of clean fuel production facilities, and the Federal excise tax registration regulations, to make them clearer and more consistent with the clean fuel production credit registration requirements in these proposed regulations. The proposed regulations would affect domestic producers of clean transportation fuel, taxpayers that may claim a credit for a related producer's fuel, and excise tax registrants.
DATES:
Written or electronic comments must be received by April 6, 2026. The public hearing is being held on May 28, 2026, at 10 a.m. Eastern Time (ET). Requests to speak and outlines of topics to be discussed at the public hearing must be received by April 6, 2026. If no outlines are received by April 6, 2026, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. ET on May 26, 2026.
...
The section 45Z credit replaces an assortment of prior fuel incentives. Those incentives consisted of income tax credit, excise tax credit, and excise tax payment provisions for various biofuels and other alternative fuels sold for use as a fuel or used as a fuel, including biodiesel, renewable diesel, compressed natural gas, second generation biofuel, and SAF. See sections 40(b)(6); 40A(b)(1) and (2); 40B; 6426(c) through (e) and (k); and 6427(e). READ MORE
Excerpt from NATSO/Biobased Diesel Daily: NATSO, representing truck stops and travel plazas, SIGMA: America’s Leading Fuel Marketers, and the National Association of Convenience Stores expressed serious concern with the section 45Z clean fuel production credit Feb. 3, after the U.S. Department of the Treasury issued its proposed rules for the incentive.
The treasury department was tasked with writing guidelines that would create a viable regulatory framework for 45Z and bolster the flailing U.S. biofuels market.
“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,” NATSO stated. “NACS, NATSO and SIGMA, which represent 90 percent 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, the executive vice president of government affairs for NATSO and SIGMA, said, “As Americans are navigating affordability challenges, now would be a great time to reinstate a tax policy that actually lowers the price consumers pay at the pump. Although the treasury department has done its best to make lemonade out of lemons, 45Z simply will not lower fuel prices. To add insult to injury, today’s proposed rule will not even improve demand for biofuels, nor will it generate meaningful support for American farmers by increasing demand for corn or soybeans.”
Fialkov continued, saying, “45Z doesn’t help farmers and it doesn’t help consumers. 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. How much longer should farmers be expected to wait before 45Z begins delivering benefits for them? We simply can’t afford to continue walking down this path when better, simpler solutions exist.”
Matt Durand, NACS deputy general counsel, added, “The transition away from the biodiesel tax credit to the 45Z production credit instituted a catastrophic decline in biofuels consumption that hurts the economy. The Trump administration inherited this unworkable mess. Congress can fix it by bringing back the biodiesel tax credit, which has a proven track record of delivering lower prices to consumers while benefitting farmers and biofuel producers.”
NATSO, SIGMA and NACS urged the administration to pursue more meaningful and measurable biofuel policies—such as reinstating the biodiesel tax credit—that can quickly revive biodiesel consumption and mitigate the damage caused by 45Z while enhancing the economy and energy-market security.
In 2025, biodiesel consumption plummeted to 960 million gallons through the end of October from more than 2 billion gallons in 2024.
Newly released EPA data underscores the continued downward spiral of domestic biofuel consumption, according to NATSO.
Tradable credits known as renewable identification numbers (RINs) used to demonstrate compliance with the Renewable Fuel Standard dropped 22 percent for biodiesel in 2025 compared with the prior year.
Ethanol RINs also declined, further highlighting that 45Z is not providing support for farmers.
“Today’s proposal from treasury underscores the need to reinstate the biodiesel tax credit, which is more robust and transparent within the fuel value chain, allowing fuel retailers to pass meaningful savings along to consumers,” NATSO stated.
NATSO, SIGMA and NACS said they look forward to working with the administration and Congress on biofuel policies aimed at advancing the U.S. fuel supply and U.S. energy markets for the benefit of American consumers. READ MORE
Excerpt from Sustainable Advanced Biofuel Refiners Coalition/Biobased Diesel Daily: One of the big questions for the Sustainable Advanced Biofuel Refiners Coalition was whether the proposed rule would just cover 2025 regulations or whether it would also cover 2026 and beyond, since the changes made to 45Z in July 2025 did not take effect until Jan. 1, 2026.
So effectively there are two programs—one for 2025 and one for 2026 and beyond.
The proposed regulations do indeed cover both programs: 2025 and 2026 and beyond.
SABR said the announcement is a positive step that provides the industry a degree of certainty.
“These proposed rules will provide clarity for the program and a much-needed signal to the market to move forward,” said SABR CEO Joe Jobe.
The biodiesel markets have been nearly paralyzed for over a year by the policy uncertainty created by lack of implementing regulations, which caused severe economic harm to farmers, biodiesel producers and all stakeholders in the biodiesel value chain.
“We very much appreciate that treasury and the IRS issued these proposed regulations clarifying many questions that were raised by preliminary guidance issued a year ago,” Jobe said. “And we especially appreciate that they included specific safe-harbor provisions, although we are still trying to confirm how those provisions will work from a practical standpoint.” READ MORE
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