On January 1, 2025, the 45Z Clean Fuels Production Credit went into effect. The law moves the federal one-dollar-per-gallon biodiesel tax credit from a blenders tax credit to a variable-price producers credit based on the carbon intensity (CI) score of the feedstock used to produce the fuel. Unfortunately, the Department of the Treasury has not established a final rule, causing significant uncertainty for advanced biofuel producers, who already face slim or negative margins. The uncertainty has already led several biodiesel producers, including Michigan’s own W2 Fuel, to idle their plants until certainty is restored.
On January 10, 2025, the Biden era Treasury announced interim 45Z guidance. The guidance provided the framework on the model (45ZCF-GREET) used to calculate CI score. The guidance also established imported used cooking oil (UCO) would not qualify as a feedstock eligible to receive a credit. Additional guidance was announced on January 15, 2025, when the Biden era Department of Agriculture released an interim rule on guidelines for the use of climate smart agriculture (CSA) for biofuel feedstocks. Advanced biofuel producers sourcing feedstock produced using these CSA practices, like no-till and cover crops, can further reduce their CI score, thus generating a higher credit value under 45Z. While the interim guidance from the Biden Administration was welcomed by the industry, it did not bring the certainty many had been hoping for.
On January 20, 2025, President Donald Trump was sworn into office and major news around 45Z ceased. However, the Administration and House Ways and Means Committee, which oversees tax policy, has given indications they are considering changes to 45Z. Groups like Clean Fuels Alliance America are working with Committee members, the Administration, and their stakeholders in the farming, fuel, and advanced biofuel industries to advocate for complete guidance that includes credit values that provide the greatest economic benefit to ensure the economics work for advanced biofuel producers, fuel suppliers, and end-users.
On top of the much awaited guidance on 45Z, USEPA is due to set renewable volume obligations (RVOs) under the Renewable Fuel Standard for 2026 and beyond this year. On February 19, 2025, a coalition of biofuel, agriculture, fuel retailer, and petroleum trade groups sent a letter to EPA Administrator Lee Zeldin, urging the Administration to set strong RVOs in a timely and multiyear fashion to ensure longer-term certainty for the industry. Strong RVOs would also provide a signal that the Trump Administration is recognizing the importance of the progress and investments made by advanced biofuel producers to grow production volumes and markets for homegrown fuels.
President Trump and members of his Administration have made statements encouraging more utilization of domestic agricultural products and energy. Biodiesel, renewable diesel, and sustainable aviation fuel support those efforts on all fronts. In fact, one of the best ways to support farmers and domestic biofuels producers is to provide 45Z guidance while setting realistic RVOs that reflect production and growth in the industry.
What This Means for the Future
At a local level, the clean fuels industry expects to see several pieces of legislation supportive of the production and use of biodiesel, renewable diesel, and SAF in Michigan to move forward in the legislature. This is a positive for the industry and Michigan’s farmers. With 45Z and RVOs yet to be determined, producers, fuel suppliers, and end-users are in a difficult situation. Producers are hurting as they have been forced to operate at a potential loss or idle operations completely without credit certainty. As a result, fuel suppliers are being forced to make difficult decisions on whether to offer advanced biofuels to their customers. The end result is directly impacting end-users the rely on fuels like biodiesel and renewable diesel to boost the performance of their fleet while lowering emissions.
To learn more and support efforts to provide certainty to the industry, visit CleanFuels.org.
Originally shared by the Missouri Biodiesel Coalition. Title and article edited for purpose and clarity.
Notice: The Michigan Advanced Biofuels Coalition (MiABC) does not lobby or influence policy in any way. The policy interests of Michigan soybean farmers and biodiesel producers are supported by the Michigan Soybean Association and Clean Fuels Alliance America, respectively.