The renewable fuel sector is braced for bad news regarding the 45Z credit, seen as a key enabler of the sector's growth in the US.
The 45Z Clean Fuels Production tax credit - which encourages the production of clean fuels in the US - may be on the chopping block by the new Trump administration, warns Scott Irwin, an agricultural economist at the University of Illinois.
Any scrapping of 45Z could slow growth in the sustainable fuel market, he says, and curb demand for the feedstocks it uses, such as dedicated energy crops and cover crops.
45Z is a tax incentive introduced by the Inflation Reduction Act under the previous Biden administration that aims to promote the production of cleaner transportation fuels by offering higher incentives for fuels with lower carbon intensities.
President Trump is yet to make public statements about the 45Z credit, but has previously referred to the Inflation Reduction Act as the "Green New Scam".
"There is a lot of discussion about 45Z but nothing specific yet out of the new administration," Irwin told AgTechNavigator. "My personal view is that 45Z is on political life support under the new administration. Trump is on record stating that the 'green new deal' is terminated. Since 45Z is part of the new green deal 2022 IRA legislation, it is hard for me to see how 45Z survives. I don't think we will know the outcome provisional until the coming reconciliation tax bill is finished. That could easily be this summer."
Sustainable Aviation Fuel was struggling to get traction under the Biden administration, he added, "because there is no mandate for SAF in the US and the stack of available federal and state tax credits was clearly not large enough to incentivise large scale SAF production in the US. If 45Z goes away and there is no alternative tax credit for SAF put it place, then it is game over for SAF in the US for the time being."
Others disagree. Mike DeCamp, CEO of CoverCress, recently told this publication that 45Z not materialising would "not be fatal" to the industry as other programmes like the Renewable Fuel Standard (RFS) and the Low Carbon Fuel Standard (LCFS) in California still exist. These function separately from tax incentives with more of a focus on the volume of renewable fuels that are blended into petroleum-based fuels.
The Renewable Fuels Association (RFA), meanwhile, was unconvinced after US Treasury released a "notice of intent to propose regulations" regarding 45Z, thus beginning a 90-day comment period that leaves major decisions on the future of the 45Z credit to the incoming Trump administration.
"While we are pleased to see Treasury has finally released its long overdue guidance on 45Z, today's package falls short of expectations and remains incomplete," said RFA president and CEO Geoff Cooper. "The guidance is a potential step in the right direction, but much work remains to be done before clean fuel producers, farmers, and consumers can fully benefit from the 45Z programme."
Important information from the emissions rate table remains unavailable in the guidance, Cooper said, making it "impossible" for producers to know whether their fuel is eligible for the credit or not.
The guidance also fails to integrate climate-smart agriculture practices that can lower the carbon intensity of renewable fuels, he said, and do not allow producers to determine their own unique carbon intensity values.
"We do not believe this guidance alone will spur the investment, innovation, and job creation in the clean fuels sector that Congress and the administration intended. It simply isn't bankable, investible, or otherwise actionable for the vast majority of biofuel producers," Cooper said.
"For the 45Z programme to truly drive innovation and value creation in the marketplace, the credit must allow for the inclusion of efficient farming practices, recognition of additional feedstocks and ethanol production technologies, flexible supply chain management tools, and the ability for individual producers to secure their own unique carbon intensity values. But most importantly, producers will not act on this or any subsequent guidance unless they have the assurance that the credit will be durable, stable, and reliably available in the future."
The law firm Latham and Watkins added that the Treasury guidance is "an important step toward implementing the 45Z credit" but should largely be considered a discussion draft ahead of forthcoming proposed regulations.
It reiterated that President Trump has made public statements indicating that his administration "will not support policies directed toward the advancement of environmentally sustainable energy production generally and has issued executive orders intended to suspend select renewable energy initiatives."