45Z is one of the tax credit provisions from the Inflation Reduction Act meant to boost the bottom line of farmers and ranchers while helping the U.S. reduce carbon emissions. Roger Cryan, chief economist for the American Farm Bureau Federation, says 45Z replaces previous tax credits that were unfavorable to American producers.
“We’re looking forward to the 45Z, which is for renewable fuels, generally, and that applies in 2025 through 2027. That is beyond sustainable aviation fuel. It has a lot of potential, especially if we get better standards, better safe harbors in place for that.”
However, Cryan says there are a few flaws with the credit that were revealed when guidance on the credit was released.
“That guidance in April finally came out, and it was very disappointing, and it really forces us to look at what’s next and how to do this better. And the other thing that’s drawn attention is how many foreign feedstocks are coming in for this renewable fuel. Chinese used cooking oil. Brazilian sugar ethanol. Brazilian second crop corn. Those all score well in the UN model for weird land use reasons, and U.S. crops actually have a harder time scoring, not because they aren’t sustainable, but because of this UN model.”
Efforts to make the credit work for U.S. farmers are continuing.
“USDA did a lot of the work, all the work, really, that supported these limited safe harbors that were announced in April. It was late. It was not enough. But the only folks who really made an effort to make that happen were USDA. AFBF is also working with corn and soy and other groups, pushing the IRS to do this right, to do it as it was intended. We’ve been talking to folks on the Hill to recognize that the intent was to build infrastructure and a supply chain in the US for sustainable fuels, not to be importing a cherry-picked selection of crops from overseas.”
Learn more at fb.org/news.