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- New Tax Credit for Clean Fuels: A per-gallon tax credit under section 45Z starts in 2025 for fuels with low greenhouse gas (GHG) emissions.
- Clear Rules for Eligibility: Guidance explains who can claim the credit, what fuels qualify, and how emissions are measured.
- Focus on Climate-Smart Farming: Proposed rules include incentives for sustainable farming practices that support cleaner fuel production.
The Treasury Department and IRS have announced new guidelines for the Clean Fuels Production Credit (Section 45Z), designed to cut GHG emissions from transportation fuels. The credit applies to sustainable aviation fuel (SAF) and other transportation fuels starting in 2025.
Key Points from the Guidance:
- Who Can Claim the Credit: Only fuel producers—not blenders or compressors—are eligible.
- What Fuels Qualify: Fuels must be suitable for transportation use. This includes marine fuels like marine diesel and methanol if they meet performance criteria.
- Measuring Emissions: Taxpayers must use the 45ZCF-GREET model for non-SAF fuels or aviation-specific methods (GREET or CORSIA) for SAF. If a fuel pathway isn’t listed, producers can apply for a provisional emissions rate (PER) under upcoming rules.
Treasury Deputy Secretary Wally Adeyemo highlighted the initiative’s impact: “This guidance positions the U.S. as a leader in clean fuel innovation while lowering transportation costs.”
Climate-Smart Agriculture (CSA)
The guidance proposes incentives for using sustainable farming practices when producing biofuel feedstocks like corn, soybeans, and sorghum. These practices reduce emissions and improve soil and water health.
Related Article: U.S. Treasury Releases Guidance to Expand Access to Clean Vehicle Tax Credits
John Podesta, Senior Advisor for Climate Policy, noted, “Today’s announcement underscores the importance of sustainable agriculture in clean transportation.”
Federal Support for Sustainable Agriculture
- The Treasury’s SAF tax credit pilot program supports CSA practices.
- USDA’s climate-smart projects, backed by $22 billion in federal funds, aim to enhance sustainable practices across 225 million acres over the next five years.
Deputy Energy Secretary David Turk added, “The final guidance provides certainty to the U.S. biofuel industry, essential for cutting transportation emissions.”
The Department of Energy’s release of the 45ZCF-GREET model will soon offer producers a tool to calculate their fuel emissions accurately, providing a clearer path to claiming this credit.
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