Several prominent farm groups have called on the Biden administration to restrict lucrative tax credits to fuels made from U.S.-grown feedstocks. The American Farm Bureau Federation, the National Farmers Union, the National Corn Growers Association, and the American Soybean Association issued a letter on Wednesday urging that the 45Z tax credits for sustainable aviation fuel (SAF) be limited to domestic sources.
The 45Z tax credits, set to become available in 2025, promise up to $1.25 per gallon for low-carbon fuels. However, with the administration yet to release detailed regulations, these groups are concerned that the benefits could be undermined if the credits are not tied specifically to U.S. feedstocks. Their letter highlights that without clear domestic feedstock requirements, the advantages of the 45Z credits might bypass American farmers, who stand to gain significantly from the expansion of SAF production.
The Biden administration has ambitious goals for increasing SAF production, aiming for a target of 3 billion gallons by 2030. This vision aligns with broader efforts to transition to more sustainable aviation practices. In April, the administration published guidance on 40B tax credits for SAF produced from 2022 to 2024. However, this guidance has been criticized for its narrow scope, as it only qualifies a fraction of U.S. biofuels for these credits. Notably, it does not impose a domestic feedstock requirement, which the farm groups argue is essential.
The current 40B guidelines are perceived as too restrictive. For example, jet fuel produced from ethanol must be sourced from corn grown under specific conditions, including the use of no-till farming, cover crops, and enhanced-efficiency fertilizers. Similarly, biomass-based diesel derived from soybeans must meet similar criteria. The farm groups advocate for broader compliance options to better support the diversity of farming practices across the U.S.
In addition to their advocacy for clearer domestic feedstock requirements, the farm groups are calling for an expansion of the list of climate-smart farming practices that produce lower-carbon crops. This step would ensure that a wider range of sustainable farming methods are recognized and rewarded, further supporting American agriculture’s role in the clean energy transition.
In related developments, CF Industries and POET, a major ethanol producer, have announced a pilot project aimed at reducing the carbon intensity of ethanol. This initiative, set to begin this fall in the western Corn Belt, will use low-carbon ammonia fertilizer to grow corn for ethanol production. The companies claim that this practice could reduce ethanol’s carbon intensity by up to 10 percent, reflecting ongoing efforts to enhance the sustainability of biofuel production.
As the Biden administration prepares to finalize regulations for the 45Z tax credits, the pressure from these farm groups underscores the importance of aligning clean energy policies with domestic agricultural interests. By ensuring that U.S. feedstocks are prioritized, the administration can support American farmers and contribute to a more sustainable and self-reliant energy future.
