For decades, Congress has made available a range of tax credits aimed at encouraging the production and blending of biofuels into the U.S. transportation fuel supply.
Today, the primary tax credit utilized to support farmers and biofuel producers is 45Z, or the Clean Fuels Production Credit. 45Z provides a $0.20 to $1 credit per gallon of eligible fuels. Eligible fuels include renewable diesel, biodiesel, ethanol, renewable dimethyl ether, methanol, synthetic aviation fuel, hydrogen, renewable natural gas, and more. The exact credit amount depends on whether facilities meet certain wage and apprenticeship requirements. On July 4, 2025, President Trump signed the “One Big Beautiful Bill Act,” (OBBB) into law, which extended the 45Z credit through 2029 while making other adjustments.
Tax credits are effective market drivers when they are certain and consistent. It wasn’t until 2019 that many tax credits were extended on a multi-year basis, after which investment in fuels covered by these credits flourished. However, throughout 2024 and 2025, details surrounding the credit’s renewal and what it would contain remained uncertain. As a result, American biorefiners, farmers, and energy markets were unable to plan long-term investments to support the country’s energy goals.
Going forward, it is important that policymakers in Washington continue to engage and communicate early with farmers and producers to ensure that they are producing effective rules to advance production of advanced biofuels and that stakeholders involved in this process have ample time to prepare for policy changes.
ABFA supports policies that are feedstock and technology neutral, are flexible, and that prioritize the unique and varied needs of farmers and biofuel producers. The latest version of 45Z limits credit eligibility to only feedstocks grown in North America, which may make U.S. biofuels more expensive and less competitive in the global marketplace, while also driving up food prices. We urge lawmakers to amend this restriction in the next iteration of the credit.
Today, the primary tax credit utilized to support farmers and biofuel producers is 45Z, or the Clean Fuels Production Credit. 45Z provides a $0.20 to $1 credit per gallon of eligible fuels. Eligible fuels include renewable diesel, biodiesel, ethanol, renewable dimethyl ether, methanol, synthetic aviation fuel, hydrogen, renewable natural gas, and more. The exact credit amount depends on whether facilities meet certain wage and apprenticeship requirements. On July 4, 2025, President Trump signed the “One Big Beautiful Bill Act,” (OBBB) into law, which extended the 45Z credit through 2029 while making other adjustments.
Tax credits are effective market drivers when they are certain and consistent. It wasn’t until 2019 that many tax credits were extended on a multi-year basis, after which investment in fuels covered by these credits flourished. However, throughout 2024 and 2025, details surrounding the credit’s renewal and what it would contain remained uncertain. As a result, American biorefiners, farmers, and energy markets were unable to plan long-term investments to support the country’s energy goals.
Going forward, it is important that policymakers in Washington continue to engage and communicate early with farmers and producers to ensure that they are producing effective rules to advance production of advanced biofuels and that stakeholders involved in this process have ample time to prepare for policy changes.
ABFA supports policies that are feedstock and technology neutral, are flexible, and that prioritize the unique and varied needs of farmers and biofuel producers. The latest version of 45Z limits credit eligibility to only feedstocks grown in North America, which may make U.S. biofuels more expensive and less competitive in the global marketplace, while also driving up food prices. We urge lawmakers to amend this restriction in the next iteration of the credit.