Biodiesel production ‘in jeopardy’ waiting for guidance on sustainable aviation fuel tax credit

Biofuel producers and politicians are urging the U.S. Department of the Treasury to issue guidance on a tax credit for sustainable aviation fuel and other low-carbon biofuels. 

The credit, known as 45Z, is part of the Biden-Harris administration’s Inflation Reduction Act, and would credit fuel producers up to $1.75 per gallon for sustainable aviation fuel, or SAF, and up to $1 per gallon for other sustainable transportation fuel. 

Eligibility for the program was set to begin in 2025, but advocates and fuel producers are growing weary as the end of the year approaches and they still don’t know the final guidelines for the credits. 

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said fuel producers in Iowa are slowing production, “if not shutting down” while waiting for this guidance.

“The reality is we need (the) Treasury to issue 45Z guidance immediately,” Shaw said in an emailed statement. “Simply put, biodiesel production is in jeopardy as we speak.”

A spokesperson from the Treasury said the department “anticipates” issuing guidance before the end of the Biden administration to “enable eligible producers to claim the 45Z credit for 2025.”

Shaw said producers need the guidelines as soon as possible to make the necessary adjustments to be eligible for the tax credit. 

“The economic uncertainty this causes does not help in planning for SAF production or any other future low carbon projects,” Shaw said. 

The guidelines are also important to corn and soybean producers, who need to know what conditions to grow their crops under in order to produce eligible feedstocks for the low-carbon fuels.

“Producers and the entire supply chain need rules in place in order to make crucial feedstock decisions now,” Shaw said. 

Farmers who want to supply corn and soybeans to fuel producers that plan to participate in the program, stand to fetch a higher price on their commodities if they are grown with the sustainable practices, like cover crops and limited tillage, that reduce the lifecycle greenhouse gas emissions of the fuel. 

Despite President-elect Donald Trump’s talk of gutting the Inflation Reduction Act, advocates for the biofuels industry believe the tax credit can be preserved and only fear delays to the program’s implementation.

A spokesperson for Sen. Chuck Grassley said in an email the senator “looks forward to working with the Trump Administration to ensure the biofuels industry is supported.”

Grassley wrote on the social media site X on Tuesday that delaying the guidelines would be “disruptive” to the biofuels industry.

“The burden remains on the Biden administration to provide urgently needed guidance on the 45Z tax credit,” the spokesperson said. “Farmers and industry stakeholders will suffer the consequences if the Biden administration fails to do so.” 

Shaw said there will be “an inevitable delay” during the transition of power if the Biden administration is unable to provide guidance before Jan. 20, which is Shaw’s biggest concern. 

“IRFA members were heartened when Speaker (Mike) Johnson noted that Republicans did not support the IRA overall, but that there were parts worth saving,” Shaw said. “IRFA members remember how the Iowa delegation united to protect 45Z and other biofuels provisions from earlier efforts at repeal, and there’s no reason to believe they wouldn’t be able to successfully defend the provisions in the future.”

This story has been updated to include comment from the U.S. Department of the Treasury.