By Heather Gieseke
The U.S. Treasury’s recent tax-credit guidance for the biofuels industry has sparked many questions about farmer impacts and ability to participate.
While there’s still a lot to figure out, it’s clear farmers who produce low-carbon fuels will benefit from greater opportunities ahead — including financial incentives and higher demand for crops with a smaller carbon footprint. To be able to take advantage of those opportunities when they arise, take time now to prepare.
What to Know Now
Each biofuels plant will manage this low-carbon market opportunity differently. There are a lot of factors in play for both facilities and farmers. But if you have implemented, or are considering, regenerative practices and you have the ability to deliver your crops to a biofuels plant, you should:
1. Document your practices.
Ideally, you’ll use data straight from your farm machinery software systems. If you haven’t done this before, start now. Even if not for 45Z, this certainly will benefit you in other ways in the future.
2. Reach out to the processing destinations local to you.
Do they have any programs already? If not, do they expect to have them in the future? What sort of data will be required to participate? How can you keep up with new information as it becomes available?
3. Hire a firm to help you calculate your current carbon intensity (CI) score.
If you have a fierce curiosity or desire to participate, consider expert help. This is likely just the beginning of a big future that will result from propelling your verified low CI score into additional revenue or demand opportunities for your farm.
New Terms In the World of Carbon Markets:
Carbon Intensity Score
A CI score is a measurement of greenhouse gas emissions divided by the amount of energy needed to produce something. A CI score is critical to determine the value of low-carbon products such as ethanol, soy biodiesel or sustainable aviation fuel (SAF). The lower the CI score, the fewer the emissions. Carbon neutral means zero emissions occurred during the product’s production. CI scores can also be negative. Crops with a lower CI are generally grown with practices such as reduced tillage, cover crops and nitrogen management strategies.
45Z
This provision in the Inflation Reduction Act provides a tax-credit incentive for producing low-emission biofuels. It only runs from 2025 to 2027 but could potentially be extended. This credit will likely be passed on as a premium to farmers for low-carbon grains and oilseeds to compensate for sustainable practices with verifiable data.
GREET
The Greenhouse Gases, Regulated Emissions and Energy Use in Transportation (GREET) model standardizes the measurement of carbon emissions across transportation supply chains. We are waiting for an updated version of the GREET model to support 45Z CI calculations.
