Ferrie: Biofuel Tax Credit Needs Could Mean More Dollars For Farmers’ Grain
When the Inflation Reduction Act was signed into law last August, it unveiled an opportunity for farmers to see substantially increased value for their grain crops, says Ken Ferrie, Farm Journal Field Agronomist.
At the heart of the opportunity: there is now a dollar value assigned to grain carbon intensity (CI) scores below 29 in the form of tax credits to biofuel plants that buy the grain as part of their decarbonization efforts.
For more insights, check out: Carbon's Next Chapter On The Farm
Ferrie says the incentives for this emerging market are big enough that he expects most biofuel refiners will take advantage of it.
“While biofuel processors will be looking for ways to sequester CO2 through other things like switching fuels and finding more efficiencies – things that take money and time – the easy way for biofuel refiners to lower their CI score is through the corn that you sell them,” Ferrie says.
He notes that corn makes up more than half of biofuel refiners’ carbon intensity score in ethanol.
“With the average CI score of ethanol being around 50, the standard CI score of your corn is around 29 and that makes up more than half of their CI score,” Ferrie says. “If refiners can source corn with lower CI scores, they can lower the CI in their ethanol product without adding anything to infrastructure cost.”
Tool Estimates Carbon Intensity Level
The Department of Energy has created a tool that calculates the carbon intensity score in a bushel of grain, as the levels of carbon in a crop can vary. The score is linked to the unit of production with lower carbon emissions resulting in a lower score. A CI score of 0 means that bushel is carbon neutral. The industry standard is 29, Ferrie says.
Buying grain from those growers with a lower score is the easiest way for refiners to lower their CI score and qualify for the tax credits.
“Lowering your carbon intensity score from 29 to eight or even zero — maybe even a negative number – would create tax credits that could amount to hundreds of dollars an acre for the biofuel industry,” Ferrie says.
The proposed tax credit under consideration is 5.4 cents per carbon intensity point, he says. So, if you lower your carbon intensity score from 29 to 0 in your corn crop, that would create a tax credit worth $1.57 a bushel to the refineries (5.4 x 29 = $1.57).
“How much of that (money) would trickle down to the grower is unknown, but I do believe the tax credit is big enough biofuel processors will come looking for the corn to lower their CI score,” Ferrie says.
During the annual Farm Journal Corn & Soybean College, slated for next week – July 25 and 26 in Heyworth, Ill. – Ferrie will address the factors that make up a corn grower’s CI score and steps they can take to lower their score, including the roles of fertilizer, reduced tillage an cover crops.
“This may be just a $369 billion experiment, but I believe those farmers who have the knowledge and are in place to take advantage of it will be able to participate in what I think will be a game changer at the farm gate and the gas pump,” Ferrie says. “If you want to learn more about your CI scores, and how to be ready for this opportunity, sign up for Corn College.”
For more information on the upcoming event and to sign up, visit https://www.croptechinc.com/cbc/
Also, get the complete details on the upcoming opportunity with CI scores from Ferrie in the video here:
